Value creation the definitive guide for business leaders

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Advance Praise
This is a rich and rewarding book which will launch organizations
into the world of value creation for customers and other stakeholders and will convert good CEOs and companies to great ones
with longevity and higher profitability. This book is a conceptual
breakthrough which goes beyond the great Total Customer Value
consulting work Gautam did for Godrej.
—Adi Godrej
Chairman, the Godrej Group
This book is a classic because it will change managerial thinking
just like Tom Peters did in In Search of Excellence. Value Creation:
The Definitive Guide for Business Leaders will shift managerial focus
to creating value for the entire business ecosystem and not just for
the shareholders. It will make firms agile, adept, and visionary for
the future. The book will cause CEOs to think, change mind-sets,
and become creative, winning the future. It will create more astute
and alert executives, and increase profits. The book gives ideas
about creating value at different levels for employees, customers,

and shareholders. If you want to be successful and win in the
future, you should not miss this trendsetting book.
—David Frigstad
Chairman, Frost & Sullivan
For those who want to learn to create value, you’ve come home to
this brilliant book. This book integrates hugging customers and
customer-centricity to unleashing the power of value creation for
business success.
This eye-opening book is about common sense, and gives you
instantly practical ideas without being a burden on your time.
Incorporating Gautam Mahajan’s uniquely creative concepts will
change your mind-set and lead you to superior achievements.
—Jack Mitchell
Chairman, Mitchells Family of Stores;
Author, Hug Your Customers and Hug Your People


I enjoyed Gautam Mahajan’s recent book, Value Creation: The
Definitive Guide for Business Leaders. It is very timely given the
­current conversations about value creation around the world and
the waste created by driving stock prices on a quarterly basis with
rewards going to a limited few. The book is a valuable catalyst,
which should result in a more robust dialogue about long-term
value creation for enterprises large and small. The key take away is
that customer-centric businesses create value for all stakeholders
which should result in higher valuations and stock prices over the
very long term.
—Edward A. Lapekas
Retired CEO and Chairman of the Board,
American National Can Group and former President and

Chief Operating Officer, Beverage World Wide Division,
Pechiney (later Rio Tinto)
Insightful. Full of harsh realities about the world of marketing and
management as you know it.
Gautam suggests a new vision, common sense and human
authenticity ... an excellent springboard for a much needed
­marketing turnaround ... Marketing with Meaning!
—Professor Luiz Moutinho
Foundation Chair,
Marketing Adam Smith Business School,
University of Glasgow,
UK Adjunct Professor,
Marketing, Graduate School of Business,
University of South Pacific, Fiji.
Founding Editor, Journal of Modelling in Management (JM2)
The days of waging battle against customers are gone. Now, ­success
comes from getting in the trenches with the customer and working
toward a win–win outcome. To survive in a world of supremely
educated buyers who, above anything else, are ­time-poor, hungry
for insight, and demanding progress, unless you can assume the
customer’s perspective, enriched by your experience with other
similar customers, your outcomes will never be great. This is the


time to create value for your customers and in this book Gautam
provides priceless signposts to get started on that journey.
—Donal Daly
CEO, The TAS Group;
Author, Account Planning in Salesforce
I loved this book. No one globally knows more about buyer–seller

dynamics than Gautam Mahajan, author of Value Creation: The
Definitive Guide for Business Leaders. Likewise, no one knows more
about how senior management should change these dynamics
to create new value for both company and customers—which
in some cases multiplies the bottom line, rather than just lifting
­profits incrementally.
As Gautam relates, too many CEOs and senior managers
discount the payback potential of adding customer value. But
he believes these executives will soon regret their reluctance to
embrace customers when their companies start experiencing limited growth and diminishing value in the near and long term.
He peppers his clearly written, no business-speak narrative with
real-life examples of companies both creating and destroying
enterprise value. His examples should persuade most CEOs and
management readers to change course in the direction of true customer-centricity that taps into customer value, rather just talking
the talk without walking the walk.
Unfortunately, as Gautam reminds us, most graduate business
programs resist change and continue teaching future executives to
embrace cost-control as their primary goal, which can doom them
from the start. He also throws shade at the commonplace corporate practice of focusing first on increasing shareholder value—
which Jack Welch calls “the dumbest idea in the world.” Creating
shareholder value is an outcome, not a goal.
On a practical level, Value Creation: The Definitive Guide for
Business Leaders lays out for CEOs and senior managers the change
process for moving their organizations from company-centric to
real customer-centricity. And when their companies start adding
value to customers, they typically get a long leg up on still inwardly
focused competitors.


