Part 4 – What can we learn from the Service-Profit Chain today?
The Service-Profit Chain was developed more than three decades ago. Businesses, technology, and the ways customers interact with organizations have changed significantly since then.
Nevertheless, the model points to a connection that is still fundamental:
The results of a business are created through several links – and people are part of the entire chain.
This makes Service-Profit Chain relevant far beyond traditional service businesses.
Value creation must be understood as a connection
One of the model's most important lessons is that it can be misleading to view employees, customers, and financial results as separate areas.
Management can work on employee satisfaction.
The marketing department can work on customer satisfaction.
The finance department can work on profitability.
But the Service-Profit Chain reminds us that the results in these areas can influence each other.
If employees lack expertise, good work tools, or the ability to solve customer problems, the consequences can ultimately be visible in the customer experience.
And if the customer does not experience sufficient value, the consequence may ultimately be visible in the business's results.
It is the connections between the links that are interesting.
The employee is more than a cost
This also provides a different perspective on how businesses view their employees.
In accounting, labor will largely appear as a cost.
But the employee also represents expertise, experience, relationships, problem-solving skills and knowledge about the business and customers.
Much of this does not exist as an asset on the balance sheet.
Still, it can have significant value.
When an experienced employee understands what the customer really needs, solves a problem or uses their knowledge to improve a service, this invisible capital is converted into actual value creation.
That is why people cannot be understood only as an input factor.
They can be the carriers of the business's value creation .
Customer experience is a result of the entire organization
The Service-Profit Chain also provides an important reminder of customer focus.
The customer experience is not only created by those who work directly with the customer.
It is also influenced by people who develop products, organize logistics, build digital solutions, analyze data, design work processes, manage employees, and make strategic decisions.
A bad customer experience may therefore have its real cause far from the customer meeting itself.
The same applies to a good customer experience.
When the customer experiences something as simple, relevant and well-functioning, it may be the result of work done by many people the customer never meets.
The customer experience makes parts of the organization's inner workings visible.
Technology must be evaluated according to the value it creates
This perspective is particularly important when businesses invest in digitalization and artificial intelligence. It is easy to measure how many processes have been automated, how many AI tools have been adopted, or how much work time a technology apparently saves.
But this does not necessarily indicate whether the business creates more value.
A more important question is what the technology does to the entire chain:
Does it make employees better able to do their work?
Does it give the customer a better experience?
Does it create greater perceived value?
Does it contribute to trust and loyalty?
And does this ultimately produce better results for the business?
The Service-Profit Chain does not provide ready-made answers to these questions. But the model gives us a way to ask them.
From theory to management
Perhaps the most important lesson therefore lies not in treating the Service-Profit Chain as a mechanical formula.
Value creation between people does not follow a simple equation.
Employee satisfaction does not guarantee customer satisfaction. Customer satisfaction does not guarantee loyalty. And loyalty does not guarantee profitability.
But the model challenges managers to examine how these relationships actually relate to each other in their own business .
Where does the value chain stop?
Where does friction occur?
What prevents the employee from creating value?
What does the customer experience?
And what consequences does this have for the business?
That makes the Service-Profit Chain more than a model from the 1990s.
It gives us a perspective on leadership.
The invisible capital becomes visible
Seen through the perspective of The Invisible Capital the connection becomes particularly interesting.
Competence, experience, organizational culture, relationships, trust and customer insight are harder to see than buildings, machinery and financial assets.
But the Service-Profit Chain shows how such intangible resources can move through the business and have concrete consequences.
From the employee.
To the customer.
To loyalty.
To the business results.
That is perhaps the most important legacy of Heskett, Sasser and
Schlesinger's work:
If we are to understand where values come from, we must also understand the people and contexts that create them.
➜ Furthermore: Values are created in the encounter between people
Further reading and sources
The Service-Profit Chain is based on decades of research into service management, employees, customers, and the financial performance of businesses. For those who want to go back to the original sources, these works are particularly important.
