Creating Business Value

In many a presentation to venture capitalist by people wanting investment, they present optimistic forecasts of lots of money some time down the road. These are so common that it is even called a "hockey stick" financial presentation. The vast majority will fail. When these forecasts fail repeatedly, they generate a series of financials that can be called a "hairy back." They fail both in making lots of money and in creating value. It is time to look at creating value in business.

Making lots of money is not necessarily creating value. Maximizing shareholder price is not the same as creating shareholder value. There have been many, many companies that shot the share price up high, pulled in lots of money, and then failed completely. A better objective is creating long term value for both the owners of the company and the customers and community.

Managers have been told repeatedly to focus on measurable qualities. "You can't manage what you can't measure." Creating value often means focusing on a number of not so easily measured qualities. For example, the "customer delight" is the willingness of customers to pay for the goods or services that are being provided. The quality of the goods or service is measured by the customer, not by the business.

Other parts to value include employee and supplier willingness. Employee value including how willing are prospective employees to apply to work there, how long employees stay, and the cost employees are willing to pay to be employed. The Return to Office mandates is testing just how much employees are willing to pay. Another measure is how willing are suppliers to do business with your company. Suppliers can be willing to extend credit, allow longer payment terms, or can be cutting companies off and demanding cash in advance.

Business leaders who "operate by the numbers" often miss out. One reason is that the numbers are always late. Boeing didn't see the issues in the numbers until way too many planes had been built with problems. The numbers do not show when a customer is unhappy but hasn't found an alternative yet. Similarly, the numbers hide employee dissatisfaction. For these reasons, it is often vital that the business leaders meet with customers to hear their complaints and to "walk around" and talk with employees to hear their issues.

Business leaders who are able to listen and gather information by intuition often generate more business value than those who are "tone deaf."

One way to create business value is to focus on creating value for the customer. By working to make customers lives better, we create far more loyal customers and employees. By doing that, the business generates a more lasting business. When we work for the customers' needs, they are far more likely to buy from us. Likewise, when we take care of the employees, they are more likely to take care of the customers.

Together, we can build value.

Data is cheap, Information costs.

Do you remember every detail of your latest drive? Nobody can. Often, we drive almost on "auto-pilot" with eyes seeing things that we forget, ears hearing sounds we forget, and thinking about other issues while navigating through traffic. We get flooded with data that we throw away. We quickly evaluate it and throw most away. The same is true with electronic data. Most of that data needs to be discarded because it is noise and we have to extract information out of that noise. Determining which data is noise and which is information is an expensive action.

Our world is filling up with sensors, cameras, and microphones capturing tons of data. Almost all of it gets thrown away. It costs effort and energy to determine what to keep and what to throw away. Information always costs and when there is far more data than we need, we spend even more to find information.

Information is always rare. When everybody knows it, that is "common knowledge" not information. Information is the knowledge of something rare, something that gives an advantage, and something that the right person can take action on.

We want information to be free. It can't be. We pay and we pay dearly.

Many managers see AI as promising free information. They will be disappointed. That which is free will flood the world but will produce noise, not information. Businesses need people who work to separate out the information from the noise.

Business needs a vision of what is information, a strategy of how to extract that information from all the data, and action to use that information to transform the business. Leadership uses information to drive business changes.

Risky World

Nearly anyone who has email has seen messages using strange characters that almost match real characters. There is another set of codes in the symbol set that match real characters but are invisible which can be used to create sentences, add them to AI commands, and cause the AI to generate malicious results when clicked.

No AI was harmed in the writing of this newsletter.