Finance x Mgmt x Network 넘사벽 강자 🥷🏻 Flashcards
전문가라고 말하려면 이정도는 알아야지
Cash on Cash return?
= Annual before tax retun cash flow / total cash invested
What is Free Cash Flow to Firm?
A company generates cash flows from its operations by selling goods or services. Some of its cash goes back into the business to renew fixed assets and for the working capital requirements.
Free cash flow to the firm is the excess cash generated over and above these expenses. The firm’s free cash flow goes to the debt holders and the equity holders. FCFF or Free cash flow to the firm is used in DCF financial modeling.
Free Cash Flow to Firm or FCFF Calculation = EBIT x (1-tax rate) + Non Cash Charges + Changes in Working capital – Capital Expenditure
What is Free Cash Flow to Equity? FCFE
And FCFE’s limitations?
FCFE Formula = Net Income + Depreciation & Amortization + Changes in WC - Capex + Net Borrowings
Limitations: can be used only when the company’s leverage is not volatile and the company’s debt leverage is not changing.
What is Dividend Discount Model?
Based on the understanding that the fair value of a stock is the present value of all its future dividends.
CF = Dividends
Dividend yield?
Dividend yield = Dividend per share / Price per share
What is difference between Enterprise value and equity value?
Enterprise value = market value of operating assets
Equity value = market value of shareholders’ equity
Equity value = Enterprise value - net debt.
What are methodologies of valuation?
Smaller discipline SMLR DCPL
Discounted cash flow analysis
Comparable comp analysis
Precedent transactions
LBO analysis
Sum of the parts
Liquidation valuation
M&A premiums analysis
Replacement value
What are common multiples of valuation?
P4, E3
EV to EBIT
Price to cash flow
Enterprise value to sales
EV to EBITDA
PEG Ratio
Price to Book value
PE Ratio
TTM
Trailing twelve months: past 12 consecutive months
Comparable comp analysis vs. Precedent transactions?
Precedent transactions are higher. A controlling premium is built into it. (Willingness to pay to secure the majority stake)
LBO analysis
Leveraged Buyout: maximum value that buyer could pay for the target company, given the future value from operations and debt.
EV to EBIT ?
얼마나 성공적으로 비즈니스를 했나 평가지표: to see if the stock is highly priced and earning yield.
PCF ?
Price to Cash Flow = share price / cash flow per share
영업활동으로부터의 현금흐름 관점에서 가격이 몇퍼센트를 차지하나.
낮을수록 투자자에겐 좋다. undervalued 되었다는 거니까.
EV?
the sum of market capitalization, preferred shares, minority shares, debt minus cash
PEG ratio?
The Price/Earnings to Growth ratio, or PEG ratio, is a tool that helps assess how appropriate the valuation of a company’s stock is, given its current market value and future potential. This ratio lets investors figure out if stocks of a company are overly priced or undervalued.
It is a ratio within a ratio as the price/earnings ratio is first calculated, then the result is divided by the company’s expected growth rate.
It states that to be fairly valued or priced, the price/ earning-to-growth ratio should either be equal to the growth rate of earnings per share or should be 1.
PB ratio?
Price to Book Value Ratio or P/B Ratio = market price per share / book value per share.
A good price to book value ratio according to value investors is less than 1.0. On the other hand, a high ratio implies that the company’s market value is significantly higher than its accounting value.
PE ratio?
Price Per Share/ Earnings Per Share
The trailing price-to-earnings ratio is based on past earnings, while the forward price-to-earnings ratio depends on the forecast of future earnings.
The analysts correlate a company’s PE multiple with the PE multiples of competition within the industry. This way, the appropriate valuation of a share is ascertained.
the Price-to-earnings ratio has an advantage of discounted cash flow valuation (DCF) technique; it is not sensitive to assumptions. In DCF, changes in WACC or growth rate assumptions can dramatically change the valuations. Therefore price-to-earnings ratio is extensively used for comparing companies within a sector.
