The notion of value creation can be abstract for all people who have never been confronted with the stage of creating a business. However, through its role in the development of a company, the creation of value is decisive. The discipline is accesible to everyone. Below, some simple tips to share with you.
How to create the value: the key levers?
The creation of value is a determining point that allows a company to define its strategy through the services offered and the customers it targets. The interest in developing carefully and in a thoughtful manner what the company is able to offer stems from a process of differentiation from the competition. Autonomously or by soliciting a specialist, the idea is to allow your company to stand out.
This can be done:
• by highlighting new solutions;
• by standing out in terms of performance, cost or efficiency from competitors.
Since the creation of value is the guarantor of the success of the company and its sustainability, its importance is crucial.
Value Creation: marketing & financial perspectives
First of all, from a marketing point of view, creating value is absolutely essential. It is indeed this element that allows the company to attract customers, to satisfy them, and therefore to participate in the development of the company. Companies having no value, in the sense of services or services capable of interesting a client or a larger clientele, are in fact at an impasse and cannot continue.
The objective of value creation is to allow a company to refine its offer and meet needs. It is by highlighting elements likely to create a clientele and retain its customers that a business can grow.
The creation of value understood from a financial point of view
In addition to the marketing aspect, the creation of value also has a direct link with the financial health of a company. The marketing aspect cannot be dissociated from the financial plan insofar as the objective of a company is to be perennial, while thus managing to create value, in the financial sense. This time around, value is simply understood by the company’s ability to be profitable.
The business model, or business model, plays a major role in the achievement of one of the main objectives of a company, namely to generate cash inflows greater than the cost of its activity. It is indeed in this scenario that the company is able to grow, and consequently to generate an always more important turnover. Companies, whatever they are, thus aim to have a positive return on investment, which is one of the main indicators to judge the financial health of a company. This rate of return on investment, which is expressed as a percentage, is positive when the profits made are greater than the capital investment they required. The higher this rate, the more the investments made generate a significant gain.
The financial health of an activity is therefore strongly linked to marketing since, with the creation of value in marketing, the repercussions are positive on the financial level. With a high rate of return, a company thus promotes the satisfaction of its managers, who are able to enrich themselves.
Which parameters should be considered in the value creation?
The creation of value in business is not simply a preliminary work to the launching of a company. While it is of course imperative to consider the issue thoughtfully before founding a business, the search for value creation must be perpetual. In any case, it is an imperative that the governance of any company must be aware of. Poor management at this level can indeed lead, in the long run, to a drop in profitability.
So that a company never runs out of steam, management must encourage a constant search for innovation. In the majority of companies, the implementation of a strategy and the fact of seeking the right information at the right time are reflexes which make it possible to promote the production of value.
Of course, the process is not the same for all businesses. While they obviously have some points in common, such as objectives such as shareholder satisfaction and the quest for growth, companies all have specific features. The nature of the activities and products offered can in particular play a role in the data to be achieved and the specific indicators to be analyzed.
Innovation, the key to creating long-term value
While the issues involved in the creation of value are relatively easy to assimilate, the process of value creation in itself can turn out to be more complex. If at the outset, companies require investments, whether from their governance itself, through majority shareholders, or through the contribution of minority shareholders, the creation of value depends on various factors. , specific to marketing and data analysis.
To maintain their financial health, companies must therefore focus on finding the most relevant information. To do this, it is particularly essential to focus on:
• carry out a competitive study, to analyze the sales and indicators of rivals;
• adopt a critical look at internal procedures in order to structure and simplify them.
Management in the company must also promote changes in the organization and working methods. Determining its strengths, like its shortcomings, is a determining factor in promoting value creation. Likewise, the key success factor can quite simply be developed through the integration of technology into work tools. Dematerialization can indeed impose itself as a serious proposition, making it possible to find information quickly, whatever the medium.
The key clues to know if a business is creating value
The creation of value also relies heavily on data analysis. Collecting indicators and analyzing them provides access to information with high added value. This then offers the company the possibility of adjusting its strategy, in particular through management by performance.
The indicators analyzed may concern:
• existing products and services, determining whether to maintain or discontinue them;
• opportunities, with the confirmation or discovery of trends allowing the launch of a new project.
The creation of value can be assessed through figures specific to the estimation of the profitability of the company and its resources. Among the information to be taken into account include:
• return on investment, also called return, which indicates the gains or losses compared to an initial investment;
• discounted cash flow, which in particular makes it possible to determine the value of a company;
• shareholder value, which is obtained by deducting the net asset financing from the operating result.