Suraj Srinivasan is the Philip J. Stomberg Professor of Business Administration in the Accounting and Management Unit at Harvard Business School (HBS) and faculty cochair of the Strategic Financial Analysis for Business Evaluation program at HBS Executive Education. In this interview, he talks about the financial analysis program's powerful value-creating framework that helps senior executives analyze performance, value a business, and assess global competition.
Our overarching goal is to create an action-oriented framework that participants can use to analyze and value companies in various contexts. For example, we might take an inside-out perspective and do a deep dive into an acquisition, initial public offering, or internal strategy change from the perspective of a general manager, or examine issues from the vantage point of a senior executive looking to present the firm to an audience of outside investors. Or we might take an outside-in perspective of an acquirer trying to value a target or an activist investor looking to force change in a company.
In each case, we delve into the many contexts of a particular leadership challenge—based on our firsthand knowledge of the organization, its operations, and its top executives, as well as the strategic options considered during the actual decision-making process. Then we draw on a wealth of insights from the program participants who view the process through the lens of their diverse industries, functions, countries, and experiences.
First, we test the cases in different HBS MBA courses and select the ones that would help participants best analyze and value firms or businesses within firms. The first step in analysis and valuation is to understand the business model, the risks and rewards, where the firm makes money, and what the challenges are. We consider questions such as: How does this firm add value? Why do we need this company to exist? How do I understand its performance? How do I measure how it’s executing on a strategy? How do I value it?
The reason for starting with strategy is to assess the performance, whether it’s for internal decision-making, investing, purchasing a stock, or executing a merger or acquisition. It could be an analyst or an investor buying for their own portfolio, a CEO evaluating the divisional performance of a number of organizations, or a divisional head assessing performance and presenting it to senior leadership.
Once you understand the strategy, you need to analyze your execution using financial numbers. To assess performance over time or across companies, we need to conduct competitive analysis and benchmarking. We need to consider: How well am I executing this strategy? Is it an execution or a strategy-design problem? How have we performed over time? How will we do in the future? How have we done compared to competitors in the field?
We bring each case to life by putting participants in the shoes of the senior executives involved. Whether they're looking at the challenge through the perspective of a CFO, a CEO, or an investor, participants live the experience. Instead of sitting back and discussing theory, they dive into the cases and create the framework. Then they step back and ask: Where else could this apply? How could it apply to my organization?
You can't become an expert in your field by listening to lectures. You have to do the analysis, perform the valuations, and think on your feet as the context changes. As participants continue to practice through a series of cases that reflect wide-ranging industries and scenarios, they figure out the framework and build the "muscle memory." By the end of the program, they don't just understand the framework—they own it.
Throughout the program, participants practice using Excel-based spreadsheet tools designed for analysis and valuation. They also acquire templates that can be used for standardizing accounting methods, analyzing and comparing companies, and making more accurate valuations.
Our focus is on making financial analysis and valuation managerially relevant for people who are decision-makers, either as investors or as senior executives of the company. We achieve this by immersing participants in the dynamic case method, which was pioneered by HBS. In fact, our hands-on case approach is so effective that most business schools use HBS case studies in their classrooms.
But here's the big difference: Because our faculty worked with the top executives featured in these real-life scenarios, performed the industry research, and wrote the cases based on input from the company's top executives, we go far beyond theory and bring the learning to life. Participants become the case protagonists and place themselves in the role of the executives who eventually make decisions on the problems that the case studies examine.
In past sessions, we've had a diverse mix of participants, from CEOs, COOs, presidents, CFOs, and controllers to general managers, vice presidents, and executive directors. Teams have included directors and audit committee members, strategic planning and business development executives, valuation consultants, and investment analysts.
Senior leaders often tell me how valuable it was for their team members—the people who will be implementing the framework and doing the analysis and valuation—to attend the program with them. For example, a CEO might attend with direct reports, a CFO with the head of M&A, the VP of Strategy with a general manager, or a lead analyst with two or three team members. This not only maximizes the learning value, but also creates a common language for applying the framework across the organization.
Every case is intended to trigger a different "A-ha" moment for each participant. I think that the biggest surprise comes when participants see what they have created in terms of the framework—and how the process can be replicated in their organization. They often tell me, “This is such a systematic process” or "I can apply this to every situation."
We help them figure out how to open up the black box of a company strategy, reflect that strategy in financial numbers, analyze those financial numbers, compare them to other companies, and then tie it all together in a value-creating framework that they can use back at their firm.
