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This appendix provides a summary of the CVF for growth strategy. It examines how the various metrics for measuring value creation in each quadrant (Community and Knowledge in Yellow; Innovation and Growth in Green; Speed and Profits in Blue; and Efficiency and Quality in Red) relate to various aspects of value creation:
n Financial outcomes
n Organizational characteristics
n Organizational tendencies
n Organizational strengths
n Aspects of organizational culture
n Organizational leadership characteristics
n Culture blind spots for the organization
n Individual blind spots
Examining these aspects should help you to deepen your understand-ing of the CVF and the pros and cons of any specific growth strategy.
The Competing Values Framework for Growth Strategy
APPENDIX
APPENDIX150
Collaborate Create Compete Control
Performance metrics Community Knowledge Innovation Growth Speed Profits Efficiency Quality
Operationalization of metrics—financial outcomes
Sales divided by the number of employees
Future growth values—the difference between the firm’s current market value and its value if its profits do not grow
The standard deviation of the alpha in the firm’s stock return—the difference between a company’s actual returns and the portion of the returns that can be explained by co-movement with overall market return
Sales growth Change in firm’s EVA growth rate from one year to next, over five-year period
Economic value added (EVA)—net operating profits after tax, minus capital charge, where capital charge equals firm’s weighted-average cost of capital, times net assets deployed
Asset turnover— sales divided by assets in given year
Gross margin—price premium of higher quality products and services drives gross margin, as measured by sum of sales return, less cost of goods sold, divided by sales revenue
Characteristics it sought
n Workforce commitment
n Shared valuesn Inclusionn Teamworkn High-performing
culture
n Workforce competence
n Continuous learning
n Employee retention
n Employee support
n Advancements in knowledge
n Product innovation
n Riskn Exceptionsn Experimentingn Change
n Capacity to change
n Riskn Vision of
possibilityn Explorationn Transforming
emerging trends
n Market share opportunities
n Quick responsen Dominationn Aggressiveness
n Shareholder valuen Predictable
opportunitiesn Focus on competingn Short-term resultsn Managed resources
n Cost controln Regulationn Monitoringn Improvementn Stability
n Reliabilityn On-time deliveryn Process
improvementn Technical capabilityn Systems and
technology
Tendencies Internal capability and long-term development of culture
Adaptability and long-term development of culture
Adaptability and breakthrough transformation
Breakthrough transformation and external opportunities
External opportunities and short-term performance
Short-term performance and stability
Stability and incremental improvement
Incremental improvement and internal capability
Strengths through what is demanded
n Focus on internal maintenance
n People orientedn Performance
through shared values and inclusion
n Teamwork and consensus
n Developing culture over time
n Focus on internal maintenance
n People/process oriented
n Performance through new competencies
n Employee satisfaction
n Organizational development strategies
n Creative crisis to overturn the status quo
n Risk-seekingn Demands
flexibility and uniqueness
n Attracts entrepreneurship
n Seeks continual breakthroughs
n Demands future vision
n Focuses on new frontiers
n Creates ambiguity
n Succeeds through developing and testing scenarios
n Transforms opportunities
n Requires market analysis
n Domination through acquisitions and alliances
n Seeks skills to winn Compete-for-results
culture
n Seeks stability through discipline
n Focused goals lead to short-term results
n Managed assets lead to shareholder value
n Maximize bottom linen Attracts logic and
predictability
n Policies and regulation drive improvements
n Seeks better, faster, and cheaper
n Data-driven standards
n Monitor controlsn Eliminate error and
variation
n Systems and technology ensure quality
n Superior capability through incremental improvement
n Regular process review
n Seeks stabilityn Smooth operations
151The Competing Values Framework for Growth Strategy
Collaborate Create Compete Control
Performance metrics Community Knowledge Innovation Growth Speed Profits Efficiency Quality
