Sadly there is no linear relationship between more work and increased value. Often the most value is created when you stop, look up and look around, assessing how the world is changing, questioning your previous decisions and improving your course, strategy and structure. The goal posts are constantly moving and a fluid approach to strategy is the way to score more goals.
The lowest common denominator to describe the purpose of work is “to increase shareholder value”. It is hard to argue that everyone within every business should not be playing some part in delivering that statement, when they cease to do so, they stop playing their part in the value creating machine, become redundant and unemployed.
But how can you set up your machine to create more value, faster?
You first need to understand your starting point.
A very useful structure to understand your valuation prospects was published by Harvard Business Review in collaboration with Deloitte (read it here). They examined 40 years of financial data for the S&P 500 companies to see how valuation trends have evolved along with business models and emerging technologies.
By understanding how these classes of business activity apply to you, you can make more informed decisions regarding the strategies you pursue and the structure of your business to increase the rate at which your business creates shareholder value.
There are four business models:
1. Asset Builders: These companies build, develop, and lease physical assets to make, market, distribute, and sell physical things. Examples include Ford, Wal-Mart, and FedEx.
2. Service Providers: These companies hire employees who provide services to customers or produce billable hours for which they charge. Examples include United Healthcare, Accenture, and JP Morgan.
3. Technology Creators: These companies develop and sell intellectual property such as software, analytics, pharmaceuticals, and biotechnology. Examples include Microsoft, Oracle, and Xero.
4. Network Orchestrators. These companies create a network of peers in which the participants interact and share in the value creation. They may sell products or services, build relationships, share advice, give reviews, collaborate, co-create and more. Examples include eBay, Red Hat, and Visa, Uber, Tripadvisor, and Alibaba.
Depending on the mix of these models you employ in your business you can start to see how that effects the valuation of your business and how by adopting new practices you can change your valuation.