Good Governance Series

Driving Value Creation Despite Volatility

Did you hear?

Diligent has written a book! Governance in the Digital Age  offers a collection of ideas, examples, tools and strategies that are designed to help directors, senior executives, and governance professionals. Written by Diligent’s CEO Brian Stafford and VP of Thought Leadership Dottie Schindlinger, this book covers topics from value creation to board resiliency to digital strategy. The first chapter is about Value Creation.

“What is value creation in the digital age? It’s a home-building company actively reallocating its capital to the markets. It’s a medical IT company2 developing products that respond to pain points in customers’ daily workflows. Dottie Schindlinger is a senior executive in scripting programming, “writes Diligent CEO Brian Stafford and VP of Thought Leadership Dottie Schindlinger in Governance in the Digital Age .

Boards in Australia and New Zealand are increasingly taking on this interactive and proactive model – companies like the Sydney-based Altassian or New Zealand-based Sanford.

Like private equity firms, they are close to the market, ready with a value creation plan, and have the tools in place to get started. Breaking down silos to focus on the whole organization on value.

“It is important that the corporate boards of directors understand that value creation today goes beyond immediate decisions. Think of it as building a strong company as well as a strong stock – a dual mission that’s more challenging than ever in today’s global landscape of technological complexity. And think about it as staying ahead of risks and opportunities. At any moment, a new innovation like blockchain or artificial intelligence or virtual reality can irrevocably upend business, even the most entrenched global leader, “the book warns.

Boards that make value creation a priority know what products to develop, how to adapt to customer behaviors, where to allocate capital. Shareholder value, linking investment in innovation and sustainability to market trends and growth.

The atlas successor in a corporate success story like atlas-based software maker Atlassian, in 2002 at a multinational with offices in Sydney, London, Amsterdam, Austin, New York, San Francisco, Manila , Yokohama and Bangalore. It boasts about $ 900 million a year in revenue and is listed on NASDAQ.

What drove Atlassian’s growth which its commitment to collaborative software development, and making products thatwere so easy to use They sold Themselves, as Forbes points out in a review of the company. “Atlassian has no salespeople. Their sales success is the result of nurturing their dedicated customer, partner and development ecosystem. “

In New Zealand, Tauranga-based seafood producer Sanford is completely reforming its corporate culture in an effort that began two years ago, with the result that the group has more than doubled its earnings for the year at $ 34.7 million – “with a concerted push sales, ” said chief executive Volker Kuntzsch . “We are now in the process of implementing a more customer-driven culture and expect more of the value to be derived from a more differentiated approach to branding and a closer proximity to those that use and / or consume our product.”

Boards take a ‘private equity’ perspective

Failure to create value means it’s likely the company will not survive. This is the tale told by 97 per cent of Australian startup companies, who do not care less than a couple of years, according to University of Melbourne statistics. There are about 100 companies disappearing from the ASX each year for much the same reasons.

This is because there has been an increase in shareholder activism in Australia, and in New Zealand in the past few years. Shareholders who used to accept board of directors’ decisions, now take a critical view and drive change. “The success of Elliott Management Corporation’s campaign against BHP – Which Involved a demand by the US activist group for the Australian resources giant to unify its shareholding structure in order to deliver more than $ 22 trillion in value – Suggests did activists Could now focus on large- cap stocks, according to a recent report .

Under this pressure, many Australian and New Zealand boards are seeking better performance, Evaluating the roles of worth individuals on the board, and refreshing the board with new skill sets to better understand the demands of trends like disruption and digital transformation, comments Allan Marks,  managing partner at the consultancy  Boyden Australia .

Some are adopting the strategic models of private equity firms: “Private equity is becoming a benchmark of performance for CEOs and boards of directors. Boards are asking, “What would we do differently if we were privately held?” asks Bain & Company in an article.

“The answer is a lot,” Bain insists. Private equity owners have an aggressive time frame in which to make changes at a time. In consequence, they are ready to start a new set of objectives and benchmarks for improved performance all prepared. Some boards are taking this outlook, with a careful understanding of the changing environment, and clear ideas on how to create value in it. Artificial Intelligence and Virtual Reality, and they are getting input from different industries and specialized areas like marketing and cultural professionals.

Value creation in this perspective means:

  • Keeping abreast of macro trends, which might include blockchain, virtual reality, augmented reality, artificial intelligence, and robotics.
  • Narrowing your focus to what really matters. Out of all the thousands of trends you could find in the external environment, identify the ones that are most relevant to your organization.
  • Track the metrics that most accurately reflect the performance and health of each department. Then synthesize this in potential opportunities (or risks) to corporate value.
  • Ask provocative questions, like does your current reporting structure enable success? Are tech budgets reflecting strategic priorities? How does your brand and business model compare with peers (including new entrants)? Does anyone need a refresh to become more contemporary?
  • Push innovation, rather than take the safe road, “the book explains.

Boards create value with informed discussion

A kind of “clustering” of digital skill sets may be inherent to value creation in the future. Today’s boards are facing market disruption and business model transformation. One digital expert on the board is a lone wolf; but, when two or three digital experts have a conversation, other board members can tune in to discuss their own experiences and skills.

Similarly, boards are getting out of the boardroom and out to the worksites, talking to workers, meeting managers, etc.

This means replacing periodic PowerPoint presentations with open and ongoing discussions. Digital age collaboration entails carving out time for big questions and long-term thinking about innovation. Some boards are creating committees dedicated to value creation and others are forming clusters of directors from different backgrounds. The goal: Richer, deeper discussions, for sharper, faster decision-making.

Key takeaways on value creation

  • Change up board dynamics. Board diversity is key to both value creation and resilience. Bringing in new perspectives leads to richer, deeper conversations and sharper decision-making.
  • Expand board education outside the boardroom. Visit other companies, work with experts, and encourage fellow board members.
  • Get comfortable with technology. Relegating tech to a single committee leaves the board out of doing that could have a broad impact on the company.
  • Do not forget employees and customers. Learn how your corporation needs to react.
  • Examine your Board Behavioral Profiles . What are the traits of your board?

Learn More About the Book

The practices outlined in this book have the power to improve how board function, enhance director engagement, and ultimately, lead to greater results. Learn more by downloading the executive summary, which overviews each major chapter.

 

 

 

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