Strategy Driven

JULY 13, 2011

Supplementing profits with ROIC and revenue growth is a step in the right direction to ensure that the profits a business earns are actually creating value, not simply over-consuming capital that another company could better deploy. However, profits, ROIC, and revenue growth are backward looking.

ROIC 62

ROIC Balanced Scorecard Metrics McKinsey 62

Harvard Business Review

APRIL 16, 2015

The results can be impressive: if your firm’s return on invested capital is 8% and you have an 8% cost of capital, a 1% improvement in ROIC will increase firm value by 19%. There are just two ways to increase ROIC: improve operating profit (by increasing revenues or cutting costs) or invest capital more wisely.

CEO 8

CEO ROIC Cost of Capital Merton 8

Harvard Business Review

MAY 28, 2018

He asked one former major investor for a reaction to the company’s prediction (accompanying poor quarterly results): “that the [current] market contraction will bottom out soon and our profits will improve.” It would implement targets linked to shareholder value, including ROE and ROIC.

Company 8

Company ROIC CFO Restructuring 8

Harvard Business Review

DECEMBER 15, 2015

When formulating a strategy, markets and segments are important categories to consider. But a market never buys anything. To borrow a telecom industry metaphor, a deal with a customer is the “last mile” in connecting any strategy with business development efforts and marketplace results. Only customers buy.

Strategy 8

Strategy Team Discount Price 8

Harvard Business Review

MAY 24, 2017

Finding, developing, and retaining this talent is hard — so much so that the business press refers to a “war” for talent. A veritable alphabet soup (ROA, RONA, ROIC, ROCE, IRR, MVA, APV, and the like) exists to measure our financial capital. Time, whether measured by hours in a day or days in a career, is finite.

Human Capital 15

Human Capital Management Company ROCE 15