Value Creation Principles

Value Creation Principles

by Bartley J. Madden
Released June 2020
Publisher(s): Wiley
ISBN: 9781119706625

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Book description

PRAISE FOR VALUE CREATION PRINCIPLES

"In Value Creation Principles, Madden introduces the Pragmatic Theory of the Firm that positions the firm as a system fueled by human capital, innovation, and, at a deeper level, imagination. He challenges us to understand how we know what we think we know in order to better discover faulty assumptions that often are camouflaged by language. His knowledge building loop offers guideposts to design experiments and organize feedback to facilitate early adaptation to a changed environment and to avoid being mired in ways of thinking rooted in 'knowledge' of what worked well in the past—a context far different from the context of today. His book explains a way of being that enables those who work for, or invest in, business firms to see beyond accounting silos and short-term quarterly earnings and to focus on capabilities instrumental for creating long-term future and sustainable value for the firm's stakeholders. I can't recommend this astounding book enough especially given its deep and timely insights for our world today."
—John Seely Brown, former Chief Scientist for Xerox Corp and Director of its Palo Alto Research Center (PARC); co-author with Ann Pendleton-Jullian of Design Unbound: Designing for Emergence in a White Water World

"In contrast to existing abstract theories of the firm, Madden's pragmatic theory of the firm connects management's decisions in a practical way to a firm's life cycle and market valuation. The book promotes a firm's knowledge building proficiency, relative to competitors, as the fundamental driver of a firm's long-term performance, which leads to insights about organizational capabilities, intangible assets, and excess shareholder returns. Value Creation Principles is ideally suited to facilitate progress in the New Economy by opening up the process by which firms build knowledge and create value, which is a needed step in revising how neoclassical economics treats the firm."
—Tyler Cowen, Professor of Economics, George Mason University; co-author of the popular economics blog Marginal Revolution

"Bartley Madden rightfully points out that both textbook and more advanced economic theories of the firm fail to address the concerns of top management and boards of directors. He offers a tantalizing pragmatic alternative that directly connects to quantitative changes in the firm's market value. His framework gives recognition to the importance of intangible assets, and his pragmatic approach is quite complementary to the Dynamic Capabilities framework that strategic managers implicitly and sometimes explicitly employ."
—David J. Teece, Thomas W. Tusher Professor in Global Business, Faculty Director, Tusher Center for the Management of Intellectual Capital, Haas School of Business, University of California, Berkeley

