“Value is created by earning economic returns above the cost of capital.”1
—Bartley Madden
THE INNOVATION AND RETURN ON CAPITAL LIFE CYCLE
Analyzing a company's performance using Bartley Madden's four value quadrant innovation and life cycle framework will guide companies strategically to choose the appropriate Pathway to net zero.2 The framework has four stages: (i) Value Quadrant 1, early growth, the high‐innovation stage; (ii) Value Quadrant 2, high‐performance, the competitive fade stage; (iii) Value Quadrant 3, cash cow, the mature stage; and (iv) Value Quadrant 4, the failing business model stage.
Applying this strategic framework for innovation and capital allocation will also inform a company about its transition plan, clarify its transition burden, and suggest how to finance it. Depending on a company's stage of growth, it may finance its net zero transition plan in three ways: reinvesting profits in the business, borrowing money (debt) or selling equity. This framework may be particularly helpful for companies inclined to choose Pathway One as the path of least resistance because it would allow them to continue business as usual and maintain their current business models.
Exhibit 11.1 depicts how companies generally move through these four stages over their lifetime.
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month, and much more.
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.
Julian F.
Head of Cybersecurity
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.
Addison B.
Field Engineer
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.
Amir M.
Data Platform Tech Lead
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.
