Growing Enterprise Value

1. Growing Enterprise Value

2. What company are you leading? Enterprise Value Decelerating Declining Growing sideways Expanding Accelerating What company would you like to lead?

3. Enterprise Value Every company has a unique story. Growing Enterprise Value requires unique solutions. Apple IBM Dell Microsoft Source: Wikinvest

4. Value Creation Are you wondering how can I grow enterprise value? 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 … Enterprise Value Future Today Cost Organic Inorganic Strategic Planning Perspective

5. The role of Intangibles The value of intangibles has been growing. Who is managing your intangible value? 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.

6. Price Earnings Ratios Do you track the correlation between your PE ratio and the market’s? 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. Mean Source: http://www.multpl.com

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? 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. Enterprise Value Business Model Brand Innovation Strategy Development Risk Employee Engagement Design Sustainability (DfX)

8. Brand Value Do you know your brand’s positioning? What are you aspiring for? ECONOMIC VALUE Stage Experiences Inspirational Religions Charities 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. Social Select Organizations Deliver Services Emotional Personal Care Products Cosmetics Fashion Clothing Make Goods Automotive Financial Services Technology Products Chemicals Functional Extract Commodities Generic Utilities / Energy

9. Innovation Do you know how know how your innovation is contributing to changes in your enterprise value? *Business Model 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 Disruption Factor *Brand Product Architecture *Customer Experiences *Channel *Services *Network *Product Performance *Product System *Structure *Core Processes *Enabling Processes Return Source: *Doblin Innovation types, Bruce Starcher

10. Risk 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? 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. Expected Risk Cost $ = Σ (Magnitude * Frequency)

11. Strategy Development Strategy development is an activity that identifies potential sources of value and solutions to capture that value. 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? Business Context Business Model Strategy Development Strategic Planning Strategy Execution

12. Sustainability activity impact on enterprise value 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. Design Given the right context, Design alone has boosted Enterprise Value significantly 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.

14. Employee Engagement In a knowledge and learning based environment, do you see your employees as key to your enterprise value? 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? Employee Engagement Customer Satisfaction Profit + 10% + 6% + 2% Source: The Gallup organization

15. Business Model IBM as an example of the impact of business model decisions on enterprise value. Have you evaluated your decisions? 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? Outsource Chip/OS to Intel & MSFT Market Value ($B) Continued focus on Mainframes Entered PC Market Services Technology Components Stand alone software 76 78 80 82 84 86 88 90 92 94 96 98 Value Inflow Value Outflow Value Stability

16. Enterprise Value Creation 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? Future Enterprise Value Business Model Brand Innovation Strategy Development Risk Employee Engagement Today Design Sustainability Cost Organic Inorganic (DfX) AND Strategic Planning Perspective Activity Perspective

17. Where do you want to go? We have been helping companies grow enterprise value for over 10 years Enterprise Value Decelerating Declining Growing sideways Expanding Accelerating

18. Bruce Starcher Managing Director Starcher Group LLC Office: 708 406 9460 email: bruce@starchergroup.com web: www.starchergroup.com