What Drives Market Value for Your Publishing Business?–Part I of II

By BNI & Referral Institute - Jun 27 , 2008

by Warren J. Rutherford

Publishers and other businesses are increasingly asking these questions –

• What REALLY drives performance, profitability, and market value, and
• How can we identify, quantify, and measure all the assets of our company to optimize its performance and market value?

Sounds complicated, but it’s actually straightforward.

Have you ever been challenged with looking at a series of dots on a piece of paper and been asked to draw a line between them? If you are like most people, you drew straight lines to connect the dots. Let’s discuss below some of the basic factors that drive performance (the dots) and discuss how you might begin to measure and manage these factors more fully (drawing lines that connect them).

Measuring Market Value Has Changed

The key drivers of a company’s market value have actually changed in the last 10-15 years. A company’s value has traditionally been reflected in purely financial terms. In 1978, when New York University’s Stern School of Business conducted a study with the country’s major corporations, it found that there was a 95% correlation between a company’s Income Statement and Balance Sheet and its market value.

In 2005, the Stern School redid the study and found that now there is only a 28% correlation between a company’s balance sheet and its market value!

The New Factors

The intangible factors that drive a publisher’s market value today include:

• Intellectual property
• Corporate strategy
• Corporate brand
• Operational and administrative systems and processes
• Access to capital
• Off-balance sheet items (for instance – activities related to knowledge, collaboration, leverage of operational systems)
• Reputation
• The experience and decision-making strength of the executive team

Because most company values are intangible, it’s natural that in highly valued companies —

• Staff now devote most of their time to solving complex and routine problems by collaboratively applying their knowledge and through leveraging their organization’s systems
• Nearly 8 out of 10 employees produce services that provide expectations of value, rather than tangible products

Weak Implementation

Despite this new emphasis on intangibles, Robert S. Kaplan and David P. Norton (both of the Harvard Business School) point out in their 2006 book, Alignment: Using the Balanced Scorecard to Create Corporate Synergies, that –

• Only 5% of a workforce understands their company’s strategy.
• Only 15% of senior management spends more than 1 hour a month defining strategy and aligning operations to it.
• Only 25% of companies have their operations aligned to the strategy.
• Only 40% of companies align their budget to their strategy.

Kaplan and Norton’s research confirms that developing an intellectually trained workforce is absolutely essential to drive the success, growth, performance, and market value of your publishing business.

Optimizing Your Employees

Because each employee thinks about his work tasks differently and has a unique perspective about his role, you must understand—

• why they connect their dots the way they do
• how your employees think and make decisions
• how to increase their performance

Some years ago, Dr. Robert Hartman (Yale/MIT) developed three core focuses to measure the thinking process and its impact in a business setting:

• (The Head) – The systemic dimension of thought – intellectual, theoretical, idealistic thinking about what should be, what ought to be, rules, structure, systems, conceptual, big picture;
• (The Hand) – The extrinsic dimension of thought – practical, real-world, results oriented thinking; and
• (The Heart) – The intrinsic dimension of thought – individuality, humanistic aspects of a situation.

Based on those three focuses for measuring thinking processes, the questions then become –

• which thinking process is dominant for any individual employee or any group of employees with the same or similar tasks?
• what thinking process should they be using to perform their tasks efficiently?
• what is the best way to retrain employees to move from their current thinking process to the optimal thinking process?

In my next article, I will discuss what you can do to perform a high-level review of your publishing business in order to optimize your market value.

Warren J. Rutherford, President, Rutherford Advisors, Inc. is an Accredited Associate, Institute for Independent Business International, and a CMT Accredited Senior Mentor. He is certified as a Behavioral Coach, an Analyst in Axiology, a One Page Business Plan Consultant, and he is a BNI Assistant Director in the SE Mass/RI Region. He provides business consulting and mentoring to small and medium-sized business, and performs market research for businesses. He can be reached at warrenrutherford@iib.ws or at www.RutherfordBusinessAdvisor.com. Copyright (C) 2008, Rutherford Advisors, Inc. All rights reserved.