Heskett, Jones, Loveman, Sasser and Schlesinger
Putting the Service-Profit Chain to Work - Harvard Business Review , March–April 1994.
This is the central article where the Service-Profit Chain was presented as a connection between internal service quality, employee satisfaction and productivity, customer value, customer satisfaction, customer loyalty and profitability.
The Service Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value Free Press, 1997.
The book further develops the perspective and delves more deeply into the connections between employees, customers, loyalty, value, growth and profitability.
Service Breakthroughs: Changing the Rules of the Game Free Press, 1990.
A previous work that examines how excellent service companies organize and manage their operations to create value for customers.
Heskett and Schlesinger
The Service-Driven Service Company Harvard Business Review , 1991.
The article is part of the professional development towards the Service-Profit Chain and focuses on how organization and management affect employees' ability to deliver good services.
A perspective that points further
The Service-Profit Chain provides one important part of the explanation for how people contribute to value creation. But it does not stand alone.
The questions about how businesses are organized, how people are managed, how innovation occurs and how the customer experiences value lead to other professional perspectives.
Academic background and further reading
This series also builds on my own professional journey through the Web Design study , the eMarketing study , Innovation and Commercialization and professional seminars in San Francisco and Oxford . Here you will find the background, professional environments and experiences that have followed the development from the early years of the web to today's digitalization.
Recommended literature
The knowledge universe The Invisible Capital is based on a simple idea: If we are to understand how businesses create value, we cannot study people, customers, management, innovation and technology separately.
Therefore, I also recommend literature that cuts across these disciplines.
Here you will find books by Peter Drucker on management, knowledge work, innovation and entrepreneurship, literature on innovation and digitalization, and works by James L. Heskett, W. Earl Sasser Jr. and Leonard A. Schlesinger on the connection between employees, customer value, loyalty and profitability.
The books are written at different times and from different professional perspectives. Some are classics. Others help us understand how digitalization and technological changes affect businesses and people today.
What the recommendations have in common is that they have contributed to my own understanding of how people, knowledge, customers, organization, innovation and technology are interconnected in value creation.
This is therefore not intended as a complete bibliography. It is a selection of books and academic works that I believe provide particularly valuable perspectives for those who wish to understand the themes we work with in Invisible Capital.
For each book, I give a short review and explain why I recommend it.
James L. Heskett, W. Earl Sasser Jr. and Christopher WL Hart
Short review
Service Breakthroughs: Changing the Rules of the Game from 1990 examines what characterizes businesses that manage to create outstanding services while achieving strong results.
Heskett, Sasser and Hart study how leading service companies organize work, develop people, design services and create value for customers. The perspective is bigger than the customer encounter itself. The authors view service as a system where strategy, organization, employees and customers must work together.
The book is particularly interesting because it came before the Service-Profit Chain was formulated as a model. Several of the questions that later became central to the Service-Profit Chain are already clear: What enables employees to deliver high quality? How is value created for the customer? And why are some companies able to do this better and more consistently than others?
Why we recommend the book
I recommend Service Breakthroughs because it shows that excellent service is not primarily about asking employees to be nicer to the customer.
Good service must be built into the business.
Management, organization, competence, work processes and understanding of the customer affect employees' ability to create good customer experiences.
This is a perspective that I believe is at least as relevant today.
When businesses digitize services or adopt artificial intelligence, it’s easy to focus on the technology itself. But a new solution doesn’t automatically create better service or greater customer value. It must be part of an organization that understands what the customer needs and enables people and technology to deliver it.
For me, Service Breakthroughs is therefore also interesting as an early step on the path towards the Service-Profit Chain.
It reminds us of a fundamental principle:
Outstanding customer experiences are not just created in the customer encounter. They are created by the business that makes the customer encounter possible.
James L. Heskett, W. Earl Sasser Jr. and Leonard A. Schlesinger
Short review
The Service Profit Chain from 1997 is the main work by James L. Heskett, W. Earl Sasser Jr. and Leonard A. Schlesinger on the connection between employees, customers and the financial performance of the business.
