Once a company has devised a reasonable value proposition and it has been communicated to the “>companys intrinsic value. It is entirely possible that heading off in a certain direction will be viewed poorly by investors, who will sell their shares in droves. If the management team were to instead incorporate the views of the market into any necessary change in direction, and then explain its new value proposition thoroughly, the result may be accepted with much less fuss.
The level of self-examination that goes into creating a value proposition may result in an actual change in strategic direction. A company may find that it does not, in fact, exactly fit the operational profile that its preferred value proposition implies. If so, it may make considerable sense to shed some operations and invest in other areas in order to arrive at a repositioned business that does fit the value proposition.
A special situation arises when management has a vision for the direction of the company, but the business is not currently positioned properly to communicate a matching value proposition. In this case, it may not be useful from a competitive standpoint to divulge the companys long-term plans. Instead, consider a gradual, long-term series of incremental changes to the stated value proposition, until the company actually reaches the point where it can justify the value proposition that it has been striving for all along. If investors see that the company efficiently meets the expectations set by each incremental change in value proposition, they will be more likely to accept subsequent changes in the proposition.
In short, the value proposition should be maintained over a long period of time, whenever the financial results of doing so are sustainable. This requires consistent support from the CEO, as well as a well-founded system of accountability for implementing plans. When a value proposition does not prove to be financially sustainable, obtain the input of the investment community before heading off in a new direction. The worst possible situation is for a company to continually swap out its value proposition, to the point where investors and analysts dismiss them as being the flavor of the week, and derive their own valuations of the business, irrespective of what the company says about itself.