It is fairly old news, but merits repeating nevertheless: our current economy, at the verge of collapse as it is, is egocentric, and at the same time understates costs while overstating benefits.
In other words, it promotes a type of behaviour that is degeneratively competitive: the ‘me’ wants, needs, more of whatever it may be, while anything and everything else is losing out. No matter how high the cost for the bigger picture – society and the planet, that is – may be.
On a corporate level, the direct consequence of this meant that, even in times when cash as well abundant – pre 2008 – and corporate profits reached historic peaks, companies would not invest it what would, potentially, happen to them in A Tomorrow. I.e. they would not leave money aside for ‘bad times’ – counter to what we’re taught as children – and neither would they think about how their business would, should, might evolve in the future, to survive in a world with entirely different pre-conditions.
None of the sort. It goes without saying that once 2008 came along, only very few corporations were even marginally prepared. And among the fashion companies, a bare few belonged to that category, and even fewer among them were retailers.
The concept of value creation as we know it has hence proven to be insufficient, at the very least, but more likely erroneous.
Value creation as we know it does not promote effective resource management – only for a small fraction of the relevant resource. It is a value creation that was, is, ‘thin’ (more and quicker of in essence useless and valueless goods and services). Innovation was merely about products, the value chain at best. It never was so far about profiting, as a corporation, from positively shifting consumers’ behaviours. Or the staff’s for that matter.
In the 4th chapter of a talk entitled ‘Achieving Behavioral Innovation’ and which he held in 2009 at New York’s Columbia University, Umair Haque introduced the attendees to how saw, still sees, the 5 new strands of ‘thick’ value creation. One that would result in lasting value, as opposed to temporary, ephemeral value:
| 5 Ways of Value Creation | New sources of Advantage | Yesterday’s sources of Advantage |
|---|---|---|
| The 5 ways of value creation according to Umair Haque (left); and how they will be reflected in current and future economic scenarios (center). For reference, on the right: Value creation patterns in the past. | ||
| Real Value (Deep Value) | Perceived Value (Thin Value) | |
| Stewardship | Loss Advantage | Cost Advantage |
| Trusteeship | Responsiveness | Dominance |
| Guardianship | Resilience | Control |
| Leadership | Difference | Differentiation |
| Partnership | Meaning | Brand |
What do the different terms in the table mean?
- Stewardship: not exploiting your resources to the point of depletion, and you will be have no other option than not being able to use them at all.
- Trusteeship: Use your resources carefully and effectively. Do not water them down or overexpose your customers until they’re fed up.
- Guardianship: Example of what guardianship is not about: social capital in US has halved since 1975 – despite all the media created and accessible in the past 30 years. In short: media have been pullling societies further apart rather than bringing it together.
- Leadership: Challenge the status quo, look ahead of times. Up until now it was commonly said that ‘you don’t want to disrupt yourself’ (as a company or as an individual). This is very short sighted, because unless you yourself does it, someone else will do it for you. Unless you are your own best challenger, others will take on that role. Case in point: Nanotech is not moving at the speed it could, because thanks to the myriads of patents that trigger cross-company tie-up efforts, everything has stalled.
- Partnership: The following is what partnership is not about. The food industry in the US has created one if not the most obese population in the world. The food industry doesn’t see their customers, every day people who buy their food and eat it, as partners in their efforts. Partnership about productive outcomes for people, and hence novel sources of advantage.
What not to do – the fashion industry case:
Fashion companies expose themselves to considerable risk by investing all their efforts and resources in the ‘old type of thin value’ creation. Just think of the following:
In the fast fashion economy, most consumers are overwhelmed. They are emotionally saturated. Most recent signs coming from retail analysis show that the uptake of quicker rhythms in terms of collection launches is slowing down. In other words: fast fashion companies keep launching new ranges at a rhythm of between 2 and 6 weeks – but consumers don’t really appreciated it any more and take less and less advantage of it. They are slowly, very slowly slipping back to where they were before the fast fashion frenzy: shopping for specific needs and occasions rather than ‘just because’. Fashion hence has overused its down stream resource ‘consumers’. Consumers don’t really want new collections to clock in at a fortnightly rhythm.
This leads hence, to the insight that fashion is facing a much larger, overarching risk. Call it meta-risk if you want. Fashion has been delivering very well and very effectively on ‘shallow’ value: the variation of the same theme, only over continuously shorter time spans. This has worked well as long as this was a novelty.
Now consumers start to crave individuality, better design. A value that contains more ‘essence’, that is ‘deeper’ if you want to use this terminology. And that is closer to their emotions, to who they are and perceive themselves as individuals.
New sources, or rather: concepts, systems, of advantage are hence needed. Not mere cost advantage. It is about loss advantage is fundamental different concept. Perceived value, perceived differentiation is no longer enough, or any, advantage all.
Now the game is on about value that indeed makes a different, that lasts, is real and authentic.