Operationalization of metrics—financial outcomes
Sales divided by the number of employees
Future growth values—the difference between the firm’s current market value and its value if its profits do not grow
The standard deviation of the alpha in the firm’s stock return—the difference between a company’s actual returns and the portion of the returns that can be explained by co-movement with overall market return
Sales growth Change in firm’s EVA growth rate from one year to next, over five-year period
Economic value added (EVA)—net operating profits after tax, minus capital charge, where capital charge equals firm’s weighted-average cost of capital, times net assets deployed
Asset turnover— sales divided by assets in given year
Gross margin—price premium of higher quality products and services drives gross margin, as measured by sum of sales return, less cost of goods sold, divided by sales revenue
Characteristics it sought
n Workforce commitment
n Shared valuesn Inclusionn Teamworkn High-performing
culture
n Workforce competence
n Continuous learning
n Employee retention
n Employee support
n Advancements in knowledge
n Product innovation
n Riskn Exceptionsn Experimentingn Change
n Capacity to change
n Riskn Vision of
possibilityn Explorationn Transforming
emerging trends
n Market share opportunities
n Quick responsen Dominationn Aggressiveness
n Shareholder valuen Predictable
opportunitiesn Focus on competingn Short-term resultsn Managed resources
n Cost controln Regulationn Monitoringn Improvementn Stability
n Reliabilityn On-time deliveryn Process
improvementn Technical capabilityn Systems and
technology
Tendencies Internal capability and long-term development of culture
Adaptability and long-term development of culture
Adaptability and breakthrough transformation
Breakthrough transformation and external opportunities
External opportunities and short-term performance
Short-term performance and stability
Stability and incremental improvement
Incremental improvement and internal capability
Strengths through what is demanded
n Focus on internal maintenance
n People orientedn Performance
through shared values and inclusion
n Teamwork and consensus
n Developing culture over time
n Focus on internal maintenance
n People/process oriented
n Performance through new competencies
n Employee satisfaction
n Organizational development strategies
n Creative crisis to overturn the status quo
n Risk-seekingn Demands
flexibility and uniqueness
n Attracts entrepreneurship
n Seeks continual breakthroughs
n Demands future vision
n Focuses on new frontiers
n Creates ambiguity
n Succeeds through developing and testing scenarios
n Transforms opportunities
n Requires market analysis
n Domination through acquisitions and alliances
n Seeks skills to winn Compete-for-results
culture
n Seeks stability through discipline
n Focused goals lead to short-term results
n Managed assets lead to shareholder value
n Maximize bottom linen Attracts logic and
predictability
n Policies and regulation drive improvements
n Seeks better, faster, and cheaper
n Data-driven standards
n Monitor controlsn Eliminate error and
variation
n Systems and technology ensure quality
n Superior capability through incremental improvement
n Regular process review
n Seeks stabilityn Smooth operations
(Continued)
APPENDIX152
Collaborate Create Compete Control
Performance metrics Community Knowledge Innovation Growth Speed Profits Efficiency Quality
Aspects of organizational culture
n Friendly atmosphere
n Participationn Team goalsn Mentorshipn Shared values
n Information sharing
n Collaborative learning
n Dedicated masters-as-teachers
n Personal growthn Long-term
solution buildingn Diversityn Organizational
development practices
n Employee retention
n Entrepreneurialn Creative
workplacen Ongoing
acquisition of new resources
n Individual freedoms
n Experimentationn Ambiguityn Risk
n Adventuren Curiosityn Emergent
opportunitiesn Clear visionn Trend followingn Manage
unknown
n Market dominationn Fast decision
makingn Hard-drivingn Expansion of
leadership powern Leveraging of assetsn Mergers and
acquisitions to speed up innovation
n Analytical
n Results-orientedn Target-focusedn Demanding leadershipn Alignment of resources
for specific purposesn Managerial disciplinen Maximization of valuen Analyticaln Cost-competitive
n Structuren Rules and policiesn Risk aversionn Cost controln Specialization of
functionsn Task focusn Preservation of
