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by Bartley J. Madden
Value Creation Principles
COVER
PREFACE AND OVERVIEW
NOTES
Part I: A Firm's Role in Society
1 OVERVIEW OF THE PRAGMATIC THEORY OF THE FIRM
THE NUCLEUS OF THE PRAGMATIC THEORY OF THE FIRM
THE EVOLUTION OF THINKING ABOUT THE THEORY OF THE FIRM
KINDRED SPIRITS FOR THE PRAGMATIC THEORY OF THE FIRM
INNOVATION AND ECONOMIC GROWTH
THE PURPOSE OF THE FIRM
THE PRAGMATIC THEORY OF THE FIRM
NOTES
2 KNOWLEDGE BUILDING AND FIRM PERFORMANCE
THE KNOWLEDGE-BUILDING PATH TO IMPROVED PERFORMANCE
THE KNOWLEDGE-BUILDING LOOP
HUMAN BEHAVIOR, CULTURE, AND FIRM PERFORMANCE
ELEGANT, PARSIMONIOUS, AND RELIABLE THEORIES
NOTES
3 WORK, INNOVATION, AND RESOURCE ALLOCATION
LEAN THINKING—“NO PROBLEM IS A PROBLEM”
THE THEORY OF CONSTRAINTS
ONTOLOGICAL/PHENOMENOLOGICAL MODEL
INNOVATION
RESOURCE ALLOCATION
THE KEY CONSTRAINT IN SUSTAINING A KNOWLEDGE-BUILDING CULTURE
NOTES
Part II: The Pragmatic Theory of the Firm Connects Innovation and Valuation
4 LIFE-CYCLE PERFORMANCE AND FIRM RISK
THE FIRM'S COMPETITIVE LIFE CYCLE
A PARANOID OPTIMIST RESTRUCTURES NOKIA
A CASE STUDY OF INNOVATION—AMAZON
THE LIFE-CYCLE VALUATION MODEL
WHAT DOES A STOCK PRICE SAY ABOUT A FIRM'S FUTURE INVESTMENTS?
FORWARD-LOOKING, MARKET-IMPLIED DISCOUNT RATE
THE ROOTS OF MODERN FINANCE
FIRM RISK OFFERS A DIFFERENT MINDSET
SUMMARY OF KEY IDEAS
A RESEARCH METHODOLOGY FOR ADVANCING THE LIFE-CYCLE FRAMEWORK
BETTER ESTIMATES OF THE INVESTOR DISCOUNT RATE
NOTES
5 INTANGIBLE ASSETS, BRANDS, AND SHAREHOLDER RETURNS
THE NEW ECONOMY AND CONNECTIVITY-ENABLED BUSINESS MODELS
EMPIRICAL EVIDENCE ABOUT INTANGIBLE ASSETS
BRANDS IMPACT A FIRM'S MARKET VALUE
A CONCEPTUAL ROADMAP FOR HANDLING INTANGIBLE ASSETS
INTEGRATED REPORTS, LIFE-CYCLE REVIEWS, AND INTANGIBLES
EXPECT MORE THAN COFFEE—STARBUCKS
COSTCO STARTS BY CARING FOR ITS EMPLOYEES
RINGING DOORBELLS AND CHANGING TIMES—AVON
WHY DID ILLUMINA OUTPERFORM THE STOCK MARKET 18-FOLD FROM 2004 TO 2014?
