Most CEOs would prefer to create more wealth for shareholders than less. After all, in our society, we create different institutions for different needs: governments to create and enforce laws, charities for good causes and businesses as places to store and grow our wealth.
The job of business is to create wealth.
But most companies also face barriers to that goal. Even if you are able to create a great product or service that will improve the lives of customers, competitors will do all in their power to steal those customers, suppliers will squeeze higher prices for their inputs if they can and even governments will sometimes impose special taxes on businesses deemed to be too profitable.
To take on these challenges, every CEO must ask themselves, ‘Is my business engineered
to created wealth?’
In the five articles that follow, we’ll examine the most common internal barriers that businesses
face in trying to create wealth and how CEOs can remove them and in the process,
engineer their business to create wealth.
Figure 1: Barriers to wealth creation
In the first article, we’ll look at research into why some businesses create wealth, while others destroy it.
The second article looks at the impact internal measures of performance can have on decision making and wealth creation.
The third article addresses capital allocation and what can be done to close the accountability loop for investment decisions.
The fourth article looks at budgeting and planning, calling for a greater focus on how the business will create wealth and less on governance and accountability.
Finally, the fifth article addresses incentive structures, outlining some of the most damaging aspects of the more popular plans before outlining a different approach that is engineered for wealth creation.