Value Creation in Organization

Value creation is a key activity in any kind of organization. In principle you could think that value creation has few limitations but reality is different. Old patterns in value creation are still very common and as patterns get established they create mental value hierarchies.

Old Value Creation in Organization

In the old world of long cycles there has been a tendency to lock value creation to correspond to the situation that existed as an organization was founded.

In products it has meant that a certain kind of physical refinement is directly linked to value creation. Significance of an input from a physical production point of view automatically sets it to a certain value position. Value creation becomes hierarchical. Those inputs that are low on the hierarchy do not receive much attention. "Information - low in value hierarchy - used to be typical thinking in the product area".

Same can be seen in a traditional service production. Old school customer journey is to a large extent fixed. Any input is positioned into a certain hierarchy position that predefines much of its value. New inputs start from the bottom. "Digital experience is not valuable experience and has low position". In the old days changes in hierarchies were slow and challenging.

New Value Creation in Organization

In the modern world value creation has its own logic that more and more seldom correlates with physical production or old service paths. It has not been an easy transformation. It still causes a lot of confusion and doubt. Especially among those people that have been trained for or are used to certain kinds of old style value creation. For them it is difficult to understand that a certain input that in the old hierarchy had low value can have value as much as it has now. Data is a good modern example. Data is moving up in value hierarchy and currently disrupts old value patterns.

Redigitalization

Digitalization as a whole is a perfect example of a new kind of input that originates outside the old value hierarchies but has meant a dramatic change to all organizations. However, talk about digitalization is now misleading. We have already seen many generations of digital systems. Every time a new generation has emerged disruption of old value hierarchies has taken place.

A new generation of digital systems (eg. with AI) mean that those hierarchies that were valid during the previous generation of digital systems are now becoming obsolete. It is not only what happens inside IT that matters. Value hierarchies inside any modern organization are changing. Because this is not the first time this takes place in the digital area we should call it redigitalization.

Value Creation as a Value Reinvention Process

• In volatile environment there is a pressing need for value reinvention activity.
• Even in redigitalization tech is not the key issue, but value is!
• We have to accept that in advance we don't know what the new successful value patterns and hierarchies will be.
• We know that they are typically more short lived than previously.

Therefore:

• Disrupt old value patterns and hierarchies to search fo new sources!
• Everyone needs to be involved in value reinvention activity!
• Co-reinvention is needed across functions and outside!
• Unexpected combinations are needed in value creation!
• Value reinvention needs to be a continuous process!

That requires:

• Value creation should be supported by an agile reinvention framework in an organization!