The Blue Line Imperative: What Managing for Value Really Means

Chapter Five

Blue Line Management

Having come to understand value conceptually – as the expected future free cash flows discounted at the Opportunity Cost of Capital (OCC) – we can take the next step, which entails asking a vital question: how do we manage for value creation in our day-to-day business? Recognizing the theoretical foundation of an idea hardly ensures that we will put it into action. A practical framework is needed.

To facilitate the application of value, we find it a necessary first step to distinguish between value as an objective and any other objective. In other words, if you aren't managing toward value, you are necessarily managing toward something else – and that something else, whatever it is, is, at least in our view, ...