Value creation is perhaps the most important phrase you can ever continually master as an executive, because people are typically remunerated according to the value that they generate for their organisations.
It matters little whether that value created is circumstantial or deliberate, or whether the organisation is paying them based on current value generated or potential earnings vested in an individual, the truth of the matter is that value is the bottomline.
To create value as an executive, you must have these 3 “looks” as part of your personal know-how. They are indispensable and are transferable to any position, post, at any level.
The first “look” is the Out-look. This means that you must seek to grow in looking forward and outside your area and job scope. You must understand industry trends, megatrends, and provide valued advice based on what you perceive. In a world wrought with uncertainty, any information or knowledge the provides a sense of security which translates to greater control, is always valued. And management is willing to pay big money for those who are able to bring this value to the decision-making table.
Start building this area by reading widely. It is not the time to take out your motivation book to inject yourself with inspirational quotes. Get a hold of the Economist, the Financial Times, Forbes, etc. Talk to market leaders when you have a chance. Talk to those who have substantial insights to the industry that you are in, or looking to get into.
The second “look” is the “In-look”. What are the assets or resources at your disposal? What is your competitive advantage? What are your critical success factors? Are you able to articulate them with clarity? What do you need to strengthen, eliminate, multiply, divide, enhance, in order to get you to where you are heading? Nothing is without a risk profile.
Every activity carries with it an opportunity cost. Weigh your decisions carefully in the light of opportunity costs when you start to take an “in-look”. Your cost of capital may well outweigh the return of investment from the changes thereof.
The third look is the “Across-look”, and the keyword here is to look out for “complementarities”. In pure managerial economics terms, the “make-or-buy” decision; whether to internalize a function or to use the market for it, should seriously consider whether that function is able to well complement what is currently existing in your processes or system.
After a few years of acquiring the higher brand steel company Corus, Tata Steel realised that it was not able to achieve the necessary cost synergies that it first thought it may have when it laid out the cash to absorb Corus into its fold. Today, Tata Steel is looking to sell some of its Corus assets.
What are some of the functions that you are considering to acquire or add to your asset base? When you do an across-look, make sure that you thoroughly examine for complementarities before taking the plunge. Don’t jump in and tell yourself “I will sort that out later”. You will live to regret the decision when the costs of doing so start to heavily outweigh the benefits accrued.
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