Management is broken—and it’s costing trillions. Employee engagement hovers at dismal levels globally. A PWC study showed that customer trust in executives scrapes 30% (while executives delusionally peg it at 80%), and most public companies limp along with five-year returns lagging the S&P 500. It’s like medicine’s dark ages, when doctors bled patients for every ailment, oblivious that the cure killed more than it healed. Bloodletting worked for a few patients; for the rest, it was unwitting malpractice.
Today, outdated management—obsessed with cost-cutting and short-term profits—inflicts similar harm: according to a McKinsey study, only 27% of U.S. firms prioritize long-term returns. But unlike those bloodletters, today we have evidence-based remedies that smart firms are already implementing.
Value Creation Principles
Enter the value creation principles that articulate what has consistently worked better in business and what has not. They are drawn from rigorous research done by major institutions, based on studies of thousands of major companies around the world.
The value creation principles constitute a way of running businesses that embodies a mindset, goal, values, operations, processes, and metrics that align to deliver steadily increasing differentiating value to customers and all other stakeholders. Compared to traditional management, the value creation principles are not just about “doing” business differently. They are about “being” a different kind of business.
The principles aren’t fluffy manifestos or idealistic dreams. The principles are actionable best-practice, distilled from multiple comprehensive studies. In short, firms do better when they:
· Prioritize fresh value creation over short-term profits.
· Champion customer delight over exploitation.
· Build autonomous networks over rigid hierarchies.
· Embrace adaptive mindsets over mechanistic processes.
The principles are interactive and multiplicative. While old-school tactics still proliferate, research by many institutions shows that the principles generally deliver better workplaces, happier customers, and superior long-term profits—paradoxically, by not fixating on profits. Firms ignoring this? They’re the management equivalent of the bloodletting that unwittingly caused needless harm to billions through the ages.
The Power Of Customer-Centricity
Let’s start with value over profits. Multiple studies show that customer-focused firms trounce profit-chasers in long-term returns. For example, a Deloitte study showed that customer-centric companies are 60% more profitable, with McKinsey finding 20-30% growth from customer strategies. Why? Obsessing over customer delight builds loyalty, and fuels organic expansion. Also BCG, Accenture. Bain. Studies also show that customer-centricity also correlates with lower churn: McKinsey.
Staff thrive too. Multiple studies show that customer-centric cultures amp engagement. For example, a Gallup study showed 20-30% higher engagement scores, 49% faster profit growth, and 51% better retention in customer-centric models; 15-20% lower engagement in profit-centric approaches due to efficiency-driven burnout.
Innovation surges. Multiple studies show that customer-centricity enhances innovation. For example, studies by Forrester and McKinsey show that by weaving customer feedback into R&D, these firms reimagine processes, achieving 60% higher profitability and 20-30% faster growth. By contrast, a JBR report showed that profit-centric management leads to 10-15% lower outputs
Tech and AI usage shine brighter. Multiple studies show that customer-first adopters leverage technology more effectively. Two McKinsey studies here and here show how customer-centric firms leverage technology including AI for achieving 35% higher revenue growth and superior satisfaction while profit-centric ones often under-utilize tech resulting in 10-15% lower returns.
Processes transform: Multiple studies show that customer-centric firms deploy processes more productively. For example studies by PWC and Experian showed more efficient budgeting with around 20% savings. Studies by Gallup and SHRM showed that customer-centric staffing yielded up to 50% gains in staff retention.
Networks Crush Hierarchies
Networks outperform hierarchies. A McKinsey study showed that networks of self-managing teams outpace hierarchies in returns, with fast-moving organizations boasting 2.5x financial performance and 4.8x innovation. Hierarchies bog down in bureaucracy; networks unleash agility: BCG, Accenture
Productivity leaps: Studies show how autonomous setups yield productivity gains. A Gallup study showed 42% higher output than typical workplaces, fueled by trust and cooperation. Engaged units (common in flat structures) deliver 14% higher productivity and 78% less absenteeism.
Innovation thrives: Multiple studies show that networks are more innovative. Thus, a Wharton study showed networks enhance innovation by 20-30% through faster experimentation and knowledge sharing, while hierarchies reduce it by 15-25% due to bureaucratic delays and risk aversion.
Tech integrates seamlessly: Networks also do better with technology. Thus, a Deloitte study showed that networks adopted technology 20-30% faster with more value; with higher staff engagement (15-20%) and higher customers satisfaction (10-20%).
The Great Mindset Pivot
Multiple studies show that transitioning demands a seismic shift in thinking—not just at the top. From profit-hungry hierarchies to value-driven networks, mindsets evolve from fixed “know-it-all” to growth “learn-it-all.” Leaders become facilitators with 50-60% more coaching; middle managers as coaches reduce layers 20-30%, as the whole firm embraces agility. Without this, between 40-70% of changes flop. (Springer, McKinsey)
Caveats
The research is necessarily backward looking. It cannot predict what will work in the future. But it does show what has consistently succeeded or failed in the recent past.
The research also details regional differences between the U.S;, Europe, India and Japan as well differences between sectors, and anomalies flowing from economic and political forces.
Europe generally lags the U.S. bogged down in regulations, silos, and traditional thinking. But globally, exceptions prove the rule: Adopters reap exponential gains.
No More Excuses
Firms espousing these value creation principles generally outperform profit seekers—without the harm. The lesson for executives, business schools, consultants, and boards: ditch the bloodletting. Embrace the evidence. The paths to creating value–or decline-are now clear.
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