Harvard Business Review

OCTOBER 10, 2017

For any business to succeed over the long term, it must earn a return that exceeds its cost of capital. It is through continuously making incremental progress in lowering costs and increasing revenues that firms achieve competitive advantage in their industry. Here are four things leaders can do. Build for the Few, Not the Many.

Innovation 8

Innovation P&L ROI Long-term 8

Harvard Business Review

OCTOBER 15, 2013

At many companies the total cash investment in acquisitions, R&D, and fixed assets has not earned back its cost of capital after adjusting for the time lag in realizing incremental benefits. It was the first time a vice chair would be based in an emerging market.

P&L 8

P&L Fixed Assets Charan Delegation 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. We find that 55 percent of respondents are convinced their cost of capital estimates are off by more than 50 basis points.

Cost of Capital 12

Cost of Capital CAPM Cost Discounted Cash Flow 12

Harvard Business Review

JULY 31, 2017

Digital technology has been roiling markets and disrupting companies for more than two decades, but despite that lengthy history, incumbents are still struggling to enact and deliver on digital transformations. In effect, incumbents are losing because they’re playing defense.

Strategy 8

Strategy ROI Technology Cost of Capital 8

Harvard Business Review

NOVEMBER 25, 2013

Marketing is in the midst of an ROI revolution. The arrival of advanced analytics and plentiful data have allowed marketers to demonstrate return on investment with a degree of precision that’s never been possible before. To date, however, the reality of marketing analytics has fallen short of the promise.

CFO 8

CFO Short-term Long-term Benchmarking 8

Harvard Business Review

MARCH 28, 2016

I was recently asked to give a talk about family businesses, and the conference organizer told me not to even mention the “three generation rule.” Without external markets to please, they can take a long-term perspective and make decisions on the basis of sustainable economic value. ” He’s perfectly right.

Long-term 8

Long-term Short-term Reputation Incentives 8

Harvard Business Review

FEBRUARY 7, 2011

Take, for instance, a group of companies that currently have high returns on invested capital (ROIC). If you follow that group over time, you would see their ROICs revert back toward the cost of capital. In determining the ultimate amount of pay, the vagaries of the market overwhelmed the performance of the executives.

Skills 15

Skills ROIC Sports Cost of Capital 15

Harvard Business Review

JUNE 18, 2015

We also know that private equity funds have outperformed public equity markets over the last three decades , even after the fees they charge are accounted for. We also ask questions about the organization of the private equity firms themselves. Rather, they rely on internal rates of return and multiples of invested capital.

CAPM 8

CAPM Discounted Cash Flow Company Rate of Return 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

Henry Guillart had been running an organic food distributor when he came across a sandal-wearing inventor in a Whole Foods store demonstrating what was then called the Power Bar Press. Competitive products came on the market, but none were as popular as the Express. Terranola’s market cap skyrocketed to $8.1 Doom and Gloom.

Case Study 8

Case Study CFO Hedge PR 8

Harvard Business Review

MAY 24, 2017

For most organizations, only one out of eight employees is inspired. Financial capital is abundant but carefully managed; human capital is scarce but not carefully managed. You can actively measure the amount of difference-making talent that you have in your organization. There you have it.

Human Capital 15

Human Capital Management Company ROCE 15

Harvard Business Review

SEPTEMBER 8, 2014

The goal of strategy is profitable growth, meaning economic value above the firm’s cost of capital. To increase profits from existing investments, the interactions between sales and other functions is crucial because those interactions accrete costs, time, and on-going asset utilization patterns in organizations.

Debt to Equity Ratio 10

Debt to Equity Ratio Cost of Capital Strategy Incentives 10

Harvard Business Review

DECEMBER 13, 2017

This has been a remarkable year for the markets. Investors punish companies with a short-term orientation by applying higher discount rates to them, which increases the cost of capital for those companies. This means they generate less revenue, profit and market value per dollar of R&D. MirageC/Getty Images.

Short-term 8

Short-term Decentralization Company Trends 8

Harvard Business Review

MAY 25, 2018

Rockefeller built what was arguably the single most impressive business organization in history: Standard Oil. Mr. Rockefeller’s business strategy was to vertically integrate every aspect of the oil business (exploration, development, logistics, marketing) to assure an ongoing competitive advantage. From 1870 to 1911, John D.

Incubator 8

Incubator Insurance Cost of Capital Competitive Advantage 8

Harvard Business Review

FEBRUARY 7, 2017

Among the firms we identified as focused on the long term, average revenue and earnings growth were 47% and 36% higher, respectively, by 2014, and market capitalization grew faster as well. public market capitalization over this period. In this case its capital charge is $800 times 8%, or $64.

Long-term 8

Long-term EPS Short-term Management 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

Harvard Business Review

MARCH 1, 2017

After all, how do you cut cost from a business or market whose structure has fundamentally changed? By reducing transaction costs among all participants in the economy, blockchain supports models of peer-to-peer mass collaboration that could make many of our existing organizational forms redundant.

Finance 8

Finance IPO Banking Venture Capitalist 8