Managing a company’s investment choices can be challenging unless you understand the broader context. As in poker, how the game will turn out depends largely on who’s sitting at the table, what cards they’re holding, and how much they can afford to risk.
Many executives primarily frame their strategies in terms of industry. But as competitive boundaries shift, companies with quite different business models and economics could end up competing to serve similar market segments. How any of them will fare depends on their value pattern.
A value pattern describes how a company’s position at a given point in time will shape the range and types of strategic moves that are most likely to create value in the future. (BCG has identified ten distinct value patterns that cross industry boundaries. To see the list, click here.)
Value patterns don’t represent an instant recipe for success. But by identifying its current value pattern, a company can create a more effective value creation strategy. Put another way, knowing your value pattern won’t necessarily tell you what to do, but it will tell you where the odds for success are better.
Four Ways to Capitalize on Value Patterns
Be realistic about your company’s starting position. How would a savvy investor describe it?
Develop an investment thesis that fits your value pattern. This agenda should outline specific actions that will create value over a given time period. A good thesis considers the trade-offs, risks, and pressure points of the company’s starting position.
Test your investment thesis to see if it unlocks value. Actions that drive success can include leading category innovation, fixing a troubled business, simplifying the portfolio, paying down debt, returning more cash to investors, improving asset productivity, and more. But which levers really matter will depend on the specific value pattern.
Anticipate shifts from one value pattern to another. Over time, businesses change and their competitive environment shifts, sometimes abruptly. These changes trigger different business economics and investor expectations, causing a transition from one value pattern to another. Prepare for these shifts by planning ahead.
protected by reCaptcha
Corporate Development & Finance