business value associates

Our Services

We help clients craft market strategies that maximize the value of their business to their shareholders. What is Market Strategy? It is a plan of approach to the market in two distinct components - in what markets or segments will the business participate, and how will it compete in those selected areas?

There are two distinct steps in crafting such market strategies - identifying market opportunities (primarily, finding the key Profit Pools going forward), and developing actions based on that knowledge to maximize long-term Cash Flow (i.e. intrinsic shareholder value).

Each consulting engagement is unique, with its own set of issues and circumstances, and leading to very different considerations, analyses and strategies. With that said, our approach is uncommon among our competitors - and we have outlined our perspective on each of the two steps to market strategy below:

Finding The Market's Opportunities

(finding profit pools)

Most businesses invest based on revenue generation performance of the existing business lines. In some cases, the future revenue potential of the market is included as a factor, as is share performance. In, fewer, other cases, the business looks at Gross or Operating Profit of product lines to gauge performance.

Yes - Get A Solid View Of Your Own Performance

While investing based on revenue or GP/OP is very common, it does not help the business maximize shareholder value - as these measures simply do not help maximize long-term cash profitability. In almost every case, we find that a reliance on revenue leads to growth in unprofitable businesses (actually destroying cash profits with growth); while reliance on GP or OP actually misleads management into investing in the wrong areas, since these measures include a highly inaccurate view of large expenses (such as Sales/Marketing and Research/Development) and capital investment costs (such as equipment, working capital and other assets).

We help clients build a solid picture of their own performance in their markets - based on Economic Profit. To do this, we help our clients understand the cash profit generated by their products, customers, geographies and certain other views - and do so in the context of the decisions that need to be made (such as investments, other spending, and resource allocations), and the need for capital in those business segments. Armed with this information, our clients achieve revenue and growth results in original plans - though at a much improved profitability (with the associated dramatic impact to shareholder value).

However - Also Get A Long-Range External Understanding

Understanding existing and future market conditions is critical to informed strategic choices. Some business managers believe that market forecast horizons that exceed three or five years are inaccurate, and - incredibly - the attitude becomes one of not developing a solid view of the future. As a result, investment choices are often under-informed; sometimes leading to actions that limit or destroy profitability.

Our experience, however, has demonstrated that management can develop a useful view of the market. In most cases, a sensible review of the market and its key drivers actually delivers a solid prediction of where demand and supply will be over a long horizon (certainly long enough for investment decisions). In cases where market forecasts do not deliver an accurate prediction, the intelligence and insight gathered in the process properly prepares management to react swiftly and sensibly - well ahead of the competition.

In fact, only with a proper review of the market can alternative market evolutions and developments be understood - together with the probabilities of events and the creation of contingencies. Furthermore, competitors play a critical role in how markets develop; and here also we have found there is returns on understanding competitor motives and personalities, and creating a solid picture of their performance and intentions.

We help clients develop these views - on the market, its opportunities and its expected evolution - and on the competition and the behaviors that can be expected.

Defining Your Market Position

(crafting an approach to customers and competitors that maximizes cash profitability)

The understanding of where market profit pools are, is a solid fact-base upon which to build market strategy. In many situations we have found management relying on qualitative information and anecdote; this seems to lead to considerable problems - stemming from the inescapable fact that the information foundation of their strategy is erroneous (anecdote is a substantive problem as it is often loud in its reporting, and correspondingly disproportionate to its actual absolute value).

Our tested approach to crafting approaches to markets includes an honest review of capabilities versus existing and potential competitors, and an examination of potential markets and their demand. This information is a highly valuable addition to our fact-base as it allows for a quantitative assessment of the businesses strategic options.

We encourage clients to spend a significant amount of time on developing a set of viable strategy options - as this is the area where most business value is created. This time is also highly strategic in nature, and is most suited to the skills of senior managers. We believe three to ten strategy options should be created (addressing the where/how compete questions), and the strategy options need to be characterized with a high degree of specificity.

With the options set, we assist management select the option (or variant) that will deliver the optimal shareholder value, limited risk and right long-term positioning. This is an involved process, though is affords management with an insightful understanding of the relative impact of various actions and their implications.

With the strategy decided, an action plan needs to be compiled, together with investment needs, responsibilities and time-lines. In addition, contingency actions are outlined, together with metrics to be monitored (which may trigger a switch from the decided strategy). Such triggers bare the weight of the strategy's value on them, as if they are not monitored in a disciplined process, the business could easily follow a path of considerable value destruction, unnecessarily. To support this, a competitive intelligence function is needed, together with technology scanning, market demand forecasting and future supply monitoring.

Outsourcing

(let BVA undertake your competitor intelligence and market scanning)

Most businesses invest considerably in recruiting and training. Such investments however, do not eliminate the need to complete many of the more mundane elements of business management, such as information gathering and data analysis. Business Value Associates is ready to help you free up those resources by taking over those functions; including market and competitor scanning, information collection, analysis and management, and dissemination.