Published 3 February 2025 in Strategy • 11 min read • 
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When Elon Musk took over Twitter, he apparently didn’t realize that its stakeholders played a very different role in value creation than he was used to. At Tesla and SpaceX, employees and external partners working on innovation were critical for the value proposition, while production workers and external partners were essential for value delivery. Musk created immense value with rapid prototyping by innovators and radical efficiency surges on the production line.
At Twitter, however, customers were also value-creating partners critical to the company’s value proposition. Applying rapid prototyping and experimenting with payment schemes to turn “tweeters” into paying customers undermined the network’s value proposition to its users and their commitment as partners. Musk failed to appreciate the importance of content moderation for advertisers. Sacking software engineers in a radical efficiency surge resulted in the loss of software-driven content moderation and undercut the value proposition to advertisers, many of whom left.
Eroding the value proposition for critical stakeholders, including tweeters, advertisers, and software engineers, damaged the value of other assets. Soft assets such as brand appeal are especially vulnerable because their decline often remains undetected.
In our work with executives worldwide, we have frequently encountered managers unaware of their value-critical stakeholders and unable to progress on strategic issues. Their problem was not one of strategy but a need for more critical stakeholder involvement in the value-creation cycle.
The underlying problem is often incorrectly diagnosed because stakeholder involvement and the quality of assets are not readily visible. When financial performance is at stake, shareholders and owners demand cost-cutting and their support for sharing whatever value is created becomes lukewarm at best. However, without shared value, support from other stakeholders to ensure a sustainable future shrinks, and a vicious cycle sets in. In two decades of working with top teams on their strategic challenges, we have encountered numerous downward spirals in stakeholder confidence.
To avoid this, you must prevent free-riders and predators, as well as your blind spots, from blocking the creation of value with stakeholders. Identify the leverage points where stakeholder involvement will have the largest positive impact on value creation and then integrate the relevant stakeholders, share value, and keep score.
Firstly, cut ties with those inside and outside the company who extract value for themselves despite its long-term impact on the organization, society, and the environment. Sever links with free riders such as overpaid executives who, in their self-interest, campaign to maintain unsustainable activities.
Part ways with predators, including some shareholder activists and external advisors seeking short-term payouts. For example, the board of DSM, the €20bn Dutch biotech champion, consistently rejected proposals by activist investors and consultants to increase dividend payouts through restructuring and bankers’ advice to increase shareholder returns by taking on more debt. The company saw the moves as incompatible with its long-term sustainability objectives.
“Eroding the value proposition for critical stakeholders, including tweeters, advertisers, and software engineers, damaged the value of other assets. Soft assets such as brand appeal are especially vulnerable because their decline often remains undetected. ”
There is a widespread lack of managerial awareness regarding how stakeholders affect the creation of soft and hard assets, as well as the quality of the processes linking stakeholders to the organization. There are four major blind spots that we have seen repeatedly while accompanying executives in making their strategic decisions.
A renowned French food condiment company failed to realize the importance of its societal and environmental stakeholders. Relying solely on its fame and harming the environment eroded its brand image. The head of its B2C business found it almost impossible to expand internationally, where the demand for ecological packaging was acute, and a lack of investment in brand recognition meant its products had no international traction.
Letting yourself become hostage to monopolistic stakeholders who extract value is potentially worse than not supporting your value-critical stakeholders. The managers of a global port company attempting to streamline operations across ports were blocked by terminal directors who were too dependent on labor unions that had monopolized port activity and were unwilling to accept any risk to workers’ compensation.
Failing to see the value of soft assets obscures the role of related stakeholders. A Nordic computer peripherals company built its success on superior hardware design and production. When profits declined, management had difficulty accepting that it would have to invest meaningfully in its software capability and a supporting stakeholder network to turn around the situation.
When the processes that integrate stakeholders into value creation are ineffective, it is tough to create value with them. At a leading European food packaging company, repeated tweaking of the customer acquisition process made it increasingly complex, inflexible, and unfit for purpose. The success rate in customer acquisition declined, forcing a reorganization of its channels and customer relationships, alienating many.
To create value with stakeholders, it’s vital to consider their total positive and negative impact. This must extend to learning, financial, and societal partners, whose impact may be less immediately apparent, especially in the way they affect talent acquisition and soft assets, such as the development of critical capabilities and brand image.
During our work with executives applying various stakeholder frameworks to analyze the “interest versus influence” relationship, we have found they often miss touchpoints between critical partners and the value-creating cycle. This is especially important in platform business models where the same stakeholders may be vital for creating more than one type of asset. A complementary assessment of the business model is needed to highlight the multiple points at which the same stakeholders may affect value creation.
We developed the Stakeholder Value-Creating Cycle (SVCC) to help executives focus on where stakeholders can most impact the creation of the soft and hard assets essential to long-term value creation. This encourages executives to assess the company’s attractiveness to stakeholders, as well as the processes that link stakeholders to the organization and how these activities contribute to value creation for the company.
Using a circular diagram of the SVCC to visualize how external stakeholders play an integral part in the ecosystem of value creation makes it easier to identify the most important leverage points.
Creating soft assets like capabilities, value propositions, and image/brand, as well as hard assets like demand, operating cashflow, and operating assets, depends on the commitment of the internal and external stakeholders. This requires effective processes to integrate the stakeholders into the value-creating cycle.
The SVCC highlights the critical external stakeholders needed to develop each asset type. The state of the asset, increasing or decreasing in value, reflects the quality of the corresponding stakeholder relationships with the company and whether the stakeholders are really creating value.
