The Big Trends Changing Community Development

Harvard Business Review

This is what is going on now in community development. From the private sector, the trend is toward recognizing the business value of community progress. Meanwhile, a second trend is the growing eagerness of the private sector to play a genuine and substantial role in community development. What began as charity-minded Corporate Social Responsibility (CSR) programs have evolved into pursuits of “shared value.”

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July's Leadership Carnival

Michael Lee Stallard

Wally Bock presents Once Upon a Time posted at Three Star Leadership Blog. Miki Saxon presents How to Improve Your Management Skill at MAPping Company Success. Managers can’t let fear rule their decision making – Sharlyn Lauby presents Handling Workplace Retaliation posted at HR Bartender. Mary Jo Asmus presents 7 Ways to Enjoy Others at Work posted at Aspire-CS. Steve Roesler presents Want to Influence?

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Why Some Digital Companies Should Delay Profitability for as Long as They Can

Harvard Business

If our oceans suddenly turned to chocolate, the incremental value of that volume would plummet — we’d truly have more chocolate than we really needed. For years, AWS has invested in driving developer and company adoption of its platform by driving down prices and introducing low cost features to make developer’s lives easier. That ecosystem investment reinforces the value proposition and drives more developer adoption.

Why We Need to Update Financial Reporting for the Digital Era

Harvard Business

In our recent HBR article , we argued that financial statements fail to capture the value created by modern digital companies. and (ii) how can digital firms improve their financial reports to communicate sources of value creation in their businesses? Business students have traditionally considered net present value, payback period, and hurdle rates as necessary tools to determine which project to select. Martin Konopka/EyeEm/Getty Images.

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How Corporate Values Get Hijacked and Misused

Harvard Business

Leaders know company value statements often become nothing more than cosmetic window dressing. They reflexively grasp for the culture lever, assuming the act of crafting and publishing a set of values actually has the power to do something. People want their company’s values to be sacrosanct. The painful result of widespread misuse of company values, according to one major study , is that only 23% of U.S. Without accountability, values become a weapon to punish.

How to Improve Your Finance Skills (Even If You Hate Numbers)

Harvard Business

But having a grasp of terms like EBITDA and net present value are important no matter where you sit on the org chart. The Refresher: Net Present Value. Your goal is to develop a deep understanding of the precise “link between profit and loss” and how that affects your organization’s performance over time, says Knight. “Think of yourself as a miniature profit and loss statement: How do you add value?”

Stop Focusing on Profitability and Go for Growth

Harvard Business

Today, the average cost of equity capital sits at close to half that: just 8% for the roughly 1600 companies comprising the Value Line Index. The ready access to low-cost capital should change the way business leaders think about strategy, and in particular the relative value of improving profit margins versus accelerating growth. But when capital costs are low, the time value of money is low. The Refresher: Net Present Value.

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Match Your Innovation Process to the Results You Want

Harvard Business Review

It tends to be short-term, uses familiar (traditional) metrics and development systems like Stage Gate. When forced to present familiar metrics for truly out-of-the-box "beginning" ideas, work teams develop what our friend Jay Paap calls "Imaginary Numbers." Proposition: If an idea is truly breakthrough then there is nothing to measure it against (a true test of breakthrough), with no true benchmarks and no familiar metrics until much further along in the development process.

How Valuable Are Your Customers?

Harvard Business Review

Many companies use a calculation called customer lifetime value (CLV) to determine how much a customer is worth in comparison with others. At its core, CLV is the present value of all future streams of profits that an individual customer generates over the life of his or her business with the firm. You can then decide on where to focus your marketing, product development, customer acquisition, and retention efforts. Not all customers are created equal.

Why You Should Crowd-Source Your Toughest Investment Decisions

Harvard Business Review

Most companies – including the movie studios in Hollywood – over-rely on basic tools like discounted cash flow and net present value. In highly uncertain contexts, the best tool is often “case based decision making” — developing a set of analogous situations (like the previously released movies), determining the results achieved in those cases, and then assessing how similar each case is to the decision at hand. How P&G Presents Data to Decision Makers.

What Xerox PARC Learned About Executing on Open Innovation

Harvard Business Review

Companies knew how to engage a design firm, license IP, and form joint ventures, but few knew how to truly co-develop innovations with external partners, such as PARC. However, we learned the difficult lesson that unless we could clearly articulate the maturity level and value proposition for a new technology within the context of our partners' other choices, there was little or no value in the technology — regardless of how much money we had invested in it.

The Secrets to Building a Lucky Network

Harvard Business Review

After all, if he were on a desert island without a capital market, the value of his skill goes nearly to zero. The net present value and strategic fit of a given relationship or initial introduction in one's Lucky Network might be foggy at best, but unintended benefits often manifest for those who embrace relationships with openness. There are no guarantees to entrepreneurial success.

