“If you aim at nothing you will probably hit it!”
– Zig Ziglar, American Author & Motivational Guru
Don’t be fooled by value, it is much more complicated than it seems. There are many dimensions to value including consumer value, profit, return on investment, cash flow, KPIs, synergies, goals and competitive advantage. Value is truly a multi-dimensional equation. You don’t have to look too far to understand the interplays, and you’ve probably seen it yourself. I’ve often seen short-term decisions to improve profits only destroy customer value and long-term value of the company. General Motors decided not to replace a faulty ignition part that cost ~90 cents. The faulty part was allegedly responsible for 13 deaths and billions of dollars in costs and damage to the brand. I’ve seen private equity firms suck the cash out of a business, not reinvesting the appropriate amount of capital back into the business, only to see competitors leapfrog the business and take substantial market share. I’ve worked with CEOs that focus on increasing short-term cash flow by increasing pricing and decreasing inventory, which ended up simply turning off customers, leading to rapid declines in sales.
There is a delicate interplay when it comes to trying to increase value within a company. As a strategic leader, it is critical to understand the various forms of value, how they interact with each other, and ultimately how strategic actions can create or destroy value.
In this section, I’ll cover the top value tools and concepts, including:
1. Customer Value
2. Sustainable Competitive Advantage
3. FCF and ROIC
4. Profit Trees
6. SMART Goals
7. Key Performance Indicators – KPIs
8. Balanced Scorecard
9. Net Promoter
10. Mission Statements
11. Core Values
Just like all of the sections on this site, you can pick and choose a topic or if you want a nice overview of a section read the topics in order.