Value drivers in the manufacturing industry

Written by: Pieter van den Berg

In our acquisition practice, the valuation of industrial companies is an important part of our work. Part of this includes analyzing what are now the so-called value drivers for the company in question. What elements primarily determine value? What are the drivers of growth?

Years ago, Jim Collins examined what value drivers were decisive in eleven companies that had fifteen years of mediocre results and far- according to at least fifteen years of extraordinary pres- tations. In summary, these companies share some common characteristics.

The leaders of these companies have a combination of personal humility and professional willpower, are modest and reserved, but have an unparalleled determination to make the company successful.

The crucial thing is to get the right people on board first before determining the direction of the company. This approach assumes that with the right people in the right positions, the rest will naturally follow. It is even more important than the strategy itself.

The companies were willing to face harsh realities without losing faith in ultimate success. It emphasizes an open culture of discipline and honesty, where the facts are not ignored but rather used to move forward.

The hedgehog concept came from the idea that the hedgehog only wields one major essential point in the face of danger (putting up spines). By knowing perfectly what they can be the best at and what drives their economic engine, they remained specifically focused on that.

Successful companies gradually built a so-called flywheel that starts slowly and then accelerates. This flywheel effect emphasizes the power of consistent effort and small but significant improvements.

Companies create a culture of discipline, where people are driven to do the right thing. This requires not only discipline in action, but also a highly disciplined way of thinking. Successful companies used technology to enhance their pre-existing strengths, but they never let technology determine their strategy. Ostensibly, these are not very special points. Will you succeed in applying them in your company as well? Good luck in advance!

This article was originally published in INTO Business magazine Haarlemmermeer-Schiphol of July 2024.