The Best Way To Create Shareholder Value Will Be To Create Value and Experiences for the Customer
Often we hear as a company priority that we need to create shareholder value. In the past few months, most businesses have seen stocks decline, which decreases the value to the shareholder. However, I subscribe to a different way of thinking and believe that shareholder value is best seen as an outcome of prioritizing the associate and customer experience - and yes in that order. Costco is a sterling example of a retail company that values their associates in a way unlike most others. In the past two years, their stock is up more than one-hundred points, more doubled in the last five years ($140 to $312), and is nearly six-times more valuable in the past ten years (from $58 in 2010). That is true shareholder value.
In a COVID-19 impacted world, there will be changes to how people view where they work, where they shop, and what they invest in. The decisions and actions businesses make now can define the next several years for all three of those critical business elements.
Start with taking care of your associates. What you do right now to show that you value your employees will drive your ability to have those same associates create value and experiences for your customers.
Retailers, restaurants, and others will not have the luxury of the cost-cutting and corner shaving that has been the norm for the past several years. All businesses will need to invest in customer platforms, creating experiences and convenience, and providing new levels of service in a world were social distancing is the norm.
Target, Costco, and even Walmart to a great degree have already proven this model works. In different ways, they have invested in their people, the infrastructure, and their technology and have been rewarded both by customer traffic, sales growth, and stock price.
The businesses that will succeed over the next 2 years are the ones that embrace the need for change now.
Leading through the changes and what has truly been a crisis for almost every business, the hardest work is still to come. Now, we must redefine what and who our businesses are. I believe the companies that will thrive will be the ones that embrace change. The ones that try to simply be what they were before will struggle and eventually fail in the months and years to come. This is a turning point for all of retail.
Each segment - hardline, soft lines, restaurant, hospitality - will need to take a look at how they deliver experiences to customers. When we look back two years from now, companies that used this situation to update and adjust their business models will be the most successful. This will be a reinvention of retail and for many brands, there is little room for error. This crisis has drained most businesses of cash and resources. Companies that were already struggling will likely face extreme challenges in the months ahead in an economy that will take time to recover. The expectations of customers will have been forever changed.
Now is the time to move our gaze forward and define new visions of what CAN BE and not what has been. We are working our way through a significant change path. And, as the crisis of the COVID-19 slowly abates and becomes a part of our ongoing landscape, the need for leading through foundational changes of business definition has only begun.
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Photo by Markus Spiske on Unsplash