investor relations as the new focus in creating long term corporate value - abf investor relations...

INVESTOR RELATIONS AS THE NEW FOCUS IN CREATING LONG TERM CORPORATE VALUECase Study, Concepts, and Debatable Ideas

Kenny OngCNI Holdings Berhad

www.myCNI.com.my www.OOBEY.com

About: CNI

1. 19 years old

2. Core Business: MLM

3. Others: Contract Manufacturing, Export/Trading, eCommerce

4. Malaysia, Singapore, Brunei, Indonesia, India, China, Hong Kong, Philippines, Italy, Taiwan

5. Staff force: ± 500

6. Distributors: 250,000

7. Products: Consumer Goods and Services

Importance of Investor Relations

Why focus on Investor Relations in the first place?

Is Investor Relations important?

1. Funds

2. Brand

3. Intelligence

4. Customer-shareholders

Importance: Funds

This is the most obvious.

The objective is to keep the paymasters happy so that they will either maintain or increase their funding.

Crisis Management is one small area that falls into this objective

Importance: Brand

Investor Relations is a key component of corporate Branding due to its direct influence on:

1. Multiple parties (Investors)• These parties are either our Branding targets

or has influence on our branding targets

2. Brand Architecture

Types of Investors (1/2)

Institutional

Fund Managers

Corporations

Sovereign Funds

Non-Profit Org

Financial (Loans)

JV Partners

Social VCs

Holding Co.

HQ (MNC)

Gov. VCs

Supply Chain

Gov. Partnership

Competitors

Franchisees

Types of Investors (2/2)

Retail

Investor-Shareholders

Employee-Shareholders

Management-Shareholders

Customer-Shareholders

Distributor-Shareholders*

Distributor-Entrepreneurs*

BRAND POSITIONING STATEMENT:

TARGET

INSIGHTS

COMPETITIVE SET

PERSONALITY

EMOTIONAL

RATIONAL

REASONS TO BELIEVE

DIFFERENTIATOR

OVERALL BENEFITS

ATTRIBUTES

Brand Architecture

Importance: Intelligence

Two types:

I.R. InvestorsCRM Intelligence

Deal with…

I.R. Management

Investor Intelligence

Deal with…

Intelligence: Types of Investors (1/2)

Institutional

Fund Managers

Corporations

Sovereign Funds

Non-Profit Org

Financial (Loans)

JV Partners

Social VCs

Holding Co.

HQ (MNC)

Gov. VCs

Supply Chain

Gov. Partnership

Competitors

Franchisees

Intelligence: Types of Investors (2/2)

Retail

Distributor-Shareholders

Distributor-Entrepreneurs

Intelligence: Why do they Invest?

1. Return/Profit

2. Risk Management/ Hedging

3. Tax-benefits

4. CSR/Image

5. Diversify revenue

6. Counter-cyclical balance

7. Support ‘Mission’

8. Exclusive rights

8. Contractual obligation

9. National Agenda

10.Control Supply Chain

11.R&D portfolio

12.Control Management

13.Alternative Cash Flow

14.M&A

Intelligence: How do Investors get their ‘INFO’? (1/2)

Institutional

Gov./PoliticsCustomer

Suppliers

EconomicsAGM

Market Research

Internet*

Annual Report

Analysts

Fund Managers

Due Diligence

NewsletterSpokespersons

Intelligence: How do Investors get their ‘INFO’? (2/2)

Retail

Gov./ Politics

Customers Public

Events

EconomicsAGMAds

Internet*

Annual Report

Analysts

Fund Managers

Relatives

Friends

Pasar Malam

Employees

Employee Bloggers

Mgmt Action

Newsletter

Intelligence: How to Communicate?

Self Reliant Need Help

Seek Change

Seek Stability

Searchers Collaborators

Streamliners Delegators

Investor Intelligence: What?

Examples…

1. Record feedback and questions

2. Competitors’ IR communications

3. Top 10 Analysts’ views on Company

4. Top 10 Analysts’ views on Industry

Investor Intelligence: Why?

1. Broad view of market

2. Less optimistic/review own assumptions

3. Upgrade IR function to be strategic

4. Feed Management discussions

5. Better and more relevant IR communications

6. Support (buy-in)

Revenue Growth

Base Retention

Share Gain Positioning Adjacent Market

New Business

Operational Excellence

Product Leadership

Customer Intimacy

Competencies Information Systems

Motivation, empowerment,

alignment

Financial

Learning & Growth

Internal Process

Customers

Investment Strategy

Productivity Market Value

Investor Intelligence: Why?

Dangers of Intelligence…

Also known as ‘Beware of Benchmarking’:

1. Big vs. Small company

2. Selective success stories

3. Correlation vs. Causal

4. Survey problems

5. Actionable vs. For-fun

Intelligence: Survey Problems…

“In business after business, 60% to 80% of lost customers reported on a survey just prior to defecting that they were satisfied or very satisfied.”

HBR March/April 1996

IR and Customer-Shareholders

Retail

Distributor-Shareholders

Distributor-Entrepreneurs

Affect Sales

Is Investor Relations important?

1. Funds

2. Brand

3. Intelligence

Obstacles to Growth of Investor Relations

If IR is so important, why is it not growing?

