Today’s business landscape has been completely stirred by the pandemic. Amidst the crisis, if there is one thing that businesses have realized, it is that the leaders must look at sustaining enterprise Value Creation by catering to a broader range of stakeholders. That means treating the customers on equal footing as shareholders.
To create enterprise value – a term given preference over shareholder value – one must foster resilience and contribute to societal well-being now and in the future. So, how can CEOs and other inspirational business leaders re-establish control of the value creation ecosystem? By re-evaluating their stance, strategies, planning, and much more, and gear up for disruption.
In taking these steps – which could involve creating new supply chains, new products, new people policies, and even new standards of transparency in decision-making – organizations must recognize that disruption and value creation are inextricably linked, and that, though disruption constantly presents risks to corporate value, it’s also creating new opportunities.
Some levers can help businesses and anyone with the best entrepreneur title on their desk win in their industries, while others can help them succeed in society. Organizational culture is perhaps the greatest driver of an organization’s vision and progress in this day and age.
As a general rule, it streams down from the top authority down to the representatives and every one of the cycles and drives at an organization.
Consequently, a leader should be at the vanguard of laying out a culture of chance-taking, straightforwardness, development, modesty, and greatness to get the best out of both the representatives and the instruments at his/her removal.
For that, a leader should show various aspects of administration that help brings to completion various upsides of one’s desired culture to insert at an association. Interestingly, some pull both levers. The purpose of this article is to describe what experts believe to be the most critical steps needed to create long-term enterprise value in today’s world.
Understanding The Value Creation Landscape
To create and grow enterprise value, companies must first understand the landscape of today’s value creation ecosystem and the trade-offs, tensions, and balancing acts that it entails. There are three main components of the ecosystem:
➔ Financial productivity:
Markets have long rewarded companies that drive growth and improve efficiency to make that growth more profitable. Companies have always had to strike a delicate balance between spending money and saving money while considering that investing in development is a long-term enabler of building resilient assets.
A genuinely resilient organization will respond to and adjust effectively to external shocks (defensive adaptability) and flex and stretch to seize opportunities (offensive agility).
In addition to addressing broad societal challenges, an organization creates enterprise value by considering stakeholders beyond shareholders in its decision-making process.
Many of the best finance leaders in India like Sanjiv Bajaj, Chairman and Managing Director, Bajaj Finserv, have proven to be great at assessing the lay of the land through tumultuous times. This way, they have been able to successfully drive sustainable value creation by keeping financial productivity, resilience, and the customer base well-oiled.
For example, the head of the Bajaj Group has always been in favor of focusing on long-term vision rather than chasing lucrative, short-term opportunities. This has resulted in a steady rise in Bajaj’s stock of financial services which remained resilient and agile even amidst the pandemic.
Sanjiv Bajaj directed the company to resort to Zero-Based Budgeting, thus reinventing its businesses and saving costs. Seeing changing consumer behavior trends, he also accelerated the plans for digital transformation that resulted in Bajaj crafting frictionless omnichannel experiences for consumers.
As a result, the company remained invaluable in the customers’ eyes even during a pandemic slowdown and registered a 14% growth in customers in FY21 over FY20.
Changing the Value Creation Strategy: 5 Tips
Let’s look at the five ways all top finance leaders in India and their organizations can help shape and execute effective strategies within the broader value creation ecosystem.
Apply “Visionary Valuation” Along with Ongoing Measurement and Correction
Attempts to limit innovation could result in lower value and prevent innovation. It can be difficult or even impossible to measure the value creation potential of a disruptive strategy before execution, such as Toyota’s launch of the Prius two decades ago as a bridge to electric vehicles or Apple’s creation of the iPad market for tablets.
In contrast, the most influential business leader should focus on developing a “visionary valuation” by defining the types of matter they aim to create, understanding how commitment to those types of value will drive enterprise value, and developing key performance indicators (KPIs) to track value creation across this broader ecosystem.
- Think Like a Disruptor
In the face of disruption, companies in any industry can ask: If we were coming into this market as a new entrant today, without legacy assets or infrastructure, what strategy would we adopt? Only the best entrepreneur with a blank-slate mindset can anticipate new competitive threats and opportunities and develop, evaluate, and fine-tune strategies that turn them into true disruptors rather than hypothetical ones.
The fundamental shifts in strategy can only be implemented when businesses relocate the capital, talent, and other resources needed to implement them. Organizational inertia can result from several factors, sometimes including the interests of top leadership. Despite today’s relentless disruption and evolving perception of value, organizations and leaders must be prepared to act radically and quickly when allocating resources; otherwise, the strategy will fail.
Execute at Higher Pace
The top finance leader builders in India no longer have the luxury of rolling out a strategy gradually in the face of multiple fast-moving disruptions, intensifying real-time scrutiny, and shifting value drivers. In any case, the strategy is at risk of being overtaken by events if it is not executed at the highest possible speed. Quicker companies may outpace those that take their time.
Be More Attuned to Your Ecosystem
Business strategies, plans, and behaviors must adapt to new disruptions, risks, opportunities, and KPIs instead of sticking to fixed rails as they have in the past. When conditions change, if the strategy doesn’t deliver, or if current actions devalue the business, it’s crucial to have the flexibility to adjust. In the age of social media, you need tools that continuously scan and track consumer sentiment to maintain agility, such as social listening.
Given its profound implications for the creation and destruction of enterprise value, any budding finance leader builder in India cannot ignore the broad value creation ecosystem. Organizations that effectively manage all their value levers in a responsive and coordinated manner will reap the rewards, while those that fail to do so will face deep pitfalls. Every CEO will have to deal with this challenge at some point as we advance into the post-pandemic world. Only those who align their strategy with resiliency and societal value will be able to sustain success.
Past few years, businesses and leaders are now realizing the importance of multiple stakeholders, like customers, in value creation. As the business landscape continues to get disrupted, leaders will have to adopt a new value creation ecosystem that favors financial productivity, resilience, and society at large. This article shares few essential tips and strategies on how leaders can shape and execute successful strategies within the value.