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Growing Enterprise Value
Growing sidewaysDeclining Expanding
What company would you like to lead?
What company are you leading?
AcceleratingDecelerating
Enterprise
Value
Dell
Apple
Microsoft
IBM
Source: Wikinvest
Enterprise Value
Every company has a unique story. Growing Enterprise Value requires unique solutions.
Value Creation
Enterprise
Value
Organic InorganicCost
Today
Are you wondering how can I grow enterprise value?
Future
Strategic Planning Perspective
Strategies are focused on delivering
increased enterprise value. In the strategic
planning environment that is often
translated into earnings per share and
expected stock price.
The traditional knobs that receive the most
focus include Cost Optimization, Organic
and Inorganic growth.
Yet there are other value creators …
The role of Intangibles
The Enterprise Value is a function
of more than earnings per share.
Brand is an example of additional
intangible value that can represent
more than 50% of total enterprise
value.
The value of intangibles has been growing. Who is managing your intangible value?
Price Earnings Ratios
Market Price Earnings multiples
also affect enterprise value.
It raises and lowers the water for
all boats and is somewhat beyond
senior management’s control, but
still very real.
The question is how to keep your
PE somewhat independent of the
broader markets.
Source: http://www.multpl.com
Mean
Do you track the correlation between your PE ratio and the market’s?
Enterprise Wide Activities that add to Enterprise Value
There are a number of enterprise wide activities that do not register well in our accounting systems.
Which activities are the most important for your company?
Employee
Engagement
Innovation
SustainabilityDesign
Brand
Strategy
Development
(DfX)
Enterprise
Value
These activities are known to
increase enterprise value
though the exact link and
analytics have not been
clearly defined yet.
The fact that our accounting
systems account for these
activities poorly does not
help.
Risk
Business
Model
Brand Value
ECONOMICVALUE
Generic
Functional
Emotional
Inspirational
Religions
Charities
Personal Care Products
Cosmetics
Fashion Clothing
Automotive
Financial Services
Technology Products
Chemicals
Utilities / Energy
Social Select Organizations
Extract
Commodities
Make
Goods
Deliver
Services
Stage
Experiences
Given the significant role that
intangible value has on enterprise
value, brand positioning is a key
driver.
The value gap between a
functional and social brand can be
significant, though not all
enterprises will be able to deliver
on a social brand.
Do you know your brand’s positioning? What are you aspiring for?
Innovation
Innovation allows an organization to
take on and manage risk. Enterprises
make a profit when they take on risk.
But not all types of innovation will
lead to an increase in enterprise value
at all times.
It is important to align innovation type
with lifecycle of the business, trends
in the broader ecosystem, company
strategy and business model.
Risk
Return
*Business
Model
*Brand
*Product
System
*Enabling
Processes
*Core
Processes
*Product
Performance
*Network
*Structure
*Channel
*Services
*Customer
Experiences
Product
Architecture
Disruption
Factor
Source: *Doblin Innovation types, Bruce Starcher
Do you know how know how your innovation is contributing to changes in your enterprise value?
Risk
Expected Risk Cost $
=
Σ (Magnitude * Frequency)
Risk is a complex topic that has a real
impact on enterprise value and
earnings. Managers are
fundamentally hired to dynamically
manage risk, ensuring that returns are
optimized with risks.
Superior management of risk will lead
to superior enterprise value and
returns in the long term.
Integrating risk in decision making at all levels of the organization will yield superior decisions and
greater enterprise value. Where have you integrated risk management?
Strategy Development
Business Model
Business Context
Strategy Development
Strategic Planning
Strategy Execution
Many organizations focus on strategic planning and strategy
execution but fail to adequately address strategy development.
Strategic Planning asks the question: What set of strategies do I
need to articulate to deliver on commitments to shareholders?
How do I ensure that the organization is aligned around those
strategies?
Strategy Development asks the question: Given the business
context and the business model, how do I identify profitable
segments to pursue in the short and long term? Where do I
continue pushing and where do I need to evolve / change the
current course of action?
Strategy development is an activity that identifies potential sources of value and solutions to capture that value.