order
n Improvement-focused
n Technology emphasis
n Best practicesn Workflow
managementn Emphasis on
troubleshootingn Data focusn Smooth operationn Best-in-class focus
Organizational leadership characteristic
n Facilitatorn People orientedn Consensus
buildern Tolerance for
diversityn Effective
communicator
n Mentorn Effective teachern Solution buildern Tolerance for
ideasn Supportive
n Innovatorn Clever and
creativen Risk takern Learns from
failuren Experimentern Tolerance for
ambiguityn Abstract thinker
n Visionaryn Future orientedn Visualizes new
outcomesn Opportunisticn Intuitiven Risk taker
n Producern Task-focusedn Stealthyn Aggressive and
decisiven Resourceful
n Competitorn Aggressive and
decisiven Demandingn Energizes employeesn Strategicn Resourceful
n Administratorn Technologically
adeptn Conserves
resourcesn Standardizingn Diligent
n Engineern Technologically
adeptn Dependable and
reliablen Systems thinkern Diligentn Technical expert
Performance blind spots
Reluctant to assume that not all viewpoints are relevant or important
Reluctant to assume that correct people, values, and skills may already be in place
Reluctant to assume that continued success is possible by extending existing practices
Reluctant to assume that future is an extension of present
Reluctance to assume that organization has capabilities necessary to enter new markets or to launch new products
Reluctance to assume that pursuit of immediate profits may jeopardize long-term sustainability
Reluctance to assume that laws, policies, and procedures can be circumnavigated
Reluctance to assume that operationalizing an idea at scale to achieve quality can be done without excessively detailed planning
153The Competing Values Framework for Growth Strategy
(Continued)
Collaborate Create Compete Control
Performance metrics Community Knowledge Innovation Growth Speed Profits Efficiency Quality
Aspects of organizational culture
n Friendly atmosphere
n Participationn Team goalsn Mentorshipn Shared values
n Information sharing
n Collaborative learning
n Dedicated masters-as-teachers
n Personal growthn Long-term
solution buildingn Diversityn Organizational
development practices
n Employee retention
n Entrepreneurialn Creative
workplacen Ongoing
acquisition of new resources
n Individual freedoms
n Experimentationn Ambiguityn Risk
n Adventuren Curiosityn Emergent
opportunitiesn Clear visionn Trend followingn Manage
unknown
n Market dominationn Fast decision
makingn Hard-drivingn Expansion of
leadership powern Leveraging of assetsn Mergers and
acquisitions to speed up innovation
n Analytical
n Results-orientedn Target-focusedn Demanding leadershipn Alignment of resources
for specific purposesn Managerial disciplinen Maximization of valuen Analyticaln Cost-competitive
n Structuren Rules and policiesn Risk aversionn Cost controln Specialization of
functionsn Task focusn Preservation of
order
n Improvement-focused
n Technology emphasis
n Best practicesn Workflow
managementn Emphasis on
troubleshootingn Data focusn Smooth operationn Best-in-class focus
Organizational leadership characteristic
n Facilitatorn People orientedn Consensus
buildern Tolerance for
diversityn Effective
communicator
n Mentorn Effective teachern Solution buildern Tolerance for
ideasn Supportive
n Innovatorn Clever and
creativen Risk takern Learns from
failuren Experimentern Tolerance for
ambiguityn Abstract thinker
n Visionaryn Future orientedn Visualizes new
outcomesn Opportunisticn Intuitiven Risk taker
n Producern Task-focusedn Stealthyn Aggressive and
decisiven Resourceful
n Competitorn Aggressive and
decisiven Demandingn Energizes employeesn Strategicn Resourceful
n Administratorn Technologically
adeptn Conserves
resourcesn Standardizingn Diligent
n Engineern Technologically
adeptn Dependable and
reliablen Systems thinkern Diligentn Technical expert
Performance blind spots
Reluctant to assume that not all viewpoints are relevant or important
Reluctant to assume that correct people, values, and skills may already be in place
Reluctant to assume that continued success is possible by extending existing practices
Reluctant to assume that future is an extension of present
Reluctance to assume that organization has capabilities necessary to enter new markets or to launch new products
Reluctance to assume that pursuit of immediate profits may jeopardize long-term sustainability
Reluctance to assume that laws, policies, and procedures can be circumnavigated
