Does Wall Street buy your growth story? For how long?
Purpose: The article introduces the authors’ “ Imagination Premium™” metric which assesses the confidence of the investing community in a business’ growth strategy. Design/methodology/approach: The article explains how the Imagination Premium is calculated and applies it to several cases--Amazon, Tesla and Buffalo Wild Wings. Findings: Amazon’s implied value of growth was nearly four times its value from operations, a result completely consistent with its “profits are optional” motto. Amazon is a prototypical example of a company that is built to thrive in the ‘transient advantage economy. Practical implications: Sky-high expectations for growth can be dashed by external events over which businesses have little control as Tesla found out. Unless a business can show, as Amazon has historically done, that it can turn expectations into gold-spun reality, lofty investor expectations can become a liability. Originality/value: By applying the Imagination Premium concept to successful and problematic cases the authors illustrate the risks and advantages of a bold growth-before-profits strategy.
Year of publication: |
2018
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Authors: | McGrath, Rita Gunther ; van Putten, Alexander B. ; Pierantozzi, Ron |
Published in: |
Strategy & Leadership. - Emerald, ISSN 1087-8572, ZDB-ID 2039442-1. - Vol. 46.2018, 2 (19.03.), p. 3-10
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Publisher: |
Emerald |
Saved in:
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