Fix: Finding Your Sources of Value
Traditional earnings approaches to valuation, performance measurement, and strategic thinking have come up short. Managing for value has again become the mantra of today’s executive. But the academic literature, mainstream journalists, and even analyst community members, have long interpreted managing for value initiatives as mere advances in metrics and measurement.
Such a narrow interpretation implies little fundamental change to the behavior of the people and processes responsible for the decisions and actions that create value. To create value, value-based management must include a powerful change to both people and processes, including planning, portfolio management, strategic and tactical decision-making, and compensation.
Many strategies fail in the decisions, not the vision. All too often, strategies and their execution are premised on flawed measures and metrics, driving uneconomic decisions and value destruction or suboptimization. The deployment and execution of strategies require countless economic, value-based decisions to be made at all levels within the company: integrations, dispositions, closures, outsourcing, run-length, customer and stock keeping unit (SKU) rationalization, changes to pricing, promotions and value propositions.
Many companies feel pressed to discern where they are creating value and where they are destroying value within their business portfolios. In our experience, roughly 80 percent of companies ...