Inside the Strategy Room
290. Tim Koller Reflects on Three Decades of Valuation at McKinsey
Inside the Strategy Room
•February 12, 2026•28 min
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Inside the Strategy Room•Feb 12, 2026
Why It Matters
Understanding valuation fundamentals is crucial for CEOs, investors, and finance professionals navigating today’s volatile markets and rapid technological change. This episode offers timeless insights that help leaders make informed, value‑creating decisions, making the discussion especially relevant as companies grapple with uncertainty and the pressure to deliver sustainable growth.
Key Takeaways
- •Valuation fundamentals: discounted cash flow, growth, return on capital.
- •Book evolved from 300 to 800 pages, adding sustainability, AI.
- •Tim’s approach survived dot‑com bubble, proved cash‑flow focus works.
- •The book influences executives, analysts, and academic curricula worldwide.
- •Emphasis on long‑term orientation and resource allocation remains critical.
Pulse Analysis
Tim Koller’s story begins in 1987 when McKinsey’s fledgling corporate finance practice needed a common language for financial analysis. A three‑ring binder of core concepts was turned into the first edition of Valuation, a textbook that quickly outgrew its modest 300‑page size to sell over a million copies worldwide. The book’s blend of academic finance, micro‑economics and strategic insight filled a market gap, offering a clear, readable guide for CFOs, consultants and investors. Its success launched a series of eight editions that have become a staple on finance‑professional bookshelves.
The heart of every edition remains the discounted cash‑flow framework, with growth and return on capital as the two levers that drive intrinsic value. Koller recalls being labeled a “Newtonian physicist” during the dot‑com bubble for insisting on cash‑flow fundamentals, a stance later validated as many high‑multiple firms collapsed. By stripping away fleeting market hype and focusing on long‑term value creation, the book reshaped how analysts evaluate companies, influencing both corporate strategy teams and academic curricula. Its emphasis on sustainable, capital‑efficient growth continues to guide executives navigating volatile markets.
While the core methodology stays unchanged, each new edition expands to reflect evolving business realities—adding chapters on sustainability, digital transformation, AI, and sophisticated resource allocation. Contributions from Wharton professor David Wessels and Amsterdam expert Mark Goodhart deepened the accounting and cost‑of‑capital sections, while empirical data on industry‑specific returns on capital give practitioners realistic benchmarks. Today, finance professionals cite Valuation as a practical “cookbook” that can be consulted selectively, reinforcing its role as a living reference that bridges theory and real‑world decision making.
Episode Description
From its origins as an internal three-ring binder to its status as a global reference text, Valuation has shaped how business leaders think about value creation for more than 30 years.
In this episode, co-author Tim Koller joins the co-leaders of our Strategy and Corporate Finance Practice, Andy West and Dago Diedrich, to reflect on the evolution of Valuation, the principles that have remained timeless, and the lessons learned across market cycles, bubbles, and changing executive expectations. Tim also shares his perspective on long-term orientation, disciplined leadership, and the legacy he hopes the book leaves with the business community.
Related Insights
Valuation: Measuring and Managing the Value of Companies
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Show Notes
- Tim Koller reflects on three decades of Valuation at McKinsey - Inside the Strategy Room - Omny.fm
290. Tim Koller reflects on three decades of Valuation at McKinsey
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- Description
From its origins as an internal three-ring binder to its status as a global reference text, Valuation has shaped how business leaders think about value creation for more than 30 years.
In this episode, co-author [Tim Koller] joins the co-leaders of our Strategy and Corporate Finance Practice, [Andy West] and [Dago Diedrich,] to reflect on the evolution of Valuation, the principles that have remained timeless, and the lessons learned across market cycles, bubbles, and changing executive expectations. Tim also shares his perspective on long-term orientation, disciplined leadership, and the legacy he hopes the book leaves with the business community.
Related Insights
[Valuation: Measuring and Managing the Value of Companies]
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