The book builds on the research behind the Service-Profit Chain and examines how quality within the business can affect employee satisfaction, loyalty and productivity. This is further linked to the value experienced by the customer, customer satisfaction and customer loyalty – and from there to growth and profitability.
The authors use examples from leading service companies to show that good financial results are not just about what happens in the market. They can have roots deep within the organization – in how people are managed, what working conditions they have, and how well the business enables them to create value for the customer.
Why we recommend the book
I recommend The Service Profit Chain because it provides a holistic understanding of something that is easily broken down into separate disciplines: employees, customer experience, loyalty, and profitability.
For me, this is also a book about value creation.
It shows why people in a business should not just be considered a cost. Competence, experience, relationships and understanding of the customer can affect the value the customer experiences – and thus also the business's results.
This makes the book particularly relevant to Invisible Capital. It provides a professional foundation for the connection between value-creating people and loyal customers, while at the same time the perspective can be further incorporated into today's discussions about digitalization and artificial intelligence.
Technology has changed businesses since 1997. But the question the book asks is still very relevant:
What needs to happen inside the business for the customer to experience value on the outside?
For anyone who wants to go deeper than the Service-Profit Chain model itself, this is the book I would choose.
James L. Heskett, Thomas O. Jones, Gary W. Loveman, W. Earl Sasser Jr. and Leonard A. Schlesinger
Short review
Putting the Service-Profit Chain to Work is the central work in which the Service-Profit Chain was presented in the Harvard Business Review in 1994.
The authors describe a continuous chain from quality internally within the business to employee satisfaction and productivity, on to the value experienced by the customer, customer satisfaction and customer loyalty – and finally the business's growth and profitability.
The interesting thing is where the chain begins. It doesn't start with sales or accounting, but inside the business and with the people who are going to create value for the customer.
Why we recommend the book
I recommend Putting the Service-Profit Chain to Work because it shows very clearly why employees, customers, and financial results should not be treated as separate entities.
For me, this hits the very core of Invisible Capital. Expertise, experience, work environment, relationships and customer insight are harder to see than machines, buildings and financial assets. But they can still have very concrete consequences for value creation.
The work is also interesting today because digitalization and artificial intelligence do not eliminate this connection. Technology may change how employees work and how customers interact with the business, but the crucial question remains:
Does the business create conditions that enable people and technology to create real value for the customer?
For anyone who wants to understand the Service-Profit Chain, this is the natural place to start.
Short review
In The Concept of the Corporation, Peter F. Drucker examines how a large corporation functions as an organization. The book builds on his study of General Motors and focuses on organizational structure, decentralization, leadership, responsibility, and the role of the corporation in society, among other things.
Why we recommend the book
The book is interesting because it shows an early and important feature of Drucker's thinking: The business is more than production, capital and financial results. It is also an organization of people, responsibilities and decisions. The Concept of the Corporation therefore provides a good starting point for understanding how Drucker's later thoughts on management, knowledge work and value creation developed.
Short review
The Practice of Management is one of Peter F. Drucker's most important books on modern management. In it, he discusses, among other things, the purpose of the business, the customer, management's responsibilities, goals, organization, and how people and resources can be directed towards results.
Why we recommend the book
The book provides a good starting point for understanding several of the ideas that later became important for modern management theory. Particularly relevant is Drucker's view that the purpose of the business must be understood from the outside, the importance of the customer, and the connection between goals, responsibility, and results. It thus also provides an important academic basis for understanding the connection between management, the customer, and value creation.
Short review
Innovation and Entrepreneurship shows how innovation can be understood as a systematic activity, not just the result of creativity, technology, or random ideas. Drucker examines how changes in markets, demographics, knowledge, and environments can create new opportunities for innovation and entrepreneurship.
Why we recommend the book
The book is particularly relevant because Drucker connects innovation to opportunity, action, and value creation. It provides a good professional perspective on how businesses can work systematically to detect change and translate it into new products, services, and solutions. It is therefore also a natural bridge between Drucker's thinking and the work on innovation in Invisible Capital.
