Well, I’m not really big enough to “poke the bear”. I’m more like a flea. If you haven’t ever heard the phrase, it refers to “going up against a competitive giant knowing the potential response will be massive”. At least that’s what one of my favorite cartoonists, Tom Fishburne, says. And how might I be poking the bear, you ask? I have just a slight quibble with McKinsey & Co. over the subject of creating value.
You can check out their article here. It really is quite good and worth a thorough read. They lay out four principles about creating value that can help CEOs when it comes to financial decision making. And I understand what they are saying about creating value. It’s all about cash flows and cost of capital… But that all pertains to “economic value” for the company. Before economic value is realized, companies have to create value for customers. McKinsey didn’t speak to that or only made reference indirectly. But that’s really the toughest part of being in business, isn’t it? It’s creating and delivering value to customers effectively and efficiently so they in turn provide cash flows back (i.e., economic value) to the business.
Every successful business has to be designed to effectively and efficiently create value for customers which in turn creates economic value for the business. If a business is designed to do that, then maybe those four principles can be applied to economic value creation so value isn’t destroyed through poor decision making. That’s my thought, anyway. And like I said, I’m not really big enough to be considered a poke at McKinsey. From what I can tell, they’re the largest consulting company in the world. I’m currently tied with countless others for the smallest. I’m sure they won’t even notice.
