The first edition of Valuation: Measuring and Managing the Value of Companies appeared in 1990. Now in its sixth edition, it has become a core reference book in the offices of senior executives and business-school professors around the world. This excerpt on value-based management appeared in the Quarterly in 1994. We present it along with a more recent video and article about the valuation principles that are most important for executives across the C-suite.
Also in 1990, the firm founded the McKinsey Global Institute (MGI) to generate fresh insights for business leaders by conducting serious research that integrated the disciplines of economies and management. One of MGI’s early, influential reports, excerpted in the Quarterly, focused on service sector productivity in the United States, Japan, and Germany.
Another area of significant intellectual development during the 1990s was pricing. In a series of Quarterly and Harvard Business Review articles, McKinsey’s Mike Marn and his colleagues laid out several core frameworks that continue to exert a strong influence on the discipline. A Quarterly article published in 2003, when the first edition of McKinsey’s pricing book, The Price Advantage, appeared, summarizes several of those core ideas.
As the decade progressed, the Internet began challenging established business models and shaking up management thinking. A hallmark of the era’s best Quarterly articles, such as “Unbundling the corporation” and “Valuing dot-coms after the fall,” was their discipline and rigor in exploring the implications of the new medium. In doing so, they followed in the tradition of foundational articles from earlier in the decade, such as “When and when not to vertically integrate,” and sidestepped the pitfalls of managing by fad instead of fact.