Create value by sticking to principles and collaborating


I’ve been reading and writing a lot about creating value.  Value creation is what sustains our spirits as well as insuring us a livelihood. It preserves quality in our relationships as well as justifying our existence.

Does creating “shared value” accomplish the same thing?  creating value

A recent headline in the Financial Times challenged the premise of Michael Porter and Mark Kramer’s ideas on creating shared values caught my attention.  Corporate Shared Value, (CSV) conceptually seeks to align social impact and company success.  A very noble goal, akin to what John Mackey, the CEO of whole foods describes as Conscious Capitalism.  Andrew Crane’s Financial Times article merely wishes the CSV theory found its way into execution and not corporate report window dressing and lip service.

15 years ago, Frederick F. Reichheld  and Thomas Teal working for Bain Capital discovered that too few growth strategies successfully drove profits and explained competitive advantage. Since the traditional profit drivers failed to explain the discrepancy in performance, they turned to study costs.  Their research delved into a firm’s relationship between customer duration and its cash flow  and found the relationship also differentiated advantage. As they had eliminated one metric after another their discovery proved that value starts with building loyalty, growth follows and then profits result. Dual loyalty, they explained isn’t merely the reciprocal relationship between a firm’s leadership and its customers.  The duality extends to employees and includes relationships with investors.The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value published in 2001, detailed this research.  For businesses to focus and sustain this value creation process, the authors recognized would require fundamental changes in business practices including new ownership structures.

Porter and Kramer’s CSV theory in part recognizes a similar fundamental shift in business practices.  Their focus seeks to compensate for the historic failure of accounting balance sheets to report and record shared value as an asset.  Is it an output, or is Shared Value part of a  larger social movement?

Mark Cheng, Director of Ashoka UK and Ashoka’s senior advisor on social finance  explains the challenges in this article that appeared in Forbes, How Philanthropists And Investors Can Work Together To Create Social Change. He suggests, that trying to build a social innovation isn’t a company but a social movement and that’s why it requires very different investments.

To change consumer behavior whether you plan to build a new market or a social movement requires organizations to earn people’s loyalty to principles.  Reichhold and Teal explain these learnings as necessary to properly differentiate between creating measurable value and creating profits.  Porter and Kramer hope businesses will value social progress, but this alone won’t re-legitimize a business. A verbal commitment to value can’t create the cost-benefit advantages necessary to sustain the firm.

Social forces of loyalty can and often do bind customers, employees and investors. Indeed they serve as measures of  cash flow and indicate a company’s ability to deliver superior value. The interlocking set of a firm’s operating principles creates both a cause and effect which satisfies, inspires and engages all stakeholders to sustain the firm.

Alternatively, a collective solution and collaborative mindset that aligns around a broader set of principles or values clearly stated presents an opportunity to create shared value. Because the concept of shared value offers people the means to take part with the resources of a firm, these mechanisms also share in, and contribute to, the success of the wider social movement.

Cheng explains that different funders should rightly have different roles.  A social business partnership between a business enterprise and an NGO doesn’t have to compromise or tradeoff its economic goals for the benefit of social good.  Using philanthropic funds to cover start-up costs for the shared venture and utilizing the distribution prowess of the corporate entity is one way to make win-win social impact possible.

Social progress is difficult to achieve by a single player, however a shared operating model based on sound principles can be adopted and replicated to spread the changes more widely.  The goal for the business may be self-interest,  where self-preservation will be a result of its underlying value creation principles and relationships.

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Are you getting my meaning?


Sense-making that’s what stories are all about. s
Surprisingly, few of us use this hardwired tool to our advantage. Having recently collaborated with several volunteers to respond to a grantmaker’s overly specified Request for Proposal (RFP), I found myself confronting the multiple meanings and associations around storytelling, from narrative to story sharing.   Was it  Mark Twain who said, ” I apologize for the long letter, if I had time I would have made it shorter?”  Well,  here goes.

It seems that too many of us confuse the message and messengers with meaning makers.  The volume of media outlets and social media sharing channels can overwhelm us and at the end of the day, one of the best contributions the journalism profession provides is the ability to tell a story and tell it well.  Sure the concept of a lead remains valuable as it easily converts into a tweet, or become the teaser to a blog post, right? But it’s the story not the lead that matters and here’s why.

Quantification, numbers, statistics and big data dominate the headlines and yet a powerful  story beats them all.  People are natural story tellers and our brain naturally likes and processes story very efficiently and effectively.  Story parallels the process in our brains that recognizes, sorts and responds to patterns. Our behavior is pattern driven which is another reason stories do more to add meaning than any set of spreadsheets, graphs or even simple analytic notation.

