What people forget is their fundamental role in the larger scheme of economic, social and personal value creation. Companies, from Main Street to Wall Street, turned their backs on the unstated, but immutable, law that value creation precedes wealth creation. Simply put, you can't expect to make money over time (wealth) if you don't first make a concrete contribution to the success of customers, whoever they may be (value). As Peter Drucker said, "The purpose of business is to create a satisfied customer." Everything else follows.
Examples of the value-precedes-wealth "law" abound. 3M makes Post-it notes and a thousand other useful, everyday products, and in turn, they and their shareholders are rewarded with income and a share price that grows consistently over time. Google makes the world's information accessible to all of us, enjoys extraordinary profits, and shareholder wealth expands in a major way. Apple gives us new ways to listen to, and watch, the world in real time, and is rewarded for its contribution.
By contrast, Wall Street firms invent arcane financial instruments that package, repackage and resell home mortgages over and over again -- creating nothing of concrete value to anyone -- and then (no surprise) go bust. Or, companies go on acquisition sprees to spur top- and bottom-line growth, and wind up with complex portfolios where the whole is far less than the sum of its parts in terms of value creation.
Trying to create wealth without first creating value is tantamount to trying to fool Mother Nature. It's a recipe for failure.
Back to basics
The one way we can all emerge from this recession with a significantly stronger economic foundation is through the conscious effort on the part of organizations to get back to the basics of value creation and let wealth creation take its natural course. That puts a lot of pressure on companies to conceive, design, make, promote and sell products and services customers will pay for gladly, leading to continued revenue growth, price premiums and higher margins.
When a corporation focuses on creating value and coordinates its resources around that mandate, every individual becomes more productive, as does the organization. The more businesses embrace this focus, the more they will see an increase in productivity and strengthen the backbone of our economy.
The marketing discipline is uniquely suited to lead this charge. Marketing executives are the guardians of value creation, given their direct line of sight to customers (who account for 68% of the GDP, or about $9 trillion annually) and their unique capacity to orchestrate go-to market strategies. In this role, marketing professionals need to act as protectors of the value-creation mandate: value first. When others start salivating over the opportunity to make a quick buck and bypass value, marketing executives need to be the voice of logic.
In the book, "Identity Is Destiny: Leadership and the Roots of Value Creation," author Larry Ackerman poses the notion that the core identity of a company is its source of value creation. He asserts that a company's productive power rests firmly within its ability to create value, making a "proprietary contribution" to the marketplace. For example, Maytag "improves the quality of home life," Fidelity Investments "celebrates individualism" through its myriad funds and customer-service ethos, and Alcoa brings its "genius for transformation" to life in customer relationships.
As we navigate through this economy and prepare for a recovery, marketing executives can and should play the crucial role in making certain that their organizations are in top shape, and issue a "call to action" to ensure that the value creation-before-wealth creation formula is clearly understood and adopted company-wide. As marketing professionals, we hold the key to unlocking proprietary value that will ultimately strengthen our economic foundation.
|ABOUT THE AUTHOR|
Robert Reiss is host of The CEO Show and chairman of The Conference Board's 67th annual Senior Marketing Executive Conference.