"Using the 'Pyramid of Organizational Development' To Create 'Incremental Alpha'" Article to be published in Strategic Management Quarterly

The article titled "Using the 'Pyramid of Organizational Development' To Create 'Incremental Alpha'"© by Eric Flamholtz is now published in Volume 4 Issue 4 of Strategic Management Quarterly.  It was written for both managers and private equity professionals and examines the factors to creating 'incremental alpha' in organizations.  An abstract of the article is provided below, and a link to the the issue is here: http://smqnet.com/vol-4-no-4-september-2016-smq


The terms "Alpha" and "Beta" are commonly used by invest professionals. The term "Beta" refers to the relationship between risk or risk and return: the greater the risk (of loss) the greater the expected return and vice versa.  "Alpha" is the term used by investment professionals to indicate a differential or incremental value of a company that is unrelated to Beta.

Investment professional of all stripes including Warren Buffett, Mario Gabelli, Carl Icahn and George Soros are typically engaged in the search for Alpha; that is, they want to identify companies to invest in that have created incremental value of a company that is unrelated to Beta. Companies that have accomplished this are sometimes said to have a "moat," (a term popularized by Warren Buffet) or sustainable competitive advantages. Moats can be attributable to a number of factors such as a leading brand (Coca-Cola, Heineken, or Mercedes); proprietary products such as pharmaceuticals; technologies (Walmart), operational advantages of scale (Intel and Cisco) or distribution Anheuser-Busch and Caterpillar); management systems and culture (Starbucks). These same factors are available to smaller, lesser-known companies as well.

This article examines how our frameworks and methods can assist companies in developing incremental Alpha for their own business enterprise!  For example, we helped Starbucks create its management systems.[1]


[1] See Howard Schultz with Dori Jones Yang, Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, Hyperion, 1997.