In some respects, corporate management seems to be a bit like the weather - everybody talks about it and everybody agrees it's important, but nobody can ever seem to quite figure it all out. More to the point, only a momentum investor or chartist would likely even try to claim that management does not matter when assessing a stock merit's. Yet even value hounds have a hard time assigning value to management, or even proposing how such a thing could be measured. (For more, see Putting Management Under The Microscope.)
Great Management Sees the Future
In 1998, Finland's Nokia (NYSE:NOK) was the world's largest cell phone maker and Apple (Nasdaq:AAPL) was struggling to right itself just over a year into Steve Jobs' return to the company. While Apple developed breakaway winners like the iPod and the iPhone, Nokia introduced lead balloons like the N-Gage. Worse still, Nokia seemed to make the decision to play it safe and follow the market instead of looking out ahead of the curve and anticipating what customers would want. As a result, while Nokia is still the largest phone company in the world, Apple has jumped ahead both in revenue and in how much investors will pay for that revenue (Apple is over nine times larger in terms of enterprise value).
This is relatively common occurrence in business, and a major axis around which management value revolves. It is incredibly difficult to succeed by forever playing catch-up or hoping to take an already proven idea and execute it just a little bit better. The CEOs of companies like Microsoft (Nasdaq:MSFT), Intel (Nasdaq:INTC), Wal-Mart (NYSE:WMT) and Nike (NYSE:NKE) saw a future that other CEOs could not see and they positioned their companies accordingly - building billions in shareholder value along the way.
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http://financialedge.investopedia.com/financial-edge/0111/What-Is-Great-Management-Worth.aspx
2 comments:
GREAT ARTICLE! I love this article.
I totally agree with you. To qualify 'Great Management' these two words, a manager must possess these two skills, be creative and have discipline to carry out the plan. The reason that Steve Job, Bill Gates, and some other billionaires are so successful because they are creative and and able to foresee future. They are visionaries. They created somethings that were not entirely developed in the market. and then they had great people to carry out the plan with them.
Thanks Anthony,
I think practicality (a good "head for business") is critical too, though.
I've seen a lot of visionaries in med-tech, but they didn't understand the dollars and cents of how to run a business.
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