Who Are You in the Value Matrix?
Introduction
In everything we do, it is easier to be motivated and motivate others if we are contributing to some goal, some higher purpose, if we are building some value and if that created value is rightly distributed to everyone. In this short article, I will give a view and a matrix of few scenarios where we can be in the world of value creation. What can all happen in terms of value creation and value capture if we are doing something: a job, a project, or a simple daily decision.
Who Participates in Value Creation and Capturing
There are many matrixes showing value creation and value capture for the companies, for businesses and even for jobs. However, companies are made of people and of their leaders and what companies do is merely a reflection of decision companies’ stakeholders take every day (leaders, managers, employees, owners, others). Leaders drive value creation or value destruction and consequently deserved capture of that value, or they decide to give that value away, or do something else with it. Not all of the responsibility lies in leaders though, we are all responsible to what we do and what our footprint towards that value creation and value capture will be.
So, what does value creation and subsequent capture means in today’s society, how do we measure it and what should be our relationship towards that? Should we even care? And why?
How Can We Be Positioned Towards Value Creation and Capture
The point of this article is to raise the awareness, and try to position each individual towards maximization of value creation and proper value distribution. Rightly distributed value will further perpetuate even more value creation — as all of the stakeholders will be motivated to do so, to create more value.
In the matrix, we can draw it like this:
What would be the names of each leader, CEO or group of leaders, or each of us, in the terms of the matrix on how we contribute to value creation and subsequent capture of that value.
Here are some names (feel free to comment and contribute):
- High value creation, high value capture — entrepreneur
- High value creation, low value capture — contributor
- Low value creation, high value capture — parasite
- Low value creation, low value capture — administrator
- Value destruction, high value capture — regressor (thief?)
- High value creation, negative value capture — volunteer
In the matrix above, we have those who create high value (named here: entrepreneurs, contributors and volunteers). Entrepreneur would be the one that really excels in creating a high value and returns that value to its stakeholders (employees, investors, society). Contributor would also be an entrepreneur, but maybe an early-stage startup or a company that creates a lot of new value, but does not yet give back a lot. Finally, among the ones that create a lot of value, but do not capture it, would be volunteers.
In the category of low value creators, we can have someone who captures much more than they create — those would be parasites. We can also have entities that create little value, but also capture little value. Those would be some established entities that are slow, but still useful to the stakeholders. They are merely administrating the situation, hence administrators.
And in the final category (those positioned all the way on the negative side of value creation line) we have value destructors. Value destructors that proverbially destroy value, but do not capture it, are called vandals. We still have those in our society unfortunately, but surely more numerous and more impactful to our society would be the entities that are destroying the value but still are capturing a large amount of it. How should we call such entities? Are they thieves? We shall call them “regressors”, as in regressors of our society and wellbeing. They are most dangerous, as their behavior is much more sustainable than that of vandals.
How Do We Measure Value Creation?
But what is value creation? Again, there are many definitions of value creation and with our better understanding of the impact we create, even more changes are coming lately. The question of what value creation is may have been simpler 10–20 + years ago. Accordingly, to accounting definitions, it is a profit given back to shareholders. Accounting is measuring value creation simply in the ways of profits given back to shareholders. But is every profit really creating a value, and is every value creation effectively expressed by profits and consequential pay of those creating that profit (including all of the stakeholders).
WEF has started new metrics projects, to try to address all of the issues where not only profit can be used to measure value creation.
In an article “A Bit Rich”, dating even more than 10 years ago, they are trying to see who creates and destroys value.
Even more than 50 years ago, Robert Kennedy already questioned our measuring of value but challenging GNP as one of the metrics that simply measures all economic activity (regardless of whether value is created or destroyed).
Conclusion
We see that in the last 10 years, the measure of value has changed significantly, and this is a small contribution from my side to address what each of us does, what our colleagues do, and to try to be aware of what we really do when we work and when we try to contribute. We should understand what really value creation is, and try to steer it all in the upper right corner of the matrix, on the positive side of X-axis. We should also try to figure out what real measures of value are. Be a real entrepreneur that really creates value and consequently deservedly captures the value that has been created.
