Management can maximize shareholder value by increasing the intrinsic value of the business, which is highly correlated with market value over the long-term. Intrinsic value is created by achieving profits over time in excess of the cost of capital, also known as economic profits. Growth in economic profit over time will increase intrinsic value and be reflected in the company's market value. Superior management can have a dramatic effect on the intrinsic value of the business by creating profitable growth and increasing returns on capital.

Management must focus on finding and implementing opportunities to create profitable growth and increase returns on capital. Therefore it must collect and analyze the facts necessary to make investment decisions. Management teams that are able to agree on the facts and economics can more quickly agree and take action on the value-maximizing decision. Better facts and quicker decision making also allow a management team to reduce downside risk by having the ability to quickly change course if an investment turns sour.

Too many businesses spread resources and investment across a wide portion of their businesses. The result is often that the best opportunities don't receive enough capital, sales and marketing investment, and management attention, while resources allocated to less valuable opportunities never receive sufficient return on investment. Most businesses have less than 4-5 issues and opportunities that, if implemented, will drive the vast majority of value creation. These opportunities should receive a disproportionate of management attention, resource allocation, and capital investment.

Strategy 5% planning and 95% implementation. To drive value creation, a management team must quickly align around the facts, take action on the key opportunities, and execute flawlessly. At Avondale, we are only successful if our clients can creating value in their businesses. The management team will ultimately be responsible for executing the strategy or business model changes, and our work cannot have the necessary impact without creating a results-focused partnership. We cannot afford to merely deliver a recommendation. To be successful, management must deliver on what we partner with them to create.