Strategy: A Structured Approach to Tracking and Realizing Shareholder Value

Too often companies launch capital-intensive change programs—whether related to technology implementations, supply chain transformations, product innovations or some other initiatives—and fail to capture the value originally targeted after the initial burst of attention and enthusiasm has faded.

Accenture outlines the process for tracking and realizing shareholder value. This paper identifies methodologies that let organizations identify, measure and manage shareholder value in corporate initiatives—especially complex, long-term change efforts—to help ensure they deliver the benefits originally intended and play a role in helping the company achieve high performance.

The meaning of “shareholder value” has been argued by critics for a long time, most recently because some wonder whether it has become a proxy for short-term thinking.

Building shareholder value includes combining quantitative and qualitative benefits of a complex initiative that is designed to achieve a long-term, sustainable benefit. When deploying complex initiatives involving substantial change, organizations should be able to:

• Track benefits over time.
• Adapt tactics based on macro environmental and organizational pressures.
• Maintain a steady pace toward a distant time horizon.

To identify shareholder value, executives should consider four main dimensions:

• Revenue enhancement.
• Cost containment.
• Asset productivity.
• Less quantifiable or intangible benefits, such as whether an investment may offer better access to skills and capabilities, increase innovation, differentiate an organization from competitors, or even support and fortify an organization’s culture.

Organizations hoping to overcome the slow deflation of shareholder value need a formal and disciplined way to identify, assess and report the value an initiative is geared to deliver.

In identifying value, a company should explicitly pinpoint the set of shareholder values the initiative will support—such as reducing sales, general and administration costs by 5 percent, or increasing revenue by 1 percent.

Over the lifecycle of a large organizational initiative, external pressures erode the actual and perceived value of what is being delivered.

External pressures eroding actual and perceived values:

• Organizational changes—such as shifts in key leadership, strategic direction or profitability.

• Changes in the business climate—if leaders choose not to modify and optimize a project over time to account for macro-economic changes, fearing a loss of momentum.

• Delays in the implementation schedule.

• Measurement challenges—performance metrics better suited to the implementation phase (i.e., task oriented) than to managing project benefits over time.

Based on this paper, Accenture has identified four key questions an organization should ask to identify whether it has the mindset and tools in place to proactively track shareholder value across the lifecycle of a complex change initiative:

• Do project sponsors actively market shareholder value as a key way to drive stakeholder buy-in?

• Does this project promise to meet or exceed financial targets (for example, return on investment, net present value over a long period of time)?

• Is the organization set up to capture this information over time, particularly beyond the implementation phase?

• Will the organization be able to identify incremental opportunities before or after launch, and be flexible to leverage them?

R. Rutledge is a senior executive in Accenture’s Management Consulting group, where he has been serving senior clients in communication and high tech for 15 years, helping them improve their operational strategy and maximize their shareholder value. His projects have ranged across enterprise transformation, strategy and execution, channel strategy and design, learning transformation and operational effectiveness. For almost five years, Rutledge worked across Asia Pacific helping clients structure and resolve their most challenging problems.

A. Boernke is a senior manager in Accenture’s Management Consulting group who brings 12 years of experience consulting to global telecommunications clients. His work has focused on identifying and realizing the value of large enterprise and business-wide transformational projects. He is based in Denver, Colorado.