By Syed Asim Shah
Corporate entities have always created value while doing business. They provide people with the goods and services they need. They contribute taxes to the economy. They create jobs and wealth, and by doing so, they have played a significant part in helping to lift hundreds of millions out of poverty. Yet that positive contribution to society comes at a price. While doing business, corporate entities also draw on the natural resources of the planet and can have negative effects on people and the environment.
The role of business today is increasingly being scrutinized, debated and challenged. This is happening even more as the world globalizes and people become wealthier and more connected. As a stakeholder, we need to be aware of this trend and respond to it. We also need to be aware of the business, social and environmental mega forces at work, including our growing global population, the increasing scarcity of water and other resources, and changing weather patterns. A Corporate creation, or reduction, of value increasingly has a direct impact on the growth, performance, competitive positioning and ultimately on revenues, costs and risk which are strategically laid down as the drivers of corporate Value & Business Growth. It is the phenomenon that corporate & business executive describes as ‘the strategic connection’ between the key drivers of corporate & business value and sustainable corporate and business growth.
To do so, corporate entities need to better understand their so called ‘The Value Creation Drivers’. That is because what was seen as ‘Value Driver Analysis” or “Key Drivers of Corporate Value Creation” needs to be strategically adopted as the key objective of their business activities in to order to evaluate the business activates & opportunities that directly appears as the driver of business growth and built the sustainable competitive advantage for corporate entities. Doing so will ultimately enhance & strengthen the financial performance of the Corporate Entities through value creation & value maximization.
What executives in Pakistani caproate entities need is a method to understand and quantify the key drivers of value creation and the likelihood they will affect their company’s operating & financial earning capability and improve risk profile in the future & ultimately results business growth. As the adage goes, what you can’t measure, you can’t manage. The strategic adoption & analysis of key value drivers help corporate entities to combine operating, financial & growth oriented drivers of value creation with strategic management practices & decision making that potentially quantify the likelihood and potential impact of these value drivers on future growth.
Identifying value drivers is a three-step process first develop a value driver “map” of your business, second test for value driver sensitivities and finally, test for controllability
Key value driver analysis can be a powerful way to focus management attention on activities that will have the greatest impact on value. It does involve a significant commitment from management and should be given high priority within the organization if it is to succeed.
The value creation & the drivers of value creation become a key strategic mantra for corporate & business executives. Corporate value creation, the drivers of value creation & business growth become increasingly interlinked, this analysis can help to ensure that strategies and decision making are aligned within the true drivers of value for the corporate entities. I hope this article provides executives with useful food for thought and a means to explore the implications for their own organizations because the value creation is the only recipe to grow sustain & built long term competitive.