The power of a story

A good story resonates with us, because story literally provides context, perspective and almost always some emotional elements.  Even ambiguous stories are more easily understood than a set of precise numbers. For example, I was quite pleased to read that Janet Yellen the new president of the Federal reserve did something sufficiently unusual to prompt the Wall Street Journal to comment as follows:

While Ms. Yellen’s underlying message on Fed policy was unchanged, her delivery was striking. Central bankers tend to speak in terms of economic theory and statistics, in jargon better understood by investors and other economists than the broader public. Ms. Yellen instead exhibited a personal touch Monday by coloring her comments with experiences of three people who had struggled to gain full-time work.

 

She did what the best of us do when we want to convey a message that will be widely understood. She listened. She sought out specific meaning, rather than relying on her experiences and intuition.  In order to more clearly and precisely understand  what the present economic data the Fed collects really means, she asked people. She called up individuals who met the conditions the data suggested to tell her their story. She invited them to share how are they managing,  their background, work history, skill sets, experiences and feelings.

Her personal interviews provided her a greater grasp and deeper meaning of present economic indicators that “suggest the labor market is operating well short of its potential.”

Telling a story remains the most effective way to deliver consistent clear messages and impart more precise meaning. So she did just that, and it did enliven her message.  She reached out to talk and listen to several people and managed  ” to put a face on the challenges that are out there in the labor market”. Not only did she connect to the people who had stories to tell, she connected their story to help others understand more deeply, personalize the meaning of the economic indicators.

On its face, her inclusion of stories may appear as a politically astute maneuver.  After all, politicians have always found it useful to tell a constituent’s personal story and demonstrate conditions that justify the need or impact of a particular initiative.   Marketers do the same thing, especially when they use vignettes designed to match values people hold deeply and hope they will then transfer those emotions to the pitched product.

The power of narrative

Personally, I think Janet Yellen did something more.  Because she made the phone calls herself and wanted to really understand the reality that produced the numbers.  Isn’t that the first step in problem solving?  We all need to understand the situation more completely and rely on collectible facts to tell us what’s what.  The assumption that  indicators alone convey meaning can be quite dangerous.  On its face the momentary value of the S&P Index or the Dow Jones Industrial Average tell us nothing.  Its only in relationship to their past that we find significance.  Still additional context is necessary to draw meaning.  We try to co- relate measure of activity to news of the day and in this case we often obscure its meaning.  It’s in the qualitative, anecdotal descriptions that often lead us to understand and make new meaning of the measured results.

narratives have guided our work to inspire young people to connect with our community and been a vital tool in driving the significant change – See more at: http://ejewishphilanthropy.com/the-power-of-narrative-to-drive-change/#sthash.mzsnZ7P8.dpuf

Social enterprise and social entrepreneurs have made great use of narrative to help people connect to a community/cause and it also proves vital to driving change.  A personal story has emotional elements that attract and motivate others to go the next level. It can move individuals past understanding and conversation and inspire action. New tactics is a non-profit describes how it’s using narrative as a lever of change.

People and communities use stories to understand the world and our place in it. These stories are embedded with power – the power to explain and justify the status quo as well as the power to make change imaginable and urgent. A narrative analysis of power encourages us to ask: Which stories define cultural norms? Where did these stories come from? Whose stories were ignored or erased to create these norms? And, most urgently, what new stories can we tell to help create the world we desire?

 

The ability to engage

I came to revisit the narrative piece with help  from other astute observers who shared examples made possible by story.  One is Thaler Pekar  who writes for Philan Topic.  She invites organizations, particularly non-profits to try harder to understand not only the problems they are trying to address, but to dive deeper to understand why and what meaning a story they use carries.

It’s impossible to overlook the reality that even if you ask, and even if you listen what story you then tell represents only a partial truth. We fail because there is always the story we are not hearing. Nicola Hughes, a Knight-Mozilla Fellow explains this as unknown knowledge because any number of reasons, rational or cosmic may deny us access. The brain research on this supports what cognitive psychologists like Roger Schank have claimed for a long time.  Stories are a dialogue in sense-making.  We hear a story and have to reconcile it with what we already know.  Sometimes the story like a direct experience will help us expand and extend what we know, and sometimes we shut down.  Consciously we may refuse to accept but emotionally and unconsciously the message may still have an impact.

Janet Yellen wanted to effectively communicate not only the latest economic indicators, but also to signal that she understood and wanted to offer meaning and hope to her audience too.  The emotional elements that stories offer effectively engage us.  Use it to learn not just teach.