Table of contents

  1. COVER
  2. PREFACE AND OVERVIEW
    1. NOTES
  3. Part I: A Firm's Role in Society
    1. 1 OVERVIEW OF THE PRAGMATIC THEORY OF THE FIRM
      1. THE NUCLEUS OF THE PRAGMATIC THEORY OF THE FIRM
      2. THE EVOLUTION OF THINKING ABOUT THE THEORY OF THE FIRM
      3. KINDRED SPIRITS FOR THE PRAGMATIC THEORY OF THE FIRM
      4. INNOVATION AND ECONOMIC GROWTH
      5. THE PURPOSE OF THE FIRM
      6. THE PRAGMATIC THEORY OF THE FIRM
      7. NOTES
    2. 2 KNOWLEDGE BUILDING AND FIRM PERFORMANCE
      1. THE KNOWLEDGE-BUILDING PATH TO IMPROVED PERFORMANCE
      2. THE KNOWLEDGE-BUILDING LOOP
      3. HUMAN BEHAVIOR, CULTURE, AND FIRM PERFORMANCE
      4. ELEGANT, PARSIMONIOUS, AND RELIABLE THEORIES
      5. NOTES
    3. 3 WORK, INNOVATION, AND RESOURCE ALLOCATION
      1. LEAN THINKING—“NO PROBLEM IS A PROBLEM”
      2. THE THEORY OF CONSTRAINTS
      3. ONTOLOGICAL/PHENOMENOLOGICAL MODEL
      4. INNOVATION
      5. RESOURCE ALLOCATION
      6. THE KEY CONSTRAINT IN SUSTAINING A KNOWLEDGE-BUILDING CULTURE
      7. NOTES
  4. Part II: The Pragmatic Theory of the Firm Connects Innovation and Valuation
    1. 4 LIFE-CYCLE PERFORMANCE AND FIRM RISK
      1. THE FIRM'S COMPETITIVE LIFE CYCLE
      2. A PARANOID OPTIMIST RESTRUCTURES NOKIA
      3. A CASE STUDY OF INNOVATION—AMAZON
      4. THE LIFE-CYCLE VALUATION MODEL
      5. WHAT DOES A STOCK PRICE SAY ABOUT A FIRM'S FUTURE INVESTMENTS?
      6. FORWARD-LOOKING, MARKET-IMPLIED DISCOUNT RATE
      7. THE ROOTS OF MODERN FINANCE
      8. FIRM RISK OFFERS A DIFFERENT MINDSET
      9. SUMMARY OF KEY IDEAS
      10. A RESEARCH METHODOLOGY FOR ADVANCING THE LIFE-CYCLE FRAMEWORK
      11. BETTER ESTIMATES OF THE INVESTOR DISCOUNT RATE
      12. NOTES
    2. 5 INTANGIBLE ASSETS, BRANDS, AND SHAREHOLDER RETURNS
      1. THE NEW ECONOMY AND CONNECTIVITY-ENABLED BUSINESS MODELS
      2. EMPIRICAL EVIDENCE ABOUT INTANGIBLE ASSETS
      3. BRANDS IMPACT A FIRM'S MARKET VALUE
      4. A CONCEPTUAL ROADMAP FOR HANDLING INTANGIBLE ASSETS
      5. INTEGRATED REPORTS, LIFE-CYCLE REVIEWS, AND INTANGIBLES
      6. EXPECT MORE THAN COFFEE—STARBUCKS
      7. COSTCO STARTS BY CARING FOR ITS EMPLOYEES
      8. RINGING DOORBELLS AND CHANGING TIMES—AVON
      9. WHY DID ILLUMINA OUTPERFORM THE STOCK MARKET 18-FOLD FROM 2004 TO 2014?
      10. THE EFFICIENT MARKET HYPOTHESIS AND THE FACTOR ZOO
      11. EXCESS SHAREHOLDER RETURNS AND THREE LEVELS OF CAUSE-AND-EFFECT LOGIC
      12. USEFUL IDEAS FOR INVESTORS, MANAGEMENTS, AND ACADEMIC RESEARCHERS
      13. SYSTEM PRINCIPLES AND EFFECTIVE LANGUAGE
      14. NOTES
  5. Part III: Value Creation
    1. 6 LIFE-CYCLE POSITION, ADAPTABILITY, AND ORGANIZATIONAL STRUCTURE
      1. LIFE-CYCLE GUIDEPOSTS
      2. FOCUSED EXECUTION OF AN INNOVATIVE BUSINESS MODEL—NETFLIX
      3. INNOVATION IN THE OPERATING ROOM—INTUITIVE SURGICAL
      4. NOTHING RUNS LIKE A DEERE
      5. SMITH CORONA AND NCR
      6. The ABCs of Organizational Structure
      7. ORGANIZATIONAL EXPERIMENTATION AT THE HAIER GROUP
      8. VALUE CREATORS DRIVE DYNAMISM IN CHINA
      9. NOTES
    2. 7 ACHIEVING PROGRESS THROUGH KNOWLEDGE BUILDING AND VALUE CREATION
      1. THE NEW ECONOMY AND THE PRAGMATIC THEORY OF THE FIRM
      2. LIFE-CYCLE TRACK RECORDS ARE A SCORECARD AND A LEARNING TOOL
      3. POLITICS AND THE GREATER GOOD
      4. PROGRESS STUDIES
      5. NOTES
  6. ABOUT THE AUTHOR
  7. INDEX
  8. END USER LICENSE AGREEMENT

Product information

  • Title: Value Creation Principles
  • Author(s): Bartley J. Madden
  • Release date: June 2020
  • Publisher(s): Wiley
  • ISBN: 9781119706625