On the home page of one of the world’s largest communications agencies, the headline promises ‘we create value’. That may be true, but I’d argue that for most companies, the biggest boost to business value comes not from what effective communications can create, but from the ability of visionary communicators to release unrecognised value that already exists.
Communications creates value by increasing demand and reducing price elasticity. If other factors are brought into line, it will also help create valuable assets such as a known and carefully-shaped brand, an engaged social media audience and a healthy sales pipeline. With a few exceptions – such as re-engineering a heritage brand, where substantial new value can be generated – the way communications creates value is simply by helping businesses make money doing what businesses do.
What many companies fail to grasp is that the biggest contribution to business value made by skilful communications is often not in creating new value, but in releasing value that is already there. Before the Melrose bid, I was pondering on how to win GKN’s communications business as it was clearly a company that is undervalued by its target customers and by investors. If you were a driveline director at a vehicle manufacturer, a purchasing specialist or an investment analyst, would you, before the publicity surrounding the bid, have been able to define the scope of their capability? Would you have understood their impressive technology roadmap and how well aligned it is to areas of growing market demand? GKN failed to deliver the right messages to the right people and that made them undervalued and vulnerable.
The astonishing rise in the share price seems to have surprised even the company’s leadership. That’s because it was driven by far more than the prospect of a premium being paid for the shares: a substantial part of the increase in market capitalisation is because the bid process revealed how capable GKN’s businesses really are.
The relationships between vehicle manufacturers and their technology suppliers are complex. Each decision is influenced by a network of specialists, often with conflicting objectives. To succeed, you have to separate out the benefits for each audience and deliver them in a focussed and engaging way. Investors and analysts, surprisingly, respond well to many of the same messages as these technical specialists, most notably around clever alignment of the technology roadmap with the ‘megatrends’ that drive demand in our industry.
Just like GKN, many companies have opportunities to use strategic communications to release more value than can be generated by years of successful trading. It doesn’t need to be created; it’s real, honest value that is there already, waiting to be monetised.