Appeal 2007-2745
Application 09/761,671
1 30. Rappaport teaches that business value depends on seven financial
2 value drivers: sales growth, operating profit margin, incremental fixed
3 capital investment, incremental working capital investment, cash tax
4 rate, cost of capital, and value growth duration. While these drivers are
5 critical in determining the value of any business, they are too broad to be
6 useful for many operating decisions. To be useful, operating managers
7 must establish for each business the micro value drivers that influence
8 the seven financial or macro value drivers.
9 31. Rappaport teaches that an assessment of these micro value drivers at
10 the business unit level allows management to focus on those activities
11 that maximize value and to eliminate costly investment of resources in
12 activities that provide marginal or no potential for creating value. Value
13 driver analysis is a critical step in the search for strategic initiatives with
14 the highest value-creation leverage. Isolating these key micro value
15 drivers enables management to target business unit operations that have
16 the most significant value impact and those most easily controlled by
17 management.
18 32. Rappaport teaches that the first step of a value driver analysis is to
19 develop a value driver "map" of the business. This involves identifying
20 the micro value drivers that impact sales growth, operating profit
21 margins, and investment requirements. Armed with a better
22 understanding of micro value driver relationships, the next step is to
23 identify the drivers that have the greatest impact on value.
24 33. Rappaport provides an illustrative table (Rappaport 172:Figure 9-3.
25 Micro and Macro Value Drivers) that presents the sensitivity of
12
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