Gautam does not let go unscathed those companies trying to

accrue value to themselves by stripping value away from customers. He addresses fundamental shortcomings of common win–lose
strategies that ignore the latent opportunities for sellers to extract
more value from customers. Instead, he urges CEOs and ­executives
to focus on win–win opportunities to add value to customers, in
ways that will add value back to the company, especially at a time
when customers are gaining new power and customer loyalty is
eroding at an alarming rate.
For CEOs, senior execs and middle managers wanting to
anticipate where higher-ups are steering their companies and
­
why, Value Creation: The Definitive Guide for Business Leaders is
without question the right book at the right time.
—Dick Lee
Author, We Are Buyers. You Are Sellers. You’re Busted
This book is fantastic, a 10 out of 10! Gautam provides CEOs
with a practical guide to rediscover the customer relationship
as an ­
inspirational source of innovation that is applicable to
any i­ndustry, and is very much needed today to drive lasting
­competitive advantage for sustainable, profitable growth!
—Brent Zions
Value Creation Transformation Consultant
This book is a gem! While it is geared to CEOs, its style will be
appreciated by anyone interested in helping their organization
maximize the long-term value they create and minimizing the
short-term value they destroy. Sprinkled throughout this book are
real-world examples from real companies, analyses from widely
respected sources, and references to articles which are available to
everyone. If you are either beginning the value creation journey
or updating your successful strategy, you should look no further

than this book for information, inspiration, and insight.
—Sam Klaidman
Principal Adviser, Middlesex Consulting


Does a CEO want to make the stockholders happy or extra happy,
or would he want his employees engaged or passionate about
their jobs? Also, would he want his customers to be satisfied
or to be loyal customers? Well this doesn’t happen by chance,
in fact so many companies and organizations around the world
need to read this excellent book by Gautam Mahajan covering
a great assortment of very important topics. This is a must read
for e­xecutives, ­practitioners, and professionals who will see so
many of the ­different components to create customer value in
their ­organization. I use this book as a desk reference and finding
myself referring back to the many critical topics. Gautam is truly a
respected global leader, speaker, editor, and mentor.
—Jim Carras
Chairman, Customer Value Creation International
In this excellent, very important book that supplements and
extends the theory of value innovation and the creation of “blue
oceans” as described by Kim and Mauborgne, Gautam Mahajan
describes the priority, strategy, and difficult complexities of value
creation as the core of a new generation of investment and management theory and practice that is now required in all businesses.
The book clearly explains why a fundamentally new type of
investment and CEO leadership is required and has to be supplemented with new C-level executive positions in order to focus the
organization and its partners on creating new value for customers
in order to survive past an average life expectancy for businesses
that has decreased to about 12 years while creating value for all
stakeholders including employees, business partners, and society.

—William L. Miller
CEO, Innovation Extension Center LLC
Gautam Mahajan has created a new handbook for customer
value. New ways of intelligent and outcome-oriented thinking
are ­combined with an individual approach for the 21st century
in management and benchmarking of value-driven customer


s­ ervices. The book is highly recommended for the CXO level as
really important, as well highly recommended for lecturers and
students in international business schools.
—Urs Hauenstein
President and Visiting Professor,
International Council for Leadership, Governance,
Entrepreneurship, Management, Swiss Quality
Competencies and Qualifications
This book isn’t just good reading, it’s a new mindset. If you are a
CEO, it will help you build your company successfully. As a result
of applying the concepts in this book you will create value for
your customers and for your company.
Additionally, apply the long-term strategies outlined in this
book, in detail, and you will see that success is so much more
than something that can be captured by having short-term focus.
A concept in this book that is examined carefully is how to create
value for your customers before you can take value from your
­customers. What an incredible idea, giving more so you can
receive more. As a business owner who has always presented a
“Nice is Right” strategy, I can relate to the author of this book. He
really “gets it.”
If you own a business, run a business or just want to find out

the importance of adding and providing value to your business
relationships, this is the book for you. A must read.
—Doug Sandler
Author, Speaker, HuffPost Blogger
Nice Guys Finish First
#1 Best Seller Ranking on Amazon
A content-rich framework for creating sustainable value to
your customers, employees, partners, suppliers, distribution
­channels—and thereby, ultimately to stockholders—in a series of
stand-alone, yet connected, chapters. There is something within
the material for everyone, irrespective of where you may be on


