What Is Decision Equity?

While we can discuss the notion of decision equity at many levels, let us begin with a simple definition that will capture its essence. At a fundamental level, we define decision equity as the net present value of the direct and indirect cash flows associated with revenue and margin increments or cost savings that result from the implementation of a strategic decision. In other words, the metric of decision equity captures the long-term financial consequences associated with the identification, selection, and implementation of a higher order strategic choice versus the status quo or an alternate option. One can see that the computational foundations of the concept draw upon the same common principles of financial valuation that several other strategic metrics including customer equity, brand equity, and stock prices draw from. However, as we argue in the remainder of this chapter and the rest of the book, the power of decision equity lies not necessarily in its computation but in its deployment in making strategic choices, understanding their consequences, and estimating their financial impact.