Author(s): Chris Anderson
Short review
The Long Tail is one of the most influential books on how the internet has transformed commerce, marketing, and consumer behavior. Chris Anderson introduces the theory of the “Long Tail,” which explains how digital markets enable significant value creation through a large number of niche products, rather than relying on a few bestsellers.
The book shows how digital distribution, low inventory costs, search engines, and intelligent recommendation systems have made it profitable to offer an almost unlimited product range. Where traditional stores were limited by physical shelf space, online stores can offer millions of products and let customers find exactly what they are looking for.
Chris Anderson illustrates the theory with examples from Amazon, Netflix, Google, and the digital music industry, showing how the internet has changed the rules of competition for businesses around the world. Many of the insights have since become even more relevant through artificial intelligence, personalization, and modern search technology.
The authors take the reader through the entire process – from planning and organizing to publishing, managing and continuously improving content on websites and digital services. Although technology has evolved since the book was published, the principles of quality, relevance, management and long-term content work are at least as relevant in an era where search engines and artificial intelligence assess the credibility and usefulness of content.
Why we recommend the book
At The Invisible Capital, we consider The Long Tail to be one of the most important books in e-commerce, digitalization, and modern value creation.
The book explains why customers no longer just buy the most popular products, but increasingly find value in specialized products and services that meet individual needs. This insight has had enormous impact on the development of online stores, digital marketplaces, search engine optimization (SEO), information architecture, and content strategy.
Today we see that the theory also fits very well into the development of artificial intelligence. AI helps people discover relevant content, products and knowledge that were previously difficult to find. This has given the Long Tail principle a new dimension, where well-structured content and high professional quality are increasingly important for visibility, trust and value creation.
This is a book we believe everyone who works with e-commerce, digital marketing, customer experience, innovation, digital strategy or artificial intelligence should read.
Author/authors: Kristina Halvorson and Melissa Rach
Short review
How do you create content that actually helps people – and at the same time supports your business goals? Content Strategy for the Web is considered one of the most influential books in the field of content strategy and digital communications. The book shows how good content does not arise by chance, but through a deliberate strategy where user needs, the organization's goals, structure, work processes and management are closely linked.
The authors take the reader through the entire process – from planning and organizing to publishing, managing and continuously improving content on websites and digital services. Although technology has evolved since the book was published, the principles of quality, relevance, management and long-term content work are at least as relevant in an era where search engines and artificial intelligence assess the credibility and usefulness of content.
Why we recommend the book
At The Invisible Capital, we believe that good content is one of the most important forms of invisible value creation. A website is far more than design and technology – it is the content that builds trust, creates great customer experiences and helps people find the answers they are looking for.
This book is perfect for leaders, communications consultants, content producers, web editors, UX designers, and anyone working with digital services. It shows why a clear content strategy leads to better user experiences, more effective interactions, and stronger digital results over time.
In an era where artificial intelligence is increasingly important in how information is discovered, understood, and communicated, this book is more relevant than ever. It reminds us that technology alone never creates value – it is good, structured, and relevant content that makes the difference.
Short review
Don't Make Me Think is one of the world's most influential books on usability and web design. Since its first edition in 2000, the book has helped designers, developers, content producers, and managers understand a simple but powerful principle: Good digital services should be intuitive. The user should be able to complete their task without having to stop and think about how the website works.
Why we recommend the book
This is one of the books that has had the greatest impact on my own work with digital services. Over the years – from SAS and the Norwegian Opera & Ballet to working on Bærum Municipality’s website – the principles in this book have been an important reminder that technology is never an end in itself. The goal is to make everyday life easier for the people who use the services. Despite the fact that the book was published many years ago, the message is just as relevant today.
