Harvard Business Review

JULY 25, 2017

For marketers (and other executives), there are several benefits associated with using this measurement, including: Justifying marketing spend. Some companies establish a threshold for MROI that takes into account its risk tolerance and cost of capital, below which they are hesitant to make investments.

ROI 8

ROI Marketing Marketing Mix Short-term 8

Harvard Business Review

APRIL 5, 2017

Repaying such profits to shareholders through share repurchases is better than misinvesting that cash to diversify into unrelated businesses in which management has no expertise or overinvesting in projects that may not return cost of capital. As I said earlier, measuring a company’s short-term orientation is incredibly tricky.

EPS 8

EPS Metrics Depreciation Short-term 8

Harvard Business Review

MARCH 10, 2011

Many are deeply uncertain about which initiatives they should fund — and one root of this indecision is a general lack of confidence in the cost of capital projections they are using to make the call. Download this pdf for an executive summary, or login here for the full report.)

Cost of Capital 13

Cost of Capital CAPM Cost Discounted Cash Flow 13

Harvard Business Review

OCTOBER 10, 2017

A recent McKinsey report found that while 84% of corporate executives think innovation is key to achieving growth objectives, only 6% are satisfied with the innovation performance of their firm. Even if executives try to prioritize it, innovation often gets crowded out by more “urgent” short-term pressures.

Innovation 8

Innovation P&L ROI Long-term 8

Harvard Business Review

SEPTEMBER 13, 2017

We thus wanted to figure out a way to help executives quantify the financial benefits of reducing their firm’s greenhouse gas (GHG) emissions. These values can be estimated credibly and cost-effectively, and we set about applying them to the Brazilian beef sector. Marfrig stands to gain between $1.3 million and $16.5

Supply Chain 8

Supply Chain Net Present Value Retail Cost of Capital 8

Harvard Business Review

NOVEMBER 20, 2013

Two uncomfortable strategic truths face the vast majority of executives and companies – and probably you, too. A second new McKinsey study delves into the question of what executives are doing about their strategic shortfall, and concludes that most are not doing enough. Execute decisively. Lucky for him!

Strategy 8

Strategy McKinsey Strategic Planning Cost of Capital 8

Harvard Business Review

OCTOBER 25, 2018

To analyze the superstar dynamics of firms, our metric was economic profit, a measure of a firm’s profit above and beyond opportunity cost. (To To do this, we take the firm’s returns, deduct the cost of capital, and multiply by the firm’s total invested capital.)

Industry 12

Industry Company GDP Bottom-up 12

Harvard Business Review

FEBRUARY 2, 2012

Today, only 9% of businesses in the world have achieved even a modest level of sustained, profitable growth over the past decade on average (5.5%, earning cost of capital) and that is declining — even though virtually all the businesses aspire to something like this or more.

Competitive Advantage 15

Competitive Advantage Porter Goleman Emotional Intelligence 15

Harvard Business Review

FEBRUARY 7, 2011

We will define skill as "the ability to use one's knowledge effectively and readily in execution or performance" and luck as "events or circumstances that operate for or against an individual." Take, for instance, a group of companies that currently have high returns on invested capital (ROIC). The first is to define the terms.

Skills 15

Skills ROIC Sports Cost of Capital 15

Harvard Business Review

AUGUST 27, 2015

Companies in the top one-fifth of profitability earn, in aggregate, about 70 times more economic profit (accounting profit less cost of capital) than those in the middle three-fifths combined, according to McKinsey’s database of 3,000 large, publicly listed, nonfinancial U.S. Consider what’s happening among corporations.

ROIC 8

ROIC McKinsey GDP Company 8

Harvard Business Review

OCTOBER 3, 2011

Concepts like "societal value," "shared value," and "customer capitalism" are offered as desirable and more enlightened substitutes. CEOs who understand the principles of shareholder value and execute effectively will satisfy most, if not all, of the objectives of those who call for a new way of thinking. This is muddled thinking.

Short-term 12

Short-term Long-term Price CEO 12

Harvard Business Review

JUNE 27, 2012

real revenue and profit growth and earning their cost of capital has steadily declined. What can executives learn from these 100 companies? Only 9% of companies achieved even a modest level of sustained and profitable growth. In the past decade, the percentage of companies achieving even 5.5% Root it out wherever you find it.

Creativity 14

Creativity Long-term Kotter Cost of Capital 14

Harvard Business Review

MARCH 28, 2016

As a result, family equity can come at a very low cost of capital, where businesses can meet the annual needs of their shareholders without having to worry about paying back the principal. The privacy that family ownership allows also helps executives stay focused on strategy rather than meeting market expectations.

Long-term 8

Long-term Short-term Reputation Incentives 8

Harvard Business Review

OCTOBER 21, 2016

Today’s executives are dealing with a complex and unprecedented brew of social, environmental, market, and technological trends. Yet executives are often reluctant to place sustainability core to their company’s business strategy in the mistaken belief that the costs outweigh the benefits.

Supply Chain 8

Supply Chain Price Loyalty Efficiency 8

Harvard Business Review

OCTOBER 11, 2013

When the well-known hedge fund manager and short-seller Jeremiah Hughes first put Terranola in the spotlight, issuing ominous warnings about unsold products, a looming patent expiration, and flawed growth projections, the considered judgment of the executive team was to do nothing. “I Terranola had been moving forward with A.J.’s

Case Study 8

Case Study CFO Hedge PR 8

Harvard Business Review

SEPTEMBER 8, 2014

The goal of strategy is profitable growth, meaning economic value above the firm’s cost of capital. In my experience, most CEOs, CFOs, and other C-suite executives involved in strategy formulation know these finance basics. It may seem that sales has little impact on the fourth value-creation lever, the firm’s cost of capital.

Debt to Equity Ratio 10

Debt to Equity Ratio Cost of Capital Strategy Incentives 10

Harvard Business Review

MAY 24, 2017

Today’s executives spend a lot of time managing the balance sheet, despite the fact that it doesn’t represent their company’s scarcest resource. Financial capital is relatively abundant and cheap. According to Bain’s Macro Trends Group, the global supply of capital stands at nearly 10 times global GDP.

Human Capital 15

Human Capital Management Company ROCE 15

Harvard Business Review

FEBRUARY 7, 2017

Companies deliver superior results when executives manage for long-term value creation and resist pressure from analysts and investors to focus excessively on meeting Wall Street’s quarterly earnings expectations. In this case its capital charge is $800 times 8%, or $64. This has long seemed intuitively true to us.

Long-term 8

Long-term EPS Short-term Management 8

Harvard Business Review

MAY 25, 2018

Executives have gotten much better at buying and integrating businesses. Today’s low cost of capital creates a powerful financial incentive to put money to work by investing in a portfolio of ideas and capabilities. .” Another is, “How will a company like that ever be managed?”

Incubator 8

Incubator Insurance Cost of Capital Competitive Advantage 8

Harvard Business Review

NOVEMBER 7, 2012

There is a fascinating relationship between executives and the stock prices of the companies they manage. On the one hand, executives generally want their stocks to rise, affirming the perceived health of the enterprise they run and padding their remuneration. But very few executives or investors do.

Price 8

Price Analysis Cost of Capital Disruptive Innovation 8

Strategy Driven

SEPTEMBER 9, 2011

The logic of NPV is to project cash flows into the future and then discount those flows back into today’s dollars at a given cost of capital. With Discovery-Driven Growth , Rita and Ian offer managers everywhere a time-tested blueprint for planning and executing a strategic growth agenda with confidence – in any market.

Innovation 50

Innovation NPV Business Model Constraint 50