Economic Profit is the performance function that delivers shareholder value. The shareholder-base will realise the pragmatic return on their invested capital and stoke the burning platform of LCD strategy [Lean Centric Design will do this]
ROIC=Profit After Tax/Invested Capital: In other words, focus on driving cost and invested capital down and revenue generation up. [Lean Six Sigma 2.0 will do this]
The WACC is basically a hurdle rate for expected returns based on a company’s debt structure and the market conditions.
Companies with high growth and negative Economic Profit are actually destroying value and are not viewed favorably in the marketplace. [Lean Centric Design will counter this]
Focus on Economic Profit improvement will accelerate market value but we do not downplay the importance of revenue growth as it is a driver of ROIC coupled with decreasing invested capital and decreasing cost. Revenue growth provides benefits on both trajectories.
Building in Economic Profit analytical hierarchy levers will influence prioritization of projects and track the financial benefits across portfolios, time and distance with enterprise wide metrics.
[Lean Six Sigma DMAIC, Design for Innovation and Complexity Rationale will do this]