The Imagination Premium: an anticipative performance metric

Abstract

Purpose

The authors offer a new metric for assessing a company's potential for growth that CEO's and leadership teams can actively manage.

Design/methodology/approach

The Imagination Premium metric reflects the value of a company's equity, beyond what can be readily explained by its ability to throw off cash.

Findings

For a CEO, TIP provides support for an argument that investments in future growth are well warranted.

Practical/implications

A negative TIP signals that investors will not even pay for the capitalized value of current cash flow and this usually leads to activist investors, hostile acquisition threats and C-suite turnover.

Originality/value

The article shows executives how to drive the premium investors will pay for corporate growth initiatives. One of the first things strategists can do to manage their company's TIP is a portfolio analysis that looks at how uncertain each current investment is, and whether the whole portfolio is one growth investors will reward with an increased TIP.

Citation

McGrath, R.G., van Putten, A. and Pierantozzi, R. (2021), "The Imagination Premium: an anticipative performance metric", Strategy & Leadership, Vol. 49 No. 3, pp. 2-10. https://doi.org/10.1108/SL-03-2021-0028