New Year’s resolutions are just like a lot of corporate goals. They start out sounding great but don’t end up happening as planned. That’s because the primary focus is on the KPI’s, not on building the system to deliver on the KPI’s.
Here's a simple (hopefully not simplistic) analogy: A person has a strategic goal to lose (or gain!) weight. The KPI for this is their monthly weigh-in. Just having the goal is a motivator. But to achieve that goal, a lot of things have to happen. If I’m going to judge their ability to meet the goal, I’m going to take an integrated view of what we call the value creation system.
A value creation system is made up of various kinds of capital. The value creation system this person needs includes the weight loss goal (strategic capital), the training they receive on how to do it (human capital), the support system they get of friends and maybe a nutritionist (relationship capital), a website, app or information they use on exercises or the diet (structural knowledge capital), maybe an exercise bicycle (structural manufactured capital) and an understanding of how their diet affects the environment (natural capital).
The value creation system is like a machine or a factory--it's infrastructure that a person or a company uses to fulfill its goals. For companies, we have good descriptions of the physical infrastructure in financials. But the most important parts are invisible. You need to make the system visible If you want to make the right decisions about how to meet your goals or if you want to get someone (like a bank, an investor, a partner or even an employee) to help you meet them. That’s why integrated thinking and reporting is a critical strategic tool.
If you want to make a New Year’s resolution for yourself or your company, take a systemic view. Here’s a value creation worksheet you can use to model and measure your value creation infrastructure.