Value_Creation

What is Value Creation and why does it matter' To understand the concept of Value Creation let’s consider the example of an MBA student. A student invests significant time and money to attain a state where he/she qualifies oneself as a candidate with increased knowledge, refined skills and a rich and diverse experience. Value creation is the process of achieving this state of superiority but at a cost governed by several factors like time and money invested during this transition. In simple words, Value Creation refers to the transformation from ‘what we are’ to ‘what we become’ under the assumption that our gains exceed our invested inputs. In today’s world, Value creation is being looked upon as one of the most important factors to determine the success of any initiative, project and moreover, the organization as a whole. It has turned out to be the primary goal for any organization irrespective of the fact whether it is profit oriented or not. Value creation needs to be implemented in perspective to every stakeholder of an organization that includes the customers/clients, the employees as well as the investors associated with the company. The term value creation has a different meaning when viewed from the perspective of a customer, employee or investor. A customer sees value being created in a product/service that is innovative, useful and rightly priced. An employee may find value creation in a job that is dynamically evolving and he/she is being given the opportunity to be involved in decision-making process at the project/organization level. Investors find their value creation when they are benefited with improved returns on their invested capital. Value creation for customers result in improved revenues and/or profits. At the same time, value creation also need to exist at the level of the organization’s workforce to sustain the ongoing motivation and enthusiasm for the people who actually bring in the value creation for the customers. The third dimension refers to creating value for the investors of the company to ensure soaring stock prices and consistent capital inflow for the ongoing operations in future. Thus it is impossible to achieve value creation for an organization unless it is achieved simultaneously for all three groups. Value Creation at Sapient Corporation Sapient claims to be an organization with “the unique ability to bridge the gaps between strategy, creativity, and execution, creating a seamless digital dialogue between a brand and its customers.”1 Sapient is a leading business and technology consultancy that pioneered a methodology of fixed time and fixed price (FT/FP) project delivery since its inception in 1991. The idea is to delivers projects to clients within a preset timeframe and at a predetermined cost, irrespective of whether the project eventually incurred a higher cost to deliver or the estimated cost. This strategy of a fixed time and fixed price delivery model hedged the clients against any loss of business value that happened due to delays in project completion, going over budget or even unfinished projects. Sapient’s FT/FP approach addressed the biggest contemporary problem in IT consulting industry where the majority of projects finished late or over budget, lacked promised capabilities or simply never finished. At the inception of every consulting assignment, Sapient held itself accountable for fulfilling its commitments on time and on budget. This accountability resulted in a robust structure for the organization and made them an expert at design, plan and implementation. Sapient was successful at keeping their promises by the innovative application advanced technology. Sapient’s Global Distributed Delivery Model tapped the advantage of low wages in India to minimize the support and maintenance cost with over 54% of work force based in India and they made this move long before the economic downturn in the early part of last decade. As was written in Sapient’s 2005 10-K filing, “this model accelerates the speed with which we deliver projects and significantly enhances the returns on our clients’ business investments.”2 The company had to face challenges in hiring and maintaining the right mix of talent pool and so was, always focused towards training their core technology people to gain business and industry knowledge in addition to the technical knowledge that gave them a business edge. Being in a results delivery business required a unique business model different from the conventional low cost model. Sapient’s approach was always based on developing an intellectual property and specializing in vertical industries that was nowhere to be seen when Sapient | Approach came into effect. Under the performance pricing approach, Sapient tied its fees with the business results of the clients eventually sharing both the risks and rewards. In a 2005 survey conducted by Sapient, “99% of clients were willing to recommend Sapient to others and the list of Sapient’s satisfied clients extend across various industries and geographies.” 1 Additionally, Sapient has consistently created value for it employees or to rightly say in Sapient’s terminology, its people. Over its tenure, Sapient has won numerous recognitions by various organizations and business journals for the company culture. In fact, in year 2006, Sapient achieved ‘Best Place to Work’ recognition in all of its countries of operation. All in all, Sapient grew strong, mature and innovative over the time while facing the challenges in the value creation process that was equally targeted at all three groups of its stakeholders. Endnotes/References 1As per Sapient website, http://www.sapient.com/en-us/about-sapient.html 2Extract from Sapient’s 10K filing (2005). Available from the SEC at: http://www.sec.gov/Archives/edgar/data/1008817/000095013505001490/b53301sce10vk.htm. http://company-seek.ceo-recruiters.com/sapient-SAPE.htm http://www.nasscom.in/Nasscom/templates/NormalPage.aspx'id=52302 http://www.referenceforbusiness.com/management/Tr-Z/Value-Creation.html http://www.pegasuscom.com/levpoints/valuecreate.html