CRACKING THE VALUE CODE

By Richard E.S. Boulton, Barry D. Libert & Steve M. Samek

How successful businesses are creating value in the New Economy. What companies can do differently and how to create long-term

value out of their asset-mix. The New Economy? One where information-rich goods &

services make up the greatest proportion of GDP One where information workers constitute the majority of the work

forceAccording to the authors, today’s economy is built on the foundation

of: New technologies Globalization New generation of people entering the workplace Increased importance of intangible assets

What is the book about?

A global revolution is changing the business; The structures of companies are changing Relationship between companies are changing The definition of success is also changing as

more and more emphasis is put on intangible assets like information & relationships between market players.

Cont;

Based on a three-year study of 10,000 companies by

Arthur Andersen. Used to determine how well a corporation is taking

advantage of its asset capabilities. Rates the contribution of assets and helps

corporations leverage all assets for driving higher value.

Distinguishes the relationships of how assets add value in combination with one another.

Recognizes that assets are not fully controlled by the corporation – customers, suppliers, partners, etc.

Uses a much broader definition of assets (beyond the accounting model) for creating value.

The Value Dynamics Framework

Assets have inbound and outbound relationships; customer assets are outbound whereas employee assets are inbound (convert resources into products and services)

All assets have outputs – Organizational assets (systems, information, etc.), Financial Assets (cash flow, etc.)

By Understanding the r/ships btn these different Assets, we “Crack the Value Code”

Basic Principles Behind the Value Dynamics f/wk

Customer

CustomersDistributors

ChannelsAffiliates

EmployeesSuppliersPartners

Employee/Supplier

CashReceivablesDebtEquityInvestments

Financial

Physical

LandBuildingsEquipmentInventory

Leadership Strategy • Knowledge

• Values • Brand

Organization

Innovation • Systems • Process • Culture •

IP

The Value Dynamics F/wrk

Value Creation; future value captured in the form of increased market capitalization both with tangible and intangible Assets

Value Realization; value captured in the form of past and current earnings or cash flows.

Value Dynamics; New set of tools developed to create value in the new economy.

Management of change concepts

Drivers of Change: Globalization: The world is a smaller place today Technology: this has transformed the operations of many

companies e.g. revolutionalization of communicationsEffects of Change: Intangible Assets: an increased importance & use Emergence of new business models that combine both

old & new economy assets New business risks: resulting from new technologies,

new transactions, new market players in the new economy. The war for Talent: p’ple & their skills/ideas are the prime

resource in the new economy

Management of Change Concepts cont’d

Adaptation Mechanisms Business model redesign: Companies can

redesign the business model to suit the demands of the global economy.

Re-organization & Repositioning: to suit the demands of the new economy

Emergence of new business Strategies: e.g. diversification, mergers & acquisitions (Coca-cola & PepsiCo in the 1980s)

Management of Change concepts cont’d

Discover the right Asset mix: Companies in today’s

super-heated economies need to discover the underlying code of value creation to find out which combinations of assets – tangible and intangible, creates the greatest amount of economic value and to avoid those combinations that destroy it.

Recognize the value of intangible assets e.g. employee knowledge, r/ships, brands, processes etc.

Embrace the Value Dynamics framework(VDF)in strategic planning and management

In the new economy managers must think of competition in terms of competing business models, whose power comes in part from how the assets within their portfolios interact

Lessons Learnt

Transparency of information is vital to value creation The use of Information-based strategies for real-time

management reporting: thru the use of data-warehousing Employees’ attitudes and sensitivities towards change is

very important in determining the success of the company or organization.

There is need to master business risks as a result of the emerging new business models by the different companies to be able to stand competitively in the new economy

Smart Asset management if businesses are to succeed in the dynamic environment

Lessons Cont’d

Q & A Comments/feedback THE END.

Thank You