The Strategic Capital Allocation Commitment:
Aligning capital availability
with strategic opportunity to drive long-term value
Nothing is more important to the health and performance of a company than the way it manages capital. Core to this: strategic discipline – regardless of the size of a project or its timeline. It's why companies should have a "strategic capital allocation commitment" like this.
We commit to ...
Taking a long-run view to increase corporate growth and profitability v. short-term hyper-focus on Wall Street analysts
Ensuring that capital can flow from "mature" portions of the business to "emerging" opportunities with higher potential
Having an "activist" philosophy for both multi-year planning and re-deployment of capital to optimize assets across business units and enable agile in-fiscal-year adjustments
Adapting a forward-looking investment mindset that puts ROI front and center as the primary metric for material projects v. backward-looking "accounting expense mentality"
Accepting that the job of strategic capital allocation, like competition in the marketplace itself, is never done; it requires commitment, collaboration and an eye on the prize: creating long-term value
Acknowledging that there are no shortcuts as you aim to rise through the four stages of Capex development: process automation, project insight and financial context; at its "peak" is strategic capital allocation
Leaders today need to master a new skill: capital allocation.
Investing
A mindset that every dollar spent is in pursuit of a desirable strategic outcome.
Spending
A mindset that you’ve been allocated money that must be spent for fear of “losing it” next time.
Continuous
Having the resources and discipline to allocate and manage capital based on current conditions, opportunities and real-time data.
Episodic
Allocating and managing based purely on fiscal year budgeting and scheduled/quarterly forecasts and reporting.
Realistic
Budgets, forecasts and ROI models based on unbiased analysis and historical data.
Rose-colored
Budgets, forecasts and ROI models based on assumptions and “gold-plate” optimism.
Targeted
Budgeting and approval of projects that are in support of greater portfolio objectives and strategies.
One-offs
Budgeting and approval of projects that are considered in isolation under the steady stampede of requests and priorities.
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