Do you really create value?

Value creation: Not to be confused with value transfer
Many managers confuse value creation and value transfer, which is unfortunately a management mistake. Indeed, value creation, to use a simple image, is the famous "2 + 2 = 5" which amounts to adding value through skills transfer, increased bargaining power, size, economies of scale, etc. While value transfer simply means moving something from your right pocket to your left pocket. For example, a company may acquire another because the target company has cash or unused borrowing capacity.
This operation allows it to use this cash or borrowing capacity but it does not create anything. It's just a transfer. Some managers will say that they acquired a company for its undervalued assets, but these assets already existed. It didn't create value. Others will think they are making a good deal because it will lead to tax relief, but there is not really any value created, it will simply be a matter of capturing, drawing value instead of creating it. Creating value is different.
First of all, it takes time and is difficult. Value creation benefits society, creates jobs, innovations, in short, creates something for the country or area where we operate. Value transfer, on the other hand, boils down to moving from one pocket to another, from one place to another. The role of a leader is therefore to create value. Of course, if he has the opportunity to transfer value, there is no question of missing out. But he must not base rewards or incentives on value transfer. He must encourage and evaluate skills based on value creation. And this must be the ultimate goal of any company in any industry and any country....


Philippe Montant CEO ExeKutive.biz