The Business Value Growth Constant: Rethink Business Value Growth Series
In our prior article titled Rethink Business Value Growth, we posited that business is a system. This position is consistent with Dr. W. Edwards Deming’s account in Chapter 3: Introduction to a System in his book, The New Economics for Industry, Government, Education.
Using Systems science to represent business, we modeled its growth using physics field theory. Second, we disaggregated the elements of an electrical systems domain and disaggregated the elements of the business growth domain. Third, we mapped the business elements to a force field framework. We stated that we would explain the business value growth constant, kg at a later time.
The purpose of this article is to explain the business value growth constant, kg. As with any field, such as the gravitational constant in gravitational field theory (Newton’s constant, kg = 6.67 x 10-11), or the electrostatic constant (Coulomb’s constant, ke = 8.99 x 109) in electric field theory, the business value growth (BVG) constant, kg, is a proportionality constant that connects the elements of the value growth field with the strength of the value growth force.
Business Value Growth Field
A field is a region of space where we observe forces. Gravity, electricity, and magnetism create fields.
Business also creates a field. Energy is consumed while inputs are converted to customer output value. Input and output value can be measured as worth in units of money.
This idea of converting value is analogous to converting position to velocity in physics through the consumption of energy per time. We may deem this as operating in a Conversion Field because we are converting input value to higher output value. It can be applied to the entire business system or any function/sub-system in business.
What we are interested in though is BVG, not value conversion. Business value growth is the transformation of the current business capability so that it systemically produces more value per time in the future.
This challenge is analogous to converting velocity to acceleration in physics through the consumption of additional energy per time. We deem this as operating in the Transformation Field, which we’ll call T1. Great companies have learned to use the Conversion Field (operating the business) to inform the Transformation Field (growing the business) in order to systematically and systemically accelerate value growth capability and outperform their peers by over 2X. This is usually compared over any five-year period because the compounding effect of the change in growth rate works in favor of growth focused organizations.
Business Value Growth Constant, kg
From our prior article, we defined the equation: