Strategic Model

Strategic Model is the main driver of shareholder value creation. It defines how the company creates, captures and controls value as well as what capabilities it uses to do it. It also includes a set of clear but dynamic choices along strategic dimensions.

Strategic Model Innovation is the process of systemic understanding of the multidimensional space of choice, creative generation and selection of possible models, a firm decision and implementation of the best Strategic Model.

Paul Kroujiline is the author of the Strategic Model framework and the Strategic Model Innovation process. He has developed this system during over 20 years of strategy development and execution across hundreds of companies - from multinationals to startups.

Both the framework and the process are fully implemented in our strategy tools. Here is a brief intro into this system.

Shareholder value creation after the crisis

Our team has analyzed how value was created during 10 years after the crisis of 2008.

While there is some difference between industries, value growth in the same industry and often even in the same segment can differ by over 10 times.

Companies that grew shareholder value below average destroyed value (even if they grew nominally). But leaders created significant value - often tens of times and tens of billions of dollars more.

A natural question emerges: what is the defining difference between companies on the right (creating value after the crisis) and on the left (destroying value after the crisis)?

Is the main driver of value creation attractive industry? strong brand? management system and team? market share? tech innovations? cost cutting?

While all these are important, none of them is a definitive guaranteed driver of value creation.

There are multiple companies that are successful examples of each of these drivers, but are at the same time on the left (destroying shareholder value).

For example, there are value destroying companies in the most attractive industries.

Some the companies with the strongest brands are on the left (e.g. Coca-Cola, Energizer, Xerox).

Great management systems (Procted & Gamble) and teams (Goldman Sachs) do not guarantee value creation.

Companies with great market share in their respective segments (Garmin, Western Union) often struggle to create any value for their shareholders.

Some of the legendary technology innovators (Xerox, Cisco) can’t even reach average shareholder value creation.

Major cost cutting programs (Sprint, Fossil) also did not bring spectacular value creation results.

If none of these important drivers can’t guarantee shareholder value creation, then what is the main driver?

The answer is:

Strategic model

Strategic model:

Create
Capture
Control
Capabilities

In its core it is a set or questions that are very hard to answer for most businesses.

For whom and how do I create value in a unique way?
Why am I allowed to capture value beyond cost of capital?
How do I control value to protect it long term from others?
What is the absolute minimum of capabilities driving investments and operations required for maximum value?

Strong answers to these hard questions, if they exist, translate into strong financials, including market size, share, revenues, costs, investments, profits and, ultimately, return on investment, NPV and market capitalization.

Dozens of comparisons of companies from the same industry on the left (destroying value) and on the right (creating value) demonstrate that a solid Strategic Model including all its components is a unique driver of value.

Strategic Model Innovation is a process used to create and implement a new model. It is built upon our universal strategy operating system and creative strategy development and uses specifically designed strategy tools.