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GAAP and FASB standards require financial reporting of earnings, cash flow, and profitability – all measures that investors have traditionally examined. We believe that a next step for investors is to analyze the predictors and drivers of these intangible factors, which means focusing on leadership.
When multiple players compete for the same space, revenues indicate the progress towards achieving market leadership that creates the dominant protocol for industry partners, suppliers, and customers. (In In a market like social media, a firm’s success can depend on the winner-take-all profits that come from market leadership.).
According to our research at the SEI Center for Advanced Studies in Management , it’s the beliefs of leaders that drive organizational investments, board selection, and management team development and selection, and these beliefs do not change quickly. Outdated beliefs about the world can linger for decades in a leadership team.
Software and other companies that develop data mirrors and scores can grow their top and bottom lines with little or no marginal costs by building investable indices that correlate their unique insight and data to investor returns. Kensho uses not just raw financial data but data from all sorts of ‘alternative’ sources.).
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