Payback multiple?
The price-to-earnings ratio is primarily derived from the payback multiple.
Initial investment made / net annual cash inflow
Similarly, the PE ratio is the number of yearly share earnings it will take an investor to recover the price paid for the share.
For instance, if the PE multiple is 10x. It implies that for each $1 of earning, the investor has paid $10. Hence, it will take ten years of earnings for the investor to recover the price paid.
How do you value a bank?
Banks are primarily valued using PB multiple.
1) banks have assets & liabilities that are periodically marked to market. So, the balance sheet represents the market value, unlike other industries where the balance sheet represents the historical cost of the assets and liabilities.
2) bank assets include investment in government bonds, high-grade corporate bonds or multiple bonds, along with commercial mortgage, or personal loans that are generally expected to be collectible.
Industry-specific multiples
- Real estate:
REITs (real estate investment trusts) = price / funds from operations (FFO)
Price/ adjusted funds from operations (AFFO) - Retail or airlines:
EV / EBITDAR (rent) - Tech:
EV/ unique visitors; EV / page views - Energy:
Price / Net Asset Value (NAV)
Price / 1 MCFE (million cubic foot equivalent)
Price / 1 MCFED (million cubic foot equivalent per day)
Sum of the parts 예시로, automobile, O&G, software, bank, E-commerce segment 의 대표적인 valuation methodologies 소개하삼
Automobile Segment Valuation – EV/EBITDA or PE ratios.
Oil and Gas Segment Valuation – EV/EBITDA or P/CF or EV/boe (EV/barrels of oil equivalent)
Software Segment Valuation – PE or EV/EBIT multiple
Bank Segment Valuation – P/BV or Residual Income Method
E-commerce Segment – EV/Sales (if the segment is not profitable) or EV/Subscriber or PE multiple
Which is better valuation methodology - PE or EV to EBITDA?
EV to EBITDA is better because of following reasons:
1) PE doesn’t consider balance sheet risk. Earnings are subject to different accounting policies. It can be easily manipulated by management.
2) PE cannot be used when earnings are negative. One must use normalized earnings or forward multiples in such cases. But if EBITDA as well as FCFF are negative, EV to Sales can be used.
Can Terminal Value be negative?
Terminal Value is the value of a business or a project beyond the explicit forecast period wherein its present value cannot be calculated. It includes the value of all cash flows, regardless of duration, and is an important component of the discounted cash flow model (DCF).
Theoretically yes but practically no.
Terminal value = (FCFF * (1+ Growth rate)) / (WACC - Growth rate)
In the above calculation, if we assume WACC < growth rate, then the value derived from the formula will be Negative. This is very difficult to digest as a high-growth company is now showing a negative terminal value because of the formula used. However, this high growth rate assumption is incorrect. We cannot assume that a company will grow at a very high rate until it is infinite. If this is the case, this company will attract all the capital available in the world.
Capacity mechanism in 2028?
Kraftwerkstrategie
Germany’s ruling coalition has agreed to speedily set up state support auctions for 10GW of new gas-fired power plants which will then be converted to run on hydrogen between 2035 and 2040. It also agreed to develop a capacity mechanism to be operational by 2028.
+ Opex subsidy for the difference between hydrogen and gas prices. That is fuel subsidy, that leads to decreased fuel switch costs. Therefore, electricity price forecast of mid term shows decreased.
Chancellor Olaf Scholz, economy and climate minister Robert Habeck and finance minister Christian Lindner agreed “that new power plant capacities of up to 4 x 2.5 GW will be put out to tender as H2-ready gas-fired power plants soon as part of the power plant strategy, which are to switch to hydrogen between 2035 and 2040,” the economy ministry said in a press release. The government did not provide any details on the volume of support, or a timeline for the auctions, but emphasised the need for speed.
Germany’s governance body?
