Harvard Business Review

MARCH 17, 2016

There are a variety of methods you can use to calculate ROI — net present value , payback, breakeven — and internal rate of return , or IRR. According to Knight, it’s commonly used by financial analysts in conjunction with net present value, or NPV. A Refresher on Net Present Value.

Rate of Return 8

Rate of Return IRR NPV Net Present Value 8

Harvard Business Review

AUGUST 15, 2016

Most executives know that the present value of an investment comes from projecting its cash flows and discounting those numbers into today’s dollars. The general rule is projects with positive net present values should get funded, and those with negative ones shouldn’t.

Net Present Value 8

Net Present Value Entrepreneur Christensen Innovation 8

Harvard Business Review

APRIL 18, 2016

There are a variety of ways to calculate a return on investment (ROI) — net present value , internal rate of return , breakeven — but the simplest is payback period. A Refresher on Net Present Value. For that reason, net present value is often the preferred method. Further Reading.

Payback Period 8

Payback Period Net Present Value ROI Rate of Return 8

Harvard Business Review

MAY 4, 2017

As long as there are strong increasing returns to create , it’s possible that the net present value of my profit harvesting is indefinitely larger if deferred to the future. The Refresher: Net Present Value. And that is a very important difference driving the behavior of managers in industrial era firms.

Collison 9

Collison Net Present Value Company Short-term 9

Harvard Business Review

SEPTEMBER 10, 2012

Incremental innovations can be managed at the operating levels where the people know the customers/consumers best and decisions can be made in a more consensus-driven way with input and agreement between all stakeholder functions. In pursuit of breakthrough, management is not the enemy as it is so often portrayed.

Process 15

Process Innovation Stage-Gate Net Present Value 15

Harvard Business Review

SEPTEMBER 13, 2017

We found that sustainable and deforestation-free practices created significant financial benefits for all players in the industry’s value chain. Specifically, our analysis found that the net benefits to ranchers ranged from $18 million to $34 million (12% to 23% of revenues) in net present value projected over 10 years.

Supply Chain 8

Supply Chain Net Present Value Retail Cost of Capital 8

Harvard Business Review

JULY 15, 2014

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. Knowing each customer’s profitability is the first step to managing them. This post adapted and reprinted material from Core Reading: Customer Management, HBP.

Discount 10

Discount Direct Marketing Present Value Customer Loyalty 10

Harvard Business Review

JUNE 8, 2018

Business students have traditionally considered net present value, payback period, and hurdle rates as necessary tools to determine which project to select. So, investors, and therefore managers, might be adjusting their approach to risk accordingly. Investors are paying more attention to ideas and options than to earnings.

Report 8

Report GAAP Net Present Value CFO 8

Harvard Business Review

NOVEMBER 7, 2011

This blog was written with Jay Terwilliger and Mark Sebell, managing partners at Creative Realities , a Boston-based innovation management collaborative. Because they can use traditional business metrics to defend the pursuit of incremental innovations to management. Skating to where the puck is now is not being customer-driven.

CEO 12

CEO Net Present Value Banking Metrics 12

Harvard Business Review

MARCH 31, 2017

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. “You’re not managing specific business decisions, you’re trying to understand and internalize how the models work” and the assumptions they make.

Finance 8

Finance Skills EBITDA Net Present Value 8

Harvard Business Review

DECEMBER 23, 2013

That estimate then needs to be tested and adjusted systematically based on the unique situation of the company using the experience and judgment of marketing and sales managers, as well as other internal data (e.g. customer surveys). typically are short-term calls to action and contribute little to building the brand and consumer loyalty.

Marketing 11

Marketing NPV Short-term Net Present Value 11

Harvard Business Review

JULY 1, 2016

Activist investors challenge management strategies. Investors and others ask why companies binge on buybacks while skimping on value-creating investment opportunities. And without knowing how managers decide, it is almost impossible to hold them accountable for what they decide.

