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In last weekend’s post I discussed the importance of consistently building value rather than just running around looking for that one big break. Now I’ll share my philosophy on how to create value.

The basic equation behind value creation is this:

Consistent Effort x Effective Execution x a Good Idea = Value Creation

Each part of the equation is very important. Without all three, you’re probably flat-lining at best.

Consistent Effort

Research psychologist Angela Duckworth has shown the significance of “grit” (which she defines as “the tendency to sustain interest in and effort toward long-term goals”), combined with self-control, as a predictor of success.

one brick on top of another

My wife Colleen calls this “consistent persistence”, and it’s a really important trait. It’s the backbone to sustainable value creation, and will allow you to survive the noise and outlast much of the impatient competition.

Effective Execution

Effort without execution is spinning your wheels. While effort is the motor that makes the wheels turn, execution is the traction that allows forward progress. Within struggling organizations, you will invariably see groups going through the motions but not blocking and tackling–executing–effectively. The resulting lack of progress is then construed as a strategic shortcoming, when the reality was simply inadequate execution of basic strategy. Unfortunately, strategy then gets revised, and typically made more complex. This in turn makes effective execution harder, not easier.

The key behind effective execution is to make sure you’re doing the right things right. Then, the consistent effort becomes a powerful engine (and far less likely to burn out).

A Good Idea

It goes without saying that terrible ideas will be met with certain disaster. Effort and execution will only add to the velocity at impact.

Average ideas can produce above-average results, but only with a lot of effort, near-perfect execution, and some good luck. That’s a pretty high hurdle. Moreover, there’s a limit to an average idea’s upside potential, which means the return on your investment is capped. There’s not much optionality to an average idea.

Good ideas are hard to come by, but offer a better payout profile. Great ideas are even better, but good ideas are often good enough. Here are two supporting anecdotes:

1. When my wife Colleen was younger, she thought she wanted to be a lawyer. “There are already too many lawyers, she was told. Find something else.” Her father told her “There may be a lot of lawyers, but there are never enough good ones.” Sometimes, doing something ordinary extraordinarily well is all it takes.
2. Yesterday on the radio I heard a successful morning talk show team complaining that other shows keep ripping off their bits. The show’s leader dismissed the concerns, saying it’s always been that way. I’m paraphrasing, but he basically said “Let them rip us off. We rip off other people all the time. The difference is we do it better than all of them.”

That open market attitude is beautiful. Just give me a good idea, and I’ll win by doing it better. That’s value creation.

Value Creation

These are the three inputs to value creation. No shortcuts.

Think about building a bridge, or a house, or even software: it’s only valuable if you finish it, built it well, and used a good plan.

The amount of value created over time (or, the slope of the value creation curve) will depend on (a) the amount and consistency of effort, (b) the effectiveness of the execution (which includes strategy, resources and tactics), and (c) the quality of the idea.

It’s an extremely simple concept, and that’s what’s beautiful about it. As you think about what you’re trying to accomplish, take stock of these three inputs and see where you stand. Then turn the dials a little and reap the rewards.