On Corporate Strategy

March 18 2014

Guest post by Stephanie Comfort, Advisory Partner at Genesis. In her role, Stephanie advises clients’ senior management teams on Strategy, Strategic Business Analysis and Valuation, Vision-Based Strategic Planning and Investor Relations.

Nothing you can see that isn’t shown. Nothing you can know that isn’t known. All you need is love. – John Lennon

As a sell side analyst for nearly 20 years, I am familiar with the impatience of Wall Street. A good Wall Street analyst has the power to move stock prices. They can be your friend or your foe, which is why strong communication of a well-articulated strategy is important, if not imperative. Understanding the role of an analyst is a valuable tool in management’s toolbox. After all, don’t management and the analyst both have a responsibility to the shareholder? 

A good analyst will sniff out the absence of a clear, believable strategy and become impatient. Uncertainty typically results in a valuation discount. According to Rivel Research studies, analysts consistently cite the absence of a well-articulated strategy as the biggest barrier to accurately valuing companies.

So, where to start?

  1. Make sure you have a strategy. If this seems basic, you’re right. It is. All companies have a vision, brilliant or otherwise. However, many fall into a trap, failing to develop a strategy to realize their vision. As a result, employees, shareholders and management are unclear and have different views on where the company wants to go and how it plans to get there.  This often results in confusion and failure.

  2. Define management strategy in terms that The Street understands and appreciates. You might be saying, giving up the company’s crown jewels takes away our competitive advantage. The Street doesn’t expect you to provide a detailed playbook of your internal business strategies. They do want to understand how you expect to compete and make your vision come to life. This means telling them in simple terms what you plan to do. Investors expect objectives that can be tracked and measured over time.  Your strategy must be believable and realistic, ensuring Wall Street that you have considered your competitive and financial position.

The exercise of distilling your company strategy into high-level communication for The Street helps reinforce employees’ understanding and confidence. Understanding and believing it will help them deliver it.

  3. Commit to it.  Each discussion with investors, management and employees should begin and end with your strategy and vision. Every press release, every meeting, every announcement and every phone call is an opportunity to reinforce the strategy and management’s belief and commitment to the goals and future of the company. Don’t panic or go silent if you don’t deliver exactly the way you had hoped or promised in the time you committed to. As long as you stay honest and communicative, most investors will understand.

I am not suggesting that having a thoughtful strategy will be instantly embraced by Wall Street or guarantee a revaluation of your stock. It’s simply a critical piece of the valuation puzzle. I have learned from experience that investors are a lot more confident in a management that commits to and articulates an actionable strategy. And the same goes for employees.

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