How innovation drives shareholder value

Enabling organizations to venture into new business



    As mentioned in

    Study
    Findings

    1

    We found empirical evidence for the innovator’s dilemma as 68% of the companies we analysed did not diversify their revenue.

    2

    We found that those companies that diversified their revenue segments vastly outperformed those that did not in terms of total shareholder returns.

    Jan, Co-Founder

    3

    We found that the positive impact on stock price development from long-term revenue diversification could already be observed after 3 years and before the impact of the
    diversification efforts were recorded in annual reports.

    This seems to suggest that stock markets value ongoing innovation efforts early on rather than only valuing long-term outcomes.

    Study
    Findings

    Jan, Co-Founder

    1

    We found empirical evidence for the innovator’s dilemma as 68% of the companies we analysed did not diversify their revenue.

    2

    We found that those companies that diversified their revenue segments vastly outperformed those that did not in terms of total shareholder returns.

    3

    We found that the positive impact on stock price development from long-term revenue diversification could already be observed after 3 years and before the impact of the
    diversification efforts were recorded in annual reports.

    This seems to suggest that stock markets value ongoing innovation efforts early on rather than only valuing long-term outcomes.

    Methodology

    We analysed sales and total shareholder return data from Worldscope Fundamentals for 1,838 listed companies in Europe, the United Kingdom, and the United States of America from 2010 to 2019. We analysed two data points for every company. First, we calculated the relative amount of revenues in 2019 generated by business segments that did not exist in 2010. Second, we calculated the annualised total shareholder return for each company between 2010 and 2019.

    We then segmented the 1,838 companies into five groups determined by the level of revenues in 2019 generated from new segments that did not exist in 2010: 0% (no revenue from new segments), 0-10%, 10-25%, 25-50% and over 50%. For each group, we calculated the average of the nnualised total shareholder return for each of the companies in the respective group. We then compared those average annualised shareholder returns across the different groups.

    Methodology

    About the authors

    Jan Sedlacek

    Managing Partner

    Zurich Office
    jan@stryber.com

    Julian Ritter

    Associate Partner

    London Office
    Julian@stryber.com

    Julius Schöning

    Lead Growth Marketer

    Munich Office
    julius@stryber.com

    About Stryber

    We empower leading organisations to venture into new business and drive growth. We do so by helping them to build an ambidextrous organisation that is both successful in its well-established core and successful at driving growth in new lines of business. At Stryber our track record shows that by establishing the right governance and leveraging corporate assets with our established methods and expertise, any company can build up resilience and succeed in the long run.

    Executive Roundtable Discussion

    Join this virtual private talk with Jan (Co-Founder) and 5 other industry leaders on the exciting findings of the study and the potential impact of diversification on your organization.

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