Reluctance to assume that operationalizing an idea at scale to achieve quality can be done without excessively detailed planning
APPENDIX154
Collaborate Create Compete Control
Performance metrics Community Knowledge Innovation Growth Speed Profits Efficiency Quality
Culture blind spots
n Issue avoidancen Too participativen Group thinkn Too slown Too internal
n Forsake short term
n Inability to quickly respond
n Lack of critical feedback
n Too slown Too internal
n Too individualisticn Lack of
teamworkn Superficiality over
complexity
n Mismatched incentives
n Lack of loyalty
n Pace is too fastn Unnecessary
competitionn Burnout
n Insufficient resourcesn Unrealistic target
settingn Wasting of assets
n Too controllingn Ideas don’t developn Turf protectionn People ignored
n Too predictablen Micro-managementn Distrustn People ignored
Individual blind spots
n Overemphasis on people and less task emphasis
n Cliquishn Lack of metrics
n Knowledge doesn’t always translate into practice
n Lack of focusn Difficulty being
direct
n Exhibits risky behavior
n Falls in love with ideas
n Micro-managingn Inability to rally
support
n Inability to produce viable ideas
n Disloyal to organization
n Micro-managingn Fails to adjust
personal ideas and won’t satisfy other objectives
n Takes easy route to quick fix
n Overly aggressiven Too fastn Bad with people
n Takes easy route to quick fix
n Myopicn Unrealistic in demandsn Bad with people
n Overly analyticaln Lean and meann Blind to new ideasn Lacks social skills
n Uses best practices as crutch
n Informs but won’t teach
n Lacks social skills
Examples—firm types
n Mission and/or advocacy-based organizations
n Associationsn Family businessesn Lifestyle organizationsn Partnerships
n Mature firms in death cycle that need innovation to resurrect themselves
n Start-up firmsn Design and/or creative businesses
n Large, diversified, public companiesn Financial institutionsn Leaders in large industries
n Operationally complex businessesn Manufacturing firmsn Discount retailersn Governments
Examples—specific firms
McKinsey Ericsson Google Apple Microsoft General Electric Wal-Mart Toyota
155The Competing Values Framework for Growth Strategy
Collaborate Create Compete Control
Performance metrics Community Knowledge Innovation Growth Speed Profits Efficiency Quality
Culture blind spots
n Issue avoidancen Too participativen Group thinkn Too slown Too internal
n Forsake short term
n Inability to quickly respond
n Lack of critical feedback
n Too slown Too internal
n Too individualisticn Lack of
teamworkn Superficiality over
complexity
n Mismatched incentives
n Lack of loyalty
n Pace is too fastn Unnecessary
competitionn Burnout
n Insufficient resourcesn Unrealistic target
settingn Wasting of assets
n Too controllingn Ideas don’t developn Turf protectionn People ignored
n Too predictablen Micro-managementn Distrustn People ignored
Individual blind spots
n Overemphasis on people and less task emphasis
n Cliquishn Lack of metrics
n Knowledge doesn’t always translate into practice
n Lack of focusn Difficulty being
direct
n Exhibits risky behavior
n Falls in love with ideas
n Micro-managingn Inability to rally
support
n Inability to produce viable ideas
n Disloyal to organization
n Micro-managingn Fails to adjust
personal ideas and won’t satisfy other objectives
n Takes easy route to quick fix
n Overly aggressiven Too fastn Bad with people
n Takes easy route to quick fix
n Myopicn Unrealistic in demandsn Bad with people
n Overly analyticaln Lean and meann Blind to new ideasn Lacks social skills
n Uses best practices as crutch
n Informs but won’t teach
n Lacks social skills
Examples—firm types
n Mission and/or advocacy-based organizations
n Associationsn Family businessesn Lifestyle organizationsn Partnerships
n Mature firms in death cycle that need innovation to resurrect themselves
n Start-up firmsn Design and/or creative businesses
n Large, diversified, public companiesn Financial institutionsn Leaders in large industries
n Operationally complex businessesn Manufacturing firmsn Discount retailersn Governments
Examples—specific firms
McKinsey Ericsson Google Apple Microsoft General Electric Wal-Mart Toyota
156 APPENDIX
If you liked what you have read and want to learn more about how to use the Competing Values Framework for designing and implementing your growth strategy, please contact:
Dr. Anjan ThakorCompeting Values
