Companies can manage their investors better by using two-way communication that incorporates segmentation and feedback to redefine strategies. Numan Waheed, a partner in Bain's Mergers & Acquisitions practice, explains the four ways that companies can turn investors into allies.
Read the article: How Companies Can Use Investors to Their Advantage (HBR.org)
Read the transcript below.
NUMAN WAHEED: Most companies think of investor management as a one-way street. They use their investor days and their earnings call as a way of sharing corporate information and making their marketing pitch. But a few companies actually think of it as a two-way street—between their executive suite and their investors. So these companies segment their investors and target them, and then solicit feedback and use that feedback to redefine their strategy.
In some cases, investors can become invaluable allies during a turnaround. But most companies don't do this. In fact, we did a recent survey that showed that less than 6% of companies have a formal mechanism to incorporate investor feedback back into their strategy. We see a few steps to unlocking the value of investors. Step one is to understand the difference between your current valuation and your intrinsic value. Are we focused on the wrong investors or do we have the wrong messaging or metrics?
Step two is to define the right investor mix. Are we segmenting our investors, are we targeting them? Step three then is to take that information from our target investors and make sure we have the right forums for feedback—both getting the information from them and then feeding that back into our strategy. And the last step is to make sure we have metrics and tracking to formalize that feedback loop. And in this way, companies can make investors into invaluable allies.
Investors can be a powerful strategic resource, providing not only capital but also less-biased insight into the threats and opportunities that a company encounters.