How Marketers Can Avoid Big Data Blind Spots

Harvard Business Review

If you were looking for a theme song that captures marketing today, you could do worse than pick Queen’s anthem “Under Pressure.” Marketing is under pressure to show results, cut costs, and drive growth. Marketers should welcome it. That’s because marketing has a big opportunity to drive above-market growth and demonstrate its value to the C-suite and the boardroom. In our experience, marketing can increase marketing ROI (MROI) by 15 – 20 percent.


Leadership Is About Alignment

Tanveer Naseer

In fact, leaders leave companies when their personal values clash with the corporate values. It was misaligned values caused Bob Funk, to leave the company where he had worked for the last seventeen years. “I The new owner’s values clashed so much with Bob’s he had no viable choice but to leave and start his own company, Express Employment Professionals. When you do something that is against your values, you are out of internal alignment.


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A Blueprint for Digital Companies’ Financial Reporting

Harvard Business

On June 25, 2018, Facebook lost market capitalization of more than $100 billion in just two hours of trading after it announced its quarterly performance, despite exceeding analysts’ earnings forecasts. This example illustrates that investors consider information beyond just earnings as value-relevant. Information on revenue and its drivers are, without doubt, the digital companies’ most value-relevant disclosures from the investors’ perspective.


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. Even if you don’t have to calculate CLV yourself (there are lots of tools that will do the math for you ), it’s important to understand the concept so you can decide whether to use it when making marketing and sales decisions. You can then decide on where to focus your marketing, product development, customer acquisition, and retention efforts.

Why We Need to Update Financial Reporting for the Digital Era

Harvard Business

The market caps of just four companies, Apple, Alphabet, Amazon, and Microsoft, now exceed $3 trillion. Their combined assets of $944 billion are an order of magnitude lower than the combined assets of $7,700 billion of the largest 3,177 companies in 1986, when the aggregate market capitalization reached $3 trillion for the first time. In our recent HBR article , we argued that financial statements fail to capture the value created by modern digital companies.


An HBR Refresher on Breakeven Quantity

Harvard Business Review

Marketers often have to make the call on whether a certain marketing investment is worth the cost. Can you justify the price tag of the ad you want to buy or the marketing campaign you’re hoping to launch next quarter? I talked with Jill Avery, a senior lecturer at Harvard Business School and co-author of HBR’s Go To Market Tools , to better understand how to use this important calculation. Financial analysis Marketing

How to Quantify Sustainability’s Impact on Your Bottom Line

Harvard Business

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. of the world market, and the second-largest beef producer and consumer. Measuring Sustainability’s Impact Across the Value Chain.

A Refresher on Price Elasticity

Harvard Business Review

In fact, determining price is one of the toughest things a marketer has to do, in large part because it has such a big impact on the company’s bottom line. To better understand this concept and how it impacts marketing, I talked with Jill Avery, a senior lecturer at Harvard Business School and an author of HBR’s Go To Market Tools. “The higher the absolute value of the number, the more sensitive customers are to price changes,” explains Avery.

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

Harvard Business Review

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. ” 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

What If Investors Who Held Their Shares Longer Got More Voting Power?

Harvard Business

” Laying out their data, they find that long-term oriented companies create more financial value and more jobs. 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.

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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.

Which MBAs Make More: Consultants or Small-Business Owners?

Harvard Business

It might be tempting to turn to the highest starting salary paid, which typically goes to the graduate with the most experience in the most competitive market, who often earns crazy money their first year. The value of that carried interest, of course, depends on the performance of the business, its size, amount of debt used to finance the acquisition and the eventual pricing of a subsequent sale. HBR STAFF. Compensation is, of course, more than money.


What Shareholder Value is Really About

Harvard Business Review

Most CEOs, as well as some of the other contributors to this forum, appear to have a false sense of what creating shareholder value means. CEOs need to understand the principles of shareholder value and why they are so important in judging difficult trade-offs, learn about the relationship between the financial performance of the company and the company's stock, and communicate clearly and act appropriately when expectations gaps open. Creating Shareholder Value.

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Only the CEO Can Make the Big Bets

Harvard Business Review

In the late 1990s, we presented the Gretzky metaphor to a division of a large, global bank. But instead of trusting our "educated gut" and making the bet, we used traditional market research to ask customers in those segments what they thought about the idea right now! And using net-present-value estimates for "beginning" ideas is nuts.

Debt and the Future of the U.S.

Harvard Business Review

Consider, for example, that the estimated net present value of obligations under the Social Security system is approximately $8 trillion. On another front, the government is also on the hook for insuring bank deposits (including money market funds at the peak of the crisis), pension liabilities, and a wide range of other loans and liabilities. The total value of explicit loan guarantees is well over $10 trillion.

