The Next Question: The Return To Core Competency

For 2024 planning, public companies face a daunting environment. The decline in affordable financing, persistent labor market constraints, margin pressures, rising global compliance costs, evolving tax frameworks, and the intricacies of managing geopolitical concerns put businesses to the test. This is particularly true for those with a wide-ranging global focus or business portfolio. Amidst these challenges, investors are likely to emphasize the value creation opportunity of companies focusing on their core competency. By answering critical strategic, financial and operational questions, businesses can adeptly traverse these complexities, foster robust dialogue with investors, and chart a course for enduring growth and value creation.

The Return to Core Competency: Why It Matters

Core competency represents a company's primary strength, a unique combination of skills, knowledge, and expertise that sets it apart from competitors. In challenging times, a sharp focus on core competency can be the beacon that guides a company through uncertainty and maintains and enhances margins.

1. Efficiency and Cost Management (Performance Excellence): By concentrating on what they do best, companies can optimize their operations, reduce wastage, manage costs more effectively and command a higher valuation.
2. Clearer Strategic Vision (Strategic Trajectory and Clarity): A focus on core competency provides clarity in decision-making, ensuring that resources are channeled towards initiatives that align with the company's primary strengths and create value.
3. Investor Confidence (Capital Structure and Market Position): Investors seek predictability and stability. Companies that stick to their core are often viewed as less risky and more reliable and provide a more streamlined platform so that they are not receiving a “sum of the parts discount” in their multiple.

Top Questions for the 2024 Strategic and Operating Plans on Core Competency:

1. What are our company's defined core competencies in today's market?
2. How have market dynamics in 2024 influenced our core strengths?
3. Which operations align directly with these core competencies?
4. Are there areas of our business that have deviated from this core?
5. How are we investing to strengthen our core competencies?
6. What costs and capabilities are essential to deliver on our strategy centered around our core competency?
7. How does our core competency differentiate us from competitors in 2024's landscape?
8. Are there emerging trends or technologies that could enhance or threaten our core competency?
9. How are we communicating our core competency to stakeholders?
10. How does our core competency align with our long-term vision and mission?

Top Questions on the Impact of Potential Strategic Shifts In Preparation for Investor Engagement:

1. How will closures, divestitures, or spin-offs impact our long-term margin targets?
2. What is the projected financial impact of these strategic shifts?
3. How will the proceeds from divestitures or spin-offs be used in our capital structure?
4. Are there potential reinvestment opportunities for these proceeds?
5. How will these strategic changes affect our debt-equity ratio?
6. What will be the tax implications of these strategic shifts?
7. How will our risk profile change post these decisions?
8. How do we envision these changes enhancing shareholder value?
9. Are there potential regulatory or compliance issues associated with these shifts?
10. How are we planning to manage the transition with stakeholders?

Top Questions from Investors on Core Competency, Simplification and Value Creation:

1. How do you define your core competency in the current market?
2. How are you ensuring that resources are focused on strengthening this core?
3. What steps are you taking to simplify operations and focus on the essentials?
4. How will a return to core competency enhance shareholder value?
5. Are there non-core operations that are impacting your margins?
6. How are you managing the costs associated with global compliance and changing tax structures?
7. What is your strategy for managing the challenges of tight labor markets?
8. How are you navigating the reduction in cheap financing?
9. Are there plans for divestitures or spin-offs to streamline operations?
10. How will these strategic decisions impact your long-term financial health?

In 2024, public corporations stand at a crucial juncture. Confronted with a range of impending challenges, focusing on core competency is not just a strategic decision but an emerging investor priority. By focusing on the right strategic and operational questions, businesses can adeptly traverse these complexities, foster robust dialogue with investors, and chart a course for enduring growth and value creation.