Even former proponents such as Jack Welch, the former head of GE, have declared shareholder value the “dumbest idea in the world”—an idea with disappointing consequences even for the shareholders themselves. But old habits die hard: most corporations continue to privilege short-term profits over the interests of their customers.
Does this mean that the C-suite has to abandon its own self-interest to please its customers? The answer is a resounding—if surprising—“no.” Thanks to new developments in technology, organizations can now connect what used to be two separate goals.
Today’s corporate ground is littered with the corpses of huge entities (such as Blockbuster, Circuit City and RadioShack) that could see customers vanishing and shareholder value plummeting but lacked any systematic, meaningful strategy to connect the two phenomena. By ignoring the pulse of the customer, these firms hung on to the false sense of being able to grow shareholder value sustainably, until they cut themselves to the bone and it was too late to recover.
Using big data analytics, today’s companies can manage customer delight to produce a direct impact on shareholder value, as we shall now see.
Making the connection between CLV and SV
Businesses are traditionally rated based on the value they generate for their shareholders (SV), a figure that’s calculated based on estimated discounted free cash flow. Shareholder value is essentially how much cash will be left at the end of the day to distribute to shareholders.
But there’s a weak link in the traditional SV formula—it doesn’t pinpoint the true source of value or identify the origin of the free cash flow. The formula allows companies to maximize shareholder value by managing major value drivers such as profit margin, tax rate, cost of capital, etc., but it doesn’t help them recognize or grow the true source of value, or accurately project future value.
Of all the ways to increase shareholder value as an outcome, the most effective is to identify and grow the true origin of the free cash flow. But what is this origin? The identity of the free cash flow is so simple that you may be surprised: it’s nothing other than the value of all your customer relationships projected through time.
Chief Executive Group exists to improve the performance of U.S. CEOs, senior executives and public-company directors, helping you grow your companies, build your communities and strengthen society. Learn more at chiefexecutivegroup.com.
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1:00 - 5:00 pm
Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process
Executives expressed frustration with their current strategic planning process. Issues include:
Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns. They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning. Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process. This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented. If you are ready for a Strategic Planning tune-up, select this workshop in your registration form. The additional fee of $695 will be added to your total.
2:00 - 5:00 pm
Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations.
Limited space available.
10:30 - 5:00 pm
General’s Retreat at Hermitage Golf Course
Sponsored by UBS
General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.
The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.
