Why Executives Should Start Acting Like Activist Investors

Business conditions are constantly changing, yet most organizations’ capital allocation is suspiciously similar from year to year. Incremental improvements to the investment prioritization process aren’t enough, the authors argue. What leaders need to do is adopt the behaviors of successful activist investors and private equity firms, and apply them to the internal management of funding and resources. This means following three strategies: 1) Maintaining a relentless focus on the differentiators that drive long-term value creation; 2) Creating more nimble investment allocation practices; and 3) Forcing trade-offs in operating resources.

For most organizations, funding levels across business lines and initiatives don’t meaningfully change from year to year. Business conditions, however, are constantly changing. Companies today face an impending earnings recession, disruptive competitors, and fundamental shifts in customer and consumer behavior.


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This article was written by Emily Riley and originally published on hbr.org