- The plus in the top-right corner of our logo symbolizes the connections between the functional silos to improve horizontal collaboration.
- The O+ icon captures our purpose of Connecting the Organization.
- Harvard found that the relationships that are most important today for creating customer value are horizontal relationships, spanning across the silos.
- Top-down change is known to fail in threequarters of studied cases; change emerges from small, loosely connected groups that are driven by a shared purpose.
To understand the meaning of the connector in our logo, we need to explain about ROUNDMAP™ and the detrimental effects of functional silos. ROUNDMAP™ covers four dynamics:
- Market Dynamics (Supply & Demand)
- Customer Dynamics (Frontline Operation)
- Business Dynamics (Backline Operation)
- Organizational Dynamics (Values, Beliefs & Core Identity aka Culture)
While creating ROUNDMAP, we found that each dynamic consists of four transformational stages. A similar pattern can be found in nature. Just consider the four seasons or the metamorphosis of a butterfly. These four transformational stages together make a lifecycle. The main objective of an organization should be to extend the various lifecycles for as long as feasible. This requires change, as change is the only constant. What change is needed depends on the circumstances.
For decades, to maximize profit, business owners have placed productivity above all other types of value creation. In the USA, productivity between 1979 and 2019 yielded +72.2% while CEO compensation increased by +1.322%. Over the same period, employee compensation grew by a mere +17.2% (adjusted for inflation), which has caused a substantial productivity-pay gap. In 2020, CEOs were paid 351 times (!) as much as a typical worker, in contrast, it was 20-to-1 in 1965. Additionally, return-on-capital outperformed return-on-labor by 4-to-1. While business owners and senior executives took full advantage, droves of employees have not.
Hanauer: Capitalists have been Wrong
Capitalists kept wages low because they believed higher wages would drive unemployment. It doesn’t. When Henry Ford doubled the wages of factory workers in 1917, he argued that his market would expand because now more workers could afford to buy a Ford. And he was right. Capitalists aren’t just wrong, according to entrepreneur Nick Hanauer, they allowed the rich to grow even richer while preying on the poor. Even to a point that the rich can now afford to buy out any competition, essentially undermining the foundation of the free market principle (Laissez-faire).
Furthermore, the broad adoption of the scientific management method caused executives to believe that workers needed to be restrained as much as possible while meticulously describing the operations’ sequences to raise productivity. Thereby depriving employees of the ability to think for themselves, causing them to lose their pride and become alienated from the product, the act of production, their objective and creative capacity, and even one another – as predicted by Karl Marx, a German economist who lived most of his live in London. We’re not in the least in favor of socialism but capitalism has its flaws. And we’re seeing the effects, now known as The Great Resignation.
Adam Smith (1723-1790), known as the father of economics and capitalism, attributed the growth of wealth and prosperity to the division of labor. Over the years, the division of labor, essentially a decoupling of the entire business process, later perfected by proponents of the scientific management theory, such as Frederic Taylor, and reframed as the value chain by Michael Porter, led to the disconnected mental, functional, and data silos we experience today. While this may have been less detrimental in recent years, the pace of change and disruption we are now seeing forces firms to fix these rambling chains fast. And we have the solutions.
Today, most HR and senior executives acknowledge that innovation benefits significantly from a diversity of thought. However, to expect employees to suddenly start to think for themselves and adopt a so-called growth mindset is being naive. It takes time, trust, and psychological safety, amongst others. We found that siloization impedes an organization’s readiness for change, as denoted by Harvard’s Heidi Gardner, “innovation hinges more and more on the interfaces.” Silos are also known for thwarting the creation of relevant customer value and the seamless delivery of customer experiences.
Business Value versus Customer Value
While many business leaders favored overall consistency and employee conformity in an effort to maximize profitability, the emphasis is now shifting toward creativity and a shared commitment to a common purpose; to restore growth. As many products and business models are maturing almost simultaneously, at the end of the business cycle, business leaders need to change the corporate mindset: from exploiting markets to exploring markets and from capturing value to creating value, so to stop favoring business value over customer value.
It shocked us to find that, according to research by Harvard Business Review, CEOs spent on average a mere 3% of their time talking to customers. When executives don’t have a clear view of the customer perspective, how can they lead the value creation process? And it was as stunning to read that CEOs spent 6% of their time talking to employees. This creates challenges if these executives desire to maintain an accurate gauge of the organization’s problems and culture. We believe it is critical to delivering customer value that CEOs spend at least 25% of their time talking to customers and frontline employees to drive meaningful value creation.
Business Value exceeds Profit-making
Business value is much more than revenue and profit. It is the standard value measure used in business valuation, defined as the entire value of a business, i.e., the total sum of all tangible and intangible elements, covering all monetary and non-monetary values of a firm, including:
- Organizational culture
- Employee attitude, skills, and maturity
- Work processes
- Waste reduction
- Production optimizations
- Usability, utility, and value of products
- Satisfaction of users and clients
- Customer loyalty
Given that we focus on growth, we typically start at the base of the operation, at the Ultimate Level of Truth™, the level of the frontline-customer interaction. We believe the answer to a company’s survival is in its ability to develop both relevant (today) as well as significant (future) customer value. However, we do not ignore the fact that a firm needs to orchestrate a feasible and viable value chain to create value, and deliver that value in a credible, distinguishable, and identifiable manner, to justify the capture of an equitable share of that value as profit.
Michael Porter and Mark Kramer wrote an excellent article, explaining that for a company to attract the right talent, it needs a shared value to “reconnect the company’s success with social progress.” According to the authors, “companies remain trapped in an outdated, narrow approach to value creation.” Shared value could reshape capitalism and its relationship to society.
Our study, leading to the ROUNDMAP™, included the Customer Dynamics, which made us perceive brand-customer relationships as a double helix, similar to a DNA-string.
The 2 strands, that run in antiparallel, symbolize the intentions of the brand, on the one hand, and that of the customer on the other. Both strands are tied together by functional, emotional, and social bonds ─ represented by the base-pairs between the strands.
These bonds are a consequence of bilateral signaling. The brand signals it value in the form of stories that are spread across channels, the so-called brand-initiated touchpoints. The customer, on the other hand, signals its need for its value by reflecting to the touchpoints.
If the customer perceives the value as relevant and desirable, a connection is established. The sum of these connections are generally referred to as the customer experience.