Wealth creation insights by the creator of the company life-cycle
framework known as the CFROI valuation model.
Investors searching for companies whose future profitability
will far exceed that implied in current stock prices, those in
business making decisions to improve company performance, and
politicians crafting legislation-all use some form of a wealth
creation framework.
In this book, author Bartley Madden addresses how to think about
the complex dynamics in generating wealth and the practical
benefits to be gained from upgrading one's wealth creation
framework. Throughout these pages, Madden shares six critical
insights:
* A systems mindset focuses not so much on the individual
pieces of a system, but on how all the pieces work together to
achieve the goal envisioned for the system. The systems way of
thinking described in Wealth Creation helps to avoid
unintended, bad consequences, and to generate insights for
leveraging change that produces big gains in wealth
* Economic systems -- the rules and relationships that exist to
create wealth by delivering value to customers -- are devilishly
complex and therefore solving economic problems requires extensive
knowledge. Seen in this light, knowledge growth and wealth
creation are two sides of the same coin.
* A prerequisite to making better buy/hold/sell investment
decisions and business judgments is an improved understanding of
how wealth is created. An especially useful approach described in
this book is to connect business firms' financial performance to
stock prices via the firms' competitive life-cycle
framework
* A deeper understanding of business firms makes it plain that
customers, employees, and shareholders have
mutual, long-term interests. In other words, a free-market
system geared to serving customers through competition is a system
in which participants share the wealth that is jointly created
* There is a huge opportunity for sustained, higher economic
growth through voluntary initiatives by the private sector. One
initiative involves an accelerated implementation of lean
management, which was pioneered by Toyota. This is a systems
approach that continually purges waste and optimizes the use of
resources in delivering value to customers
* The other initiative concerns improved corporate
governance. The wealth creation principles discussed in this
book offer a blueprint for boards of directors to vastly improve
how they fulfill their responsibility to shareholders, and in so
doing, improve the performance of corporate America
These ideas have taken shape as a natural outgrowth of a
commercial research program that began in 1969 at Callard, Madden
& Associates focused on how to value business firms. It
produced the CFROI (cash-flow-return-on-investment) metric and its
related life-cycle valuation model. This work was further advanced
at HOLT Value Associates, which was later acquired by Credit Suisse
in 2002. Credit Suisse HOLT continues the research to improve the
valuation tools and related global database that analyzes 20, 000
companies in over 60 countries. This system is used by a large
number of institutional money management firms worldwide in order
to make better investment decisions.
