Bridging to Market-cap

Dealing with value perceptions: from customers and the market perspective.

How to bridge the gap between market capitalization and value stream management (VSM):

  1. Market Capitalization (Market Cap):
  • Definition: Market capitalization is the total dollar value of all outstanding shares of a company. It is calculated by multiplying the current share price by the number of outstanding shares.
  • Significance: Market analysts often use market cap to designate a company’s size. Many stock market indexes are weighted by market capitalization.
  • Fluctuations: Market cap can fluctuate greatly from month to month or even from day-to-day due to changes in share prices.
  • Limitations: It does not measure the equity value of a company. Only a thorough analysis of a company’s fundamentals can provide that insight. Additionally, market cap does not determine the amount the company would cost to acquire in a merger transaction. A better method for calculating the price of acquiring a business outright is the enterprise value.
  1. Value Stream Management (VSM):
  • Definition: VSM is a lean business practice that improves the way teams deliver high-quality customer experiences. It focuses on two critical aspects:
  • Delivery Speed: How quickly customer-requested features or updates are delivered.
  • Realized Value: Whether the customer realizes value from those changes.
  • Roots in Lean Principles: VSM’s roots trace back to lean manufacturing and the Toyota Production System (TPS) in the 1950s. It aims to shorten time-to-value and deliver higher-quality products.
  • Benefits of VSM:
  • Faster delivery of customer-centric products, increasing competitiveness and revenue.
  • Better customer experiences, leading to positive reviews and referrals.
  • Improved employee engagement with cross-functional teams, enabling a holistic view instead of silos.
  • Data-driven decision-making for future investments.
  1. Connecting Market Cap and VSM:
  • While market cap reflects the market’s perception of a company’s worth, VSM focuses on delivering value efficiently.
  • VSM helps connect the C-Suite with Agile and DevOps teams, aligning around customer satisfaction.
  • By managing value streams effectively, organizations can streamline product delivery, adapt to market changes, and deliver more predictably.

In summary, market cap represents the financial market’s valuation of a company, while VSM ensures efficient delivery of customer value. Both perspectives are essential for a comprehensive understanding of an organization’s capacity of value-delivery.

Company Valuation and Equity; How to build a straight link to VSM the such way that impact on it and promote increasing?

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