Why is it important to communicate your strategy to investors?
"You only have to go through one or two communication debacles as a senior executive to understand the importance of communication" - Indra Nooyi, former Chairman and CEO, PepsiCo
While organizations tend to prioritize internal strategic communication — a crucial step for employee empowerment and implementation — external communication, specifically to investors, is of paramount importance. Properly executed, it captivates potential investors, rallies existing ones, and positions them as champions of your brand's narrative. Conversely, ambiguous communication can lead to misdirected efforts, stagnation, and, worst cases, a decline in share value.
4 distinct ways to communicate your strategy to Investors
Adopt a Holistic Communication Perspective
- Avoid a myopic approach that emphasizes only one fact of your strategy. How to combat this narrow focus? Establish a centralized FAQ database about your company's strategic vision, catering to varied investor profiles. This not only streamlines message customization but also augments communication effectiveness. Involve senior management and strategy peers; their insights not only enhance the repository's quality but also foster alignment within leadership.
- Use communication levers:
- Make investors visualize your firm’s aspirations, and direct their attention on the opportunities and possibilities ahead. Your goal is to tease their curiosity, spark imagination, and build excitement.
- Detail the competitive advantages that your strategy promises, and its impact on financial metrics.
- Bold strategies should be highlighted, and be vocal about it. Encourage investors to see the transformative potential they hold.
- Showcase your organization’s capability in strategy execution, but acknowledge potential hurdles. As Sun Tze said: “Strategy without tactics is the slowest route to victory”. In practice, be ready to:
- Describe your strategic planning process
- Explain the thinking, logic, and evidence that supports the choices.
- Highlight what will change to execute your strategy e.g. will your organization change? How will resources be reallocated?
- Describe the new activities, capabilities, and behaviors that enable the strategy. Have you established pilot programs? If so, how about organizing a site visit?
- Associate metrics that are relevant in assessing the new behaviors, activities, and outcomes.
- Yes, it is a lot to deliver in a single meeting or email, so you should not do it in one go. The trick is to combine the right message with the right audience using the most effective medium, then listen attentively to the feedback and refine as required.
Sequence your communication into dynamic exercises
- Map out a series of campaigns targeting various investor categories at different junctures to ensure message clarity and consistency.
- Tailor your communication according to the investors’ familiarity with your company. For prospective investors, spotlight your organization’s ambitions, and the opportunities and possibilities ahead. For existing shareholders, provide updates on strategic execution and interpret results in this very context.
- Carefully select the tool or asset to match the audience, the message, and the environment. For a chance encounter, you may want to use a one/two-minute elevator pitch, or a compelling anecdote about your firm’s competitive advantages to incept curiosity. An elaborate story about how your organization overcomes challenges can be better remembered in a group meeting. In an email, a succinct strategy overview complemented by relevant FAQs often works best.
Empower your organization to echo your strategy
- Often, the onus of strategy communication falls solely on senior leadership, and the information communicated is limited. Research shows that few misconceptions have led to this approach. The top team believes that only itself has the responsibility to share the strategy, that the strategy is too complex for others to communicate, that too much detail will distract people, and competitors will gain an advantage from knowing more about the strategy.
- In reality, this approach limits the opportunity for employees, partners, suppliers, and other stakeholders to validate and amplify the distribution of your strategy to investors. In particular, when they check for information consistency and verify the steadiness of your execution. “Ideas are easy. execution is everything.” – John Doerr, Chairman Kleiner Perkins. Clear internal and external communication about your strategy sets your organization on a trajectory of superior execution excellence.
Be obsessive about making investors understand your strategy
- Share as much of your strategy as possible. Collate and present material and information in an accessible manner, allowing investors to discern what is relevant.
- Wisely exercise discretion in providing details. Only restrict information if it has the potential to overwhelm or confuse investors or divulge trade secrets.
- Upon important decision-making, e.g. new investment, closure, restructure, or partnership, elucidate the underlying rationale – assumptions made, uncertainties foreseen – and emphasize the alignment with broader strategic intents.
- Engage in regular, candid updates. Share what’s working and what’s challenging. Actively solicit investors’ thoughts.
- Facilitate open dialogue. Encourage investor queries and actively engage, fostering mutual understanding.
- Listen, refresh, and repeat. Often, after intense periods of strategy communication, like IPO, M&A, or strategy U-turn, investor communication will focus on business updates. A reason for such behavior may be leadership assuming that all the investors are aware of their strategy. First, this is not true, there are always new investors who are not acquainted with your equity story. Second, when your strategy evolves, you will face a growing disconnect in investors’ expectations. Research suggests that it takes about two months to embed a new habit, therefore even with the best communications and incentives, the effort needs to be continuous. Over time, you will know your messages have been embedded when investors start to use the same language as you.
We hope this article gave you fruit for thoughts on how you can approach the communication of your corporate strategy in the context of IR. Irostors is the first SaaS platform that helps IROs and CFOs simplify investor targeting through IR data. Feel free to contact us to discuss the solutions we offer.