BMWK, Bundesministerium für Wirtschaft und Klimaschutz
4 TSOs of Germany
TransnetBW, Tennet, 50 Herz, Amprion
Ukraine crisis 이후 유럽 전력시장 개편 움직임
In December 2023, the EU formally agreed on power market reforms,
including the mandatory adoption of two-sided CfDs.
This will be mandatory for new subsidized renewables and nuclear.
RED II Delegated Act? - hydrogen to be classified as renewables?
Renewables Energy Directive
The RED II Delegated Act defines additionality, geographical and temporal
correlation criteria that must be satisfied for H2 to be classified as renewable.
However, hydrogen producers who source their electricity from the grid or directly from renewables are
exempt from proving certain criteria
Gas, coal, carbon, hydrogen prices
Gas Europe - TTF day-ahead 30EUR/MWh, Henry hub 30% fell y-o-y
Coal - ARA monthly average of front month prices 97 dollars per Tonne in Feb. Newcastle 이라는 인덱스도 있음.
Carbon- monthly average of daily EU ETS Front year prices 57.6EUR/tCo2 in Feb, dropped.
Hydrogen - HYDRIX EEX hydrogen index, average across 2023 converted to Higher Heating Value (HHV) terms is almost 200EUR/MWh.
Clean spark spread, dark spread, quark spread and bark spread?
Clean spark spread or “spark green spread” represents the net revenue a gas-fired generator makes from selling power, having bought gas and the required number of carbon allowances.
The term dark spread, quark spread and bark spread[1][2] refers to the similarly defined difference between cash streams (spread) for coal-fired power plants, nuclear power plants and bio-mass power plants respectively.
SMART goal?
Specific, Measurable, Appropriate, (ambitious but achievable) Relevant, Terminated
Platform as a multi-sided marketplace
Key concepts and constructs:
Regulated participation of multiple sides (user groups): interaction/ transaction rules; matching of sides
Economics of multi-sided markets:
same-side (direct) and cross-side (indirect) network effects; pricing strategies & revenue sharing
Platform envelopment
Examples: Uber, Airbnb, Ebay, Alibaba, Amazon, YouTube, Twitter, Facebook, Kickstarter, Indiegogo, LinkedIn, Match.com, Monster.com
Timing of market entry (strategic decision) - advantages of pioneers and followers
Advantages of pioneers
- Technological leadership
- Discriminating appropriation of scarce resources
- Specific restrictions or behavioral patterns on the customer side
Advantages of followers
- exploitation of free-rider effects
- resolution of technological and demand-related uncertainties
- technological innovations or shifts in demand
Corporate venture capital? And its objective
Venture capital funding provided by major corporations to startup companies with a high potential for growth
The ultimate objective may be to acquire the startup and consolidate them with the company’s internal initiatives. If this occurs, the CVC partner may be seeking complimentary opportunities or related emerging, disruptive technologies.
Publicly-owned company의 경우 리턴이 목표는 아니고 (주주들의 의견에 반해서 리스크 높은 사업에 투자하기는 힘드니까) 밴처캐피탈 펀드나 PE Vehicle 을 통해서 직접투자하는 경우가 많다.
Host company —> CVC Fund —> Portfolio companies
Pros and cons for both sides?
Pros:
Host company: rolip
option to learn business models, markets and technologies, industry creation, pre-empt competition, option to acquire, financial returns
Portfolio companies: cdtif
corporate certification, distribution channels, technological support, industry contacts, financing
Cons
Host company: hlt
possible harm to brand, possible litigation if stealing of business idea is suspected, time demands of managing disparate cultures
Portfolio companies: cs
less opportunities to cooperate with competitors of the investor, risk of having business ideas stolen
Implications of position on the S-curve?
Important factor for technological performance forecast. Robust heuristics.
- Early stage, low R&D productivity: lots of early failures
- Riding up the S-Curve: focusing on an overall ‘architecture’, following on narrower and more well-defined technical challenges; leveraging prior experience
- Hitting Natural Limits: key physical limits determined by broad technical choices
Tech s-curves: challenges
Local search bias,
Performance measures change.