Authors: Ward Hanson and Kirthi Kalyanam
Short review
Internet Marketing & eCommerce provides a thorough introduction to how the internet has changed marketing, commerce, and business development. The book combines theory and practical examples in digital marketing, e-commerce, customer behavior, value creation, and digital business models. Although written at a time when the internet was still in its infancy, many of the fundamental principles are still highly relevant.
Why we recommend the book
This book was an important part of my own learning journey in digital marketing and e-commerce. It helped build my understanding of how technology, customer experience and business strategy are interconnected – an insight that later became very important in my work with SAS, the Norwegian Opera & Ballet, Bærum Municipality and eventually the project The Invisible Capital. Many of the ideas about customer value, digitalisation and innovation presented on the website have their roots in the knowledge this book conveys.
Authors: Clayton M. Christensen and Michael E. Raynor
Short review
In this sequel to The Innovator's Dilemma, Clayton Christensen shows how businesses can translate innovation theory into practical strategy. The book explains how companies can identify new growth opportunities, develop disruptive innovations, and build organizations that thrive in rapidly changing markets.
Why we recommend the book
While The Innovator's Dilemma explains why established businesses are often challenged, The Innovator's Solution provides concrete advice on how to meet the challenges. The book is therefore a natural next step for anyone who wants to understand innovation, strategy and long-term value creation.
Authors: Jeff Dyer, Hal Gregersen and Clayton M. Christensen
Short review
What characterizes people who create groundbreaking innovations? The authors identify five key skills – observation, questioning, experimentation, networking and association – that are common to the world's most innovative leaders and entrepreneurs.
Why we recommend the book
This book shifts the focus from organizations to the people behind innovation. It shows that creativity and innovation can be developed through deliberate training and experience. The perspectives align well with the philosophy behind Invisible Capital, where human competence and curiosity are the most important drivers of development.
Authors: Clayton M. Christensen, Taddy Hall, Karen Dillon and David S. Duncan
Short review
In this book, Clayton Christensen further develops the theory of Jobs to Be Done – the idea that customers do not primarily buy products, but "hire" them to solve specific needs. Through practical examples, the authors show how businesses can develop products and services that address customers' real-world challenges.
Why we recommend the book
For anyone working in customer experience, service design, and innovation, this is one of the most insightful books ever written. It reminds us that value creation always starts with understanding the people we are developing solutions for – a fundamental principle of Invisible Capital.
Author: Clayton M. Christensen
Short review
The Innovator's Dilemma is considered one of the most influential books on innovation and technological change. Clayton M. Christensen introduces the theory of disruptive innovation and explains why even the most successful businesses can fail when new technologies and business models challenge established markets. Through a series of examples, he shows how companies often focus on today's customers and incremental improvements, while overlooking innovations that later change entire industries.
Why we recommend the book
This is one of the books that has had the greatest impact on modern innovation thinking. When I first read it, it gave me a whole new perspective on why some businesses succeed in transformation, while others lag behind – even when they are well led. The insight has been an important part of my own understanding of digitalization, innovation and change management, and many of the reflections in The Invisible Capital build on the ideas Clayton Christensen presents in this classic. The book is as relevant today, in the face of artificial intelligence and digital transformation, as it was when it was published.
Author: Henry Chesbrough
Short review
Henry Chesbrough introduced the concept of Open Innovation and changed the way many businesses think about research and development. He shows how companies can create more innovation through collaboration with customers, universities, start-ups, suppliers and other external partners.
Why we recommend the book
Open Innovation has had a major influence on modern innovation thinking and was also an important topic during the seminars in Oxford and San Francisco. The book shows why future value creation occurs in the interaction between people, businesses and knowledge environments – not within closed organizations alone.
Authors: W. Chan Kim and Renée Mauborgne
Short review
Blue Ocean Strategy challenges businesses to shift their focus away from fierce competition and instead create new markets with little or no competition. The authors present strategies and models that help organizations develop innovative products, services, and business models.
Why we recommend the book
This book has inspired leaders around the world to rethink strategy and innovation. Instead of competing for the same customers, it shows how businesses can create new value through creativity and differentiation. The perspectives align very well with the themes of innovation, digitalization, and long-term value creation in Invisible Capital.