Challenges of Investor Relations

1. Stake- vs. Share-holder*

2. Public Opinions

3. Global operations – difficult to explain

4. Increasing focus on ecological, social, ethical issues

5. Diverged expectations for same issue

6. What to do with Excessive Cash?

7. Superficial changes vs. Fundamental Changes

8. Investors depend on ‘hearsay’ vs. ‘facts’

9. Share Price ≠ Market

10.R&D/M.S./HR vs. Investor Expectations

11.Opposing ‘Expert’ views

IR Challenges

“Good news for stockholders can be bad news for other

stakeholders.” Gregory Miller, Assoc. Prof., Harvard Business School.

Principles of Investor Relations to counter Challenges

1. Long-term relationship

2. Consistent and Proactive

3. Performance vs. Controllability

4. Aligned with operating/strategy position*

5. One message, Different Emphasis

Good News vs. Controllability

Can Control Cannot Control

Internal Attribution

External Attribution

Bad News vs. Controllability

Can Control Cannot Control

Internal Attribution

External Attribution

Obstacles to IR growth

How is IR not maximized?

1.Because I can - Competency problem

2.Poor business value – Ignorance problem*

3. No Budget lah - Alignment problem

4.Not exciting lah – Glamour problem*

5.Idealistic Theories – Practical-ness problem*

2. Aligning IR to Business Priorities

Market Discipline

Profit Model

Business Model

Operational Excellence(low cost producer)

Ref: The Discipline of Market Leaders, Michael Treacy & Fred Wiersema; 1995

Product Leadership(best product)

Customer Intimacy(best total solution)

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

• Competitive price

• Error free, reliable

• Fast (on demand)

• Simple

• Responsive

• Consistent information for all

• Transactional

• 'Once and Done'

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Customer Intimacy

• Management by Fact

• Easy to do business with

• Have it your way (customization)

• Market segments of one

• Proactive, flexible

• Relationship and consultative selling

• Cross selling

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Product Leadership

• New, state of the art products or services

• Risk takers

• Meet volatile customer needs

• Fast concept-to- counter

• Never satisfied - obsolete own and competitors' products

• Learning organization

Upturn Flat Downturn

Fight Complacency

Sharpen Edge

Keep Momentum

Conquer

‘Change’ mgmt

Reduce Fat

Continuity

Everyone Happy

Innovation

Acquire

Profits

Build momentum

Cash Flow

Talent Mgmt

Innovation/R&D

Early wins

Slow Down HR Costs

Top Talent focus

Sales, Sales, Sales

Increase attrition

4. Glamour vs. Hardwork

• Durian Party

• Wisma Tour

• Hampers

• Umrah

• China Factory Visit

• Large Events

• Donations to Media

• Jakim visit

5. Idealistic Theories

Transparency

Integrity

Managerial Competence

Build Trust

Right Information at the Right Time

Integrity + Care towards Individuals

Managerial (Internal) vs. Technical (External)

Manage conflicting ‘Trust’ agendas

Manifestation of Correlation vs. Causal problem

IR vs. Communications

Maximizing the value of IR

• How do we maximize the value of IR to the organization?

IR in Communications

Communications

Internal External

Mgmt Distributors

Suppliers

Government

Public

Authorities

Associations

Universities

Investors

Proactive Reactive Proactive Reactive

COMM Tools COMM Tools

Employees

Revisit – IR’s Key Roles

1. Funds

2. Brand

3. Intelligence

Communication to bring in the Funds

Revisit – IR’s Key Roles

1. Funds

2. Brand

3. Intelligence

Communication to bring in the Sales

Communications to bring in the Funds

1. Long-term relationship

2. Consistent and Proactive

3. Performance vs. Controllability

4. Aligned with operating/strategy position

5. One message, Different Emphasis

6. Outside-in Intelligence

Communications to bring in the Sales

Ultimate Objective of Marketing: “Get more people, to buy more things, more frequently, at higher prices.”

Sergio Zyman

“Retention and Loyalty are useless if No Conversion is happening.”

“Comm (IR) is useless if No Conversion is happening.”

Loyalty is Useless…

• Virtual Consumption vs. Real Consumption

Loyalty is misleading…

• Heavy Consumption ≠ Loyalty

• Loyalty ≠ Heavy Consumption

1.Comm = Relationship (something like Dating)

2.Comm ≠ Media glitz 3.Comm ≠ ATL/BTL/BwTL/ArTL/FTL4.Comm ≠ CSR5.Comm = Get more people, to buy

more, more frequently, at higher prices

Virtuous Cycle to Maximize IR and Communications

Internal External

Summary

Importance of Investor Relations

1. Funds

2. Brand

3. Intelligence

Obstacles to IR growth

How is IR not maximized?

1.Because I can - Competency problem

2.Poor business value – Ignorance problem*

3. No Budget lah - Alignment problem

4.Not exciting lah – Glamour problem*

5.Idealistic Theories – Practical-ness problem*

Maximizing IR in Communications

Communications

Internal External

Mgmt Distributors

Suppliers

Government

Public

Authorities

Associations

Universities

Investors

Proactive Reactive Proactive Reactive

COMM Tools COMM Tools

Employees

“…in the past 18 months, we have heard that profit is more important than revenue,

quality is more important that profit, people are more important than profit,

customers are more important than our people, big customers are more important than small customers, and that growth is the key to our success. No wonder our

performance is inconsistent"CEO, Anonymous

Don’t forget…

“The business of business is Business, not Investor

Relations”

Thank You.

soft copy of slides: http://totallyunrelatedrandomanddebatable.

blogspot.com/

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