TradeBriefs Editorial

From the Editor's Desk

What's the Best Way to Create Long-Term Value?

It's a well-known paradox. Most executives are committed to the idea of maximizing long-term shareholder value, but when they want to track and improve performance, they focus on a dizzying variety of short-term measures (and acronyms). ROA. ROC. TSR. EBIT. EBITDA. CAR. EPS. We could go on.

Why this focus on short-term measures? In large part, because they're easy to obtain, easy to use, and have been widely used in the past. The problem, as studies have long made clear, is that optimizing short-term accounting measures and ratios often doesn't maximize long-term value. To think clearly and effectively about long-term value, companies need a better measure - and, as we write in a recently published article in the Strategic Management Journal, we've devised one that we call LIVA, short for Long-term Investor Value Appropriation.

The idea behind LIVA is simple: Add up the net present value of all the investments a firm has engaged in over a long period of time. The key insight from our analysis is that this can be done by using publicly available stock-market data. LIVA uses historical share-price data to calculate the value a company has either created or destroyed for its entire investor base over a long time period.

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TradeBriefs Editorial

From the Editor's Desk

Could a robot care for grandma?

When Goldie Nejat began developing robots in 2005, she spent much of her time knocking on doors in hopes of demonstrating her high-tech prototypes. Back then, the health-care world was hesitant. "Now, it's the opposite," says Nejat, a professor of mechanical engineering at the University of Toronto. "I have people calling from around the world saying, When's your robot going to be ready?"

Nejat's machines, a special type known as socially assistive robots, are designed to engage with humans and could help fill an urgent need: caregiving for the elderly. The population of people over age 80 is projected to almost triple worldwide, from 143 million in 2019 to 426 million in 2050.

Such robots could be especially useful for patients with Alzheimer's disease or dementia because the robots can be programmed to assist with everything from providing medication reminders to leading exercises. Nejat's robots also can help run bingo and memory games to keep patients cognitively active.

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TradeBriefs Editorial

From the Editor's Desk

Ikea seeks to disrupt itself before it is disrupted

World's largest furniture retailer rolls out a series of experiments that could uproot its business model

Just off Oslo's main shopping street lies an experiment at the heart of Ikea's attempts to disrupt itself before it is disrupted. Until recently the only way to experience Ikea was to travel to the outskirts of big cities, visit an enormous warehouse and transport the furniture home yourself to then spend hours assembling it.

All that is changing, and the Oslo planning studio is just one in a bewildering number of experiments encompassing everything from renting out furniture to students to selling second-hand sofas.

While at an early stage, the moves will provide a case study of a large company trying to rediscover the entrepreneurial spirit that brought it success. If scaled up, the experiments would potentially uproot a business model that Ikea has followed faithfully for seven decades.

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Editor's Note: We inadvertently had the wrong link to the article '41 of Google's Toughest Interview Questions' in yesterday's TradeBriefs International newsletter. Here is the correct link.

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