Sustainability activity impact on enterprise value
Enterprise Value =
Revenue Increased competitive position
Access to markets
Win bids
Increased loyalty
Retain business
− Cost Increased efficiencies
Less material
Less waste
Lower energy use
+ Brand Increased brand equity
Consumer perception
Emotional connection
+ Employees Increased employee engagement
Increased productivity
Retention
Hiring
− Financing Lower cost of capital
Access to SRI funds
Pass financial institution filter
− Risk Lower risk
Supplier risk
Product risk
Facility risk
Regulatory risk
Competitive risk
Reputational risk
A focus on sustainability can grow enterprise value, driven by a number of factors. Is your sustainability
program contributing to your Enterprise Value?
Many enterprises have sustainability
programs though they are viewed as
a cost and a means to feel good.
The reality is that sustainability
activities can have a very positive
impact on enterprise value AND a
very positive impact on society.
One study done in 2004 quantified the impact of design on
stock market performance. The 63 companies studied as
effective users of design outperformed the FTSE 100 Index
companies by 200%. The big question is how?
Design is an enterprise asset, a method and approach to
solve problems, one where solutions exist at the
intersection of people, technology and business.
Design also focuses on delivering experiences to customers
and well designed experiences have significantly higher
customer value than products and services.
Design
Enterprise Value =
+ Revenue
Increased competitive position
Price premiums (relative to non-design)
Superior experience, products,
services, support, …
− Cost Increased efficiencies
Design for Manufacturing
Design for Supply Chain
Design for Service
…
+ Brand Increased brand equity
Consumer perception
Emotional connection
+ Employees
Increased employee
engagement
Total Employee Experience
− Financing Lower cost of capital Lower risk reduces cost of capital
− Risk Lower risk
Supplier risk
Product risk
Regulatory risk
Competitive risk
Reputational risk
Given the right context, Design alone has boosted Enterprise Value significantly
Employee Engagement
Customer SatisfactionEmployee Engagement Profit
+ 10% + 6% + 2%
More companies are using “cost of the workforce” metrics
to make business decisions where a lower cost of the
workforce is better.
Employee engagement has been shown to increase
customer satisfaction, leading to increasing profits.
Gallup, among others, have a set of questions that help
management understand what is important to employee
engagement.
The Q12 Index
1) Do you know what is expected of you at work?
2) Do you have the materials and equipment to do your
work right?
3) At work, do you have the opportunity to do what you do
best every day?
4) In the last seven days, have you received recognition or
praise for doing good work?
5) Does your supervisor, or someone at work, seem to care
about you as a person?
6) Is there someone at work who encourages your
development?
7) At work, do your opinions seem to count?
8) Does the mission/purpose of your company make you feel
your job is important?
9) Are your associates (fellow employees) committed to
doing quality work?
10) Do you have a best friend at work?
11) In the last six months, has someone at work talked to
you about your progress?
12) In the last year, have you had opportunities to learn and
grow?
Source: The Gallup organization
In a knowledge and learning based environment, do you see your employees as key to your enterprise value?
Business Model
Market
Value
($B)
Outsource
Chip/OS
to Intel & MSFT
Entered PC
Market
Stand alone
software
Services
Technology
Components
76 78 80 82 84 86 88 90 92 94 96 98
Value Inflow Value Outflow Value Stability
Continued focus on
Mainframes
Managing your business model and
business model innovation will lead to
significant changes in the enterprise
value.
Good decisions can lead to significant
value inflows and misalignments with
the marketplace lead to value erosion.
Do you know how to manage and
innovate your business model?
IBM as an example of the impact of business model decisions on enterprise value.
Have you evaluated your decisions?
Enterprise Value Creation
Enterprise
Value
Do you look at multiple lenses to gain insight on how to grow enterprise value? Do you know how to
integrate all these perspectives into a mutually reinforcing set of activities and strategies?
Strategic Planning Perspective Activity Perspective
AND
Organic InorganicCost
Today
Future
Employee
Engagement
Innovation
SustainabilityDesign
Brand
Strategy
Development
(DfX)
Risk
Business
Model
Where do you want to go?