THE EFFICIENT MARKET HYPOTHESIS AND THE FACTOR ZOO
EXCESS SHAREHOLDER RETURNS AND THREE LEVELS OF CAUSE-AND-EFFECT LOGIC
USEFUL IDEAS FOR INVESTORS, MANAGEMENTS, AND ACADEMIC RESEARCHERS
SYSTEM PRINCIPLES AND EFFECTIVE LANGUAGE
NOTES
Part III: Value Creation
6 LIFE-CYCLE POSITION, ADAPTABILITY, AND ORGANIZATIONAL STRUCTURE
LIFE-CYCLE GUIDEPOSTS
FOCUSED EXECUTION OF AN INNOVATIVE BUSINESS MODEL—NETFLIX
INNOVATION IN THE OPERATING ROOM—INTUITIVE SURGICAL
NOTHING RUNS LIKE A DEERE
SMITH CORONA AND NCR
The ABCs of Organizational Structure
ORGANIZATIONAL EXPERIMENTATION AT THE HAIER GROUP
VALUE CREATORS DRIVE DYNAMISM IN CHINA
NOTES
7 ACHIEVING PROGRESS THROUGH KNOWLEDGE BUILDING AND VALUE CREATION
THE NEW ECONOMY AND THE PRAGMATIC THEORY OF THE FIRM
LIFE-CYCLE TRACK RECORDS ARE A SCORECARD AND A LEARNING TOOL
POLITICS AND THE GREATER GOOD
PROGRESS STUDIES
NOTES
ABOUT THE AUTHOR
INDEX
END USER LICENSE AGREEMENT
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Endorsement
Table of Contents
COVER
PREFACE AND OVERVIEW
NOTES
Part I: A Firm's Role in Society
1 OVERVIEW OF THE PRAGMATIC THEORY OF THE FIRM
THE NUCLEUS OF THE PRAGMATIC THEORY OF THE FIRM
THE EVOLUTION OF THINKING ABOUT THE THEORY OF THE FIRM
KINDRED SPIRITS FOR THE PRAGMATIC THEORY OF THE FIRM
INNOVATION AND ECONOMIC GROWTH
THE PURPOSE OF THE FIRM
THE PRAGMATIC THEORY OF THE FIRM
NOTES
2 KNOWLEDGE BUILDING AND FIRM PERFORMANCE
THE KNOWLEDGE-BUILDING PATH TO IMPROVED PERFORMANCE
THE KNOWLEDGE-BUILDING LOOP
HUMAN BEHAVIOR, CULTURE, AND FIRM PERFORMANCE
ELEGANT, PARSIMONIOUS, AND RELIABLE THEORIES
NOTES
3 WORK, INNOVATION, AND RESOURCE ALLOCATION
LEAN THINKING—“NO PROBLEM IS A PROBLEM”
THE THEORY OF CONSTRAINTS
ONTOLOGICAL/PHENOMENOLOGICAL MODEL
INNOVATION
RESOURCE ALLOCATION
THE KEY CONSTRAINT IN SUSTAINING A KNOWLEDGE-BUILDING CULTURE
NOTES
Part II: The Pragmatic Theory of the Firm Connects Innovation and Valuation
4 LIFE-CYCLE PERFORMANCE AND FIRM RISK
THE FIRM'S COMPETITIVE LIFE CYCLE
A PARANOID OPTIMIST RESTRUCTURES NOKIA
A CASE STUDY OF INNOVATION—AMAZON
THE LIFE-CYCLE VALUATION MODEL
WHAT DOES A STOCK PRICE SAY ABOUT A FIRM'S FUTURE INVESTMENTS?
FORWARD-LOOKING, MARKET-IMPLIED DISCOUNT RATE
THE ROOTS OF MODERN FINANCE
FIRM RISK OFFERS A DIFFERENT MINDSET
SUMMARY OF KEY IDEAS
A RESEARCH METHODOLOGY FOR ADVANCING THE LIFE-CYCLE FRAMEWORK
BETTER ESTIMATES OF THE INVESTOR DISCOUNT RATE
NOTES
5 INTANGIBLE ASSETS, BRANDS, AND SHAREHOLDER RETURNS
THE NEW ECONOMY AND CONNECTIVITY-ENABLED BUSINESS MODELS
EMPIRICAL EVIDENCE ABOUT INTANGIBLE ASSETS
BRANDS IMPACT A FIRM'S MARKET VALUE
A CONCEPTUAL ROADMAP FOR HANDLING INTANGIBLE ASSETS
INTEGRATED REPORTS, LIFE-CYCLE REVIEWS, AND INTANGIBLES
EXPECT MORE THAN COFFEE—STARBUCKS
COSTCO STARTS BY CARING FOR ITS EMPLOYEES
RINGING DOORBELLS AND CHANGING TIMES—AVON
WHY DID ILLUMINA OUTPERFORM THE STOCK MARKET 18-FOLD FROM 2004 TO 2014?
