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 McKinsey Kaplan 62

Harvard Business Review

AUGUST 27, 2015

companies’ return on invested capital (ROIC), and compare it with economy-wide ROIC estimates constructed by Deloitte. Economywide ROIC has trended downward since the 1980s, falling from above 6% in the mid-1960s to 5% in 1980, then to 3% in 1990, and to only a bit more than 1% by 2010. An increasing number of U.S.

ROIC 8

ROIC McKinsey Company GDP 8

Harvard Business Review

DECEMBER 19, 2011

During the current recession, overall consumer spending has declined or held flat, sales per square foot have not improved significantly, and retailers' return on invested capital (ROIC) has suffered dramatically. The most obvious victims of this shift so far are music, video, and book sellers.

ROIC 15

ROIC Retail Mass Marketing Price 15

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 Merton Cost of Capital 8

Harvard Business Review

FEBRUARY 7, 2011

Take, for instance, a group of companies that currently have high returns on invested capital (ROIC). If you follow that group over time, you would see their ROICs revert back toward the cost of capital. This means that an extreme outcome, good or bad, will be followed by an outcome that has an expected value closer to the mean.

Skills 15

Skills ROIC Sports Cost of Capital 15

Harvard Business Review

MARCH 7, 2013

Like Return on Invested Capital (ROIC), which reflects what a company earns, how much capital it needs to earn it and the ratio between the two, ROIT reveals what the company earns, how much it has to spend on its talent to earn it, and what the ratio is between the two.

ROIC 8

ROIC Airlines Chief Executive Officer Human Capital 8

Harvard Business Review

MAY 24, 2017

A veritable alphabet soup (ROA, RONA, ROIC, ROCE, IRR, MVA, APV, and the like) exists to measure our financial capital. But today’s great CEOs need to be equally great at managing human capital. How can we manage human capital better? Measure it. As the adage goes, you can’t manage what you can’t measure.

Management 16

Management Human Capital Company ROCE 16