Publications

Value: Use it, or Loose It

Share this article

It’s easy getting lost in the day to day battles companies face keeping their heads above water, while losing sight of the reason for being in business in the first place… creating value for owners, investors and other stake holders. Without clear focus on objectives designed to deliver the prize at the end of the race… value, it’s difficult to efficiently organize the right resources… at the right time… on the right tasks… to achieve success. So, what is value? In most cases it’s the financial return investors expect, which ultimately boils down cash flow today… cash flow tomorrow. Whether its current earnings, future backlog, market share, reputation or sustainable ROI, value and cash flow are generally one and the same. Attaining results investors expect therefore comes down to a clear understanding of core activities responsible for value creation, versus non-core activities playing a support role. Success becomes a matter of ensuring core staff are not distracted by non-core activities, requiring focus and discipline.

 

Consider: 

-For every hour core staff spend on non-core activities, less value is created.

-For every hour core staff spend on non-core activities it’s done less efficiently and at a cost premium.

-For resource stretched companies operating at the margins, impact from the above often becomes the difference between success and failure.

 

Delivering value is the result of allocating, organizing and managing scarce resources dedicated to the activities essential to its creation. A simple illustration of the types of typical activities involved in value creation versus support is laid out below: 

 

                 

 

Success today, as well as into the future requires a different mindset around best use resource allocation decisions. Changing competitive landscape; constant cost pressure; adoption of new tools, processes and regulations all make it essential to understand how the investment of scarce resources directly tie to achieving mission critical objectives. This is not complicated. It starts by asking the simple question… how does this decision tie back to value creation? 

One of the fathers of modern management theory, Peter Drucker provided insight into what it takes to succeed in today’s highly competitive world. He said… those organizations capable of getting the greatest productivity from its knowledge workers shall win in the 21st century… Translation; success requires laser-like focus on the tasks and activities responsible for driving value creation, while figuring out how to handle everything else. The good news is there are software applications and best practice business processes available to help smaller organizations better manage non-mission critical activities more effectively, freeing core staff to drive value creation. Cloud computing, along with information and knowledge sharing via the internet are leveling the playing field with respect to value creation. 

 

By:

Ron Albright – VProA Founder and CEO

 

References:

https://www.merriam-webster.com/dictionary/value