Authors: Patricia B. Seybold
Short review
Patricia Seybold shows how businesses can create better products and services by actively involving customers in the innovation process. The book describes how dialogue, co-creation and close collaboration with users can provide better solutions and stronger competitiveness.
Why we recommend the book
Customers often hold the most important insights into how products and services can be improved. This book emphasizes the importance of listening, involving, and learning from users – a perspective that is echoed in many of the articles on The Invisible Capital. Innovation rarely happens alone; it is created in the interaction between people.
Authors: Philip Evans and Thomas S. Wurster
Short review
This book analyzes how digital information is changing competitive conditions, markets, and business strategies. The authors explain how the internet is disrupting established structures and creating new opportunities for businesses that are able to think differently.
Why we recommend the book
Although written early in the internet revolution, the book describes many of the developments that still characterize business today. It provides valuable perspective on how digitalization affects value chains, competition, and innovation – themes that are central to Invisible Capital.
Authors: Don Tapscott and Anthony D. Williams
Short review
Wikinomics shows how openness, sharing and collaboration across organizations create new forms of innovation and value creation. Through a number of international examples, the authors describe how digital networks make it possible to develop products, services and knowledge together.
Why we recommend the book
This book was groundbreaking when it was first published, and many of the ideas have since become a natural part of everyday digital life. The perspectives on collaboration, knowledge sharing, and open innovation processes align very well with the philosophy behind Invisible Capital, where people and networks are at the center of value creation.
Author(s): Author: Michael E. Porter
Short review
Competitive Strategy is Michael E. Porter's classic work on how companies can understand the competition they find themselves in and develop a position that provides a basis for long-term profitability. Porter shifts the focus from the individual competitor to the structure of the entire industry and shows how competition is affected by customers, suppliers, new entrants, substitutes and the rivalry between existing companies. This forms the basis for what has later become known as Porter's Five Forces. The book is also about how companies can choose a competitive strategy on the basis of this analysis. It thus established an analytical language for strategy that has gained great importance in both research, teaching and practical strategy work.
Why we recommend the book
We recommend Competitive Strategy because it provides the analytical foundation for much of the thinking Porter later develops in What Is Strategy?. If a company is to choose a unique strategic position, it must also understand the competitive forces, the industry structure and the factors that affect the ability to create and retain value. The book is particularly useful because it reminds us that strategy is not just about internal goals, plans and ambitions. Strategy must be developed in the face of customers, competitors, suppliers, technology and structural changes in the market. Together with What Is Strategy?, the book therefore provides a much richer picture: First, the company must understand the competitive arena. Then, it must choose how to be different.
Author(s): Author: Michael E. Porter
Short review
In Competitive Advantage, Porter moves the analysis from the industry to the business itself. The main question is how competitive advantage is actually created. One of the book's most important contributions is the value chain, where the business is understood as a system of activities that collectively develop, produce, market, deliver and support a product or service. Competitive advantage cannot therefore be understood only through products or overall strategies; one must examine the activities that create costs, differentiation and value. This understanding later becomes central to Porter's argument about strategic fit: the activities must not only be good in isolation, but also fit together and reinforce each other.
Why we recommend the book
We recommend Competitive Advantage because it brings strategy right down to where value is actually created: in the activities the business performs. This makes the book particularly relevant together with What Is Strategy?. When Porter argues in 1996 that strategy consists of performing different activities than competitors, or performing similar activities in other ways, this builds on the thinking he developed here. For our perspective on value creation, this is particularly interesting. Value does not arise because the business has formulated a strategy on a document, but through people, expertise, technology, processes, collaboration and activities that together enable the business to create something that customers value. The book therefore provides an important connection between strategy, competitive advantage and actual value creation.
