Take your pick of the headwinds that will assail your operations in 2024: media paucity, shipping in the Red Sea, Apple Vision Pro, US elections, recessions – it’s a fair bet that strategic status quo won’t cut it. The world is changing at a pace that confounds businesses and leaders, making it increasingly challenging to identify where growth will be found in the future. Market attitudes and behaviours are changing dramatically, and reliable ‘givens’ and ‘go-to’s’ are failing to even remotely deliver.

Businesses have focussed too much on the tools and measures digital media provided us rather than seeking to truly build connection, meaning and influence. We valued what we measured as they say, and that means when it comes to consumer engagement, 99 per cent of us have been getting it wrong.

Overwhelming, perhaps, but there is good reason for hope. Looking at businesses with a healthy attitude to change (both those with burning ambitions and burning platforms), a principal commonality is a focus and investment in community. Not as a database or a channel, but as a true and literal asset of the business. Gaming, lessons from web 3, the rise and rise of traditional sport, the flourishing of emerging sports – all these are variations on a theme. They are businesses that have focused on changing their relationship with their customer bases through adjusted strategy and business model, all focused on cultivating a sense of community. Both as a direct asset, and as an indicator of the health of a business, community is the higher order objective beyond the muddle of briefs and internal strategy. It provides a focus that unifies teams.

Present Company and The Growth Distillery set out to audit how a community could be modelled and measured. Gaming represented the most sophisticated intersection of consumer change, technology and business model adaptation, so we started there. It became clear that a healthy community has a very simple value exchange model. A business contributes to key consumer needs – identity, collaboration, status, access, belonging, rituals and outcomes – and is thereby permitted by those consumers to pursue business objectives: influence, fostering advocacy, product creation, trial, and good old growth, revenue and profits. As one supplies the other, so a healthy community is nurtured – one of virtuous value creation. Both business and consumer advance together, turning retention into a growth engine. Obvious, really, but rarely acted on.

Most of the prior efforts to determine the effectiveness of a business’ relationships with its consumers have been focused on auditing the activity of the business – largely, only looking at its marketing activity. Virtuous value creation instead seeks to create a rubric that helps gauge the health of its community. Rather than measuring advocacy, could we establish ‘belonging’? Where NPS and brand measurement have provided strong indicators of how a business is tracking in the market, a measure of community could provide them context and fidelity.

Putting theory into practice

A theory is all well and good, but how do you put it into practice? What principles should we focus on to measure this community, or virtuous value creation? We needed to discover whether a business has truly invested in experience over engagement; whether the value exchange is clear to its community and has the capacity to evolve. Could we see self-identification? Does the business engage in risk or jeopardy in service to its consumers? Is it willing to cede power to them? Can it proxy a system that allows them to create their own outcomes? Does it foster its own economy? Can we all win together?

For these flourishing businesses, they could answer yes to many or all of those queries. Being able to do so gives them greater clarity on key business questions. Can we enter a new market? Can we change a price? Can we enter a new vertical? Can we rebound from a scandal?

The model has broad application: as a higher-order metric for a marketing department; as alpha for VCs on start-up upside, or turnaround businesses seeking outsized returns; as the makings of key inputs into a strategy pivot for establishment brands; as a trade-off mechanism for operational decision making under a profitability squeeze. 

We are now developing virtuous value creation – or VVC – into a canvas, as a leading indicator that goes directly to the materiality of growth, in the real world, right now. We are exploring applications to valuation models and asset pricing. So far, all evidence points to the fact that the intangibles – the goodwill – of a business, is generally not intentionally designed, nor rigorously interrogated. A clear opportunity exists to deliberately create the circumstances for accruing unforeseen value. By detailing the value of a community, VVC might value the intangibles of a business – and thereby identify its edge before anyone else. Watch this space.

The ultimate goal for virtuous value creation is the provision of a language for businesses to compare apples with apples – a way to connect business decision makers directly to their communities to agree on the impact of investments as quickly and clearly as possible. This sounds lofty, but it might also be the minimum requirement of true growth and velocity in the very near future. Virtuous value creation has the potential to not just diagnose ineffective brand-consumer arrangements, but to provide the acetate through which a business can gauge the impact of all its activity in creating the circumstances for its own growth.

So if ‘community’ was possibly the most overused word of 2023, it will *definitely* be the most overused word of 2024, and probably every year for a while. Because it’s shorthand for the value exchange that underscores a business’ best bet on itself. Community is the new horizon of growth.

For more information or to download the full Community report from The Growth Distillery visit https://www.thegrowthdistillery.com.au/article/vvc/