Coin Toss of Shareholders or Customers

Shareholder or Customer Value wins the toss?

Is the shareholder the only one with value?

Yes and no. The measure is easier to capture and record. It also relates directly to the financial pages read by CEOs and reported annually. Values of customers and readership, meanwhile, get reported to audit bureaus, and distributed to media buyers.

But first, let’s consider the slow buy-in to applying shareholder value methods along with the solution outlined by esteemed Professor Alfred Rappaport, Leonard Spacek Professor Emeritus at Northwestern University’s J.L. Kellogg Graduate School of Management.  In Doing the Right Thing and Self-Interest – Alfred Rappaport – Harvard Business Review (10.25.11), he explores the ethos of shareholder value. By focusing on long-term numbers and measuring success as shareholder value (SV), CEOs of public companies have much to gain and retain. Prof. Rappaport notes how its adoption has been slow following its introduction in the mid 1980s. He observes that despite its potential,  adoption of  SV practices can be stymied by entrenched organizational behaviors. In essence, the resistance has been, “What’s in it for me”? He suggests a simple incentive:  “enlightened self-interest.”

Saving Capitalism from Short-Termism: How to Build Long-Term Value and Take Back Our Financial Future , the professor’s new book, explores this topic in depth. Now on to the other side of the coin.

What about customer value?

All of which comes back to the question of customer value or LTV. Can an enterprise truly mention one or manage for one and not the other? Of course not, yet the attention and concern are not often equal at the C-level.

For global enterprises measuring customer value can be even more difficult. There are often many different pools of customers, communities, and relationships. Yet, managing customer values as rigorously as shareholder value or other capital asset is key to long-term vitality.  Zappos shoes are one example. Without strong customer value, there would have been no sale to amazon.com and the rest would be e-commerce history.

What are your thoughts? Please rank customer value, brand value, and shareholder value. Which should be the domain of the c-suite?