Don’t Let Your Company Get Trapped by Success

Harvard Business Review

This can be quantified by analyzing the extent to which the share prices of S&P 500 firms are driven by a firm’s present value of future growth options (PVGO) rather than cash flow from current operations. This overall decline represents an enormous loss in future option value. Investors now value the future growth options of these firms relatively less—by a staggering $1 trillion. It’s harder to stay on top than to get there.

The Secrets to Building a Lucky Network

Harvard Business Review

A major customer may default, a promised source of funding may disappear, or the world's markets may sour — any of these can shift your trajectory in an instant. After all, if he were on a desert island without a capital market, the value of his skill goes nearly to zero. There are no guarantees to entrepreneurial success.

Still Many Ways to Skin a Capital Cost

Harvard Business Review

When executives evaluate a potential investment, whether it's to build a new plant, enter a new market, or acquire a company, they weigh its cost against the future cash flows they expect will spring from it. To make sure they're comparing apples to apples, they discount those future cash flows to arrive at their net present value. They believed managers needed a better way to come up with a number to represent their cost of capital, and that's what they were presenting.

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What Xerox PARC Learned About Executing on Open Innovation

Harvard Business Review

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. It's hard to value an idea without understanding just how much time and money it will take to implement it. Net Present Value ).

The (Not Very Deep) Meanings of the Dow's New Record

Harvard Business Review

stock market performance in 1923, when Standard Statistics Co. It's also one that would be pedantic to harp on, given that, despite its flaws, the Dow is sending pretty much the same message as the S&P and Russell 3000: the stock market is back! So the stock market is doing great. There are three main ways of explaining stock prices: The first is basic economics — a share of stock is worth the present value of the future cash flows associated with it.

Why Quants Should Manage Your Supply Chain Risk

Harvard Business Review

When Thai flooding created significant shortages in the hard disc drive market, manufacturers lost millions of dollars. Let's start by defining what we mean by risk, which is simply the possibility of more than one outcome (of unequal values) to a given future state. The possibility of more than one future outcome can very easily generate a cost in the present. Because the fact that value is not guaranteed in the future lessens value in the present.

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 to Choose the Ideas Your Company Should Invest In

Harvard Business Review

Can we get to the market without any technological miracles? Note what isn't part of the decision: an idea's net present value or return on investment. 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.

Why Is an App Worth as Much as a Small Oil Field?

Harvard Business Review

While on the surface, the dirty business of fossil fuels is nothing like Silicon Valley, many in the oil business have moved beyond the standard net present value (NPV) model for assessing the merit of investments. If you’re evaluating the rights to new shale oil reserves in a place like North Dakota, today you’d rely instead on a different economic model: option value. But Facebook has also bought itself time to figure out how to extract value from that audience.


The Big Trends Changing Community Development

Harvard Business Review

Take the example of child sponsorships, highly popular as a marketing tool for many NGOs. From the private sector, the trend is toward recognizing the business value of community progress. What began as charity-minded Corporate Social Responsibility (CSR) programs have evolved into pursuits of “shared value.” And when companies collaborate, even further value can be created – a point I discussed in a previous post.


Will You Be Writing Off Your Investment in Egypt?

Harvard Business Review

For decades multinational corporations have poured hundreds of billions of dollars of foreign investments into emerging markets , sometimes preferring the investment climate of "stable" authoritarian regimes over "messy" democracies. If the first possibility prevails, then it's hard to see how the short-term hit to profits created by political instability could subsequently be made up (unless an investor were granted some favor that created or locked in a favorable market position).

Forget About That Cash Bonus

Harvard Business Review

While many might see this sort of gift giving as a sign of the boss's kindness and generosity, economists mostly see inefficiency : why can't Columbia just pay me a cash bonus rather than offering presents that collect dust? But Akerlof mostly had in mind monetary rewards — you pay me above-market wages, and I'll repay the favor by working harder — which can't quite account for the booming corporate gift business.

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

The Swedes had given the award to one guy, Eugene Fama , who is best known for originating something called the efficient market hypothesis, another guy, Robert Shiller , who once called the efficient market hypothesis “one of the most remarkable errors in the history of economic thought,” and a third guy, Lars Peter Hansen , whose work is so dense that even academic economists couldn’t satisfactorily explain it or its connection to Fama and Shiller.

Shape Strategy With Simple Rules, Not Complex Frameworks

Harvard Business Review

Employees frequently attribute breakdowns to incompetence or bad faith on the part of colleagues in other departments: "Those bozos in headquarters [or finance or marketing] screw everything up." 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.