Investors

Why GE’s Jeff Immelt Lost His Job: Disruption and Activist Investors
YASUYOSHI CHIBA/Getty Images Jeff Immelt ran GE for 16 years. He radically transformed the company from a classic conglomerate that did everything to one that focused on its core industrial businesses. He sold off slower-growth, low-tech, and nonindustrial businesses — financial services, media, entertainment, plastics, and appliances. He doubled GE’s investment in R&D. In his Harvard Business Review article summing up his tenure, Immelt recalls that the two things that influenced him most were Marc Andreessen’s 2011 Wall Street Journal article “Why Sof [...]
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What BMW’s Corporate VC Offers That Regular Investors Can’t
In 2012, one of us — Gregor Gimmy, a California-based serial entrepreneur and former IDEO consultant — accepted a new role at BMW’s corporate R&D headquarters. Gimmy’s task was clear but highly demanding: to reimagine the way BMW innovates. At the time, BMW had no dedicated, company-spanning unit to leverage the creative power of startups. This meant that the company was leaving out huge innovation potential — thousands of startups with billions of funding — that could help BMW innovate anything from core vehicle technology (batterie [...]
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The Answer to Short-Termism Isn’t Asking Investors to Be Patient
Tim Evans for HBR Short-term corporate behavior is a major problem in the 21st century firm. Too many companies prioritize quarterly earnings over long-term innovation, human capital investment, and brand development, and many people believe short-term shareholders are to blame. The popular argument goes as follows: Short-term investors – those who hold onto a stock for less than, say, a year – aren’t interested in the company’s prospects beyond that year. So, if the company misses its quarterly earnings target, they sell their shares. The fear of such selling forces [...]
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Research: The Rise of Superstar Firms Has Been Better for Investors than for Employees
Few things are stable in economic life. Sixty years ago, Nicholas Kaldor laid down one seemingly immutable fact: The share of the national income taken by labor was constant. In other words, every year workers took home around two-thirds of the economic pie, and the owners of capital took the rest. The stability of this ratio was, as his fellow Cambridge economist Lord Keynes said, “something of a miracle.” So much for miracles. In America, labor’s share has been on the decline for about three decades, and it has accelerated since the turn of the century. The fall has al [...]
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What If Investors Who Held Their Shares Longer Got More Voting Power?
Joe Bower and Lynn Paine “had me at hello” (to quote Jerry Maguire) with their new HBR article, “The Error at the Heart of Corporate Leadership.” Laying out their data, they find that long-term oriented companies create more financial value and more jobs. In fact, if more American companies were focused on the long term, they estimate, investors would have an additional $1 trillion, workers would have an additional 5 million jobs, and the country would have more than an additional $1 trillion in GDP. I agree with their vision of a future in which more companies focus on [...]
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How Investors React When Companies Announce They’re Moving to a SaaS Business Model
On April 23, 2012, Adobe Inc. launched a Software-as-a-Service (SaaS) subscription version of its key product line, Creative Suite, causing its net income to plummet by almost 35% percent the following year. Yet by April 2016 Adobe’s stock price had nearly tripled from its value four years earlier. Adobe’s radical transformation from a product-based business model to a service-based one raised eyebrows in the industry, with many software vendors now wondering how radically they should approach the SaaS model. Due to the fast growth of the SaaS market and the high valuations of [...]
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Why Top Management Should Listen to Activist Investors
Activist investors who expect to raise returns by influencing strategic decisions are having a meaningful impact on many industries from consumer-packaged goods to aerospace and defense. And the odds that your company, or industry, may find itself targeted by an activist are going up. Activists launched 159 campaigns in 2015 focused on shareholder value maximization, nearly double the 88 that were launched the year before. If you are a senior executive in a company concerned about activists, you have two potential paths: take the defensive (and perhaps expected) posture of defending your curre [...]
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Startups Could Fundamentally Change the Way Big Investors Operate
Innovation has the potential to transform the investment industry. Small startup firms are already developing proprietary technologies — such as machine vision, deep learning, and other innovations —– that could help large investors evaluate opportunities and risks with far greater accuracy and efficiency than was previously possible. Yet the world’s largest funds are closed off from these innovations. Research we have collected in recent months shows that pension funds, sovereign wealth funds, and endowments expect imminent breakthrough innovations in investm [...]
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Investors Today Prefer Companies with Fewer Physical Assets
Having physical stuff just isn’t as great as it used to be. At home, we’re Marie Kondo–ing our way to minimalism, buying experiences rather than things, and using services — Netflix, Spotify, Uber — rather than owning assets such as movies, music, and cars. The companies that provide those services and enable us to share what we have (insights, relationships, assets) with others not only are valued more highly by investors but also are relatively asset-light themselves. Amazon has only a handful of brick-and-mortar stores, Uber doesn’t manage a fle [...]
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Research: How Investors’ Reading Habits Influence Stock Prices
A cornerstone of efficient and transparent markets is freely available information. Information drives financial activity, and ensuring equitable access to that information is seen as critical to a well-functioning marketplace. But does the mere action of placing a piece of financial news in the public domain make it readily seen and efficiently reflected in stock prices? According to my and others’ research, not necessarily. In 2001 professors Gur Huberman and Tomer Regev of Columbia University drew attention to a peculiar sequence of market reactions to news regarding a cancer research [...]
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Mayer makes amends with Yahoo's agitated investors
Nicholas Carlson, author of the book Marissa Mayer and the fight to save Yahoo!, said the Alibaba spin-off showed her pragmatically putting shareholders' desires first, even if some insiders wanted her to invest the money in acquisitions. “She's ... [...]
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World leaders, CEOs, investors, and Peter Gabriel: What Davos bigwigs make of …
... zone's first true experiment with easy money was thus pitted against the bloc's steadfast defender of thrift and fiscal austerity. The hordes of journalists buzzing about the conference hall in Davos were furiously typing, tweeting, and live ... [...]
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