Value Cycle

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ederal Express, Airborne Express (now part of DHL), and Genentech are three powerhouse corporations, each successful in its own way. However, it can be shown that, whether consciously or not, they employ a Value Cycle to spur their success. As with many management models that elucidate complex processes, some initial defining of terms will help you to use the concept in your own business. The Value Cycle articulates a broadly applicable management process for achieving and sustaining superior performance; specifically, it ties together: Value, which refers to an organization’s ability to exceed the specific needs of its customers. The concept of a customer can be more complex than it appears. For a consumer products company, for example, a firm may have two sets of customers – the retailers who purchase its products directly – and the consumers who buy the firm’s products from the retailers’ shelves. To create value for these two sets of customers, the firm must understand each set’s distinct needs. For example, while the retailer might list its top three requirements as high profit margins, rapid shelf stocking and generous cooperative advertising budgets, the consumer’s top needs might be the product’s excellent taste, low price, and recommendation from family members. To create superior customer value, a firm would need to exceed its competitors’ performance on each of these attributes. Cycle, which refers to an important notion that in most industries, firms are continually investing to upgrade the value they create for customers. Moreover, new entrants backed with innovative technology may seek to upend the firm’s basis for creating customer value. Furthermore, over time, the needs of customers and/or the relative

Performance, which is deliberately vague at this point in order to enable managers of both for-profit and non-profit organizations to use the Value Cycle. Superior performance for shareholders of public companies is measured by long-term return on...