Short-term 9

Short-term Long-term Objective Incentives 9

Harvard Business Review

MARCH 10, 2011

To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value. The motivation behind it, as with many, many articles published over HBR's nearly 90-year history, was to take an effective practice developed in one corner of industry and spread it to managers everywhere.

CAPM 14

CAPM Cost Discounted Cash Flow Cost of Capital 14

Harvard Business Review

FEBRUARY 24, 2011

Imagine if managements, boards, and investors adopted them: we could restart our economy, energize our business school curricula and create prosperity for our children and grandchildren. But why compare apples (book value) to oranges (share price and dividends)? In all but seven of these 45 years, Berkshire beat the S&P.

Letter 15

Letter P&L Net Present Value Insurance 15

Harvard Business Review

DECEMBER 2, 2010

Since the Three Horizons represent different levels of uncertainty, they need to be managed and valued differently. The higher level of uncertainty associated with H2 and H3 necessitates an updated valuation methodology that takes into account more than the net present value (NPV) of the target. Alexander B.

NPV 14

NPV Net Present Value Price Engineering 14

Harvard Business Review

JUNE 28, 2016

Owners of small businesses can set their own hours, make their own management decisions, and take pride in the ownership of their work.

Consultative 8

Consultative CAGR EBITDA CEO 8

Harvard Business Review

OCTOBER 3, 2011

Creating Shareholder Value. Critics imply that managing for shareholder value is all about maximizing the short-term stock price. Companies that manage for shareholder value, the thinking goes, do whatever it takes to engineer an ever-higher market price. That is a profound misunderstanding.

Short-term 12

Short-term Long-term Price CEO 12

Harvard Business Review

JUNE 18, 2015

What have been less explored are the specific actions taken by private equity (PE) fund managers. In a survey of 79 PE firms managing more than $750 billion in capital, we provide granular information on PE managers’ practices and how firms’ strategies relate to the characteristics of their founders.

CAPM 8

CAPM Discounted Cash Flow Company Rate of Return 8

Harvard Business Review

MAY 29, 2017

And finally, writing a values statement is used as the start of an ongoing, transformational journey, not the conclusion of one. When these three conditions aren’t present, values can get hijacked and misused. Without accountability, values become a weapon to punish. Here’s how it happens: 1.

Bottom-up 10

Bottom-up Competitive Advantage Organization Workshop 10

Harvard Business Review

SEPTEMBER 27, 2012

Managers in these organizations translate corporate objectives into a few straightforward guidelines that help employees make on-the-spot decisions and adapt to constantly shifting environments, while keeping the big picture in mind. Its new management team took over an organization that was bureaucratic, overstaffed, and bleeding cash.

Strategy 8

Strategy Proposal Guidelines Net Present Value 8

Harvard Business Review

MARCH 29, 2018

A second, more radical solution is to create budgets and authority for a service line or integrated practice unit (IPU) that manages a patient’s entire treatment for a high-volume medical condition. The IPU is an essential component of the value-based care model advocated by Harvard Business School’s Michael Porter.

Budgeting 8

Budgeting System Innovation Payback Period 8

Harvard Business Review

APRIL 9, 2015

Analyzing ROI isn’t always as simple as it sounds and there’s one mistake that many managers make: confusing cash and profit. You can use one or more of four ROI calculation methods: payback, net present value , internal rate of return, and profitability index. Financial analysis Project management'

ROI 8

ROI Analysis Rate of Return Net Present Value 8

Harvard Business Review

NOVEMBER 19, 2015

” Only few firms manage to be ambidextrous—most struggle to maintain a healthy balance between exploration and exploitation. And managers focused on immediate total shareholder returns may be delighted with high performance. Some firms manage to maintain this dual discipline as they grow. Our research shows that U.S.

Company 8

Company Succession Maturity Long-term 8

Harvard Business Review

AUGUST 3, 2018

Based on disclosures following this blueprint, a smart analyst can project a firm’s future revenues, estimate outlays required to sustain the firm’s business model, and calculate the present value of future cash flows. The analyst can then top that valuation with the option values of moonshot projects.