Measures for UIC
QCUH5
DV: Firm performance: Tobin’s Q (stock price related performance)
Collaboration intensity: joint publications related to the firm’s total cost scaled in a mil $.
University quality: proportion of universities from THE ranking in the total numbers of collaborative universities
University concentration: Herfindahl-Hirschman-Index (HHI) within collaboration network
Basic research orientation: 5-year average impact factor of the journals, where the publications have been published.
IPR type, scope, procedure, examination, max terms
IPR type, scope, procedure, examination, max terms
Patent - Invention - Registration - Examination - 20 yrs
Registered utility model - technical invention (no process) - registration - no examination - 10 years
Registered design - design, use - registration - no examination - 25 years max, 3 years use
Trademark - for goods and services - registration - examination for absolute protection obstacles - renewable every 10 years
Copyright - literature, art, software - no registration - no examination - 70 years beyond holder’s death
EU Patent criteria
Patents protect technical inventions that are:
Dov. (Industrially applicable, non-obvious, novel)
- Industrially applicable (USA: useful) (technically reproducible, technical character and technical effect)
- Novel to the world
- Non-obvious to the average professional practitioner (that is they are exceeding a certain minimum level of invention -> inventive step)
EU Patent criteria
Not patentable are (examples) according to the European Patent Convention Art. 52
DASCOM
Discoveries (e.g. chemical elements)
Scientific theories (e.g. Einstein’s relativity theory)
Obscene or harmful inventions
Artistic expressions/ works (e.g. form of a prosthesis)
Mathematical methods (e.g. binomial formulas)
Computer programs
KPI 로써 financial ratios 종류
PALL
- Profitability ratio: profit margin, ROI
- Asset management ratio: efficient use of net working capital
- Financial leverage ratio
- Liquidity ratio: short-term solvency of a business
Difference between provision and reserve?
provisions are for known liabilities or losses, while reserves are for specific purposes.
Balance sheet items
Assets
> Current assets
» cash and cash equivalents
» account receivable
» inventory
> Non-current assets
> PPE (property, plant and equipment)
> intangible assets
Liabilities
> Current liabilities
» Accounts payable
» Other financial current liabilities
> NC: Long-term debt
> Shareholder’s equity
> common stocks
> retained earnings
Profitability margin?
Net income / Revenue
Analysis makes sense only when an industry comparison is made.
Return on sales?
= EBIT margin
= EBIT / Revenue
Only makes sense when an industry comparison is made.
Gross profit margin?
(Revenue - COGS) / Revenue
Analysis makes sense only when an industry comparison is made.
Return on investment?
Return? Investment?
ROI = Return / Investment
Return is a profit number, originated from income statement.
Investment is an asset or resource that may generate income in the future. (E.g. total assets, capital employed, owner’s equity), originated from the balance sheet.
ROE? What does ROE represent?
Return on equity = Net income / Owner’s equity
A measure of the company’s performance from the viewpoint of shareholders.
It determines the time needed until an investment is returned to the investor.
Net income is the profit attributable to shareholders.
Their contribution is depicted as owner’s equity in the balance sheet.
This makes both figures a natural match.
ROA?
Return on assets = EBIT / Total assets. Profit earned from all of the company’s assets.
Unlike ROE, ROA is not dependent on the capital structure.
Total assets is identical to total capital, which is made up of equity and debt. So a matching profit figure should include returns for both the providers of equity and debt.
ROCE?
Return on Capital Employed = EBIT / capital employed
Considers only equity and interest-bearing (financial debt). Thus it calculates the yield earned on a capital that requires a return.
Same as ROE - having EBIT as a numerator, a measure that includes proceeds to be paid to creditors and owners.
ROI’s issue and solution?
Logical inconsistency that comes from different time dimensions the figures have.
