create value

Create value, don’t erode it

Create value, don’t erode it

Companies today often fall into the trap of focusing on short-term quarterly profits and share gains at the expense of long-term sustainable growth. In fact, in a recent study 80% of executives surveyed would sacrifice R&D spending to meet quarterly earnings estimates.  While earnings are important, this focus on short term earnings rather than what actually drives success erodes the value of the company versus the objective to create value.  The only question is how long it takes the market to recognize that. 

Create value – Key steps include the following:

  • Understanding the source and drivers of creating value – Establish or assess your “fact base” to ensure that you’ve really identified what the market (and your customers) value

  • Investing in the future – Identify which capital investments should be pursued to support long term growth, even if short-term earnings are in decline

  • Making better outsourcing/insourcing decisions – Concentrate on keeping high value or complex activities in-house (e.g. innovation, market strategy, talent development, variable demand products, and complex or regulated manufacturing and distribution) – and find partners who can execute on the more straightforward products and support activities

  • Choosing good talent and aligning them well – Identify your company’s true key employees, the right team configurations most fundamental to creating value, and design reward systems that align their behavior accordingly

Create value – Focus on Quality, Customer, Brand and Organization

True value is found in product and service quality and innovation,  customer satisfaction, and brand reputation, and it is delivered by talented workers and leaders aligned to a well thought-out strategy.   Management who understand and practice these principals earn the confidence of customers and shareholders, and they and the organization will be rewarded in kind.  As a bonus, success in this area generally means the whole earning thing tends to go a lot more smoothly as well.
Posted in Strategy.

3 Comments

  1. Thanks, Jason. Watching companies decay in this fashion is certainly one of the most painful things you can experience. Customer, shareholder, partner, or employee, it doesn’t matter as everyone shares in the painful results.

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