your customer-focus journey. Gautam Mahajan will have you
finding fresh new opportunities to powerfully lever the word
“value” for your business.
—Harvey Thompson
Author, Who Stole My Customer?? Winning Strategies for Creating
and Sustaining Customer Loyalty (Second Edition)
Former Head of Customer Value, IBM
Every CEO’s job is about creating and delivering value to all stakeholders. And this book is guaranteed to start the CEO’s day on the
right track—that of understanding and focusing on key aspects
of internal and external customer value, presented with an easy
­narrative style that helps refocus on the fundamentals of ­addressing
customer expectations. Better than your first cup of coffee!
—Kall Ramanathan
Value Creation & Strategy—Blog website
The Mobile Ecosystem in India—Blog
Creating customer value is essential for success, and Gautam
Mahajan’s latest book is a must reading on how to do it! It really

is good. It flows well, has great substance, a solid logic which
causes one to think and helps put many conflicting concepts in
their proper place.
—Ray Kordupleski
Founder of Customer Value Management;
Author, Mastering, Customer Value
Professor, Customer Value, University of Montana, USA
Yesterday, the landscape for competitive business owners extended
between the Yellow Pages and a 20-mile radius around your consumer. Today, competition is global. With efficiencies in technology and greater access to consumer information, the edge is
no longer guaranteed to the company with the biggest marketing
budget—it’s going to the company that offers their customers


the greatest advantage, benefit, and value. It’s all about “Value
Creation.” Gautam Mahajan’s book offers many tips, ideas, and
insights for the value-focused CEO to attain just such an advantage.
—Charles E Gaudet II
Best-selling author,
The Predictable Profits Playbook: The Entrepreneur’s Guide to
Dominating Any Market and Staying on Top
One of the most important tasks in marketing is to create and
­communicate value to customers to drive their satisfaction, l­ oyalty,
and profitability. This new book will keep you enlightened on
both concepts and application of value creation and it serves as an
influential source for academics and practitioners alike.
—Werner Reinartz
Professor of Marketing, University of Cologne
In his latest book, Value Creation: The Definitive Guide for Business
Leaders, Gautam Mahajan makes a compelling business case for
the imperative of focusing on value creation. Blending his wealth

of experience, personal and practical examples and an abundance
of marketplace research, Mahajan offers practitioners a hands-on
toolkit for unlocking the potential of creating value in their own
organizations. Not fearful of challenging conventional wisdom (see
his premise about the notion that companies are to serve a greater
purpose than profits), his candid and authoritative point of view
will serve leadership well in their aspirations for i­nstitutionalizing
a culture of value creation.
—Scott M. Broetzmann
President & CEO,
Customer Care Measurement & Consulting


Gautam succeeds in liberating value from its abstract s­trategic
prison and turns it into an exciting project for the entire
­organization. Today more than ever, CEOs need to be visible and
relevant to their highly diverse stakeholders. While CEOs are
often dragged into a swamp of compliance, this book allows CEOs
to rise as the commanders of value. This book provides them the
concrete words, discourse, arguments, and frameworks to unambiguously choose for value creation as central course of action and
performance. The value creation theme will destroy silos and give
the organization a new tangible horizon that extends way beyond
the CEO’s own tenure.
—Olaf Hermans
NHTV Breda University of Applied Sciences
(The Netherlands), and Pennsylvania State University,USA
A very timely book on why and how companies must embrace
and implement value creation culture, not just for shareholders,
but also for customers, employees, and the community at large. 
—Jagdish N. Sheth

Charles H. Kellstadt Professor,
Marketing, Emory University, USA



VALUE
CREATION



VALUE
CREATION
The Definitive Guide for
Business Leaders

Gautam Mahajan


Copyright © Gautam Mahajan, 2016
All rights reserved. No part of this book may be reproduced or utilized in
any form or by any means, electronic or mechanical, including photocopying,
recording or by any information storage or retrieval system, without permission
in writing from the publisher.
First published in 2016 by

SAGE Response
B1/I-1 Mohan Cooperative Industrial Area
Mathura Road, New Delhi 110 044, India
www.sagepub.in
SAGE Publications Inc