How to Choose the Ideas Your Company Should Invest In

Harvard Business Review

Note what isn't part of the decision: an idea's net present value or return on investment. Teams should certainly develop their best guesses about how the idea will make money, but leaders shouldn't place too much emphasis on financial metrics for early stage ideas. My last post described how Innosight follows a three-stage process to evaluate investment proposals from outside entrepreneurs. But deciding how to invest in ideas at a corporation is a different beast.

Beware of Short-term Management, Not the Short-term Investor

Harvard Business Review

The short-term investor does not reduce the firm's long-term competitiveness and value;short-term management does. Moreover, I fail to see any argument why such short-term traders, by themselves, destroy value for the economy as a whole. Indirectly though, these short-term traders can destroy value. A firm's long-term value should correspond to the present value of future expected cash flows.

An Unexpected Lesson from Mandela: Why Context Matters

Harvard Business Review

I made what I thought was a brilliant presentation to senior bureaucrats and technologists. These were engineers and network planners; surely, they understood economics and net present value analysis. Yes, I was there at a true inflection point, armed with the finest analysis possible, elaborate layers of spreadsheets, and well-crafted presentations. If South Africa was to develop, it could not afford to ignore the technocrats entirely.

Warren Buffett's 2010 Shareholder Letter: What to Expect

Harvard Business Review

Establish "an unbending standard of performance" : Since 1965, Buffett has annually compared Berkshire's compounded growth in book value per share to the growth in the S&P 500 (plus dividends). But why compare apples (book value) to oranges (share price and dividends)? Buffett explains that book value is the best proxy for "intrinsic value," the net present value of all estimated future cash flows. billion more than their total tangible book value.

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How CMOs Can Get CFOs on Their Side

Harvard Business Review

In our work with clients across dozens of sectors over more than five years, we have found that the strongest CMO/CFO partnerships develop when both parties undertake five actions: 1. CFOs are more interested in capital investment estimates, net present values, and a clear outline of the trade-offs of any investment. Together with the CFO, the CMO must develop a set of objectives that directly deliver on financial objectives and business goals.

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Rethinking Valuation So You Don't Miss a Good Deal

Harvard Business Review

To do this, we combine two separate frameworks: the first is the Three Horizon strategic model developed by McKinsey. The other is a process called Opportunity Engineering (OE) that instills a different way to look at value. To define the full value of acquisitions analyze the target's assets and assign them across the Three Horizons of the acquirer to understand how they add value. We call this the Opportunity Value (OV) of an asset.

Still Many Ways to Skin a Capital Cost

Harvard Business Review

To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value. Estimating the rate at which to discount the cash flows — the cost of equity capital — is an integral part of the exercise, and the choice of rate has a significant effect on estimates of a project's or a company's value.

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What Private Equity Investors Think They Do for the Companies They Buy

Harvard Business Review

” PE firms typically take three types of value increasing actions — financial engineering, governance engineering, and operational engineering. These value-increasing actions are not necessarily mutually exclusive, but it is likely that certain firms emphasize some of the actions more than others. (We In operational engineering, PE firms develop industry and operating expertise that they bring to bear to add value to their portfolio companies.

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Will You Be Writing Off Your Investment in Egypt?

Harvard Business Review

Anyone who has had to make the argument for an investment knows the basic tool involved: a Net Present Value (NPV) calculation. The overall value of a foreign investment is equal to the NPV of the expected stream of profits for the life of the investment. If this is in the ballpark, then many foreign investors will likely have to write off some of the value of their Egyptian subsidiaries.

Shape Strategy With Simple Rules, Not Complex Frameworks

Harvard Business Review

Next, ALL's CEO assembled a cross-functional team to develop simple rules for prioritizing capital spending. To prioritize projects, for instance, the ALL team could have forecast future cash flows for every potential investment and ranked all proposals on the basis of their net present value. Successful companies shape their high-level strategies by relying not on complicated frameworks but on simple rules of thumb.

Is Your Business Biased Against Innovation?

Strategy Driven

Many conventional metrics we use to estimate value are based on faulty assumptions. Net present value [NPV] is a case in point. For instance, intelligent failures can add more value than predictable successes, and low-cost experimentation trumps analysis. The authors then show how to best execute specific initiatives, test major project assumptions, and develop a culture that values disciplined experimentation and learning over meeting mindless and unrealistic goals.

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Why Those Guys Won the Economics Nobels

Harvard Business Review

Campbell’s work has also made liberal use of the analytic tools developed by Hansen. Many lay readers are familiar with John Burr Williams and the dividend discount model , or the discounted value of future cash flows. You know, the future value of money, the present value of money — money today is worth more than in the future because you can invest it and get interest. There’s also a size factor and a value factor.

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