Shareholder Return

no matter what business or market space you are in, you need to build an understanding of the drivers of shareholder return.  in other words, out of all the things that you do in your business what exactly is it that really drives your return (the dollars in your and your investors pockets).  believe me, it is not everything that you do in a normal day.

take the health care service market space for an example.  total shareholder return within the healthcare market space over the last 10 years has been exceptional.  During the mid-2000s, average annual total shareholder return (TSR) exceeded 40%.  from 2010 to 2013 health care service companies posted an average annual TSR of 18% (Source: Boston Consulting Group)

now why?  what are the drivers of that return?

if you take a hard look at the market space a number of drivers become obvious;

• Growth -- Aging populations and new entrants into the market space due to health care reform
• Value -- the beginning of a focus on patient outcomes and underlying costs which can provide margin expansion.  this is value based health care
• Big data -- the use of big data to identify the best protocol to address specific patient needs
• Genomics -- new and emerging genomic data bases that allow appropriate past history of diseases and protocols to be quickly reviewed
• Patient Empowerment -- use of the internet by patients both within and outside of collective patient groups to find the best provider/protocol for any specific diagnosis -- even at a premium in immediate costs
• Free working capital/current ratio -- the generation of free working capital to fund new products and services as the market space changes around any company
• Statistics -- better statistical analysis of market spaces in total, including the competition

understanding the drivers of TSR in any market space or business segment is critical.

what are your drivers?