Solution: to replace the figures from the balance sheet with more representative figures, like averages from 2 different balances sheets, e.g. one at the beginning and one at the end of a period.
Inputs from the same financial statement
Vs.
Inputs from different financial statements
EBIT margin = EBIT / Sales
ROA = EBIT / Assets
TAT?
Total Asset Turnover = Revenues / Total assets. How successful a company generates sales with existing assets.
Indicator of asset utilization
Business can either start utilizing idle capacity or simply eliminate them.
FAT?
Fixed Asset Turnover = Revenues / PP&E
Company’s ability to generate revenues from investments in non-current tangible assets, in particular PP&E.
Since fixed assets are considered net of accumulated depreciation, FAT might also be a signed of fixed asset base.
Inventory turnover?
COGS / Inventory
A low turnover may suggest overstocking or obdolescence.
A high turnover rates suggest inventory efficiency.
Yet management must be careful regarding possible stock shortages.
Inventory turnover?
COGS / Inventory, measures how efficiently management mange inventory.
A low turnover may suggest overstocking or obdolescence
A high turnover suggests inventory efficiency.
However, management must be careful regarding possible stock shortages.
DSI?
Days sales in inventory. Measures how long it takes on average to sell the inventory.
365 days / Inventory turnover = Inventory / COGS * 365
High DSI shows flexibility (재고가 많으니까 판매 융통성이 크다는측면), but high stock levels may be considered as inefficient.
DRO?
Days receivables outstanding = Accounts receivables / Sales * 365
A measure for the time it takes on average to collect accounts receivable.
DRO only considers credit sales. If a company has both credit and cash sales, the ratio will be diluted by the cash sales (which have a collection period of zero)
DPO?
Days Payables Outstanding = Accounts payable / COGS * 365
Average time to pay a bill
This ratio produces meaningful results only if COGS mainly represents the cost of purchases (for a retailer) or the cost of material (for a manufacturer) and not the entire manufacturing cost.
Cash conversion cycle?
= working capital cycle
Gap between DPO and DRO
DWC?
Days working capital = DSI (days sales inventory) + DRO - DPO
It represents the time a company needs to finance current assets and thus be able to offer its products or services in the market.
To bridge the gap: mainly by external funds.
Companies often need to pre-finance their operating cycle with capital that must be available simply to ‘keep the business going’.
Capital structure ratio?
Total debt ratio = total debt / total asset.
This analyzes the composition of the funds on the right side of the balance sheet.
Debt to equity ratio?
Called ‘gearing’, and reveals how much funding is provided by lenders versus owners.
A ratio above 1 means the company employs more debt than equity.
The ratio is used in leverage effect formula.
Equity multipler?
Total assets / Total equity = 1+ Total debt / Total equity = 1 + debt-to-equity ratio.
Indication of how leveraged the company is.
Shows how much in assets the company finances with its equity.
Interest coverage and EBITDA-to-interest ratio?
EBIT / interest expense
Measures whether the operating profit is sufficient to cover for the interest charge of the business.
Because EBIT is not a measure of cashflow, sometimes investors, analysts, and controllers prefer to add back depreciation and amortization to EBIT (thus EBITDA)
Net debt to EBITDA? How much is generally considered as fine?
Net debt / EBITDA
Tells how long it would take to pay down net debt with current EBITDA.
Tells the amount of debt the company has and its ability to redeem it.
Any values below 4 are generally considered as fine. Values of 4 to 5 or higher are seen as increasingly dangerous.
How to increase the return the shareholders receive?
And explain the leverage effect formula
Given the formula ROE = net income / owner’s equity,
- Increase the numerator: sell more goods, and/or cut costs.
- Decrease the denominator: lower the amount of equity by replacing it with debt.
Solving the leverage effect formula for ROE = ROA / equity ratio - interest rate x debt ratio / equity ratio
yields ROE = (ROA - interest rate) * total debt / total equity
As long as ROA is higher than the interest rate, an increase in leverage will boost ROE.
