The purpose of corporations is to create wealth… not only financial wealth for stockholders, but total wealth for society. When corporations build competence in their employees they are creating wealth. When they innovate they are creating wealth. When they build relationships across groups of people and countries they are creating wealth.
Wealth is not only money. In my New Capitalism book I define total wealth as including not only financial capital, but also social, spiritual, human and process or technology capital. These five forms of capital represent an holistic understanding of value. On an individual level, when you educate yourself, when you improve your physical health, when you develop a strong social network, you are creating personal wealth. You don’t create personal wealth by focusing your energies on money. You are more likely to create financial wealth by investing in your competencies, your values, your social relationships. Then, in an organic, or natural manner, these result in higher income and financial wealth.
The same is true in corporations. Corporations that just focus on money are likely to be bureaucratic, uncreative, lack strong values and the loyalty of their people. The money focused company is less likely to make money in the long term than the company that focuses on the whole value creation stream.
Every process can be defined as input-work process-output. The value creation stream follows this same flow. The stuff you need to start or build a company are all five forms of capital. The work processes, the things you do to transform input into higher value output include the core work process of the organization, the HR development systems, the information systems, etc. These are the nuts and bolts that get the work done. The outcomes of the value stream are an increase in all five forms of capital.
Strategic planning is most often focused on finances, increasing revenue and reducing costs, and then focusing on enhancing competitive market position. Nothing wrong with this. But, market position and financial success are the end of the line, the final result of enhancing human competence, improving brand equity and internal social capital, and innovations in technology or process. The new strategic planning must now focus on the entire value stream from input to output and all forms of capital.