Winning Enterprises do Value Creation Three Ways (pt. 1)

?Internal disruption, empowered workforce and customer centric

I love my work at Next Act Advisors, where I provide strategic advisory consulting to scale new business models with operational excellence and good governance. To continue to provide strategic advisory, I aim to remain on the cutting edge of management and governance topics through my networks, my reading, and engaging with the people -thought leaders and doers that are innovating with new business models. Some of them are guests to the Founders Sandbox podcast.

?My clients are building companies that are purpose driven, scalable and resilient ?and their end goal is to create enterprise value that rewards all stakeholders: investors want a return on investment, employees want to work for companies that are purposeful in their mission to solve a big problem, vendors seek to become part of ecosystem that may not have existed before; and above all else customers who love the products that my clients make. Without paying customers, you don’t have a business.

?My advisory consulting guide company owners with real time information on the market dynamics in which they compete; the financial metrics required to achieve scale and to attract new customers, investors, employees, vendors.? To compete and to drive the value of the company through operational excellence – all supported by the undergirding elements of good governance.

?This month’s blog post shares three ways that I believe value creating firms shall need to do well to create enterprise value into the next decade. ?

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Why now?

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For the first time since the start of the pandemic, the effective federal funds rate was reduced by 50 basis points and the FED has communicated that we can expect another 50 basis points by end of 2024, and up to 100 basis points in 2025. There is a recalibration taking place, as the US economy eases into a new economic cycle.

?This is uncharted territory with a US election in slightly over a month. Upcoming interest rate changes in the pipeline, desired inflation level of 2% on the horizon, geopolitical uncertainty, etc.

?How will companies, like my clients, small to mid sized companies prevail?

??Monetary policy makers will have to model into projections once the fiscal policies are revealed behind the programs of the incoming elected officials, including the Whitehouse and Congress. ?

?Small businesses employ over 47% of the US work force. ?

?One aspect that remains from the pandemic that of a tight labor market. The hiring rate is at historical lows as are the layoff rates. Recent college graduates (2024) have difficulties in finding work. ?What is driving this? Is it generative AI, is it the great resignation,

?It doesn’t matter and only hindsight 10 years from now will prove me wrong.

What does matter are three ways that I believe winning enterprises may prevail –

?-first is that of servant leadership as a cornerstone for attracting, retaining and developing workforce that will increasingly work alongside “agents;”

?-second relentless focus on customer centricity and

?-third organizations –large medium and small –are disrupting themselves from within rather than being disrupted from the outside.

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?Servant leadership and workforce enabled by agents

?I found this infographic of Purdue University’s depiction of the current composition of the US workforce with four distinct generations enlightening.

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Could the advent of generative AI tools for small, medium and large corporations be driving this tightening of the labor market? I doubt it. It took over 20 years to see use of information technology reflected in productivity gains.

?Could it be the fickleness of employees in the younger generations?

Could it be the lag effect of the pandemic?

Could it be that what some human workers do may be better performed by robots?

?As an economist may state “It depends.”

?I have observed that servant leadership – as defined by Robert Greenleaf – may be a mid to long term remedy for the tighter labor market.

?The term first appeared in an essay by Robert Greenleaf in 1970 which was later expanded into a book, and the Servant Leadership movement was born.

?Of his philosophy, Robert Greenleaf wrote:

“The servant-leader is servant first… Becoming a servant-leader begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. That person is sharply different from one who is leader first… The difference manifests itself in the care taken by the servant first to make sure that other people’s highest priority needs are being served.

?What if we were to embody leadership models that the leader is servant first while working alongside robots?

?I could not be more tickled to see one of the first prize winners – a 5th grader- vision of a future with humanoids and robots – with heart of metal and heart of flesh.

?This 5th grader is in a generation that in 20 years will be in the workforce. What will the workforce look like then?

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?Customer Centricity

?Two management gurus of the past and present continue to be relevant in my work.

Their earlier teachings remain as cornerstones to the true essence of an enterprise and the reason why companies exist.

??Peter Drucker provided the guiding star of the discipline of management with his single sentence: “There is only one valid purpose of a corporation: to create a customer.” Only one.

The corporation must do many other things as well—create great workplaces, and do right by partners, society, the environment, and shareholders.

?A recent article by Stephen Denning, in Forbes Leadership council comparing ?Drucker’s contribution to management to that of Einstein to physics emboldened me to highlight the that the true essence of winning companies of value creation are driven by extreme ?customer centricity.

Figure 2: The history of the purpose of the firm

Stephen Denning

?John Mackey’s seminal piece “Creating the High Trust Organization,” informs the work I do with company owners as they scale their business and revisiting the original purpose of their firm. In the essay John stated: “The single most important requirement for the creation of higher levels of trust for any organization is to discover or rediscover the higher purpose of the organization."

?I had the honor to meet in person John Mackey, prior CEO and co-founder of Wholefoods, at the launch of his new book “ The Whole Story: Adventures in Life, Love and Capitalism and new ?business? Love.Life,

?In his own words, writing the book was cathartic for him. The book took on a life of its own and could only have been written with the hindsight of 44 years at the helm. From starting out in a hippy enclave in Austin, Texas not yet vegetarian, his spiritual experience with psychedelics, a board room showdown when he returned to the CEO role upon a failed venture in supplements. Like all good stories there are good guys and bad guys. ?I particularly loved the Hitchhiker “adage” for venture capitalist monies that were returned early and in 1992 the company went public only to, with the proceeds go on a buying spree,? to make fellow friends in the nutritional health stores business millionaires.

?His response to my question from the audience, where I participated as guest lecturer at a business university,

” If you were to teach one business class today what would that be?”

?“Appreciation and it is one of the key secrets that Amazon struggled to understand when they purchased WholeFoods.? ?There were some folks with 30 or 40 years with the company. People feel seen, heard and love coming to work. We had a practice of appreciation awards to workmates. Employee satisfaction leads to customers coming back." he paused; " And if I were to sum it up “Love” corporate America has left “love” in the closet.”

?His new venture is accordingly named: Love.Life, an integrated health and wellness company. Love.Life provides a one-stop immersive health experience by combining nourishing food, evolved medical care, and cutting-edge wellness therapies.

Sounds kind of like Whole foods when it started a one stop health nutritional grocery store.

?To read more on the third way that I believe value creating firms shall need to do well to create enterprise value into the next decade. Please consider subscribing to my blogs.

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Disruption from within- for subscribers only

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I'm pleased to announce something very special to me- a new subscription based service through?Next Act Advisors?that allows members exclusive access to personal industry insights and bespoke corporate governance knowledge, in the form of blogs, personal book recommendations, and access to?Founder's Sandbox podcast?episodes before they release to the public. As you know, my writings about scaling resilient, well governed businesses are very important to me, and for the first time I have it all in one place to offer as an industry tool!?

?At Next Act Advisors, my mission is to work with company owners to accelerate growth in enterprise value. If you enjoyed learning about winning value creating businesses, please sign up for more articles and consider subscribing to the Founder’s Sandbox podcast released monthly here.

Signing off for this month,

?Brenda A. McCabe

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#valuecreation

#servantleadershp

#customercentricity

#disruptionfromwithin

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