Harvard Business Review

APRIL 16, 2015

Unless your company’s return on capital exceeds its cost of capital, no amount of revenue growth can create value. For the many firms whose cost of capital and return on capital are roughly equal, in fact, the only path to value creation is to increase return on capital.

CEO 8

CEO ROIC Cost of Capital Merton 8

Harvard Business Review

DECEMBER 13, 2017

Investors punish companies with a short-term orientation by applying higher discount rates to them, which increases the cost of capital for those companies. In contrast, companies with a long-term orientation are rewarded with a lower cost of capital, which allows them to afford more innovation—a virtuous cycle.

Short-term 8

Short-term Decentralization Company Trends 8

Harvard Business Review

FEBRUARY 1, 2018

The cost of capital is at historic lows, averaging below 6% for most large U.S. Indeed, for most companies, the value of accelerating growth greatly exceeds the value of returning capital to shareholders. The intrinsic value of a company with growing cash flows doubles every time the discount rate is cut in half.

Supply Chain 9

Supply Chain CEO Discount Retail 9

Harvard Business Review

JULY 25, 2017

Some companies establish a threshold for MROI that takes into account its risk tolerance and cost of capital, below which they are hesitant to make investments. “In principle, managers should try to estimate the full cost of the marketing activity, including creative development, media spend, and customer-facing staff time.”

ROI 8

ROI Marketing Marketing Mix Short-term 8

Harvard Business Review

SEPTEMBER 4, 2017

.” There is a virtuous cycle between productivity and people: Higher levels of productivity allow society to reinvest in human capital (most obviously, though not exclusively, via higher wages), and smart investments result in higher labor productivity. Productivity in most developed economies has been anemic.

Human Capital 15

Human Capital Kaizen Agility Energy 15

Harvard Business Review

MAY 25, 2018

Mr. Rockefeller’s business strategy was to vertically integrate every aspect of the oil business (exploration, development, logistics, marketing) to assure an ongoing competitive advantage. The most successful will develop clear joint goals and an entrepreneurially enabled management style that focuses more on outcomes than on control.

Incubator 8

Incubator Insurance Cost of Capital Competitive Advantage 8

Harvard Business Review

NOVEMBER 4, 2014

Both of us have done work on sustainable development and are keen to see a transition away from fossil fuels in order to limit climate change. The key argument for fossil fuel divestment is that the cost of carbon dioxide emissions and other pollutants are not being accurately priced by the market.

Finance 8

Finance Cost of Capital Constraint Price 8

Harvard Business Review

NOVEMBER 4, 2014

Both of us have done work on sustainable development and are keen to see a transition away from fossil fuels in order to limit climate change. The key argument for fossil fuel divestment is that the cost of carbon dioxide emissions and other pollutants are not being accurately priced by the market.

Finance 8

Finance Cost of Capital Constraint Price 8

Harvard Business Review

OCTOBER 25, 2018

To analyze the superstar dynamics of firms, our metric was economic profit, a measure of a firm’s profit above and beyond opportunity cost. (To To do this, we take the firm’s returns, deduct the cost of capital, and multiply by the firm’s total invested capital.)

Industry 13

Industry Company GDP Bottom-up 13

Harvard Business Review

OCTOBER 15, 2013

At many companies the total cash investment in acquisitions, R&D, and fixed assets has not earned back its cost of capital after adjusting for the time lag in realizing incremental benefits. It reflected the reality that a lot of GE’s growth will be coming from the developing world, and the leaders have to be there.

P&L 8

P&L Fixed Assets Charan Delegation 8

Harvard Business Review

OCTOBER 10, 2017

For any business to succeed over the long term, it must earn a return that exceeds its cost of capital. It is through continuously making incremental progress in lowering costs and increasing revenues that firms achieve competitive advantage in their industry. Here are four things leaders can do.

Innovation 8

Innovation P&L ROI Long-term 8

Harvard Business Review

NOVEMBER 20, 2013

Retool your strategy development process. The process of developing that strategy is critical. Companies run by decisive CEOs rack up more economic profit — what’s left of operating profit after the cost of capital is subtracted – than competitors do. Whatever the degree of change required at your company, make it.

Strategy 8

Strategy McKinsey Strategic Planning Cost of Capital 8

Harvard Business Review

APRIL 26, 2017

Banks’ cost of capital is typically 50 basis points or less. These low-cost and reliable sources of funds are from taxpayer-insured deposits and the Federal Reserve’s discount window. ” Can banks out-compete the disruptors?

Banking 12

Banking Stage-Gate Credit Scoring Competitive Advantage 12

Harvard Business Review

MAY 4, 2012

By helping to fill this analytical void, CFOs can make it more likely that the market will develop expectations that are grounded in reality. Less Volatility in Stock Price: The net effect of providing guidance is arguably a less volatile stock price, which can result in a lower beta and a lower cost of capital. FD) constraints.

CFO 13

CFO Metrics Price Depreciation 13

Harvard Business Review

MAY 14, 2013

Share prices for European utilities and industrial companies have fallen too, threatening a wave of credit downgrades and increasing companies'' cost of capital. That means future carbon-credit auctions, which help fund clean-energy initiatives, will yield lower revenue. Will the European debacle affect China''s plans?

Price 8

Price Energy Politics Marketing 8

Harvard Business Review

NOVEMBER 25, 2013

Without a strong business case built on analytics, marketing too often is seen as a cost rather than an investment, despite marketing’s ability to drive above-market growth. Together with the CFO, the CMO must develop a set of objectives that directly deliver on financial objectives and business goals.

CFO 8

CFO Short-term Long-term Benchmarking 8

Harvard Business Review

JUNE 18, 2015

In operational engineering, PE firms develop industry and operating expertise that they bring to bear to add value to their portfolio companies. Rather, they rely on internal rates of return and multiples of invested capital.

CAPM 8

CAPM Discounted Cash Flow Company Rate of Return 8

Harvard Business Review

OCTOBER 21, 2016

Managing risks therefore requires making investment decisions today for longer-term capacity building and developing adaptive strategies. Recognizing the growing consumer interest in sustainable products and looking to solve consumer challenges such as high energy costs, CPG companies have developed new products to gain access to this market.

Supply Chain 8

Supply Chain Price Loyalty Efficiency 8

Harvard Business Review

APRIL 2, 2014

Campbell’s work has also made liberal use of the analytic tools developed by Hansen. Back in the ‘60s, people developed the capital asset pricing model [CAPM] as a way to do that. The capital asset pricing model was supposed to allow companies to calculate their cost of capital in a consistent way.

CAPM 8

CAPM Discount Price Finance 8

Harvard Business Review

FEBRUARY 7, 2017

It started with developing a proprietary Corporate Horizon Index. The data for this index was drawn from 615 nonfinance companies that had reported continuous results from 2001 to 2015 and whose market capitalization in that period had exceeded $5 billion in at least one year. rate for other companies.

Long-term 8

Long-term EPS Short-term Management 8

Strategy Driven

SEPTEMBER 9, 2011

The logic of NPV is to project cash flows into the future and then discount those flows back into today’s dollars at a given cost of capital. New product development is such a big piece of building new business, or so we are told. Net present value [NPV] is a case in point.

Innovation 50

Innovation NPV Business Model Constraint 50

Harvard Business Review

MARCH 1, 2017

Blockchain was originally developed as the technology behind cryptocurrencies like Bitcoin. Done right, ICOs can not only improve the efficiency of raising money, lowering the cost of capital for entrepreneurs and investors, but also democratize participation in global capital markets.

Finance 8

Finance IPO Banking Venture Capitalist 8