labor and specialization, is its spatial and temporal distributedness. Thus, different value creation activities are distributed sequentially or in parallel, staggered over time, and performed in various places (e.g., locations, buildings, rooms).
• Labor-division-based value creation depends on reliable, well-functioning collaboration. Enduring, robust, and goal-oriented collaboration needs to be institutionalized within an organization. By institutionalization, we mean developing a certain, lastingly stable, and person-independent practice (e.g., in a democracy, popular votes and electing members of parliament). Repeated enforcement makes such practices collectively self-evident. They can be based on both implicit rules and formalized regulations (→ TRA, 2.1 and 3.1).
Thus, institutionalizing labor-division-based collaboration enables this cooperation to be practiced as independently as possible of specific individuals. To this end, organizations serve as structured spaces of action for lastingly stabilizing labor-division-based cooperation (Barnard, 1938).
2.3 Primary and Supplementary Value Creation
Products, services, and other value creation outcomes must create added value (benefit) for their target groups. Target groups are the key addressees of organizational value creation. They include certain customer groups (for companies), citizens (for public administration), students and research [24] partners (for universities), parties to a conflict (in courts of law), or patients (in hospitals). Thus, an outcome-centered understanding of value creation focuses primarily on how organizational value creation impacts target groups. Examples include material products (vehicles, computers, household items, textiles, semiconductor components, agricultural products, books, etc.) or immaterial services (financial services, overnight accommodation, educational services, etc.). We call target group-oriented value creation primary value creation.
This refers to those impacts of an organization’s activities that are related to its basic purpose, i.e., its core function. For example, an economic organization (enterprise) aims to satisfy customer needs, a political organization (e.g., party) seeks to form majorities, in order to meet public concerns, and a scientific organization (e.g., university) strives to generate new knowledge.
At the same time, organizations achieve much that extends beyond primary value creation and represents additional value creation: They create jobs, pay taxes, form a place of belonging, help establish meaningful employee identity, contribute substantially to occupational pension funds, and serve the common good. Thus, today’s organizations, as stabilizing institutions, are important pillars of modern society.
2.4 Value Creation in Environment-Organization Interaction
Organizational value creation arises from the coordinated interaction between an organization and its environment and must continuously evolve. Accordingly, developing and utilizing a specific environment is inseparably linked to organizational value creation.
An organization’s environment is not simply an undefined space surrounding that organization. According to the SGMM, that environment is rather the space of possibilities and expectations specifically relevant to an organization. Organizations need to purposefully open up this existence-relevant space and shape it entrepreneurially. This requires developing robust relationships with specific stakeholders, most of all with the organization’s target groups as its primary value creation addressees. For instance, establishing an innovation partnership with a technical university also opens up new product innovation possibilities for an enterprise. These possibilities need to be concretized in the product development process as innovative product characteristics and subsequently purposefully utilized. How an organization performs these tasks opens up its specific environment while new possibilities also arise for a university if its partnering enterprise [25] provides funding. Enterprise and university become relevant environments for each other. We understand their interplay, i.e., how these two organizations develop in relation to each other, as co-evolution.
Thus, organizational value creation, as a key point of reference for management, always focuses on design and on development. This dual focus encompasses organization and environment – with a view to enabling their sustainable co-evolution.
2.5 Types of Organizations
Not all organizations are identical. Essentially, an organization defines itself in terms of its primary value creation: What does this consist of? And which specific environment is this value creation oriented toward? The SGMM understands the primary environment as the environment toward which an organization’s primary value creation is oriented.
Primary value creation and the primary environment shape an organization’s identity and self-concept. This also includes how it deals with the concerns, interests, demands, and disturbances it faces. The terms primary value creation and primary environment also indicate that organizations can have several purposes or functions. They can be multi-purpose or multi-function systems required to cope with manifold heterogeneous expectations.
Overall, organizations can be typified in terms of three main distinctions: First, some organizations align their primary value creation with markets (the economy as an environmental sphere), while others provide a different type of primary value creation. Second, organizations whose value creation aims to achieve a financially realizable increase in value for their owners, while others emphasize other values. Third, some organizations are privately owned, others publicly.
On this basis, we distinguish six types of organizations:
• First, organizations are enterprises if they align their value creation with markets and thus with the economy as their environmental sphere. They generate added value for their owners. They are privately owned. Enterprise ownership is more or less fully tradable in the form of shares or other forms of participation.
• Second, organizations are public enterprises if the state is either the owner or at least a majority shareholder. Such enterprises must align themselves [26] simultaneously with two environmental spheres: politics and the economy. Typically, public enterprises include the state postal service, state railway, state providers of communication services or public water supply and waste disposal. Their value creation is (at least partially) state-regulated, e.g., if critical infrastructures or politically desired services (public service) are concerned.
• Third, organizations are public organizations if, in contrast to public enterprises, they do not orient themselves toward the economy, but instead create sovereign value (e.g., public security). Based on a government mandate, this type of value creation is oriented toward the environmental spheres of politics and law. Examples of public organizations include the army and police or public administrations (e.g., building authorities, citizen registration offices, inland revenue, etc.).
• Fourth, organizations are nongovernmental organizations (NGOs) if they are typically oriented toward the environmental spheres of the public and ethics, but if their value creation – in contrast to public organizations – is not legitimized by a state mandate. NGOs are oriented toward societal concerns (e.g., the protection of human rights, nature, or animals).
• Fifth, organizations are nonprofit organizations (NPOs) if their foundation and continued existence are motivated not by increasing value for their owners but by collective self-help or by added societal, cultural, symbolic, or intellectual value. Typical organizations include ones committed to their members’ concerns (e.g., cultural associations, sports clubs, neighborhood and elderly aid associations, etc.).
• Sixth, organizations are pluralistic organizations if several of the above organizational characteristics apply simultaneously (e.g., public hospitals or private universities). Their value creation is typically characterized by multiple orientations toward several environmental spheres, by heterogeneous notions of success, and often also by hybrid ownership. In such organizations, effective management as a reflective design practice is associated with special challenges.
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