2455 Teller Road
Thousand Oaks, California 91320, USA
SAGE Publications Ltd
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London EC1Y 1SP, United Kingdom
SAGE Publications Asia-Pacific Pte Ltd
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#10-04 Samsung Hub
Singapore 049483
Published by Vivek Mehra for SAGE Publications India Pvt Ltd, typeset in Berkeley
11/13 pts by Zaza Eunice, Hosur, Tamil Nadu and printed at Sai Print-o-Pack,
New Delhi.
Library of Congress Cataloging-in-Publication Data
Name: Mahajan, Gautam.
Title: Value creation : the definitive guide for business leaders / Gautam
Mahajan, President, Customer Value Foundation and Inter-Link Services
Private Limited, New Delhi.
Description: Thousand Oaks : SAGE Publications India Pvt Ltd, 2016. |
Includes index.
Identifiers: LCCN 2016001974| ISBN 9789351508977 (pbk. : alk. paper) |
ISBN 9789351508991 (ebook) | ISBN 9789351508984 (epub)
Subjects: LCSH: Strategic planning. | Chief executive officers. | Customer relations.
Classification: LCC HD30.28 .M3234 2016 | DDC 658.4/012—dc23 LC record
available at />ISBN: 978-93-515-0897-7 (PB)
The SAGE Team: Sachin Sharma, Sudeshna Nandy, Megha Dabral and Ritu Chopra


I dedicate this book to all those who believe in and promote the
concept of Value Creation and to those I have reached out to and those
that have reached out to me.

My Value Creators are my family, Veena, Karan, and Shiv.
Thank you!


Thank you for choosing a SAGE product!
If you have any comment, observation or feedback,
I would like to personally hear from you.
Please write to me at
Vivek Mehra, Managing Director and CEO, SAGE India.

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This book is also available as an e-book.

Contents
Preface
Acknowledgments

xiii
xliii

1. WHY IS VALUE CREATION IMPORTANT FOR CEOs?1
Long-term Strategy Creates More Value than Short-term Focus
1
Why Value Creation Is More Crucial than Value Extraction?
9
Value Creation Is a Good Idea!
12
8 Signs Why Your Company Isn’t Creating Value
17
From Value Grabbing to Value Creating: Lesson for Leaders
23
Leadership Training Not Effective: A Contrarian View
27
Why Leaders Fail
30
2. CEOs AS VALUE CREATORS FOR
BUSINESS/CUSTOMERS33
Customer Strategy
34
Value Creation Is Output/Input
38
Business As Unusual

41
Think Out of the Box; Think Radically About Your Business
41
Customer Value and Shareholder Wealth
43
Customer Value Management Increases Customer and
Company Value (and Also Increases Sales and ROI)
43
Share of Wallet Goes Up When Your Customer Value Is
Added or Customer Score Goes Up
48
Customer and Value Migration
53
Transforming Companies through Value Creation
Not Value Destruction: The Balancing Act
56
Will Value Destruction Ace Value Creation?
60
Big Brother: Google, Apple, and Microsoft
60
The Case for Value Creation Centers
62
Value Councils Go Beyond Pricing Councils and
Innovation Councils
62
The Real Sources of Value: Assets and Performance
67
Chief Value Creation Officer (CVCO)
70
Death of Companies

74
Death of Profit
76
Death of Competition
76
Death of Demand
79


viii  VALUE CREATION

3. HOW CEOs CAN USE VALUE CREATION
FOR CUSTOMERS
Customers As Ambassadors and Their Networks
Customers with “Social Value”: Your Customer Ambassadors
Creating Value from Your Customer’s Network
No Time for Customers? Conduct a Task Audit
When Zero Defects Are the Norms, Why Not
Zero Customer Complaints
5 Ideas for Creating Customer Value
4. CEOs CAN SEE HOW THEIR VALUES (AND THEIR
COMPANY’S VALUES) CREATES CUSTOMER VALUE
Values Create Value
Driving Businesses from Values: Achieve Higher Profits
CSR or Conscious Capitalism or Capital Consciousness?
Corporate Unconsciousness: A Wakeup Call
5. BUSINESS TRANSFORMATION IDEAS FOR CEOs TO
CREATE VALUE
How to Get Senior Leaders to Change?
The Leadership Skill of Being Able to Unlearn:

Create Value through Unlearning
Building Silos or Breaking Silos? Internal Customers
Is a Flawed Concept!
The Memory of Your Experience Is More Important than
Your Experience
Training versus Mind-set in Value Creation
Nuisance Value: Value Creation or Value Destruction?
6. HOW CEOs CAN AND WHY THEY SHOULD
CREATE VALUE FOR EMPLOYEES
Why Companies Need to Empower Employees and
Get Connected
Creating Value for Yourself
Using Employees to Build Market Place Foresight
and Value Creation
Value Creation by Employees
Is Employee Churn Costing You As Much As
Your Salary Expense
Employee Journey

83
83
84
85
87
89
92

96
96
98

100
102

106
106
109
112
115
118
122

126
126
129
132
134
137
138


Contents ix

Whom Do I Work For?
What Does Being Secure Have to Do with Creating Value?