Evidence of the SVCC’s usefulness comes from responses from middle and senior managers with whom we have worked to develop a strategy for their business. This work has involved the application of 12 analytical frameworks to each participant’s business, with weekly assignments reviewed by a coach. A total of 1,416 executives from 94 countries and 430 companies participated during the first 10 years of this initiative as part of an executive education program. Of the 12 frameworks deployed, the SVCC was the second most cited for its usefulness.
The biggest value-creating opportunities involve critical stakeholder relationships and processes that have the largest potential impact on the value of assets. Capitalizing on these opportunities can unleash a wave of value creation, as the effect cascades through the value-creating cycle. To illustrate how this can work with the help of the SVCC, consider the following real-world example.
The HR vice president of the Asian division of an international healthcare company, Wei Ling (not her real name), was struggling with a mandate from her regional CEO to mediate in a conflict between the heads of Global Research and Asian Marketing about the right strategy for the roll-out of a revolutionary new treatment. Research wanted a rapid roll-out to beat the competition, but marketing claimed there was insufficient demand.
Before intervening, Wei Ling applied the SVCC to understand the situation better. Filling out a SVCC chart to highlight the pressure points for her division made it clear that the origin of the dispute was neither the hubris of R&D nor the conservatism of marketing but the lack of stakeholder support.
Being restricted to marketing and sales, the division had no influence over corporate financial and production activities. It lacked local talent to train customers and collect data on the efficacy of new products. Most importantly, because it was perceived as a low-price brand in Asia, it didn’t have a network of local healthcare professionals to help validate and market its products.
There had been limited appetite for creating an integrated Asian network of healthcare professionals. The market was fragmented, with widely varying levels of insurance and service, and the division’s financing was tight. The go-to approach for Wei Ling’s division was to deploy light touch training for customers and let the market validate the efficacy of a new product through use.
However, Wei Ling realized that, in contrast to differences in regional regulations, healthcare professionals across markets shared similar professional interests and practical concerns when applying new treatments. This meant that an Asian network of healthcare professionals could be envisaged.
Applying the SVCC, Wei Ling saw that an Asian network would enhance asset creation at three points in the value-creating cycle: as value-creating partners participating in the validation of the value proposition, as societal partners enhancing the brand’s value by participating in an online dialogue about healthcare, and as customers creating demand for the company’s products. The division’s most value-critical stakeholder was a missing network of Asian healthcare professionals.
A solution to the dispute between the research and marketing departments was in Wei Ling’s hands. Apart from corporate finance’s refusal to provide resources for additional stakeholder activities, the critical constraint on the SVCC was the division’s recruiting process. The potential value-creating leverage would be considerable if this constraint were loosened. The SVCC diagram made it easier for Wei Ling to highlight the importance of missing stakeholder support and to quickly persuade her regional CEO to see that the recruiting process for talent and Asian healthcare partners was the most immediately available leverage point for value creation. Once the CEO realized the potential payoff from bringing in these stakeholders, he agreed to take the risk of reallocating some of the division’s limited resources for investment in new talent despite profit pressure.
To optimize the ecosystem represented by the SVCC, you must do three things:
The relevant stakeholders must be explicitly integrated into the creation of soft assets. To help enhance her brand’s image in Asia, Wei Ling – after talking to Marketing – realized it was critical to take account of differing regulatory regimes by collecting and analyzing clinical data from different sources. This would validate the efficacy of new value propositions in the Asian context. To access field data, Wei Ling’s team developed an Asian network of healthcare professionals and others involved in using the new treatment.
The organization created two internal stakeholder teams to interface with the external network: an internal digital team to collect and process data and a mixed internal and external education team to help customers use the treatment.
To further enhance the brand’s image, Wei Ling followed the company’s practice in its home market. She encouraged the digital team to extend its reach beyond healthcare professionals and to incorporate patients in dialogue about their needs.
The value created must be shared to ensure ongoing stakeholder commitment to developing and maintaining assets. Quality assets require the long-term commitment of those stakeholders relevant to value creation. Soft assets, in particular, take time to develop and are very vulnerable to neglect.
In addition to access and training in the use of the new treatment, healthcare professionals received online access to the company’s international selection of scientific resources, as well as updates and best practices from the field and conferences on the latest innovations. Patients were invited to ongoing experience-sharing events to help them understand how to make the best decisions for their health.
Drawing on the company’s extensive employee development program, Wei Ling was able to offer the new digital and educational teams an attractive value proposition involving exposure and integration into the corporate digital network, further digital and AI education, and related opportunities for promotion based on their contribution to clinical trials and their record in helping customers adopt the new treatment.
Given the importance of quantitative financial data for investors and financial markets, a special effort is needed to monitor the quality of soft assets and any related stakeholder engagement. A stakeholder ecosystem can play a major role in keeping engagement in the creation of soft assets “front of mind”. In the healthcare industry, a well-tended ecosystem of employee, technology, and industry partners, as well as active healthcare professionals and patients, plays a big part in sustaining value propositions, image, and brand, as well as the capabilities on which they depend, at the top of the executive agenda.
To avoid blind spots, boards, and senior teams need communication channels and people in their ranks who are receptive to what’s happening on the frontline. In the case of the global healthcare company, this meant top executives at headquarters who were sensitive to the right degree of risk-taking in R&D and communication with the Asian market. In Wei Ling’s division, the capabilities to support communication with headquarters were absent until she recruited healthcare experts who emphasized the value of local clinical data and training.
The ultimate test of the value created by stakeholders is the long-term financial performance of the value-creating cycle. Once the clinical data was in, Wei Ling’s division ramped up its marketing of the new treatment. The company’s image locally benefited, revenues increased, and the return on investment began to approach the corporate target. Wei Ling demonstrated the value that can be created by identifying critical stakeholders, integrating them effectively, sharing value, and keeping score.
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