Two Joint and Mutually Reinforcing Objectives

Abstract

In Chapter 3, we introduced three new concepts that in combination constitute what we call The EP Uplift + TSR Alpha Construct. The first was the notion of a Bow Wave of Expected Economic Profit that underpins the share price and market capitalisation of every listed company at every point in time. The second was the idea of a Pair of Economic Profit Bow Waves that could be used to quantify the extent to which a company had created shareholder wealth by either exceeding market expectations over a given measurement period, or by convincing the capital market that it had developed the ability to do so at some point beyond the measurement period. The third was the concept of TSR Alpha, which in combination with the Pair of EP Bow Waves, enabled us to link performance either delivered or expected in the market for a company’s products and services, with the capital market outcomes experienced by shareholders. In this chapter, we will take the thinking one step further by introducing the notion of customer value and shareholder wealth creation as joint and mutually reinforcing objectives in the pursuit of ongoing intrinsic value uplift.