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Index
Title Page
Copyright Page
TABLE OF CONTENTS
Dedication Page
PREFACE
PART I: ECONOMIC PROGRESS AND MANAGEMENT’S CORE RESPONSIBILITIES
CHAPTER 1: Capitalism and Economic Progress
A culture of dynamism
CEOs carrying a torch for free-market capitalism
John Allison
T. J. Rodgers
John Mackey
Is capitalism a moral system?
CHAPTER 2: The Firms’ Competitive Life Cycle
Foundational principles
The life-cycle valuation framework
Eastman Kodak’s failure to adapt
Why the life-cycle framework is so important
Changing environments and firm adaptability
3 M’s managerial skill
Illumina and wealth creation
The capitalist’s dilemma
CHAPTER 3: The Firm’s Purpose and Management’s Core Responsibilities
Making the world a better place
What is the firm’s purpose?
The interrelated components of purpose
The core responsibilities of management
#1 To integrate an operationally useful valuation framework
#2 To use resources efficiently and organize for continuous improvement
#3 To sustain a knowledge-building culture focused on innovation
Management should stop playing Wall Street’s quarterly earnings game
Membership in the beat-the-fade club: Amazon
PART II: A KNOWLEDGE-BUILDING CULTURE IS CRITICAL TO A FIRM’S LONG-TERM SURVIVAL AND SUCCESS
CHAPTER 4: The Pivotal Role of Worldviews in Building Knowledge
The world you see
Knowledge-building loop
Core belief 1: past experiences shape assumptions
Core belief 2: language is perception’s silent partner
Core belief 3: improve performance by identifying and fixing a system’s key constraints
Core belief 4: behavior is control of perception
Why Michelin run-flat tires failed
CHAPTER 5: The Firm’s Foundational Culture and Business Performance
What is culture and why is it so important?
More on how to change a culture
Toyota Kata
Knowledge base
Purposes
Worldview
Perceptions
Actions and consequences
Feedback
Cleveland Clinic
Culture, life-cycle reality, and strategy
Can America sustain a culture supportive of free-market capitalism?
Koch Industries
Vision
Virtue and talents
Knowledge processes
Decision rights
Incentives
PART III: THE FIRM’S PERFORMANCE AND VALUATION
CHAPTER 6: Valuation Insights, Life-Cycle Reviews, and Integrated Reporting
Both levels and changes in stock prices are important to understand
Net cash receipts
Components of the life-cycle valuation model
What really causes big, long-term moves in stock prices?
The firm’s black box, intangible assets, and organizational capital
The need for Life-Cycle Reviews
Life-Cycle Review (LCR) objectives
#1 Value-relevant track records
#2 Strategy and reinvestment
#3 Intangible assets
Benefits from Life-Cycle Reviews
#1 Gain more long-term investors in the firm’s shareholder base
#2 Earn the right to purposively depress quarterly results to create long-term value
#3 Improve communications with a common valuation language
#4 Apply what is learned from life-cycle valuation principles to executive compensation
#5 Get engaged with a learning process about intangible assets
The Integrated Reporting movement
CHAPTER 7: The Valuation of Firms Should Be a Continual Learning Process
Early development of the CFROI life-cycle valuation model
Ten critical ideas to connect financial performance to valuation
#1 Adjustment for inflation/deflation
#2 Project economic return
#3 Cross-sectional economic return
#4 Definition of net cash receipts
#5 Systems thinking
#6 Forward-looking investors’ discount rate
#7 Evaluating the valuation model
#8 Avoid using a CAPM-Beta equity cost of capital
#9 Intangibles and the art of life-cycle fade forecasting
#10 A systems-based valuation research methodology
Model corporation
Future Research
CHAPTER 8: The Quest for High Performance and Concluding Thoughts
The halo effect
Experimentation, feedback, and adaptation
JCPenney’s life-cycle transition
Intuit’s learning culture
Strategy and execution
A path forward
NOTES
REFERENCES
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