558  Strategic Management: Analytics
3. Asset health is how well a company maintains and develops its assets. For 
land transportation and logistics companies, the share of electric or hybrid 
vehicles in their fleets can indicate the extent of their exposure to potential 
tax increases on fossil fuels. For an airline, indicators may be the average 
lifetime of the current fleet and the resale or trade-in value of decommis-
sioned aircraft. For a refining company, it could be the average time be-
tween plant turnarounds. For a hotel or restaurant chain, the average time 
between remodeling projects may be an important driver of asset health.
Long-Term Value Drivers  Long-term value drivers reflect a company’s abil-
ity to sustain its core business, capture new growth areas, and develop its 
talent, skills, and culture over the next decade and more. Assessing long-term 
value drivers often requires more qualitative milestones, such as progress 
in selecting partners for mergers or for entering a market.10 In most cases, 
these drivers affect ROIC and growth through multiple categories of short- 
and medium-term value drivers. For example, a company’s ability to attract 
and develop talented employees likely affects its future commercial and cost 
structure health, with higher sales and cost productivity as a result. In an-
other instance, a track record of trading fairly with suppliers could improve 
a company’s reputation with key stakeholders and enable it to charge a price 
premium for its products or attract more talented employees.
We distinguish two basic categories of long-term value drivers:
1. Strategic health consists of a company’s ability to sustain its core business 
and to identify new growth opportunities. For example, the growth of 
market share captured by new entrants to the sector can be an insight-
ful measure of strategic health for a company. New entrants often rely 
on radically different business models that incumbents may find hard 
to compete with. Even small current market shares for such attackers 
could translate into significant strategic threats over the longer term. Il-
lustrations are found when looking back at the success of Ayden in the 
payments sector, Booking.com in the travel sector, or Dollar Shave Club 
and Harry’s in razors and personal grooming. Besides guarding against 
threats, companies must continually watch for new growth opportuni-
ties, whether in related industries or in new geographies. A meaningful 
indicator can be the number of successful ventures or partnerships in 
new business areas. Examples are the successes of Alibaba and Apple 
in building new businesses outside their traditional core, such as Ali-
pay and Apple Pay. In the automotive industry, the share of electric ve-
hicle offerings in the development pipeline of a manufacturer could be 
a meaningful indicator of long-term growth in premium car categories.
10 See Chapter 1 for a discussion of long-term value creation and the evolving context in which compa-
nies view their commitment to shareholders and broader stakeholders. Chapter 6 addresses the chal-
lenges of valuing companies’ approaches to environmental, social, and governance (ESG) issues.