The senior leaders of a diversified global industrial company recently got a major shock when they took a more fine-grained look at corporate performance. Rather than viewing the company through the usual lens of the top-line growth, economic profit, and return on invested capital (ROIC) of its four divisions, the members of the top team broke things down much further—into 150 business segments. Two-thirds of those segments were falling so short of their economic-profit targets that they alone would have made the company overall miss its targets by 40 percent. The rest, however, were outperforming by enough to skew the averages for the company and each division, giving the appearance of only a 7 percent shortfall. Recognizing the performance disparities helped the company identify a more significant set of opportunities to reallocate resources and stimulate value creation than anything that had been on the table previously.
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To read the original article: Unearthing the sources of value hiding in your corporate portfolio | McKinsey & Company
