Summary: "Great Strategy Considers More Than Customers and Investors"
This MIT Solan Management Review* article illustrates – with examples – how companies have uncovered new sources of value by understanding and meeting the needs of stakeholders beyond investors and customers. Employees, business partners, and local communities are also essential stakeholders in the business strategy but are often overlooked. In their survey, 96% said they considered only customers as stakeholders in the strategic planning process, and only 11% considered a comprehensive stakeholder perspective in their development strategy.
It is important to identify the full range of stakeholder groups served and where and how the exchange of value can be improved.
• Value Creation with Employees
Treat your employees right and they translate their satisfaction to the customer. Service industries like Marriott Hotels, Southwest Airlines, and Costco are well-known for recognizing their employees as a crucial part of delivering excellent customer service. Boston Consulting Group was cited as an example of changing its culture and providing employees with better work-life balance. Managing director and senior partner Deborah Lovich said, “The results were even better than we expected, as not only did work-life balance get better, but the work itself got better — learning got better, client delivery got better, efficiency is better.”
• Value Creation with Upstream Partners
Supply chain management is a key element of strategy and important to a business’s overall value proposition. As such, retailers such as Costco understand the appeal to shoppers and classify 75% of their products as essentials their customers need, and 25% as items that delight them based on quality and price. Whole Foods and Trader Joe’s also recognize the benefit and have created relationships with small suppliers in return for shelf space, thereby making them unique places to shop.
• Value Creation with Downstream Partners
To increase the lifetime value of customers, manufacturers must provide solutions to the customer by leveraging distributors’ experience and insights. Apple and Alphabet/Google are cited as examples, these technology companies invest in community platforms to provide a space for their downstream partners to collaborate, co-create, and specialize. Support services, online forums, and marketing tools also enable distributors to evolve into partners and add value to the overall end-user experience.
• Value Creation with Communities
Research has shown that consumers are becoming more socially and environmentally conscious and are willing to pay higher prices for materials that are sustainably sourced or designed to be reused/recycled. Companies like Chipotle, Patagonia, and New Belgium Brewing are examples of companies that appeal to customers willing to pay more for ecologically sustainable products. By doing so, they are perceived as valuable members of the local community while enjoying increased customer loyalty and higher margins.
Read more of the article in full and learn about other examples of companies embracing and creating value with various stakeholders.