It’s Time to Rethink Outdated Enterprise Value Formulas

In today’s complex environment, enterprise value is becoming as much about what and how you deliver value to stakeholders as it is about the value you capture in return ✔ Learn more: EnterpriseValue BusinessGrowth

extends business outcomes beyond regulatory compliance to a range of stakeholders. Benefits or impacts at stake include safety, innovation, privacy, ecosystem and alignment with values. Impact can accrue to the organization’s brand value, reputation and loyalty, outpacing associated costs in return.customers and employees expect suppliers and employers to commit to brand values

These types of decisions play out every day, but we lack good frameworks to account for nonfinancial variables in our cost-benefit analyses.We know the how of creating enterprise value has already changed considerably in the digital age. Just look at the shifting rankings of the highest-valued companies in the world. In 1995, General Motors, Exxon Mobil, Ford and GE topped the list; today, Apple, Microsoft, Alphabet and Amazon do.

Using a more multifactored value equation gives IT and other business leaders a more accurate and encompassing way to respond to new stakeholder demands and demonstrate the impact on enterprise value of their decisions and investments.Multifactor enterprise value takes continuous account of a range of material variables and value levers, enabling you to balance the value you deliver to stakeholders with the value you realize in return.

Another example: There are benefits of technology-driven innovation or investments in critical infrastructure like cybersecurity that are obvious but not easily articulated in financial terms. Yet most organizations still make strategic and resource allocation decisions using pre-digital and even pre-internet approaches that leverage a narrow set of levers to optimize value for a singular stakeholder: investors.

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