THE EFFICIENT MARKET HYPOTHESIS AND THE FACTOR ZOO
EXCESS SHAREHOLDER RETURNS AND THREE LEVELS OF CAUSE-AND-EFFECT LOGIC
USEFUL IDEAS FOR INVESTORS, MANAGEMENTS, AND ACADEMIC RESEARCHERS
SYSTEM PRINCIPLES AND EFFECTIVE LANGUAGE
NOTES
Part III: Value Creation
6 LIFE-CYCLE POSITION, ADAPTABILITY, AND ORGANIZATIONAL STRUCTURE
LIFE-CYCLE GUIDEPOSTS
FOCUSED EXECUTION OF AN INNOVATIVE BUSINESS MODEL—NETFLIX
INNOVATION IN THE OPERATING ROOM—INTUITIVE SURGICAL
NOTHING RUNS LIKE A DEERE
SMITH CORONA AND NCR
The ABCs of Organizational Structure
ORGANIZATIONAL EXPERIMENTATION AT THE HAIER GROUP
VALUE CREATORS DRIVE DYNAMISM IN CHINA
NOTES
7 ACHIEVING PROGRESS THROUGH KNOWLEDGE BUILDING AND VALUE CREATION
THE NEW ECONOMY AND THE PRAGMATIC THEORY OF THE FIRM
LIFE-CYCLE TRACK RECORDS ARE A SCORECARD AND A LEARNING TOOL
POLITICS AND THE GREATER GOOD
PROGRESS STUDIES
NOTES
ABOUT THE AUTHOR
INDEX
END USER LICENSE AGREEMENT
List of Illustrations
Chapter 1
FIGURE 1.1 The purpose of the firm
FIGURE 1.2 Components of a pragmatic theory of the firm
Chapter 2
FIGURE 2.1 The knowledge-building loop
Chapter 3
FIGURE 3.1 Work, innovation, and resource allocation
FIGURE 3.2 Lean Thinking
FIGURE 3.3 The Theory of Constraints
FIGURE 3.4 OPM framework
Chapter 4
FIGURE 4.1 Life-cycle performance and firm risk
FIGURE 4.2 The life-cycle framework
FIGURE 4.3 Aggregate CFROIs for global industrial firms, 1950–2017
FIGURE 4.4 Nokia 1988–2018
FIGURE 4.5 Amazon 1995–2018
FIGURE 4.6 Life-cycle valuation model
FIGURE 4.7 % Future and the firm's life cycle
FIGURE 4.8 % Future for selected industrial firms, January 15, 2020
FIGURE 4.9 U.S. aggregate market-implied investor discount rates, 1976–2019...
FIGURE 4.10 The firm as a portfolio of projects
FIGURE 4.11 Simulated Earnings/Book
FIGURE 4.12 Amazon's 2013 CFROI
FIGURE 4.13 Two equivalent calculations of net cash receipts
FIGURE 4.14 Knowledge building and the life-cycle framework
Chapter 5
FIGURE 5.1 Shareholder returns
FIGURE 5.2 An evolutionary path for quantifying the value of intangibles
FIGURE 5.3 Intangible assets and fade rates
FIGURE 5.4 Starbucks 1992 to 2018
FIGURE 5.5 Costco 1993 to 2018
FIGURE 5.6 Avon 1960 to 2018
FIGURE 5.7 Illumina stock price 2005 to 2019
FIGURE 5.8 Illumina life-cycle expectations year-end 2004
FIGURE 5.9 Cause-and-effect logic applied to shareholder returns
FIGURE 5.10 The crossover problem
Chapter 6
FIGURE 6.1 Competitive life-cycle stages and key management tasks
FIGURE 6.2 Netflix 2000 to 2018
FIGURE 6.3 Intuitive Surgical 2000 to 2018
FIGURE 6.4 Deere 1960 to 2018
FIGURE 6.5 Three types of organizational structure for business firms
FIGURE 6.6 Haier Group 2000 to 2018
Guide
Cover
Table of Contents
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