Because of decrease in net income (why?), owners must know ________________________.
Since total assets are financed by debt and equity, the return a company makes on its assets must be equal the return on equity plus the return on debt, each weighed by its capital proportion.
ROA = ROE * equity ratio + interest rate * debt ratio
Because of decrease in net income (the higher the debt, the larger the interest payment), owners must know when the leverage effect trade-off makes sense.
Performance measures in logistics
CDR
Delivery reliability (in %) = number of items delivered as specified / total number of delivered items x 100
Supply chain cycle (SCC) = Procurement time + production time + internal inventory time + packaging and shipment time
—> this ratio measures the time elapsing between placement of an order with the company’s supplier and shipping of the finished goods to the company’s customer.
Replacement time: measures the period between triggering of the order for an article and its arrival at the required location
Performance measures in HR
Staff fluctuation rate (in %) = number of employees leaving company in period / average number of employees in period x 100
Absenteeism rate (in %) = number of absenteeism days in period / total number of budgeted working days in period x 100
Employee satisfaction: this is often measured using questionnaires that cover different aspects of employees’ work environment and their satisfaction with these individual aspects.
Performance measures in manufacturing?
TPR
Productivity = produced output quantity / resource quantity consumed
—> this ratio relates an output quality to a resource quality that is consumed in order to produce that output quality
Reject rate (in %) = rejected quantity in period / total quantity produced in period x 100
Throughput time = process occupancy time + transition time + idle time
—> the time that a product takes between the first work operation and the last work operation is measured.
Performance measures in marketing?
PCC
Customer churn rate (in %) = number of discounted customer in period / number of customers at beginning of period x 100
Click Through Rate (CTR) (in %) = number of AdClicks / number of AdImpressions x 100
Price elasticity of demand = relative change in quantity demanded (in %) / relative change in price (in %)
Non-manufacturing costs budget?
What are the costs of the other functions along the value chain that are necessary to produce our goods?
Budgeted income statement?
What is the expected profit to be earned?
The cash budget is a direct expression of management’s willingness to __________________.
High-budgeted cash reserves are a sign of ____________________, while low-budgeted cash reserves indicate more of a ____________ mentality.
Take the risk of insolvency
Risk-averse management
Risk-taker mentality
Motivational aspects of budgeting
Theory says that the highest performance is triggered when a budget is set at a rather difficult level. Thus, setting the budget at a high level will trigger the highest performance.
On the other hand, it must be considered that it will also lead to an adverse budget variance.
Expectation budget, aspiration budget?
Performance x degree of budget difficulty 그려봤을 때, Budgeted performance (budget level) 은 당연히 일직선으로 양의 기울기.
Actual performance 와 닿는 점으로부터 y 축으로 쭉 그은선, 최고점으로부터 y 축으로 쭉 그은선을 각각 Expectation budget, aspiration budget이라고함.
Aspiration budget - actual performance 사이의 간극을 Adverse budget variance 라고 함.
Motivational effects of budgeting
+ to invoke the highest level of actual performance, budgets should be set as a stretch goal and any adverse variances should be considered normal.
- If budgets are set as too difficult, and employees never reach a target, motivation will suffer over time.
- Unattainable budgets may motivate people to take short-term unethical actions, such as budget gaming and data manipulation.
- When budgets are set too high, planning and coordinating the other aspects of the value chain can become awfully difficult and expensive.
—> typical compromise used in business practice is the usage of realistic, but challenging budgets with a reasonable probability of being achieved. This allows for a combination of the planning and coordination function with the motivation function of budgets.
Top-down budgeting, bottom-up budgeting and participative budgeting
+ and - ??
Budgetary slack?
Top-down budgeting:
+ strategic goals are incorporated in budget
+ quicker to set up
- budgets ex Cathedra may not be accepted by operating managers and employees
- no specialized / first-hand market knowledge incorporated.
