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Definition: Value Creation Index CGE & Y
The traditional practice of assessing the performance of the firm was using its financial ratios and methods. The price of a stock can be explained on the basis of its financial parameters but not completely. In order to make a correct assessment we also need to include the non-financial parameters. These mainly include Brand Value, innovation, ideas and concepts which hold their relevance in the global markets today. In most countries it has been observed that these intangible drivers are becoming predominant.
In order to establish a direct relationship between all of these non-financial drivers and the evaluation of a firm a Value creation index has been created by Cap Gemini and Ernst and Young also known as Business Innovation index.
There have been several models to build on the determinants. The study has been conducted across all the industries. The major ones being healthcare, pharma, media and entertainment.
The non-financial factors play a very crucial role in a business to business context in various sectors. However a lot of additions were also done to the list. These were alliances, technology, turbulence, Customer relation management, business environment, talent management and mapping etc.