VALUE MAXIMIZATION

The ultimate challenge for your business is to generate superior value to all your stakeholders in the face of a hostile and fast-changing environment.

In its simplest form, customer value can be defined as delivering more economic, convenience, emotional and psychological benefits at a lower price. Value can be measured by benefits to stakeholders and to the firm, market share, brand and reputation and financial performance. The concept of value innovation embodies a quantum jump in value by offering customers a dramatically superior experience. If your company can effectively reconfigure its value network, it will achieve an increasing flow of knowledge and intangible benefits. The importance should be stressed and exploited of the value-creating characteristics of the firm’s customer, employee, organizational, physical, financial and supplier asset segments. In defining strategy, the “strategy canvas” approach can be used to show the value curve of the firm’s offerings on each critical success factor of competition.

Value growth for all stakeholders can only be achieved through sustainable profitability, which in turn depends on continuous revenue growth and decreasing costs. A superior customer value proposition is essential to generate increasing sales levels and underpin higher prices. Producing superior value cannot be separated from efficiency in operations and processes that drive down costs. Profitability of the company is ultimately determined by its ability to sustain a competitive advantage in a given industry structure through a differentiated strategic approach, embodying the distinctiveness of the company’s activities. In the fast-changing environment, any possible advantage might be short-lived and difficult to sustain, therefore the challenge is to define and adapt value-adding activities continuously to suit the evolutionary industry and market conditions. Efforts to sustain, renew, or repeat a competitive advantage are only valid if they are based on innovative actions that add value for the customer.

The incessant competitiveness in most industries accentuates the need to raise barriers to entry by staying ahead of imitators. In this respect, intangible assets are playing an ever-increasingly important role in leading companies and management should carefully consider how to combine soft skill intangible assets with tangible assets in strategy formulation and execution. Competitive advantage in operational effectiveness can drive productivity gains and increased efficiency. This in turn will result in better asset utilization and a lower cost structure, which will favorably influence profitability.