Report 8

Report GAAP Company Proposal 8

Harvard Business Review

DECEMBER 2, 2013

I can’t imagine, recalling my days at Rio Tinto, the managers of a copper mine measuring and proudly reporting how much dirt was moved, how deep the hole was, and how many trucks they had procured – while staying mum about how much copper was produced. To a business person, think how absurd this would seem.

Trends 8

Trends Development Net Present Value NGO 8

Harvard Business Review

FEBRUARY 7, 2011

With political upheaval roiling the streets of Cairo, the first concern of top management in many multinationals is to get their employees and their families out of Egypt safely. Anyone who has had to make the argument for an investment knows the basic tool involved: a Net Present Value (NPV) calculation. percent per annum.).

NPV 13

NPV Short-term Discount Politics 13

Harvard Business Review

MARCH 4, 2013

While somewhat removed from the corporate context that most managers inhabit, the study has the merit of focusing on a task for which it's easy to measure productivity : how fast and accurately employees catalog their books. The study was inspired, in part, by the need to catalog books at a German university's economics library.

Motivation 8

Motivation Library Short-term Loyalty 8

Harvard Business Review

JUNE 22, 2015

“It’s one of the more popular ways that managers calculate marketing ROI,” says Avery, pointing out that other common ones include calculating the investment payback period, calculating an internal rate of return, and using net present value analysis. BEQ = 200 units.

Payback Period 8

Payback Period Fixed Costs Analysis Price 8

Harvard Business Review

JULY 9, 2012

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.

Net Present Value 15

Net Present Value Entrepreneur Strategic Fit Open-book 15

Harvard Business Review

OCTOBER 15, 2012

As innovators engage with the market through the MVP, they learn valuable information to help them refine the product-market fit and better understand and further build for the value proposition. Net Present Value ). This iterative approach is consistent with "real options" (vs.

Innovation 8

Innovation Execution Net Present Value Open-book 8

Harvard Business Review

AUGUST 21, 2015

This is one of the key metrics for marketing managers, says Avery. “Our job is to create products and services that have unique and sustainable value for customers compared with other options available to them in the marketplace. ” What are some of the common mistakes managers make with price elasticity?

Price 8

Price Debt to Equity Ratio Marketing Metrics 8

Harvard Business Review

NOVEMBER 25, 2013

CFOs are more interested in capital investment estimates, net present values, and a clear outline of the trade-offs of any investment. It’s the CMO’s job to make sure that metrics reflecting the health and value of the customer base –net present value, lifetime value, return on loyalty, cost per acquisition – get on the balance sheet.

CFO 8

CFO Short-term Long-term Benchmarking 8

Harvard Business Review

APRIL 27, 2017

But I long for actions that go beyond admonitions to managers and boards to do better, that give both parties a better chance to stand up to capital markets players, like activist hedge funds, pressuring them to become too short-term focused. The Refresher: Net Present Value. Related Video. There is no difference whatsoever.

Hedge 8

Hedge Short-term Long-term NPV 8

Harvard Business Review

MAY 1, 2017

In these circumstances, strategies that generate faster growth create more value for most companies than those that improve profit margins. The Refresher: Net Present Value. Related Video. Next time you're deciding about a big investment, NPV can help you make a more informed decision.

ROE 14

ROE Long-term GDP Six Sigma 14

Harvard Business Review

APRIL 2, 2014

Others, most notably money managers and former Fama students Cliff Asness and John Liew in an epic Institutional Investor article , have done a lot recent to clarify how Fama’s ideas and Shiller’s can at least co-exist peacefully. It seems like the clearest practical lessons from this academic work have been in asset management.

CAPM 8

CAPM Discount Price Finance 8

Strategy Driven

SEPTEMBER 9, 2011

Many conventional metrics we use to estimate value are based on faulty assumptions. Net present value [NPV] is a case in point. Yet for the small handful of companies that have managed to drive growth consistently – even through tough times – the payoff is great. How do they do it?

Innovation 50

Innovation NPV Business Model Constraint 50