. Bartley J. Madden. 2023. Bartley J. Madden Foundation.
by Bartley J. Madden, is a singular book that consists of an autobiography, an introduction to systems pondering and knowledge generation, and a call for healthcare reform. Madden, retired Managing Director of Credit Suisse HOLT and writer of the 2020 book , spent greater than three a long time in finance. His early research led to the Cash Flow Return on Investment (CFROI) metric, which is widely utilized in asset management. Madden has now entered the philanthropic world with the Bartley J. Madden Foundation.
The book begins with Madden’s winding path into business and finance, which incorporates a level in mechanical engineering, a transient foray into boxing, and a fortunate military deployment in Salt Lake City reasonably than Vietnam. After completing his military service, Madden earned an MBA from the University of California, Berkeley, and commenced his financial profession in 1969 within the investment research department of Continental Bank in Chicago. There he met a securities analyst, Chuck Callardwith whom he founded Callard, Madden & Associates six months later. The two later developed the CFROI metric.
The major focus of is Madden’s quest to raised understand the knowledge creation competency. According to Madden, knowledge creation is the important thing to value creation. Throughout the book, Madden emphasizes the role of systems pondering and the knowledge creation cycle, which he finds useful in formulating economic/business problems and developing solutions. Madden presents the knowledge creation cycle as a pie chart that features , , , and .
This approach allows the user to think creatively a couple of problem and formulate higher solutions than those reached by the widely accepted linear pondering. Although language looks like an odd part of data constructing, Madden points out that language limits our perception. For example, he points out that the founders of Airbnb created a brand new industry by asking, “What is a hotel room?”
A big a part of the book is about how CEOs can use systems pondering to enhance the performance of their corporations, but these concepts apply to all areas of life and business. For those within the investment business, it will be significant to acknowledge corporations led by leaders who promote a culture of data constructing, similar to Ken Iverson of Nucor, may very well be rewarded with above-market returns.
To illustrate the importance of CFROI, Madden reformulates the standard life cycle diagram by linking the fee of capital to CFROI. The cycle begins with , when the firm successfully markets its product and its economic return exceeds the fee of capital. occurs when competitors attempt to copy or improve the originator’s innovation. How quickly competitive decline sets in relies on the innovator’s competitive advantage. Firms then move into the , where they’re merely earning the fee of capital. Finally, occurs when the firm can not earn the fee of capital. This pattern is inevitable unless management recognizes it and tries to reinvent itself.
To illustrate these concepts, Madden presents several case studies of corporations that broke free from years of mature growth to generate value-added returns. First, he presents a transient history of farm equipment manufacturer John Deere from 1960 to 2018. Founded in 1837 by blacksmith John Deere, the corporate spent roughly 4 a long time, from 1960 to 2000, within the mature phase, with CFROI suggesting it was merely earning its cost of capital.
Under the leadership of Robert Lane from 2000 to 2009 and Samuel Allen From 2010 to 2019, Deere embraced the digital world and transformed itself from a product-centric company focused on the corporate’s products to a platform-centric company that helps farmers increase yields and reduce costs. These changes have given shareholders a 20-fold increase of their stock price since 2000.
Another case study examines Cummins, which designs, markets, manufactures and services diesel, electric and hybrid powertrains and related components. From 1997 to 2003, Cummins lost market share within the diesel engine market. However, in 2000, when Solso Team As CEO, he was capable of increase productivity and increase research and development spending. These changes enabled the corporate to supply modern diesel engines that met U.S. Environmental Protection Agency standards while remaining fuel efficient, giving it a competitive advantage over its competitors.
During Solso’s time as CEO, Cummins outperformed the S&P 500 index by about 10 times. Madden points out that skeptics consider Cummins will likely be overtaken by electric truck makers like Tesla. But he points out that this conclusion is predicated on a flaw in linear pondering. Electric vehicles could also be more environmentally friendly than diesel vehicles, but that ignores the environmental costs of generating electricity, manufacturing batteries and producing solar panels.
One area where Madden hopes to make use of his knowledge-building approach to learn society is reforming the Food and Drug Administration (FDA). Researchers on the Madden Center for Value Creation at Florida Atlantic University are pursuing many issues, including overhauling FDA’s procedures. Madden has used his book and a number of other articles to advertise a few of these ideas.
He describes an in depth approach that the FDA could use to alter its procedures to permit the administration of probably life-saving drugs to terminally ailing patients. Not only would this be a way of ensuring compassionate treatment, it could also facilitate the gathering of invaluable information that would allow recent drugs to receive full FDA approval sooner and supply a greater understanding of who would profit most from treatment.
In summary, Madden has written a book that challenges business leaders to think outside the box in a scientific way. It will not be a “how-to” book that gives detailed recipes for fulfillment. Instead, it provides a framework for pondering through difficult problems. Business leaders and investment professionals who can apply a few of the concepts to their decision-making are more likely to be rewarded. As the world continues to alter, Madden’s insights into systems pondering and knowledge constructing make it a worthwhile journey.