140
144

7. HOW AND WHY CXOs SUCH AS CFO/MARKETING/HR
CREATE VALUE

De-commoditizing Commodities: Add Value
CIOs Can Be True Value Creators
8 Ideas for Value Creation for HR Professionals
Become Line Managers
Does Value Creation Need Financial Incentives
When You Wake up Do You Say I Will Create Value?

148
148
153
156
156
162
162

8. VALUE CREATION AND CUSTOMER SERVICE/LOYALTY
TIPS FOR CEOs167
Converting Call Centers from AGGRAVATION
Centers to ACTION Centers
167
The Charm of Good Service
170
Customer Care or Do We Care?
173
Customer Value Journey
174
Making the Journey Easy and Meaningful Creates Value
174
Customer-value Marketing Critical as Airline
Executives Lose Focus

177
Industry and Telcos Need to Improve Use of New Channels
180
Two Out of Three Consumers Switched Companies in 2011
182
Value Creation Implementation Ideas: Avoid Value Destruction 183
Examples of Extra Steps Executives Can Take (Of Course,
This Depends on Your Role in the Organization)
184
Examples of Value Destruction That Can Be Avoided
185
When Less Is More for Customers
187
Should Executives Think Like the Customer?
190
From Executive Think to Customer Think
192
9. HOW CEOs CAN USE VALUE CREATION TO
ENHANCE PRICING
The Last Mile of Pricing Is NOT Selling but Buying
If You Want to Raise Prices, Tell a Better Story
5% More in Price at Retail for Good Customer Experience
81% of Shoppers Willing to Pay More for Better
Customer Experience
Companies Misunderstand Price

196
196
198
201

201
204


x  VALUE CREATION

10. CEOs LEARN FROM VALUE CREATION
AND EDUCATION
Teaching Value Creation
Value Creation in Education
Role of Faculty Members
Example of Value Creation in Education
At the Michener Center, University of Texas, Austin
11. C
 ONCLUSION: HOW CEOs DRIVE THEIR
COMPANIES TO BECOME LEADERS THROUGH
VALUE CREATION AND INCREASE PROFITS
THROUGH CUSTOMER VALUE
Getting CEOs to Become More Customeric: Are We
Blowing in the Wind?
Are Tasks and Priority the Same?
Departmental Tasks and Priorities
Steps in Value Creation Implementation:
The Customer Department
Why is a Customer Department Needed?
How will the Customer Department Function?
APPENDIX I: ARTICLES I LIKE
82 Ways to Add Value for Customers
Excellence Is Being Great At the Things Your
Customers Value Most

The Customer of the Future and Your Future
Why Training Does Not Create Great Leaders?
APPENDIX II
Short Guide to Customer Value Creation: Definitions
from the Book Customer Value Investment:
Formula for Sustained Business Success

Index
About the Author

206
206
208
209
210
210

214
218
221
221
235
236
237
AP-1
AP-1
AP-11
AP-13
AP-18
AP-20

AP-20

I-1
A-1


Perspectives On Value Creation...
Value Creation:Executing proactive, conscious, inspired and imaginative actions that Create better gains or benefits for
Customers and all stakeholders, including enhanced
returns on investment
Satya Nadella
on Microsoft
new vision:

To empower every person and every organization on
the planet to achieve more1

Phil Kotler:

 he role of Marketing is to Create Customer Value
T
and Capture Value. Create a Customer Strategy

Peter Drucker:There is only one valid definition of business purpose:
to create a Customer. Value is created for Customers,
and wealth is generated for owners
Financial people believe businesses make money.
In reality, businesses make products for Customers.
Money is a result earned by products delivering Value

that Customers are willing to purchase.
Jagdish Sheth: T
 he distinctive difference between the 1985 and the
2004 American Marketing Association definitions of
marketing is the lack of exchange. In the new definition, a focus on creating and delivering Value through
Customer relationships replaces the historical focus
on the exchange paradigm
Don Peppers The only Value your company will ever create is the
and Martha
Value that comes from Customers—the ones you
Rogers:
have now and the ones you will have in the future

1

In my interpretation, create more value for everyone.