Capture Future Value Now
The Power of Visionary Storytelling and Investor Engagement
If your digital transformation is not creating immediate lift in your market capitalization, they you are doing it wrong. Non-digital executives often rely on debt as their primary financing instrument, as they struggle to find new ways to attract investors. However, digital executives take a different approach and avoid debt whenever possible. To truly succeed in digital transformation, organizations must not only develop a visionary strategy but also inspire their investors with that vision while reducing their reliance on debt, which has historically been used to enhance existing products and services based on past cash flows
The Role of Visionary Storytelling
Leading digital CEOs help financial markets understand that a a big and irreversible trend is changing their industry. These CEOs let investors know that the company has the tools to be a leader of that big and irreversible trend. If investors find the CEO’s vision believable, it creates more demand for the stock, which pushes the stock price higher and gives the company the necessary resources to invest in its digital transformation.
Leaders like Elon Musk exemplify the power of visionary storytelling. He excites the market with an ambitious vision about creating a sustainable energy environment and multi-planetary species. Investors flock to the stock, because they do not want to miss out. Companies like Tesla and SpaceX have achieve higher valuations than the competition and gain access to capital at a much lower cost. This approach enables these organizations to invest in digital capabilities without relying heavily on debt financing.
This pattern is repeated at every leading digital company that uses an annual event to demonstrate it vision and new technologies. By setting an ambitious vision and showing progress towards that vision, it attracts new investors to drive up the stock price. Smart digital executives know that investors who are excited about the company’s vision and have a higher than average risk tolerance can be a great capital partner.
Traditional executives often miss this crucial element, focusing on their digital strategies without inspiring investors, aligning with them, or considering alternative financing options. After developing a digital transformation strategy, they operate in a “business as usual” mode. Or worse, they decide to keep their new strategy a closely held secret. This lack of investor engagement and over-reliance on debt can hinder the growth and development of a company’s digital transformation.
Engaging Investors in the Digital Transformation Journey
To truly succeed in the digital transformation, CEOs and boards must work together with investors to ensure alignment. By sharing the company’s vision and progress, they can inspire the market and potentially increase the stock value. This engagement allows the company to capture the value of its future vision in the present at a minimal cost of capital.
Traditional executives and boards may be hesitant to adopt this approach, fearing that a drastic digital transformation will change the stock’s historical risk/reward profile in a way that might scare existing investors. To overcome this challenge, CEOs and boards must find ways to reward current investors while attracting new, more digitally enthusiastic investors.
Beware of the Dark Side
While visionary storytelling, investor engagement, and reducing reliance on debt are crucial, companies must also deliver on their promises incrementally to maintain credibility. Showcasing progress and maintaining strong financial fundamentals are vital to building trust with investors and ensuring a successful digital transformation. The cases of WeWork and Theranos highlight the dangers of capturing future value too quickly and over-relying on debt. Both companies initially achieved high valuations but eventually collapsed due to weaknesses in their underlying financials. These examples underscore the importance of balancing vision and progress with sound financial management and exploring alternative financing options.
The power of visionary storytelling, investor engagement, and reducing reliance on debt cannot be underestimated in driving digital transformation. If the company’s executives can see the future and deliver on that future, then its investors need to know it. A well told story can attract investors based on what they believe will happen, which allows the company to capture of the value of its future vision in the present. By doing so, they can unlock the full potential of digital transformation and create a brighter, more innovative future.