Module #2 will discuss value creation. And really this is the frame of reference for this entire specialization. In the past, If you were to answer the question, what should be the top priority of any organization? The answer would be to make a profit to meet the shareholders objectives. However, as we've seen, traditional methods of assessing a business's success or organizational performance are no longer adequate. So those things like stock price and market capitalization are less determined by the earnings of an organization or an asset base. All you have to do is look at google and alphabet and Amazon. Value today is created in companies by their intangible drivers. And really it's about people, the innovation that is created within a business, the people, their ideas and really the brand that pulls all of that together. Some of the best leaders use this idea of value creation to evaluate and measure the impact of their actions and decisions and changes. Are they creating value for their stakeholders or are they destroying value? And making that analysis before a decision is made is now what we are calling stakeholder capitalism, right. But what creates value? Value is a very interesting word because it means something different to every stakeholder. Yet there are some fundamental things within a business that create value for all stakeholders. Technology and the way a business uses technology as well as manages changes to technology. Innovation, how they drive innovation from within and externally. Their intellectual property, the alliances that they make with other organizations external to the company. Their management and leadership capabilities, their employee relationships, their customer relationships, community relationships and their brand value. And again, creating value for all stakeholders. Another key tool in a leadership tool built is the need to understand the role of business acumen in creating value. So business acumen, it's an interesting term and I like it because one definition as I have here brings it all together. This isn't about a financial analysis, this is about a keenness and quickness and understanding and dealing with a business situation in a manner that is likely to lead to a good outcome. And that good outcome in the case of stakeholder value creation is making sure that all stakeholders are accounted for in the analysis before the decision is made. To be a leader with good business acumen, which is what you would want to be known for. You understand the dimensions of an issue that is facing you and in almost every case there's going to be a degree of complexity and ambiguity associated with that. And we've talked about this before about a leader's role in making sure that they are the confident, competent individual. The team needs to understand the complexity and lead through the ambiguity. Mindful of the implications of choice on all parties and this really is stakeholder impact. And developing a stronger business acumen means a more thoughtful analysis. So when you are thinking about, okay. How do I these tools to create value? Well, we talked about some of the tools at an organizational level, like innovation and technology. These now are traits that you a leader can begin to identify and practice now in your work and in the future. Business in the last 30 years or so has revolved around shareholder capitalism. Which is the key stakeholder, is a shareholder or investor in the organization and the social responsibility was clearly seen to increase its profit and it's a short term view. More recently, stakeholder capitalism is being practiced by many, many organizations. And it's absolutely necessary to be able to stay competitive, not only in the market with your customers, but in the warfare talent. And making sure that you have the right people, the best people working for you. So all stakeholders matter. And the focus is on long term value creation and environmental, societal and governance measures. I had you read something about conscious capitalism and this is really taking stakeholder capitalism to the next higher level. This idea of conscious capitalism, it is an economic system that builds on stakeholder capitalism and it guides businesses to conduct socially responsible and ethical practices in their organization. Some examples of companies that practice conscious capitalism are whole foods, the container store, Patagonia, Southwest Airlines, Starbucks and Costco. There's four pillars to conscious capitalism. One having a higher purpose for an organization and that higher purpose is used to make sure that all stakeholders are engaged and energized. The focus on stakeholders is not only are they to be assessed and addressed making sure that you understand the impacts on the stakeholders. But the stakeholders are active and strong and they are part of building a resilient business. Leadership now, has to understand this deeper purpose and engage the stakeholders as well as creating and maintaining a culture of conscious capitalism. Which means sort of tending to the values and principles and practices of an organization. So it does take stakeholder capitalism to the next level. So the future of value creation, when we think about it, it used to be to create more value. You were trying to find economies of scale. Now it's a function of economies of creation and innovation and mass customization. Things that society customers want based on the white technology has allowed. So the challenge for a leader is we've gotten very, very good at managing efficiency and productivity and how to measure it, how you manage creativity. How do you manage innovation as well as we have managed those things, we know very well. Taking cost out is always important. Because cost growth within an organization is kind of insidious. And if you aren't watching for it, you will be surprised at how maybe large different parts of the organization are growing without testing the value creation associated with that particular, let's say project area or functional area. It's interesting because this idea of future value creation now, leaders and individuals need to understand how they add value and how to put value into the product or service. How does the organization meet now a very, very challenging 24/7 365 innovation schedule and these agile creative networks. So the old way of doing business is different where the thinking was, interestingly, employees are the biggest risk to where employees are the biggest asset. And the new thinking is about transparent communication behaviors over skills, empowering results, having flexibility in the work environment, potentially failing often but failing fast. Genuine honesty versus sort of culture of fear in the old way of thinking. So now we're going to move on and we're going to look at the value and the quality of change management in value creation. So there are two videos I want you to watch now. One, describes sort of future vision of changes coming to businesses primarily directed by the pandemic but other social issues. And then I want you to listen to a Lego case study. So this is business that almost went bankrupt in 2003. And by 2004, they recognized they had to change their strategy and rethink the business literally from the ground up. This particular case study shows a degree of resilience and embracing change and that's sort of the topic for the next lesson. So after watching those videos, I'll see you there.
