Top executives are reassured by financial measurements. But, says Tim Ambler, that may not always be the best way to plan and measure the effectiveness of the marketing effort.
Just as in ages past alchemists sought the philosopher’s stone, so 21st century executives try to express important concepts in single financial numbers. “That’s a great idea,” they say, “but what will be the effect on shareholder value?” Consequently, in our research, we routinely found top-flight managers who were unable to understand brand equity as being anything but its financial valuation. If this made sense, management would be immeasurably simplified.
Managing for value has become a dominant philosophy in many modern companies. Strategic options are analysed to provide their forecast shareholder value and determined accordingly. Costs are reduced and assets are squeezed. The question is whether this approach assists or damages the generation of inward cash flow.
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