Transforming Value Management: From Tradition to Evolution PPT
This PPT slide, part of the 28-slide Value Creation Framework Series: Primer PowerPoint presentation, presents a critical evaluation of traditional Value Based Management (VBM) approaches, contrasting them with evolved principles that better align with investor expectations. It identifies 3 primary levers of value creation that traditional methods emphasize while neglecting the investor strategy lever. The content is structured into a comparison table, highlighting traditional principles alongside their associated issues and the evolved principles that address these shortcomings.
The first principle discussed is the focus on earning a return above the cost of capital. Traditional VBM emphasizes existing assets and incremental investments, but fails to consider investor expectations, which can lead to misalignment with market demands. The evolved principle shifts this focus toward earning a Total Shareholder Return (TSR) greater than average, suggesting that businesses should aim to exceed investor expectations through improved performance.
Next, the slide addresses the improvement of intrinsic value, which traditionally relies on metrics like Net Present Value (NPV) and Economic Value Added (EVA). However, it notes that this approach ignores the drivers of realized valuation multiples. The evolved principle advocates for managing both intrinsic and realized value, emphasizing that NPV must be presented in a manner appealing to investors, with management actions directly influencing valuation multiples.
Lastly, the slide touches on the assumption that stock markets are efficient, where traditional views overlook investor segmentation. The evolved principle encourages treating investors like customers, highlighting the importance of understanding the investor mix and its implications for value management. This nuanced approach to investor relations is essential for aligning business strategies with market expectations and optimizing value creation.
This slide is part of the Value Creation Framework Series: Primer PowerPoint presentation.
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