Long-term value drivers and company performance

For most of the previous century, the value of a business was determined in large part by its tangible assets, but in the current digital era, tangible assets comprise less of a company’s value than they once did.

This changing shape of business value has created clear problems for our economy – because the more it has evolved, the more it has contributed to a growing disconnect between players along the investment chain. Companies and investors recognize the importance of creating long-term value but without consensus on how to measure this value they often rely on short-term metrics to measure success.

Surprisingly, there was a striking consensus among the diverse group of companies, asset managers and asset owners. They agreed on many of the factors that define long-term value – from a productive, creative and cost-efficient workforce to effective corporate boards.

Together, they then set out to measure a number of them. Although there were many important factors identified, participants agreed to focus on four key areas during the project: talent; innovation and consumer trends; society and the environment; and governance.

Up to now, many have considered these aspects too abstract and intangible to measure. Even when leading companies do report on them, investors say that the information reported is not actually useful or does not enable comparisons among companies.

The metrics and narratives in our report are a starting point toward changing that. They offer some well-researched yet practical ways to measure factors that participants agreed contribute to a company’s long-term value.

Read the full report here.