VALUE BASED MANAGEMENT IN THE NEW ECONOMY

• Main Authors: Cozmiuc Diana, Petrișor Ioan
• Format: Article
• Language: English
• Published: Bucharest University of Economic Studies 2020-09-01
• Series: Business Excellence and Management
• Subjects: digitalization; intangible assets; customer value proposition; key performance indicators; venture capital
• Online Access: http://beman.ase.ro/no103/5.pdf

The main objective of this paper is to investigate the updates brought by the New Economy, especially new business models brought by digitalization, on value-based management. This objective is to see if classic valuebased management and the updates brought by the New Economy conflict or are somehow harmonized or complementary. Another objective is to illustrate the updates brought by digitalization as case object on Siemens as case subject. The paper is focused on value-based management particularities for digitalization products, services, solutions. The context of the paper is digitalization technology and its impact on business and society, digital transformation. The phenomenon is new to society in all and therefore both literature review and case studies are highly relevant. The article is a case study on a top European corporation, both leader in digitalization and excellent value-based management practitioner. The case study is exploratory and descriptive, searching for the connections between digitalization and value. It relies on secondary evidence about Siemens. The questions are how New Economy value patterns work in practice and how do they relate to classic value indicators, net present value of discounted cash flow or its equivalent Economic Value Added. The paper finds a connection between innovation lifecycle and investment approval or capital budgeting. The beginning of the project lifecycle involves investment in intangible assets, business models, an open network structure and is funded by venture capital. As the idea matures close to customer contract negotiation stages, the network structure turns into a project budgeted via program management and equity and debt. The findings show how so-called new capital budgeting methods, venture capital, are reconciled with classic value-based management using equity and debt and Economic Value-Added investment appraisal. Both funding methods have their logic and place in idea lifecycle at Siemens. The paper finds a match between the lean start-up method and early stages of digital offering lifecycle, and a complementarity between venture capital funding methods and equity and debt capital funding methods given by the innovation lifecycle.