Bottom-up budgeting (participants: line and operating managers only):
+ ensures line managers’ commitment to meeting the budget
+ specialized / first-hand market knowledge is incorporated
- no alignment with strategic goals
- subject to manipulations (e.g. budgetary slack)
Participative budgeting: mixture
Budget manipulation types?
Budget gaming
- Budgetary slack: underestimate revenues and overestimate costs to make budgets easily achievable to benefit from bonuses and performance rewards
- Budget lapsing: 보도블럭 공사. money is spent at the end of a period, just to avoid the budget being cut in the next period. Sometimes, necessary spending is deferred to the next period just to meet this period’s budget.
Reasons of budget manipulation? Possible to completely avoid it? How to mitigate?
Info asymmetries / hierarchies / personal interests
- Budgeting is a process featuring information asymmetries. Information advantages can be used to achieve individual goals.
- Personal interests of the budget participants may lead to hidden agendas as participants might hide their true intentions in influencing budget goals.
- Budgets often reflect hierarchies and power in a company and can be highly political leading people to dysfunctional behavior.
—> As long as humans are involved in the budgeting process, it is not possible to avoid budget gaming completely. Yet, by getting involved in the budgeting process, managers can mitigate the problem.
Reporting dimensions, order and structure - success factors
- Automated and fast reporting processes
- Short reports
- Connecting performance indicators to strategy
- Comprehensive performance indicators
Management and its functions?
Management is the act of getting people together to accomplish desired goals and objectives.
Functions:
1. Planning
2. Organizing
3. Commanding and leading
4. Coordinating
5. Monitoring
Definition of accounting
Accounting denotes the system that records, analyzes, and reports business transactions of a company systematically to provide useful information to its users.
Accounting is a system because it comprises various elements that are logically connected: individuals, tools, information
An accounting system records business transactions, which is any event that affects the stocks and flows of goods and resources such as inventories and machines.
Management accounting? Efficient utilization of resources?
Is the internal accounting system that supports managers in carrying out management tasks.
For efficient utilization of resources, managers need precise information.
Management control? Strategy?
Control makes sure that management reaches a desired goal, Management control assists managers in ensuring that a company reaches its strategic goals.
Strategy is the sum and combination of all intended activities to bring about a desired future. The most common strategy defined by Michael Porter is cost leadership and differentiation.
Management control is a set of activities, systems, and processes by which managers influence other members to implement the company’s strategy.
Cost elements of management control systems?
Operational planning
Budget preparation
Resource allocation
Performance measurement
Evaluation and employee compensation
The roles of managers and controllers
Management control lies where manager and controller intersects.
A controller combines business expertise with other technical and analytical competencies from accounting, planning, information processing, and process management.
Job?
Is a goal, task or anything a group of people are trying to achieve or accomplish.
Job-to-be-done through outcome-driven innovation
Process
- Define the market: job executor and job to be done
- Uncover the customer’s needs, tied to the JTBD
- Quantify the degree to which each need is under/ooverserved
- Discover hidden segments of opportunity
- Use the data model to innovate
(JTBD) market definition: defining the core functional job
Identify all the products/ services the customer is using in conjunction with yours
Define the JTBD at the correct level of abstraction (e.g. not boil water but prepare a hot beverage for consumption)
Don’t ask “what job does my product do”, but ask “what job is the customer trying to get done”
Rules of core functional job
Functional- not emotional
Active
Free from solution - no technology, product, service or feature (solution agnostic)
Free from ambiguity - clear and concise
Consistency
JTBD Framework Job Map
Job executor - core functional job - job steps
10-20 job steps 가 rule of thumb
Rules of job map
The job map is used to analyze the core job by decomposing it into ideal sequence of steps
Generalized
Ideal
Functional
Format follows the rules (solution agnostic, format, no jargon)
Active
Completeness
Customers measure success of their jobs execution in 3 dimensions
Time
Stability
Output
