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The Nature of ValueHow to Invest in the Adaptive Economy$
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Nick Gogerty

Print publication date: 2014

Print ISBN-13: 9780231162449

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231162449.001.0001

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Allocating to Firms with a Unique Capability Mix

Allocating to Firms with a Unique Capability Mix

Chapter:
(p.89) Chapter Six Allocating to Firms with a Unique Capability Mix
Source:
The Nature of Value
Author(s):

Nick Gogerty

Publisher:
Columbia University Press
DOI:10.7312/columbia/9780231162449.003.0006

This chapter argues that firms possessing many categories of unique capabilities have a greater chance to grow and thrive. The more types of unique capabilities a firm's goods and services offer, the longer it may dominate competitors. But having fantastic innovation or possessing a single powerful capability does not guarantee a firm's success. Hero products and markets are dangerous because fierce adaptive competition shortens the value-creating life span of unique capabilities. The capital allocator or manager needs to assess the duration and value-creating potential of a capability, and only allocate resources to those with high long-term returns on capital (ROC) payoff potential. The high death rate of the new and novel is how adaptive evolution works through the competitive process.

Keywords:   innovation, adaptive competition, value, ino, hero products, capital allocation, adaptive evolution

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