THE BLOG
11/17/2014 08:33 am ET Updated Jan 17, 2015

Two Ways Entrepreneurs and CEOs Mistake Growth for Value

Whether in a small or mid-size entrepreneurial business or a major corporation, the CEO sets the vision and direction for the company. But is there real value in the vision? Is the entire company focused on creating that value? Does the company culture support adding value?

Increasing margin.
By design, businesses focus intently on lowering costs, which can inadvertently result in lowering product quality. Not only that, a focus on lowering costs is frequently at odds with a focus on innovation. Lowering costs can pit you, your competition and even your entire industry in a race for the bottom.

When you ask yourself, "Why are you in business?" certainly, the answer is not to lower costs. Maybe your answer is, "to deliver value to our shareholders." In that case, you need to remember the only way to do that is to first deliver value to your customers. Decreasing waste is always a business objective, but increasing margin by lowering costs is never a value-based vision.

Increasing Sales.
For the first seven years I was CEO of the polymer science company, POLY-CARB, I thought I understood customer value. Our sales reps would tell us that a prospect needed a product that required a specific performance or application characteristics. We would get to work in the lab, develop a formula that solved their problem, and sell it to them. Problem solving equals value creation, right? The result was a broadening product line, an increasing customer base, and lots of sales activity, but little or no profit.

It was only after we began focusing on adding the "highest" value for our customer that we really began to understand the meaning of value. When we focused on highest value, we looked at making the greatest impact for our customers. We began to see needs our customers didn't know they had - or didn't think they could find solutions for, so they never asked. We began to connect the dots across customer needs so we could focus on creating industry-wide solutions. We became innovative and proactive, and though we were a relatively small player in our industry, we revolutionized it.

Put highest value in your vision.
To cultivate a culture of innovation, your vision must be built on the concept of adding the highest possible value to the customer. With your focus on adding real value to those you serve, you will effectively move yourself out front of the pack and position your sights well ahead of those of your competitors.

Ratanjit S. Sondhe is the founder and CEO of Discoverhelp, Inc., a public speaker and the author of the new book, "How Oneness Changes Everything: Empowering Business Through 9 Universal Laws."