Creating Value in Business

What this session covered

This international webinar, held under the theme of value creation in business, opened with introductory remarks from the host institute, followed by a moderator who introduced the president of the organisation and each speaker in turn. Participants were noted as joining from a range of countries. The opening remarks drew a distinction that framed the discussion: that a healthy profit or cash position does not, in itself, amount to value in a business, and that value has to be built deliberately over time through particular measures. Three invited speakers each addressed a different facet of the subject, followed by a brief moderated question-and-answer exchange.

The first speaker concentrated on customer value, arguing that satisfaction alone does not produce loyalty and that value is best understood as the balance of benefits against cost, where cost extends beyond price. He distinguished value for money from money for value, cautioned against competing on price rather than on value, and described practices and rigid rules that frustrate customers, which he termed value starvation. He advocated a customer strategy driven from the top of an organisation alongside customer circles formed from front-line staff, illustrating the points with service examples drawn from hospitality and aviation. The second speaker approached the theme from what he called its flip side, value destruction, focusing on complaint handling. He argued that complaint handling exists to keep customers returning and that customers need a route past organisational bureaucracy, cited research suggesting that only one third of complaints are functionally the organisation's own fault, and used a leaky-bucket analogy to contend that retaining customers is considerably less costly than acquiring new ones. He distinguished efficiency from effectiveness, criticised automated telephone systems and metrics such as handling time, and recommended acknowledging the customer's problem first, resolving it, then examining why it arose and measuring the return on customer-centric complaint handling.

The third speaker addressed value creation through inorganic growth, that is, mergers and acquisitions, framing value creation as enhancing the benefits accruing to all stakeholders. He presented acquisition as a serious decision requiring a clear and measurable rationale, whether geographic expansion, scale, synergy, unique technology, cost synergies or access to a client base, and stressed cultural fit, valuation discipline, adequate funding and the ring-fencing of the existing business. He placed particular weight on establishing a dedicated integration team, citing instances in which acquisitions faltered, and set out a transaction lifecycle running from defining the need through due diligence, negotiation, closing and integration, emphasising transparency, communication and keeping boards and regulators informed. In the closing exchange, the discussion returned to how an organisation might build a culture of value creation, pointing to a customer strategy at senior level, customer circles at the front line, policies designed around customer convenience, and turning individual fixes into systemic ones.

Key points raised

• Value in a business was presented as distinct from profit or cash position, and as something that must be built deliberately over time.
• Customer satisfaction was described as insufficient for loyalty; value assessed relative to competitors was framed as the driver of retention.
• Speakers favoured competing on value rather than price, supported by a top-down customer strategy and front-line customer circles.
• Complaint handling was framed as central to customer retention, with the argument that many service failures are designed into systems rather than accidental.
• Retaining existing customers was argued to be considerably less costly than acquiring new ones.
• Mergers and acquisitions were discussed as a route to value creation, contingent on a clear rationale, cultural fit and a dedicated integration team.