Growing
sideways
Declining Expanding AcceleratingDecelerating
Enterprise
Value
We have been helping companies grow enterprise value for over 10 years
Bruce Starcher
Managing Director
Starcher Group LLC
Office: 708 406 9460
email: bruce@starchergroup.com
web: www.starchergroup.com

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Growing Enterprise Value

  • 2. Growing sidewaysDeclining Expanding What company would you like to lead? What company are you leading? AcceleratingDecelerating Enterprise Value
  • 3. Dell Apple Microsoft IBM Source: Wikinvest Enterprise Value Every company has a unique story. Growing Enterprise Value requires unique solutions.
  • 4. Value Creation Enterprise Value Organic InorganicCost Today Are you wondering how can I grow enterprise value? Future Strategic Planning Perspective Strategies are focused on delivering increased enterprise value. In the strategic planning environment that is often translated into earnings per share and expected stock price. The traditional knobs that receive the most focus include Cost Optimization, Organic and Inorganic growth. Yet there are other value creators …
  • 5. The role of Intangibles The Enterprise Value is a function of more than earnings per share. Brand is an example of additional intangible value that can represent more than 50% of total enterprise value. The value of intangibles has been growing. Who is managing your intangible value?
  • 6. Price Earnings Ratios Market Price Earnings multiples also affect enterprise value. It raises and lowers the water for all boats and is somewhat beyond senior management’s control, but still very real. The question is how to keep your PE somewhat independent of the broader markets. Source: http://www.multpl.com Mean Do you track the correlation between your PE ratio and the market’s?
  • 7. Enterprise Wide Activities that add to Enterprise Value There are a number of enterprise wide activities that do not register well in our accounting systems. Which activities are the most important for your company? Employee Engagement Innovation SustainabilityDesign Brand Strategy Development (DfX) Enterprise Value These activities are known to increase enterprise value though the exact link and analytics have not been clearly defined yet. The fact that our accounting systems account for these activities poorly does not help. Risk Business Model
  • 8. Brand Value ECONOMICVALUE Generic Functional Emotional Inspirational Religions Charities Personal Care Products Cosmetics Fashion Clothing Automotive Financial Services Technology Products Chemicals Utilities / Energy Social Select Organizations Extract Commodities Make Goods Deliver Services Stage Experiences Given the significant role that intangible value has on enterprise value, brand positioning is a key driver. The value gap between a functional and social brand can be significant, though not all enterprises will be able to deliver on a social brand. Do you know your brand’s positioning? What are you aspiring for?
  • 9. Innovation Innovation allows an organization to take on and manage risk. Enterprises make a profit when they take on risk. But not all types of innovation will lead to an increase in enterprise value at all times. It is important to align innovation type with lifecycle of the business, trends in the broader ecosystem, company strategy and business model. Risk Return *Business Model *Brand *Product System *Enabling Processes *Core Processes *Product Performance *Network *Structure *Channel *Services *Customer Experiences Product Architecture Disruption Factor Source: *Doblin Innovation types, Bruce Starcher Do you know how know how your innovation is contributing to changes in your enterprise value?
  • 10. Risk Expected Risk Cost $ = Σ (Magnitude * Frequency) Risk is a complex topic that has a real impact on enterprise value and earnings. Managers are fundamentally hired to dynamically manage risk, ensuring that returns are optimized with risks. Superior management of risk will lead to superior enterprise value and returns in the long term. Integrating risk in decision making at all levels of the organization will yield superior decisions and greater enterprise value. Where have you integrated risk management?
  • 11. Strategy Development Business Model Business Context Strategy Development Strategic Planning Strategy Execution Many organizations focus on strategic planning and strategy execution but fail to adequately address strategy development. Strategic Planning asks the question: What set of strategies do I need to articulate to deliver on commitments to shareholders? How do I ensure that the organization is aligned around those strategies? Strategy Development asks the question: Given the business context and the business model, how do I identify profitable segments to pursue in the short and long term? Where do I continue pushing and where do I need to evolve / change the current course of action? Strategy development is an activity that identifies potential sources of value and solutions to capture that value.