Author(s): Author: Michael E. Porter
Short review
In The Competitive Advantage of Nations, Porter raises the perspective from business to countries, regions and business environments. The book is based on extensive studies of the competitiveness of ten leading trading nations and examines why certain countries and business clusters are particularly successful in certain industries. A central premise is that national prosperity is not simply something a country inherits through natural resources or other given conditions. It is created, and productivity, innovation, competence, competition and the quality of the environment in which businesses operate are crucial. Here, Porter also develops the well-known diamond model to explain how different national and regional conditions can interact and stimulate competitiveness.
Why we recommend the book
We recommend The Competitive Advantage of Nations because here Porter extends the strategy perspective to the ecosystem surrounding the business itself. Value creation does not occur in a vacuum. Businesses develop in societies with education, research, infrastructure, capital, suppliers, demanding customers, competing businesses and public institutions. This makes the book particularly interesting for understanding value creation as an interaction between people, businesses and society. It also provides an important corrective to the notion that a country's competitiveness can mainly be understood through low costs or access to natural resources. Innovation, productivity and the ability to continuously develop are far more central to Porter's explanation.
Author: Joan Magretta
Short review
Understanding Michael Porter brings together and explains the most important parts of Michael Porter's strategic thinking in one accessible whole. Joan Magretta herself worked on strategy at the Harvard Business Review and organizes Porter's ideas around two fundamental questions: What is competition, and what is strategy? She explains, among other things, the Five Forces, competitive advantage, the value chain, value creation, trade-offs, fit, and strategic continuity. This makes the connection between Porter's various works clearer than when the concepts are studied separately. The book also includes an interview with Porter.
Why we recommend the book
We recommend Understanding Michael Porter because it helps the reader see the whole picture of Porter's understanding of strategy. Porter is often reduced to the Five Forces or a few models used in isolation. Magretta shows why this is too simple. Competition, value creation, strategic positioning, trade-offs, activity systems, fit and continuity are interconnected. This makes the book a particularly good supplement after reading What Is Strategy?. It makes it easier to understand why Porter does not view strategy as a plan or a collection of goals, but as a coherent system of choices about how the business will create value and compete over time.
Authors: Harvard Business Review, Michael E. Porter, W. Chan Kim, Renée A. Mauborgne and more
Short review
HBR's 10 Must Reads on Strategy brings together some of Harvard Business Review's most influential writings on strategy. The original collection from 2011 features Michael E. Porter's What Is Strategy? as its main article and combines it with works on competitive forces, Blue Ocean Strategy, the organization's vision, business models, strategy execution, and the Balanced Scorecard, among others. The result is not one unified theory of strategy, but multiple perspectives on how organizations can develop, formulate, and execute strategy.
Why we recommend the book
We recommend HBR's 10 Must Reads on Strategy because it places Porter in a broader strategic context. After reading What Is Strategy?, it will be interesting to encounter other central perspectives and see how they complement, challenge, or extend Porter's understanding. The collection also shows why strategy cannot be reduced to a single model. Competitive position, choice, innovation, business model, execution, priorities, and measurement must be seen in context. For the reader who wants to move on from Porter and into the strategy discipline more generally, this is therefore a very good introduction.
Author: Joseph E. Stiglitz and Bruce C. Greenwald
Short review:
Creating a Learning Society examines how knowledge, learning, and technological development contribute to economic growth and long-term value creation. Joseph E. Stiglitz and Bruce C. Greenwald challenge the notion that economic development is primarily about accumulating more physical capital. They argue that society's ability to create, disseminate, and apply knowledge is crucial for productivity growth and increased living standards. A key point is that learning does not only occur in schools and universities. It also occurs in businesses, through work, production, innovation, and interaction between people and organizations. Knowledge can also spread from one business and one part of the economy to others.
The book thus provides an important perspective on why human capital, competence, innovation and learning must be understood as central parts of a society's ability to create value over time.
Why we recommend the book
We recommend Creating a Learning Society because it expands the understanding of what lies behind economic value creation.
Machines, technology and financial capital are important, but they do not create productivity growth alone. Behind the development are people who learn, develop knowledge, improve work processes, share experiences and find new solutions.
