Strategy – Passing the Strategic Test Through Value Generation
Managerial Conceptual Model
As a c-suite executive in an organization and industry, it is almost imperative that the job demanded to create value for driving the profitability, growth and the ‘sustenance’ of the demanded growth. The intent is the navigating, exploring and detecting the right direction along with your chosen team to avoid disruptions and change facing the industry.
In the prevalent times the corporate executives faces ever growing challenges in shape of financial, political, demographics, economic and above all the ‘technology’, altering the shape and intensity of competition.
Top executive as a savvy manager needs and expected to absorb and digest large amount of information to make correct decisions with agility in a limited time frame, never witnessed before, even it seem unrealistic at time.
The questions arise of “how do the decision managers get a full view of the dynamics underlying this critical challenge? Any slackness can create or intensify both the systematic and unsystematic risks in value generation chain in the intended strategy.
The corporate and business (horizontal) senior line mangers has a very difficult task of pinpointing the options and actions to make right decisions which must be able to drive the firm forward with minimum fluctuations. The expected value at each stage of the strategy in transition has hidden variables of different attributes and characteristics.
The senior executives and senior business managers are desired to ‘Unlock’ these hidden values in continuity in order to make sure that their ship is sailing in the right direction and almost free from ‘oceanic storms’ down the strategic journey.
There is always a sustained burden on the decisions makers as ‘strategists’ to be ready to face the newer challenges to drive the organizational productivity and growth to satisfy all the stakeholders.
The most difficult question faced by the people who are delegated this task of improving the overall productivity and growth of their organization is “How to do it? I wish, the answer is simple as a rule of thumb, but it’s not unfortunately.
Though, it can be put in much simpler terms as, “ for those who are capable of Unlocking the mystery behind finding the right set of Strategic Value Enablers’ are most like to seek, see and find opportunities’ to dive organizational growth in short, medium and long terms (goals).
- The perimeters underlying the growing challenges facing by the top managers or decision makers gyrates around not only facing challenges, but rather ‘identifying’, understanding and clearly communicating and transmitting the ‘value drivers’ within the organizations and keep zoom-focus on their efforts and decisions where it matters.
- One has to go through information from day to day operations, instituted by operational areas of the organizations and the information on the continuous impact from the outcomes of these functions and operations. All such information and data assimilated o daily – periodic basis has a direct impact on the financial – economic side of organizational productivity
- Just as a small example, such outcomes (subjective they may look in generality), but bear direct impact on Net Operating profit (NOPAT), Invested Capital (IC), Return on Invested Capital (ROIC), Return on Equity (ROE). Financial spreads, Current Value, Operating Enterprise Value (EV). Future Values and consequently trickles to the Strategic Organizational Value in shape of ‘Total Returns to Share holders’ (TRS). The Strategy Aspiration through ‘Value invention and pièce de résistance’. (A keen understanding of how business decisions affect value and are reflected in financial metrics and accounting statements & vice versa when often over looked)
The basic principle is “Value Generation” which will deliver the value to the share and stakeholders. What goes on behind this machinery has umpteen nuts & bolts and managerial gearbox parts which work together to grind the inputs to produce Strategic Value Creation’; the aim of any organization.
The author’s intent is to give a conceptual view of the importance of Uncovering the mystery of Value Creation and not to discuss all the technical parameters and variables to run this machinery.
By Farooq Omar
Corporate and Business Strategy Consultant