Create more value than you capture

This phrase became a company motto at O’Reilly Media in 2008, largely in response to the tremendous amount of value that left our economy during the financial crisis. Five years later, Tim O’Reilly advocates for this principle every chance he gets while applying it to emergent trends, such as the Sharing Economy.

Since 2011, I’ve been chipping away at my own understanding of trust, particularly from an organizational communication standpoint. After all that I’ve read and studied, however, it seems that the questions still outnumber the answers. Psychological researchers disagree about how to define trust and the business community rarely speaks about it from an evidence-based standpoint.

In short, it is easy to preach the heroic attributes of trust but surprisingly difficult to make a foolproof case for trust in a business context. Therefore, it might be more fruitful to define the ideal productivity experience of a high-trust organization instead of defining trust itself. Create more value than you capture instructs how we make decisions, trustworthy decisions, and it applies to all levels of organizational leadership.

The meaning

When we create more value than we capture, essentially, we focus less on short-term gain and more on the enduring qualities of our work. To me, the most important aspect of this phrase is that it reminds us of what it means to create value. Inside an organization, it’s natural to feel a sense of accomplishment from a well-crafted presentation or a well-executed plan, but did that work truly lead to more value creation for customers and society?

I often hear business leaders express frustration over their employees’ focus on processes and tasks. It’s the looking down instead of looking up that aggravates leaders. Processes are important, sometimes, and tasks are essential, sometimes.  But, the context has to be one of meaningful value creation, and individuals need a concrete assessment tool to evaluate and prioritize their activities.

Therefore, the real challenge is to determine whether workplace activities create lasting value for customers or simply achieve short-term gains for an individual, a team, or a department. The second part of this principle clarifies the type of value that is created. Activities that create personal gain are less important than those that produce meaningful benefit to others.

For example, in a one hour team meeting, which tasks should you share with the group? Some of your accomplishments highlight your personal skills, while other activities may produce greater value to the company and its customers. In this scenario, clearly the second set of activities should be given more attention in a team meeting.

Create more value than you capture is an effective decision-making tool for small, everyday activities and for big-picture corporate strategy.In the hands of an employee, this principle can guide improved self-awareness and task prioritization. In the hands of a manager, this principle becomes an effective performance evaluation tool.  And in the hands of senior leaders, this principle can serve Mr. OReilly’s larger goals of building business models that strive for more than short-term profits.

The most successful companies treat success as a byproduct of achieving their real goal, which is always something bigger and more important than they are.

Competitive strategy

When Mr. O’Reilly (who probably prefers to be called Tim) talks about this motto, he often references the open source projects that enabled the web to become a remarkable source of value for all of us.

According to Mr. O’Reilly, the early architects of the web were not self-serving. They engineered an environment that would generate value for decades to come. These early innovators and pioneers developed tools for widespread engagement, giving individuals and small businesses a powerful voice.

Here’s how Mr. O’Reilly explains his principle:

Focusing on big goals rather than on making money, and on creating more value than you capture are closely related principles. The first one is a test that applies to those starting something new; the second is the harder test that you must pass in order to create something enduring.

Take Microsoft. They started out with a big goal, “a computer on every desk and in every home,” and for many years unquestionably created more value than they captured. They helped grow the PC industry as a whole; they built a platform that helped many small software vendors to flourish. But over time, they began to capture more value than they created: as the cost of PCs plummeted, hardware vendors had to survive on the slimmest of margins while Microsoft collected monopoly rents; bit by bit, Microsoft consumed its own developer ecosystem by building the features of successful startups into their own products, and using their operating system dominance to crush the early movers. As I’ve written elsewhere, I believe that Microsoft must re-commit itself to big goals beyond its own profitability, and to creating more value than it captures if it is to succeed. (Danny Sullivan wrote a great piece about the strategic relevance of this very idea just last week, Tough Love for Microsoft Search.)

Workplace engagement

When we examine value creation and value capture as distinct activities, it becomes possible to create a new model for workplace engagement. While businesses unquestionably need to clarify and communicate their core culture, mission, and values (beliefs), these attributes are not directly tied to daily business decisions.

A company’s culture and values should guide employee decisions, but in most instances, they cannot instruct decision-making.  Mr. O’Reilly’s motto focuses on how decisions are made. Therefore, employees can readily determine whether their decisions will create value for the company’s customers, or conversely, capture value for their personal or team benefit.

This straightforward litmus test is congruent with activities in both service and manufacturing organizations and has the power to influence greater levels of collaboration, innovation, and organizational trust.

Employees who work collaboratively to create value are more likely to consider the long-term interests of their customers. The process is measurable, sustainable, and highly conducive to trust.

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