This makes the book particularly relevant to Invisible Capital and our perspective on value creation: A significant part of society's value-creating capacity is found in the knowledge, competence, and learning ability of the people who participate in the economy.
Stiglitz and Greenwald thus provide an academic foundation for one of the most important relationships in modern value creation:
Author: Mariana Mazzucato
Short review
In The Value of Everything, Mariana Mazzucato asks a fundamental question: What exactly is value – and who creates it? Mazzucato returns to the historical discussions of value in economics and shows how the understanding of value creation has changed. She challenges the notion that high income, high prices or large profits necessarily mean that correspondingly large values have been created. One of the book's most important contributions is the distinction between value creation and value extraction . Mazzucato examines the financial sector, the pharmaceutical industry, innovation and the public sector, among others, and argues that we must become better at distinguishing between activities that actually create new values, and activities that primarily extract values that have already been created.
The book also challenges the traditional notion that the private sector creates value while the public sector mainly consumes or redistributes it. Innovation and economic development often arise through a complex interaction between public investment, research, businesses, capital and people.
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
The Power of Creative Destruction is about one of the most important drivers of long-term economic growth: innovation.
Philippe Aghion, Céline Antonin and Simon Bunel build on Joseph Schumpeter's classic idea of "creative destruction" – the process by which new technologies, businesses, products and ideas challenge and replace existing solutions.
But the book is not just about the disappearance of the old. The authors examine why some economies manage to create continuous innovation and productivity growth, while others stagnate. Competition, entrepreneurship, research, education, institutions and public policy thus become important parts of the explanation.
Creative destruction also comes at a cost. New technologies and businesses create opportunities and jobs, but can also make existing skills, tasks and business models less relevant. The challenge is therefore to create societies that both promote innovation and enable people to participate in the transition.
Why we recommend the book
We recommend The Power of Creative Destruction because it shows why innovation is a fundamental driver of value creation .
Value creation is not just about producing more of what we already produce. It also occurs when people develop new ideas, technology, and ways of working that enable us to solve tasks better than before.
This makes the book particularly relevant to The Invisible Capital. Behind innovation are people with knowledge, expertise, creativity and experience. But Aghion's perspective also shows that human capital must be part of a larger system where competition, institutions, research, investment and policy create the conditions for new ideas to actually turn into economic and social development.
The book thus provides an important context in our understanding of value creation:
Knowledge → new ideas → innovation → productivity growth → long-term value creation.
Author: Philippe Aghion, Céline Antonin and Simon Bunel
Short review
Institutions, Institutional Change and Economic Performance is one of Douglass C. North's most important works on why some societies are more successful than others in creating economic development over time.
North shifts attention from traditional factors of production such as capital and labor to the institutions that shape how people, businesses, and governments act and cooperate. Institutions are society's formal and informal rules of the game – including laws, regulations, norms, traditions, and established ways of organizing interaction.
These rules of the game affect the incentives that people and organizations face. They also affect investments, knowledge development, cooperation, transaction costs, and which economic activities emerge.
North also shows that institutions develop over time. History therefore matters: Today's economic opportunities are influenced by institutional choices and development paths that can stretch far back in time.
Why we recommend the book
We recommend Institutions, Institutional Change and Economic Performance because it explains a crucial aspect of value creation that easily becomes invisible:
Value creation needs good rules of the game.
People may have knowledge. Businesses may have capital. Entrepreneurs may have great ideas. A society may have natural resources and advanced technology. But outcomes are also influenced by the institutions that determine how people can collaborate, invest, compete, make deals, and develop businesses.
This makes North particularly interesting for our understanding of trust as part of invisible capital. Trust is not the same as institutions, but stable rules of the game, credible agreements, and well-functioning institutions can reduce uncertainty and make economic interaction easier.
North thus gives us another important part of the value creation picture:
Institutions → predictability and incentives → cooperation and investment → productive activity → long-term value creation.
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