A while back (Part 18, to be precise) I wrote about the need for corporate investor relations sites to speak about strategy. The basic premise of the piece was that when buying a stock, investors are purchasing a claim on the future cash flows of the company and therefore need visibility into the future plans of the company. Many companies are reluctant to discuss strategy on their investor web sites, however, so when I came across a great example of a strategy discussion, I thought it would be an opportune time to revisit the topic.
Whenever I discuss this topic there is usually some push back from investor relations officers and executives along the lines of “We can’t tell them that – then our competitors would know what we are going to do” or “That’s way more detail than the regulations require us to disclose and therefore we’re not going to do it”. I understand these concerns (well, at least the first one) but feel that the importance of stating your strategy outweighs most concerns about how many of the corporate information you divulge. Besides, there are ways to discuss strategy that do not let the competition in on your innermost secrets.
Take for example the way ENI, the Italian energy company, discusses strategy. They start with a general overall write up of their growth strategy, followed by a tabbed table that sets out their targets in a number of areas and follows that with more detailed discussion of the strategies to achieve their targets.
The strategy discussion is followed up by a page that lays out the company’s growth drivers, so investors can get a sense of how ENI will achieve its strategic objectives.
Finally, the company examines their outlook for the next year, which allows the reader to understand how everything is supposed to fit together.
The overall effect of all of this is to give the diligent investor a sense that ENI has carefully thought out its strategy and is confident enough in its ability to execute the strategy to put it out where everyone can see it. I think this is a very effective strategy section that many companies can learn from.