Six Disciplines

MARCH 25, 2011

In military training, the first rule is to instill soldiers with trust in their officers -- because without trust, they won't fight. Until a business returns a profit that is greater than its cost of capital, it does not create wealth -- it destroys it. Nobody trusts you if you offer something for free.

Drucker 136

Drucker Cost of Capital Definition Commitment 136

Harvard Business Review

APRIL 16, 2015

Unless your company’s return on capital exceeds its cost of capital, no amount of revenue growth can create value. For the many firms whose cost of capital and return on capital are roughly equal, in fact, the only path to value creation is to increase return on capital.

CEO 8

CEO ROIC Cost of Capital Merton 8

Harvard Business Review

SEPTEMBER 4, 2017

The evidence suggests the former: We could improve productivity if we stopped systematically underinvesting in human capital. The compounding and virtuous effects of increasing customer and employee advocacy more than offset the higher cost of wages. billion in its associates through higher wages, better benefits and enhanced training.

Human Capital 15

Human Capital Kaizen Agility Energy 15

Harvard Business Review

OCTOBER 10, 2017

Another pervasive reason is that senior executives are trained as operators, not innovators. For any business to succeed over the long term, it must earn a return that exceeds its cost of capital. 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

APRIL 9, 2015

You just add up all the costs of the investment. This includes items such as equipment costs, shipping costs, installation costs, start-up costs, training for the people involved, and so on. If you’re just buying a new machine, it’s pretty easy to estimate all the costs.

ROI 8

ROI Analysis Rate of Return Net Present Value 8

Harvard Business Review

MARCH 28, 2016

For much of the 20th century, success depended on a company’s ability to hire, train, and retain ever-larger numbers of employees. 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.

Long-term 8

Long-term Short-term Reputation Incentives 8

Harvard Business Review

OCTOBER 21, 2016

Wal-Mart, for example, aimed to double fleet efficiency between 2005 and 2015 through better routing, truck loading, driver training, and advanced technologies. A focus on sustainability can also unlock opportunities for process and logistics savings.

Supply Chain 8

Supply Chain Price Loyalty Efficiency 8