EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
Recent Searches
How can Africa businesses tap into long-term and growth value in an era of disruption?
Executive summary
- One of the biggest challenges facing African businesses in a post-pandemic world, is ensuring long-term value for their organisations, and addressing the needs of a full range of stakeholders.
- How do businesses take a long-term value approach to building a growth strategy in this era of uncertainty and disruption?
One of the biggest challenges facing African businesses in a post-pandemic world, is ensuring long-term value for their organisations, and addressing the needs of a full range of stakeholders. The enterprises that best define their long-term value narratives, and invest for the greater good, will benefit their shareholders and, in the long run, their own bottom lines.
If anything, the pandemic has reinforced the importance of a long-term value approach. It has increased the expectations of stakeholders – including employees and the wider public – for African organisations to play a more active role in tackling major societal issues, such as inequality and climate change. It is making CEOs and boards question and change the role of their organisations in terms of who they are serving, the contribution they can make to society, and what constitutes value.
Taking a long-term value approach at a time when most businesses are focused on dealing with short term crises and pressures, is going to take a significant shift in mindset. Of course, executives still must keep an eye on short-term performance. Running a lean and profitable core remains critical to a company’s ability to drive transformative investments.
But forward-looking leaders are making strategic decisions based on the clear understanding that investing in a broader set of stakeholder considerations will have a considerable impact on total enterprise value, access to capital and the talent market for their organisations.
They are realising that the days of focusing solely on the shareholder are over. Stakeholders evaluate an enterprise by considering its customer value, people value, and societal value, in addition to its financial value. Accordingly, companies are rethinking how to grow their businesses while communicating both purpose and strategy by focusing on long-term value. Traditional strategies that narrowly focus on financial output are becoming increasingly risky.
So, how do businesses take a long-term value approach to building a growth strategy in this era of uncertainty and disruption? It starts when C-suites, boards, and investors are able to ask – and answer - two key questions:
One, what will drive, or destroy, value for the business in the coming years?
How are you allocating the resources, capital and focus of the organisation in a way that supports longer-term value? How are you addressing the broader social issues in the communities that you operate within? How do you execute on a long-term strategy? How do you measure success?
Two, how can the business be aligned around a wider, stakeholder-driven agenda?
How are you making sure you identify all the stakeholders in your universe that actually affect your enterprise? How is your business dealing with national and local government, labour unions, your communities and your own people? How do you redefine your purpose and vision of what you are trying to achieve – and how do you communicate that to all stakeholders? How are you thinking about sustainability in a broader sense, and addressing key environmental, social and governance (ESG) issues?
At EY-Parthenon, we believe that if you're not identifying all your stakeholders, and measuring your effectiveness in engaging with these stakeholders, your enterprise will likely struggle to survive in the long term. By the same token, an organisation whose strategy prioritises all four long-term value pillars – financial, customer, people and societal - and that can articulate how the customer, people and societal pillars drive financial performance, will outperform its competitors.
To achieve this, organisations should take these critical steps to success:
- Establish your purpose, define your value creation approach, and understand stakeholder expectations. This is the essence of a long-term value strategy. Beyond defining their purpose, businesses must also identify key stakeholders as well as their specific needs and expectations.
- Build diversity to encompass various perspectives. Diverse and inclusive boards – including dimensions such as race, gender, career background and age – bring a full range of perspectives and solutions to big issues, like climate change or inequality, and can challenge established thinking and biases in a way that homogenous boards will not. Diverse and inclusive boards are also better placed to ensure that different stakeholder impacts have been taken into account in decision-making.
- Set and measure metrics across stakeholder goals. The importance of this step cannot be emphasised enough. Leadership must maintain a tenacious focus on a comprehensive set of KPIs and use that dashboard to drive investment and communications.
The bottom line is that African business leaders are increasingly realising that, to be successful, they need to have a multi-stakeholder, long-term approach to doing business. The continent’s success depends on it.
Summary
An organisation whose strategy prioritises all four long-term value pillars – financial, customer, people and societal - and that can articulate how the customer, people and societal pillars drive financial performance, will outperform its competitors.
