Focus on value creation, not value extraction

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Articles Home » Browse Articles » Focus on value creation, not value extraction

Posted by - The Vanguard Network -

on - September 8, 2019 -

Filed in - Leading at the top -

By BigThink

Focus on Value Creation, Not Value Extraction: Essential Questions for Making Sure Your Business Makes Fundamental Contributions, with Mihir Desai, Professor of Finance and Law, Harvard Business School, and Author, The Wisdom of Finance

For an industry and an economy to grow and thrive, its members need to be adding more value than they’re extracting from it. Too often these days, this just isn’t the case. The fundamental trouble isn’t necessarily overt greed on the part of businesses so much as a lack of introspection. A failure to take a long, hard look in the mirror and ask: are our products truly creating value for our customers, or are we merely skimming value off the top of existing processes and instruments?

Think hard about your business. Ask: How much of our underlying economics are associated with furthering value-creating activities?
For example: Do we make things more efficient? Do we spread risk in a good way? Do we enable investments that wouldn’t have happened otherwise?
How much of our business is about skimming a piece out of a transaction that would’ve happened without us? Is our product actually serving a customer’s needs? Are we really creating value for them?

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