Emerging from among the many pandemic-related disruptions to our lives is a persistent, if cautious, optimism. Accompanying that optimism is uncertainty about the pandemic’s lasting impacts on businesses and their customers. Already, the punditry is fully engaged in prognostications of the ‘new’ or ‘next’ normal. These speculations are not without value; scenario planning is an important activity for leaders. Yet, when it is possible to leave speculation behind with the support of something that supports action, that is an even better course for leaders.
Beginning to act is aided by remembering that there will be things about both business and customers that do not change. The most fundamental thing that will not change is that customers do business because of the value that business creates. No matter what the next normal involves, a leader’s central task is to develop and deliver what customers perceive as a value. Never drifting from this mission is what it takes for leaders to build back better.
Berkley Baker, a teacher, entrepreneur, and health care technology consultant, offers a metaphor for maintaining a focus on the fundamentals that underpin value creation. It came to him as he looked for effective ways to communicate the value of new technologies to the various and diverse stakeholders whose approval he needed to sell into a health system.
To frame his case around value, Baker uses the five fingers of the hand to explain the different ways value is evaluated by decision-makers across an organization. Much like the hand accomplishes complex tasks through fingers working in coordination, leaders deliver an offering’s full value when its different sources are recognized. These five sources are labeled core, financial, operational, strategic, and social. The leaders understand how to organize the activities that create value through each source will grow their business in the next normal.
Let’s look at the symbolic hand on which Baker relies. Just as each finger plays a critical role in your hand’s functioning, each represents a vital element of the value creation process.
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In Baker’s healthcare work, the thumb represents the clinical value of a new offering. An innovation creates clinical value when it allows an organization to realize gains in patient outcome efficiency or quality. A similar logic applies to any business. As such, the thumb represents the core value proposition – creating this value is the essence of why the organization exists. The thumb represents this purpose-filled construct. And, not coincidentally, the thumb’s oppositional position allows it to easily touch each of the remaining fingers – a good reminder of their interdependence in value creation.
The Index Finger
The index finger is the one we use to point, push buttons, and pull triggers; it’s the one we use to talk about what it is that comes first. Baker uses the index finger to represent the financial health of a business. Questions executives must keep front and center involve the degree to which decisions either grow the top or bottom line. As Baker reminds us, “Financial value is second to the core value proposition, but sometimes we get this confused. The fan finger of choice to communicate “We are number one!” is this second digit, not the first. Despite this choice, the thumb is still the first digit, and core value propositions should proceed financial ones.”
The Middle Finger
The middle finger is the anchor of the hand. In Baker’s metaphor, it represents operational value. In other words, did the production unfold as designed so that it was efficient and effective? Examples of operational value propositions include increased throughput, time reductions, avoided cancellations, and so on. While operational value is critical, it is naïve to focus on it at the expense of other sources. After all, he notes, “The third digit extended alone and presented to another is unmistakenly offensive.”
The Ring Finger
When we think about the ring finger, long-term relationships come to mind. As Baker points out, “Aligning with a customer’s strategic concerns is a signal of interest in longer-term commitment. Strategic value propositions require alignment between internal performance and external positioning.” Value is derived through customer relationships characterized by strategic alignment, trust, and sustainability. Just as it has always been, customers will reward businesses they can count on in the next normal.
The Pinky Finger
Finally, the often too quickly dismissed pinky finger is a critical part of the hand. Without it, your hand loses a tremendous amount of its strength. What component of business value has historically been too quickly dismissed? Social value. If the new normal changes anything about the way stakeholders perceive value, it seems there are daily reminders that it is in this area where leaders have the most work to do in creating and communicating value creations. As Baker offered for illustration, “The other day, my daughter suggested we make a pinky promise about something. Pinky promises are cute but generally not considered legally binding.” His experience is that too many leaders view social value propositions with the same degree of commitment as they see pinky promises.
Interestingly, the fifth digit contributes considerably to our hand strength. Baker suggests trying a pushup without it. Continuing, he notes, “Companies that construct and deliver social value propositions that touch communities, like Toms and Warby Parker, create a condition that essentially force multiplies what they create through the other forms of value.”
It’s just a first step for a leader to understand how to assess value using these five elements. Delivering value requires leaders to communicate the plan so that followers can execute it. Creating and reinforcing understanding is a complicated thing to do, even more so in an evolving, complex, and unfamiliar business environment. Simple tools like Baker’s five fingers can help leaders track and communicate why the plan matters, no matter the stakeholder.