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January 25, 2021

Shareholder value should guide technology strategy, says asset management CTO

Without an understanding of the levers of value creation, technology projects – and the CIOs who lead them – are doomed to failure, argues Gresham House's Andrew Hampshire.

By Cristina Lago

When Andrew Hampshire started his career as a software developer, he soon realised he was not particularly good at it. The first programmer he hired showed him that other people could deal with the technical aspect of the job better than he did. However, along with that sobering realisation, Hampshire also noticed that what he really enjoyed was understanding how businesses work and how you can use technology to solve problems. “The thing for me has always been about value creation through technology.”

Today, Hampshire is chief technology officer and chief operating officer at Gresham House, a London-based asset management firm focused on sustainable investment that has £3.3bn worth of assets in its clients’ portfolio. In this role, he frequently meets CEOs who are frustrated by their inability to advance their organisations through technology, which they often attribute to their own lack of tech-savvy skills.

These encounters sparked the idea for Hampshire’s new book, Creating Value Through Technology, in which he advises business leaders to look at technology investments not through a technical lens but the perspective of shareholder value.

Andrew Hampshire

Andrew Hampshire, CTO and COO at Gresham House. (Photo courtesy of Gresham House)

Finding the levers to value creation

There are many ways to quantify the performance of a business, such as revenue generation or profit. But to help direct technology strategy, Hampshire prefers to focus on shareholder value, he says, as it encompasses both the financial and non-financial aspects of a business. “Clearly valuation is based on profit, revenue, cash or debt. But it also factors [in] other considerations… like brand, reputation, market positioning or your unique selling proposition.”

This doesn’t mean executives should only care about profit at the expense of their environmental and social responsibilities, Hampshire adds. “These are important components of shareholder value,” he says. “Businesses that aren’t considering those factors will be at a disadvantage in the future, either because that means they are less investable or because it means they are competitively disadvantaged. As such, that will be reflected in their shareholder value.”

To understand how technology can boost shareholder value, business leaders need to understand the levers of value creation available to them. These are different for every business: some might focus on improving cash generation or revenue growth from existing customers, while others might focus on boosting operating margin through cost reduction or productivity improvements.

Hampshire recommends that companies identify three or four critical value creation levers, whatever they might be, for the next three to five years. These should be defined in detail so a rough value can be attributed to each one and time and investment allocated accordingly.

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Value-led implementation

Once the value drivers have been clearly defined, the next two steps are selecting and implementing technology that advances these levers.

“Implementing technology well is not just about the project management methodology you use: it’s about that focus on the value you’re trying to get.”

It is vital that the value levers are front-of-mind throughout these processes, Hampshire stresses. He has witnessed several technology implementations where the objective was the implementation itself, whether that is upgrading a website, introducing a new CRM or implementing RPA.

“What you’re trying to do, for example in the case of introducing a CRM system, is drive revenue or improve the performance of your sales team,” says Hampshire. “Implementing technology well is not just about the project management methodology you use: it’s about that focus on the value you’re trying to get.”

If a CEO or business leader does not understand their value levers and has a clear vision of what they are trying to achieve, he adds, technology projects are doomed to fail.

Value-driven CIOs: the secret weapon

A common shortcoming among CIOs and CTOs, Hampshire says, is a lack of understanding of how their businesses are valued. This, combined with limited guidance from the CEO or the CFO, leads to a failure in their roles, regardless of how good they are at understanding technology.

But by developing an understanding of their organisation’s value drivers, CIOs can become more than mere service providers, stresses Hampshire. A truly valuable CIO in the private sector is one who understands financial statements and the drivers of the business valuation just as well as the CFO or the CEO does, while also understanding how technology can be applied to those levers.

“A really good CIO working very well with the CEO and aligned to the business strategy could be a secret weapon for many businesses,” Hampshire says.

Do you agree? Should shareholder value be the purpose of all technology investments? Or could it lead businesses to neglect the wider impact of their decisions? Share your thoughts with us over on LinkedIn.  

Home page photo by Shutterstock/ST House Studio.

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