What Value Is: Part 2 – Not properly in focus

• Part 1: Value is misunderstood
• Part 2: Value is not properly in focus
• Part 3: Value is understandable, manageable and measurable

“Value”.  One of the most frequently-used words in commercial contexts, and we think we all know what it means. But what is “value”, really? Do we understand it? And, if we don’t, what goes wrong? In this series, we’ll show what value really is and, ultimately, why it’s all that matters.

In this second part, we unpack how and why “Value” isn’t properly in focus: how our organizations lose touch with it, and how this reflects Value not being properly in focus in how we think, in our relationships and in how we work.

Last time, we saw how Value is significantly misunderstood, how we lose sight of the end customer and how Value is so much more than either price and cost (or what we do and how we do it).

We also reflected on how clarity and focus on Value is the only effective response to the accelerating challenges of today’s ever more Complex world.

But what are we up against here in seeking to focus on Value?

To answer that question, we need to begin by looking at what happens in most organizations.

Why and how organizations lose touch with Value

As organizations grow over time, they typically do so through a mixture of vertical business units and horizontal departments, and this generic organizational chart illustrates what this looks like:

But the problem is that this kind of organizational development and structure reduces alignment and fragments the original focus on Value.

Each department and business unit tends to develop its own distinct priorities and focuses, and collective awareness and responsibility around overall Value are usually then left to senior management.

Not only are senior management a relatively small group, but they’re also increasingly removed from the “front line” by levels of hierarchy.

And so organizations slowly lose touch.

Then, when change starts to bite, they find – sadly often too late – that they’ve lost the ability to adapt.

Our logo helps illustrate why, showing all the “levels” that define an organization:

Each level flows out of, and is shaped by, the one above, and they make up a spectrum that we can summarize in terms of “Inspiration” down to “Execution”:

• “Inspiration” is all about purpose, possibilities, innovation: subjectivity.
• “Execution” is then about making real what’s emerged from those higher levels through repeatability, efficiency, etc: objectivity

The whole spectrum is critical, but with what we’ve just talked about in terms of drift and dilution over time, the upper levels get taken for granted.  They fade from focus, and as we discussed in Part 1, the lower levels of capability and best practice become the main priority.

And so, as organizations often realize too late, a barrier emerges in the middle:

The upper levels that enable and encourage the adaptation and innovation we now so desperately need not only wither, but the two “sets” of levels also become disconnected.

Think how often the stated corporate values seem detached from the front line, for example.

So something needs to reinvigorate organizations at the inspiration levels to remove this barrier.

And that something is Value.

How Value reinvigorates organizations and empowers people

In particular, Value forces attention back up to the higher levels in a focused way, and it also connects all the levels.

So, as well as Value flowing “down” to shape each level, what we talked about in Part 1 about motivation, innovation and collaboration harnessing change means that Value is also fed back “up”.

The barrier is therefore dissolved from both directions, creating momentum for refocusing, realigning and reinvigorating the organization:

And, finally, Value empowers people.   

If we now add in what each of the levels “deals” in (its “currency”, if you like), we can see two things:

Firstly, the lower three levels are increasingly where machines and AI have the advantage: indeed, “language” (at the capability level) is exactly what large language models like ChatGPT are all about.

But secondly, with the higher levels, only people have inspiration, vision, and understanding.

So, by re-awakening these higher levels, as well as the motivation this provides people, it also empowers them, and puts their roles out of the reach of AI.

But standing in the way of all this is that Value isn’t properly in focus.

And this begins on a really fundamental level: how we think.

Value isn’t properly in focus in how we think

There’s more detail elsewhere on our site about all this, and do look up the work of Iain McGilchrist here, but the point is that the two hemispheres of our brains broadly work in complementary but very different ways. 

These also reflect that “split” in the levels we just saw:

So, the “upper” levels are primarily associated with the right hemisphere; the “lower” levels with the left. 

There’s therefore also the same inspiration through to execution dynamic.

However, for lots of reasons, there’s also the same bias as with organizations: we tend to heavily favour the left hemisphere:

This leads firstly to lots getting lost: in the red list on the left above, ‘big picture’, ‘creativity’, ‘subjectivity’, etc, all suffer.

Secondly, and to the right of that, other things also become overdone, e.g. ‘bureaucracy’, ‘data’, ‘objectivity’.

And so you can then see the fundamental roots of what we’ve been talking about in this series so far:

• How we end-up over-focussed on capability and best practice
• Why our organizations tend to have with rigid structures
• How we tend to lose sight of the big picture: subjectivity and the end customer.

And this imbalance in both organizations and individuals means that Value isn’t properly in focus across our relationships. 

Value isn’t properly in focus in our relationships

So, if we look at the familiar Kraljic matrix, we can see how this bias towards objectivity plays out, with objectivity and subjectivity broadly pulling in contrasting directions:

(Note, how we’ve said, that subjectivity is bound up with Complexity, so it’s no accident it pulls in the same direction.)

The bias we have towards objectivity means that, for the most part, our Q1 and Q2 relationships are in good shape, but – as the diagram above makes clear – there are then obvious consequences in our “Strategic” and “Bottleneck” relationships.

These are where the most serious issues are usually found: indeed, even optimistic statistics suggest that only around a third of such relationships really succeed.

And then finally, again reflecting this big imbalance, Value also isn’t properly in focus in how we work.

Value isn’t properly in focus in how we work

Let’s return again to the generic organization chart:

As this makes clear, we primarily tend to work top-down, but – as we saw in Part 1 – Complexity means that things instead increasingly happen bottom-up.

We also try to define, control and optimize – often via horizontal departments – but that’s now working against our constantly and rapidly changing reality.

We then tend to be either or both 1. too prescriptive (standardizing, which ignores crucial differences) and 2. exhaustive (trying to make sure that nothing gets missed, which can be incredibly inefficient).

So, whether it’s training or best practice that –  despite being well-intentioned – misses the point or adds to overload, it reinforces that disconnect we discussed earlier between leadership and the front line.

The result is a real challenge to agility, resilience and adaptability, and this is perhaps now particularly obvious with contracts – hence how there are already lots of management approaches that look to go beyond them.

Value: the missing piece

This diagram maps some of the more common management approaches on a spectrum of how they’re typically used (and which pulls together a lot of what we’ve been talking about in this series so far):

Toward the left are formal approaches – more top-down, driven and execution-focused – representing “management” as a noun, and they tend toward rigidity (see Part 1 for the importance of the noun vs verb distinction).

Toward the right are organic approaches – more bottom-up, guided and inspiration-focused  – representing “management” more as a verb, and they tend toward flexibility.

And there are some real challenges here, especially if we consider the relative adoption of all these approaches:

The gap when it comes to Value becomes even more obvious, and also note the horizontal black line above the circles, i.e. these approaches mostly come from outside (so already assume what’s valuable) and they mostly focus on how we do things (when, as we saw in Part 1, Value primarily flows back from the customer; not forward from us).

Now, to be clear, these tools and approaches all contain lots of valuable insights and learning, and they do often encourage us to consider Value.

But there nonetheless remains that gap in clearly establishing what that Value is and in staying focused on it.

We’ve then seen that this Value is customer-led and primarily subjective.

But, of course, subjective Value is challenging.

Everyone values things differently; perceptions change; and so subjective Value can seem mysterious, even scary.

And even if you could “demystify” subjective Value, how do you make it measurable and actionable?

That’s what we’ll find out next time.