February 2021 Volume 3

OPERATIONS & MANAGEMENT

Why they were a “Gotta Have” Let’s look at what created the “Gotta Have” label. Over the years as Waterborne grew, the CEO/CVO stayed focused on what was necessary to achieve and support that growth. The results included a very strong leadership team and systems that helped their efficiencies and customer service. Investments were made in new specialized equipment to improve margins and quality. A true outside advisory boardwas created and a strong culture of innovationwas established. But they did one more thing that made me realize what was most important to increasing value. This realization led to my transition from Growth Management to Strategic Value and to the need for the CEO to become the CVO. That one thing was to change their perspective from a total focus on profit today to a focus of building value for tomorrow. Before you think it or have a panic attack, I’ll ease your mind. Yes, you do need to make a profit today. However, having an exclusive focus on making profit and taking cash out today will prevent you from being able to make rational decisions regarding investment in the future of the company. Investing in infrastructure, talent, product development, technology, and even culture is the only way to create the sustainability, differentiation, and “Gotta Have” company that will accelerate your company value. Sure, there’s risk involved. You’re placing bets on the future and some bets will be wrong. Waterborne, with its innovation culture, made big bets. Some they lost, but that didn’t deter them from continuing to make big bets and from doing whatever they felt would be necessary to achieve their vision and accelerate their value. To take the CVO title seriously, you need the stomach and patience to follow through with the commitment to accelerate company value. That means committing to making investments in the future of your company, often at the expense of today’s profitability and cash flow. It means placing bets on future growth. It means you and your leadership team having confidence in your decisions, making those decisions, and continually measuring the results of those decisions. Robert Iger, CEO of Disney, was a good example of someone who knew his primary role as CEO was to be the CVO. In his book, “The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of the Walt Disney Company,” Iger (2019) states, “The decision to disrupt businesses that are fundamentally working but whose future is in question—intentionally taking on short-term losses in the hope of generating long-term growth—requires no small amount of courage.” Vision and Commitment Waterborne was focused on a vision. They had painted a picture of what they wanted their future to look like. That vision drove their actions. Lots of companies paint a picture of their future, but few have the commitment to attain it. The vision of maximizing value and reaching $100 million in revenue in ten years was achieved because leadership focused on what was necessary to build long term value, not on taking cash out of the business. There were times

when ownership became weary, but they remained committed. Their patience paid off for them. They waited for and received the bigger prize. There was little confusion or conflict in the company. The leadership team and the entire company knew the vision and understood the commitment. Strategic Value I’m not alone in my contention that there is much more to creating value in a company than simply the bottom line. There are so many examples of the most valuable “Gotta Have” companies being just great companies. They’re well run, efficient, innovative, growing, fun, and profitable. They stand out among their rivals. I developed the Strategic Value concept to give CVOs a straightforward tool and process to build valuable “Gotta Have” companies. Utilizing the Four Pillars of Strategic Value provides you—as the CVO—a methodology to engage everyone in creating a great company. You can start your Strategic Value acceleration journey by visiting www.chiefvalueofficers.com and taking our no cost or obligation Strategic Value Assessment to obtain your current CVO score and assessment. ■

Joel Strom is the Founder and CVO at Chief Value Officers. He is also Managing Director of the Value Creation Advisory Practice at CKS Advisors, investment bankers focused on maximizing value. He can be reached at joel@joelstrom.com.

FIA MAGAZINE | FEBRUARY 2021 63