Harvard Business Review

NOVEMBER 7, 2011

And using net-present-value estimates for "beginning" ideas is nuts. Because they know they would get laughed out of the room if they were to advocate for a hunch. Skating to where the puck is now is not being customer-driven. It's being customer-reactive. And yet we continue to do the same thing and expect different results.

CEO 15

CEO Net Present Value Banking Metrics 15

Harvard Business Review

SEPTEMBER 10, 2012

When forced to present familiar metrics for truly out-of-the-box "beginning" ideas, work teams develop what our friend Jay Paap calls "Imaginary Numbers."

Process 16

Process Stage-Gate Innovation Net Present Value 16

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. Today, AWS is a much more valuable business for the company’s long-termism. So is Google.

Collison 13

Collison Net Present Value Company Short-term 13

Harvard Business Review

JANUARY 11, 2012

Note what isn't part of the decision: an idea's net present value or return on investment. Teams should certainly develop their best guesses about how the idea will make money, but leaders shouldn't place too much emphasis on financial metrics for early stage ideas.

Company 16

Company Net Present Value How To Proposal 16

Harvard Business Review

DECEMBER 2, 2010

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. We call this the Opportunity Value (OV) of an asset. This is where Opportunity Engineering comes into play.

NPV 15

NPV Net Present Value Price Engineering 15

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.

CAPM 15

CAPM Cost Discounted Cash Flow Cost of Capital 15

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.

Payback Period 8

Payback Period Net Present Value ROI Rate of Return 8

Harvard Business Review

FEBRUARY 24, 2011

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. Consider that since 1965, Berkshire's book value grew 434,057% and the S&P index grew only 5,430%.

Letter 15

Letter P&L Insurance Net Present Value 15

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

FEBRUARY 7, 2011

Anyone who has had to make the argument for an investment knows the basic tool involved: a Net Present Value (NPV) calculation. The overall value of a foreign investment is equal to the NPV of the expected stream of profits for the life of the investment.

NPV 15

NPV Short-term Discount Politics 15

Harvard Business Review

DECEMBER 28, 2016

Customer Lifetime Value : This is the net present value of all future customer revenues with account for attrition and your discount rate. Share of wallet is the ultimate measure of how they spend their money when the ultimate point-of-sale (POS) decision occurs. Study the drivers and barriers of both to optimize here.

Attrition 14

Attrition Metrics Net Present Value KPI 14

Harvard Business Review

FEBRUARY 24, 2014

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. What if I suggested that the best place to look for answers could be the shale oil fields of North Dakota?

NPV 11

NPV Net Present Value Industry Video 11

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

APRIL 27, 2017

The Refresher: Net Present Value. An activist hedge fund, for example, can exert massive pressure to change the strategy and/or investment approach of the company based on its ownership of a sufficient share of the company’s equity. Related Video.

Hedge 12

Hedge Short-term Long-term NPV 12

Harvard Business Review

OCTOBER 16, 2013

Most companies – including the movie studios in Hollywood – over-rely on basic tools like discounted cash flow and net present value. But it is possible to significantly improve your odds by understanding which decision-support tools work best for which decisions.

Discounted Cash Flow 8

Discounted Cash Flow Net Present Value Comparison Tools 8

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. Some of these ideas contradict traditional financial thinking whereas others seem highly controversial or pessimistic.

Report 8

Report GAAP Net Present Value CFO 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. For instance, CMOs often focus on brand awareness, TV ad impressions, or share of voice in the market, which do not easily translate into financial impact.

CFO 9

CFO Short-term Long-term Benchmarking 9

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 15

ROE Long-term GDP Short-term 15

Harvard Business Review

DECEMBER 11, 2013

These were engineers and network planners; surely, they understood economics and net present value analysis. Still frustrated, I walked the corridors of South Africa Telkom and ran into the old guard. I told them my story. They agreed that the Mandela proposal was nonsense.

Net Present Value 10

Net Present Value Politics Analysis Telecommunications 10

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 9

Innovation Execution Net Present Value Open-book 9

Harvard Business Review

DECEMBER 2, 2013

Managers have embraced this kind of thinking not because they have taken a “be nice” pill, but rather because they see that truly effective community programs reduce community risk, and thereby increase the net present value of their assets in developing and fragile states.

Trends 9

Trends Development Net Present Value NGO 9

Harvard Business Review

SEPTEMBER 27, 2012

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. But like most complicated models, that approach would have had many disadvantages relative to simple rules.

Strategy 9

Strategy Proposal Guidelines Net Present Value 9

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 Present Value 8

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. If you’re not a numbers person, finance is daunting. How can you boost your financial acumen? And who’s in the best position to offer advice?

Finance 8

Finance Skills EBITDA Net Present Value 8

Harvard Business Review

APRIL 9, 2015

You can use one or more of four ROI calculation methods: payback, net present value , internal rate of return, and profitability index. The finance people determine hurdle rates by looking at the company’s cost of capital, at the risk involved in a given project, and at the opportunity cost of forgoing other investments.

ROI 8

ROI Analysis Rate of Return Net Present Value 8

Harvard Business Review

MARCH 23, 2015

Do you think they’re going to do a net present value (NPV) analysis that shows they don’t need that computer? Joe Knight. Add to Cart. Everyone always wants new equipment — new computers or other hot technologies. Of course not.

Finance 8

Finance NPV CFO ROI 8

Harvard Business Review

MARCH 29, 2018

Despite a one-year payback period and a highly positive net present value (NPV) from this investment, the department will often reject the attractive opportunity. Consider the opportunity to raise spending in Year 1 by $100,000 to acquire technology that would decrease spending each year thereafter by $100,000.

Budgeting 8

Budgeting System Innovation Payback Period 8

Harvard Business Review

JUNE 18, 2015

For instance, despite the prominent role that discounted cash flow valuation methods play in academic finance courses, few PE investors use discounted cash flow or net present value techniques to evaluate investments. 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

AUGUST 21, 2015

Once you do that, you can adjust price up or down to better represent the level of value you are providing to your customers. Read refreshers on net present value , breakeven quantity , debt-to-equity ratio , and cost of capital.

Price 8

Price Debt to Equity Ratio Marketing Net Present Value 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.

Payback Period 8

Payback Period Fixed Costs Analysis Price 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. Many people do not typically think of metrics and accounting as roadblocks to innovation, yet you call these out as potential problem areas.

Innovation 50

Innovation NPV Business Model Constraint 50