top of page

Creating vs. Unlocking Value

Writer's picture: Matias Felix RuizMatias Felix Ruiz

Updated: Nov 2, 2024

As executives, one question often takes center stage, especially in the capital markets: How do we drive value? It's a topic that keeps you awake at night and fuels your daily endeavors. Yet, the answer isn't always as clear-cut as we might hope. Value in business can be dissected into two distinct realms - "Creating Value" and "Unlocking Value". Understanding the nuances of these concepts can be your compass in the quest for business success.



Value Creation

Get Ready for the Trade-Offs


Executives often struggle with the decision of whether to prioritize creating new products and services or unlocking the value inherent in existing assets. While innovation is essential for long-term growth, an excessive focus on creating value can lead to neglect of operational efficiency and execution. This "innovation trap" can result in significant misallocations of resources, where organizations pursue cutting-edge projects without a solid foundation, ultimately leading to stalled initiatives and missed market opportunities.


On the other hand, unlocking value emphasizes optimizing current resources and processes, often yielding immediate returns through cost savings and improved productivity. Companies that excel in this area can identify inefficiencies and implement data-driven solutions that enhance their bottom line. For example, streamlining operations or enhancing supply chain efficiency can free up capital and resources, allowing for reinvestment in innovation and strategic leadership initiatives. This focus on operational excellence can create a sustainable competitive advantage.


Finding the right balance between creating and unlocking value is critical for organizational success. Effective leaders understand that these business strategies are not mutually exclusive but rather complementary. By evaluating their organization's strengths, market trends, and stakeholder expectations, executives can develop a strategic leadership framework that allows for both innovation and optimization. This balanced approach ensures that organizations remain agile, responsive to market demands, and capable of achieving long-term success.


To navigate these trade-offs, executives can employ a framework that evaluates their organization's current position and strategic leadership goals. Questions to consider include:


  • What is the state of our existing assets? Are there underutilized resources or processes that could be optimized for immediate gains?

  • What market trends indicate a need for innovation? Are there emerging customer needs or technological advancements that we must address to remain competitive?

  • How do our stakeholders view risk? Understanding the appetite for risk within the organization can guide decisions about whether to invest in creating new value or focus on unlocking existing potential.


Creating Value

This involves developing new products, services, or business models. It's the act of innovation and vision, where you pioneer uncharted territories and challenge the status quo. Is the result of long-term investing - for example, when M&A activity to acquire technology or market access or position is ultimately connected to a longer-term value proposition.


To create value, you need to:


(1) Vision and Goal Setting

Define a clear vision for where you want your organization to be in the long term. This establishes a roadmap for value creation.


(2) Identify Unmet Needs

Keep a keen eye on market gaps, customer pain points, or unexplored opportunities. This forms the foundation for your creative process.


(3) Invest in R&D

Allocate resources to research and development, nurturing a culture of innovation within your organization.


(4) Risk Tolerance

Embrace calculated risks. Not every venture will yield immediate returns, but the potential long-term gains can be substantial.


(5) Continuous Learning

Stay curious and open to new ideas. Learning from failures is just as important as learning from successes.


Apple Logo

Apple Inc. stands out as a prime example of a company adept at creating value through innovation and a customer-centric approach. Over the years, Apple has consistently introduced innovative products such as the iPhone and MacBook, redefining entire industries. Their commitment to design excellence adds aesthetic appeal to functional products, enhancing their desirability. Apple's ecosystem integration ensures a seamless user experience, and their focus on understanding and meeting customer needs drives continuous value creation. The company's innovative business models, like the App Store and Apple Music, offer convenience and quality. Apple's ability to combine innovation, design, and customer-focused services has not only built a strong competitive advantage but also maintained a dedicated and loyal customer base, solidifying its position as one of the world's most valuable technology companies.


Unlocking Value

This involves tapping into existing assets, processes, or capabilities that are underutilized or overlooked. It's about optimizing what you already have. Unlocking value frequently means strategic capitulation for short-term gain.


To unlock value, you should:


Business Strategy 1: Data-Driven Insights

Leverage data analytics to uncover inefficiencies, untapped market segments, or areas where cost reduction is possible.


Business Strategy 2: Operational Excellence

Streamline processes, reduce waste, and improve productivity to enhance your bottom line.


Business Strategy 3: Synergy and Collaboration

Identify partnerships, acquisitions, or mergers that can amplify your existing strengths and capabilities.


Business Strategy 4: Customer Focus

Ensure your products and services align with the evolving needs and expectations of your customers.


