This white paper, which can be ordered directly from the publisher, Pegasus Communications,  advocates an approach to management that is based on the fundamental principle that the purpose of any business is to create value for customers, employees and investors. The most successful organizations understand that the interests of those three groups are inextricably linked, and that sustainable value can not be created for one group unless it is created for all of them. The first focus should be on creating value for the customer, but this cannot be achieved unless the right employees are selected, developed and rewarded, and unless investors receive consistently attractive returns.  (The table of contents and introduction are reproduced below.)

Table of Contents

The Purpose of a Business

• Redefining an Organization’s Self-Interest
• Expanding the Pie
• Competition and Customer Value
• Successful Value-Creation Strategies
• Pragmatic Idealism and Value Creation

Does a Value-Creation Focus Work? The Evidence

• Corporate Culture and Performance
• Building Businesses That Last
• Market Leaders in Value Creation
• Value Creation, Loyalty, and Financial Performance

Value Management and the Information Economy

• Fundamental Changes in the Economic Environment
• Increasing Complexity of Relationships
• Customers’ Increasing Knowledge and Expectations

The Strategic Balance Sheets: A Tool for Measuring Value Creation Over Time

• Balance Sheets and Time Delays
• The Importance of Intangible Assets
• Creating True Management Accountability
• GM and Toyota: A Customer Balance Sheet Example

Introduction

A great deal of traditional management wisdom has been called into question by the fundamental changes taking place in the global economy. Strategies and business practices that worked in the past are breaking down in the face of more competitive markets, more demanding shareholders, and customers who expect ever higher levels of quality and value. Given these complex challenges, many companies are struggling to develop new ways of doing business that are better suited to today’s environment.

Often the first step in this corporate renewal process is to revisit the organization’s mission: "What is our purpose as a company? What business should we be in?" These are not academic questions. Having a clearly articulated purpose that is understood and embraced by all employees is the essential foundation upon which practical strategies, tactics and action steps can be built.

In this paper Paul O’Malley asserts that the most successful companies view their fundamental purpose as being not to maximize short-term earnings or beat the competition, but rather to create a continuous stream of value for customers, employees and investors, in ways that integrate the interests of those three groups. After stating the case for a value-creation focus, O’Malley presents evidence that demonstrates the superior financial performance of companies adopting that focus. He then explains why a purpose rooted in value creation is increasingly important as we move deeper into an information economy. Finally, he introduces the Strategic Balance Sheets, a tool for measuring and managing value creation.