To ignore this foundational step and merely focus on narrower issues is likely to create a shaky platform for sustainable value creation.

Management must have a clear idea as to what the market is in need of and work toward that end to satisfy that need. It then works backward to its original mission and vision to ensure the vision and strategy do not neglect generation of return on invested capital to create value for its stakeholders.

“In the modern economy, it is increasingly the interaction among assets, e.g. people, technology, capital, networks, that drives value creation,[1]”

It is the quality of such a journey that stakeholders are most interested in when assessing how to extrapolate the current present cash flow to the future. Stakeholders would expect the following items in the itinerary.

Strategy mapping

A well-articulated roadmap that covers strategic objectives, cause-and-effect linkages, key metrics to be measured, setting of targets and the initiatives to be undertaken. To have in place an efficient and effective communication system so that there is no delay in the execution of the strategy.

Sponsorship level

The level of commitment from the top to achieve common goals and how different divisions, strategic business units are adequately aligned. Installing an incentive scheme aligning individual goals to the overall strategy.

Training and development

What resources are been allocated to create awareness and train the organisational workforce to function as a strategic focused enterprise?

Execution

What initiatives have been underwritten to improve the value chain processes aligning to the strategy?

Institutionalisation of corporate memory

What best practices are in place to capture and share knowledge? Establish a continuous feedback loop so that the entire organisation is able to learn how the implementation has panned out and quickly make the necessary adjustments to strategy and tactics.

Research and planning

Taking the necessary steps to gather information, gauge market expectation, perform business analysis, simulation and forecast.

If one is unable to put one’s head around these qualitative attributes, which usually serve as lead indicators, it is likely that the future cash will disappoint and result in value destruction. In the next post, we will cover: Does connecting the dots in value creation mean breaking down of silos?

[1]source: http://www.ft.lk/2014/05/26/prof-mervyn-king-champions-integrated-reporting-at-ca-sri-lanka-sec-corporate-directors-program-launch/ published : 12:01 am May 26, 2014