Shareholder Value John Ballow
- 1. Research shows that corporate executives are deeply dissatisfied with their current Enterprise Performance Management (EPM) capabilities. Source: October 2002 survey of 245 companies - CFO Research Services Common Capability Gaps EPM Capability Satisfaction Rate Alignment between company strategy and their planning process (40%) Focus on key business drivers (24%) Amount of time required to create the annual plan (47%) Speed and accuracy of the forecasting processes (48%) Ability to produce business models and test impact of proposed changes (31%) Speed and accuracy of the monthly financial reporting (63%) Reporting of non-financial measures (28%) Ability of business users to view and analyze performance reports at will (25%) Integrated IT systems to collect and manage the information (41%) Visibility into current results (29%) Understanding of future performance trends (30%)
- 2. Future Value affects all industries, with most companies in a management space somewhere between eBay and a coal mine. “ Intangibles” $ (MV-IC+GW) Future Value $ The solution? Future systems focus on current and future value from all assets with an integrated solution driving sustainable high performance. The problem? Current systems focus on current value and tangible assets with point solutions and traditional measures of financial performance. 1 10 100 1000 10000 100000 1000000 1 10 100 1000 10000 100000 1000000
- 3. Why? The asset base has changed dramatically: accounting management systems ignore and under-manage value creating assets. Statutory Reporting vs. Performance Reporting Information Requirements Tracking by accounting systems Not tracked by accounting systems Source: AssetEconomics Holdings Inc
- 4. Intellectual and Intangibles Assets behave very differently and need to be managed very differently than traditional accounting assets
- 5. Changing Economies, Business Models, and Value Drivers Monetary Physical Relational Organizational Human Value Chain Value Network Value Shop 1 These asset classifications will be further defined in the upcoming slides . Value Chain Additionally, the economy has changed bringing along new business models and different value drivers. Key Asset Value Drivers 1 Business Models Knowledge Economy Industrial Economy Type of Economy Present Past
- 6. Current systems do not do a good job at helping you plan for what may occur and track the key drivers to enable decision making. Note that all totals do not sum to 100% due to rounding This is surprising given that these same executives admitted that intangibles were critical for their future success in creating shareholder value. 33% We do not measure their performance 41% We apply some measures but mainly informal or qualitative 20% We apply some measures but it’s not organized 5% We have a robust system Does your company measure the performance of Its intangible assets? Compare how your ideal company would measure, manage, or disclose intangibles to your own company. Accenture/Economist Intelligence Unit (EIU) Survey 2003 85% 59% Gap 53% Gap Measurement Management Disclosure 26% 59% Gap Ideal Company | My Company Ideal Company | My Company Ideal Company | My Company 90% 31% 71% 18%