General Electric

General Electric (GE) serves as a prominent example of a company adept at unlocking value through strategic leadership actions. Their approach includes portfolio restructuring, where they divest non-core assets to focus on core strengths, reallocate resources, and unlock value within their businesses. GE prioritizes operational efficiency, optimizing processes, and reducing costs to increase profitability and uncover hidden value. Embracing digital transformation, they enhance products and services through technology, reducing downtime and adding value for customers. Strategic leadership alliances with other companies amplify their capabilities, fostering innovation and unlocking new value. By investing in cleaner and more sustainable technologies, GE not only addresses environmental concerns but also unlocks value by meeting evolving market demands. These business strategies collectively illustrate GE's expertise in consistently unlocking value from existing assets and resources, reinforcing their competitive standing in various industries.


A Three-Step Roadmap for Creating and Unlocking Value


The art of balancing 'Creating Value' and 'Unlocking Value' lies in understanding when to initiate change and when to refine the status quo. Here's a three-step roadmap to guide you:

Step 1: Assess Your Current Position

Start by evaluating your organization's strengths, weaknesses, opportunities, and threats. Identify areas where value can be created and where it can be unlocked.


Step 2: Strategic Leadership Alignment

Develop a clear business strategy that combines both value creation and value unlocking, ensuring they align with your organization's long-term goals.


Step 3: Execution and Adaptation

Implement your business strategy with precision. Monitor progress, be open to adjustments, and remain agile in response to changing market conditions.


Food for Thought: Prioritizing Unlocking Over Creating Value


Many executives focus heavily on creating value through innovation, believing it's the key to long-term success, and they are not wrong. However, in today’s saturated market, I would argue that unlocking value from existing assets is often more impactful - and sometimes even more critical - than creating something new. Businesses are littered with underutilized resources, inefficient processes, and missed opportunities within their current operations - they are sitting on a gold mine. Too many leaders chase the next breakthrough innovation while neglecting optimization, which, in many cases, yields faster returns with less risk.


Also, while creating value is often seen as the hallmark of visionary corporate leadership, I believe it's frequently overemphasized, especially in the short term. The reality is that many businesses fail not because they lack innovation, but because they don't focus enough on efficiently managing and unlocking the value already at their disposal. In an era where rapid returns and agile responses to market shifts are critical, obsessing over long-term innovation can distract leaders from fixing immediate inefficiencies that could have a more significant, faster impact on the bottom line.


A Strategic Leadership Approach to Long-Term Value Creation


To fully grasp these two concepts, you need to adjust your focus, viewing them through the lens of long-term value creation rather than the temptation of short-term gains - but remember the above controversial thoughts. The challenge lies in recognizing that driving change at scale is an imperfect science, a process that demands time and resiliency. As an executive, your role is to steer your organization toward a bright and prosperous future. Understanding the duality of creating and unlocking value is a crucial tool in your arsenal. By continuously innovating and optimizing, you will ensure that your company remains agile, competitive, and valuable to all stakeholders.


In the world of value, the journey never truly ends. It evolves, it adapts, and it unfolds with every business strategy move you make. As you move forward, remember that the choice between creating and unlocking value is a dynamic dance. It's up to you to choreograph the steps to success.


 

💡Explore our Business Insights Hub for the latest in business strategy and corporate leadership! Discover proven strategies to build a resilient, lasting organization that thrives beyond your tenure.

 

Stay Ahead with Weekly Executive Insights! Subscribe to our newsletter for exclusive tips and insights delivered straight to your inbox — helping you lead with impact every week.

248 views0 comments

Recent Posts

See All

Comments

Rated 0 out of 5 stars.
No ratings yet

Add a rating
  • What are the key qualities of an effective leader?
    Effective leaders possess qualities such as vision, empathy, resilience, and integrity. These traits are essential for corporate leadership and help in inspiring and motivating teams, communicating clearly, and making strategic decisions that align with the organization’s goals.
  • How can I improve my decision-making skills as a leader?
    Improving decision-making skills involves gathering relevant information, considering multiple perspectives, and weighing potential outcomes. Leaders should also reflect on past decisions to learn from successes and mistakes, and seek feedback from trusted advisors. This approach is crucial for Strategic Leadership and effective business strategy.
  • What strategies can help in managing a diverse team?
    Managing a diverse team requires cultural competence, open communication, and inclusive practices. Leaders should foster an environment of respect, encourage diverse viewpoints, and provide equal opportunities for all team members to contribute and grow. These strategies are often discussed in Senior Executive Insights.
  • How do I handle conflicts within my team?
    Handling conflicts involves addressing issues promptly, listening to all parties involved, and facilitating open dialogue. Leaders should aim to understand the root cause of the conflict, mediate discussions, and find mutually acceptable solutions. Effective conflict resolution is a key component of corporate leadership.
  • What are some effective ways to motivate my team?
    Effective ways to motivate a team include recognizing and rewarding achievements, providing opportunities for professional development, and creating a positive work environment. Leaders should also set clear goals, offer constructive feedback, and support work-life balance. These practices are highlighted in the Business Insights Hub for enhancing team performance.
bottom of page