Business leaders have a fiduciary responsibility to maximize shareholder value; achieved by boosting future cash flow expectations
2.
Top-line factors (sales and price) impact cash flow by magnitudes more than any other factor; business leaders who recognize their objective is to drive value should focus their efforts on crafting Market Strategies oriented around long-term cash flow
3.
20% to 40% of capital in the typical business is invested in market areas (offerings, customers, channels or geographies) that don't even earn their cost of capital; 10% to 30% actually drains cash
Unfortunately, most business simply do not have granular information, and inappropriately invest and grow areas that drain cash, and short-change areas with good returns – leading to accelerated cash losses and huge opportunity costs
Further, the profit information used to measure performance usually comes from GAAP-based accounting systems, despite large artificial/non-cash adjustments and inappropriate allocation schemes that greatly distort cash profit measures
Neutralizing cash drains can boost cash flow by 10%, often much more; the corresponding impact to shareholder value is magnified by leverage ratios and growth expectations
4.
Three quarters of a typical business’ value is based on cash flow in the next 15 to 20 years; large, discrete jumps in value will only be achieved by developing a thoughtful and fact-based view of long-range market Profit Pools
Near-term distractions and limited familiarity with long-range Market Strategy results in businesses being managed to only a 3 year horizon (addressing only 15% their value, typically); the long-term is largely left to serendipity
However, much can be forecasted in markets in the 5 to 15 year timeframe, and a great deal has to be prepared to create and exploit opportnities
5.
Businesses aren't organized to find and exploit Profit Pools; only the business' leaders are in a position to emphasize value growth and pull business functions together efficaciously
Insightful market dissections to find cash Profit Pools require a blend of market and finance skills to cut through GAAP and segment markets
However, businesses organize in silos, including a Finance group and a Marketing group; each group has its own skills focus (one recruits accountants, the other recruits product managers), day-to-day mandate (GAAP reporting versus revenue growth), incentive schemes and other factors driving seperation
Furthermore, business leaders tend not to have exposure to their value-growth obligations until late in their careers, and day-to-day issues are a constant distraction; less familiar and long-term Market Strategy issues get put off indefinitely