  • 12. Sustainability activity impact on enterprise value Enterprise Value = Revenue Increased competitive position Access to markets Win bids Increased loyalty Retain business − Cost Increased efficiencies Less material Less waste Lower energy use + Brand Increased brand equity Consumer perception Emotional connection + Employees Increased employee engagement Increased productivity Retention Hiring − Financing Lower cost of capital Access to SRI funds Pass financial institution filter − Risk Lower risk Supplier risk Product risk Facility risk Regulatory risk Competitive risk Reputational risk A focus on sustainability can grow enterprise value, driven by a number of factors. Is your sustainability program contributing to your Enterprise Value? Many enterprises have sustainability programs though they are viewed as a cost and a means to feel good. The reality is that sustainability activities can have a very positive impact on enterprise value AND a very positive impact on society.
  • 13. One study done in 2004 quantified the impact of design on stock market performance. The 63 companies studied as effective users of design outperformed the FTSE 100 Index companies by 200%. The big question is how? Design is an enterprise asset, a method and approach to solve problems, one where solutions exist at the intersection of people, technology and business. Design also focuses on delivering experiences to customers and well designed experiences have significantly higher customer value than products and services. Design Enterprise Value = + Revenue Increased competitive position Price premiums (relative to non-design) Superior experience, products, services, support, … − Cost Increased efficiencies Design for Manufacturing Design for Supply Chain Design for Service … + Brand Increased brand equity Consumer perception Emotional connection + Employees Increased employee engagement Total Employee Experience − Financing Lower cost of capital Lower risk reduces cost of capital − Risk Lower risk Supplier risk Product risk Regulatory risk Competitive risk Reputational risk Given the right context, Design alone has boosted Enterprise Value significantly
  • 14. Employee Engagement Customer SatisfactionEmployee Engagement Profit + 10% + 6% + 2% More companies are using “cost of the workforce” metrics to make business decisions where a lower cost of the workforce is better. Employee engagement has been shown to increase customer satisfaction, leading to increasing profits. Gallup, among others, have a set of questions that help management understand what is important to employee engagement. The Q12 Index 1) Do you know what is expected of you at work? 2) Do you have the materials and equipment to do your work right? 3) At work, do you have the opportunity to do what you do best every day? 4) In the last seven days, have you received recognition or praise for doing good work? 5) Does your supervisor, or someone at work, seem to care about you as a person? 6) Is there someone at work who encourages your development? 7) At work, do your opinions seem to count? 8) Does the mission/purpose of your company make you feel your job is important? 9) Are your associates (fellow employees) committed to doing quality work? 10) Do you have a best friend at work? 11) In the last six months, has someone at work talked to you about your progress? 12) In the last year, have you had opportunities to learn and grow? Source: The Gallup organization In a knowledge and learning based environment, do you see your employees as key to your enterprise value?
  • 15. Business Model Market Value ($B) Outsource Chip/OS to Intel & MSFT Entered PC Market Stand alone software Services Technology Components 76 78 80 82 84 86 88 90 92 94 96 98 Value Inflow Value Outflow Value Stability Continued focus on Mainframes Managing your business model and business model innovation will lead to significant changes in the enterprise value. Good decisions can lead to significant value inflows and misalignments with the marketplace lead to value erosion. Do you know how to manage and innovate your business model? IBM as an example of the impact of business model decisions on enterprise value. Have you evaluated your decisions?
  • 16. Enterprise Value Creation Enterprise Value Do you look at multiple lenses to gain insight on how to grow enterprise value? Do you know how to integrate all these perspectives into a mutually reinforcing set of activities and strategies? Strategic Planning Perspective Activity Perspective AND Organic InorganicCost Today Future Employee Engagement Innovation SustainabilityDesign Brand Strategy Development (DfX) Risk Business Model
  • 17. Where do you want to go? Growing sideways Declining Expanding AcceleratingDecelerating Enterprise Value We have been helping companies grow enterprise value for over 10 years
  • 18. Bruce Starcher Managing Director Starcher Group LLC Office: 708 406 9460 email: bruce@starchergroup.com web: www.starchergroup.com