On Value Creation

I was reading this post by Steve Denning in his blog at Forbes.com:  The Dumbest Idea In The World: Maximizing Shareholder Value.  Both Steve Denning and Roger Martin are two of my favorite management thinkers.

A snippet from that article:

“Although Jack Welch was seen during his tenure as CEO of GE as the heroic exemplar of maximizing shareholder value, he came to be one of its strongest critics. On March 12, 2009, he gave an interview with Francesco Guerrera of the Financial Times and said, “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy… your main constituencies are your employees, your customers and your products. Managers and investors should not set share price increases as their overarching goal”

As I have often argued in my posts here, traditional management theory and thinking is what won’t work in the future.  Just as Jack Welch did a convenient U-turn above, so did Michael Porter very subtly in his ‘Creating Shared Value‘ post in HBR earlier this year that might be the anti-thesis of his Competitive Strategy published in 1980.

So what we are seeing in recent times is not just a failure of the value creation models of the past that executives live by, but even celebrated theorists and practitioners alike are now admitting they were wrong – some openly like Jack Welch.

What does all this mean to a product manager?   Make products customers would use, you would use and let the market decide.  Don’t waste your energy in things like managing analyst expectations – not just financial analysts, but also “industry analysts”.  There are far more powerful mediums where you could get social worth for your products and services by going directly to the users – that is where and for whom, value is created.

– Prabhakar Gopalan

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