---
id: "prereq-valuation-multiples"
type: "prereq"
source_timestamps: ["§ Why Efficiency Isn’t Enough"]
tags: ["finance", "investor-relations"]
related: ["concept-multiple-expansion", "concept-efficiency-ceiling", "concept-growth-blindspot"]
reason: "Without understanding multiple expansion, leaders will incorrectly weigh the value of a dollar saved via efficiency equally against a dollar earned via organic growth."
sources: ["spine"]
sourceVaultSlug: "hbr-seg-spine"
originDay: 1
articleStem: "hbr-tier1-04-ai-for-growth"
sourceUrl: "https://hbr.org/2026/06/companies-are-using-ai-for-efficiency-they-should-use-it-to-grow"
sourceTitle: "Companies Are Using AI for Efficiency. They Should Use It to Grow."
---
# Understanding of Valuation Multiples

To fully grasp the authors' argument, a leader must understand how financial markets value companies — specifically, that **enterprise value derives from a multiple applied to earnings**, and that this multiple expands significantly when investors foresee sustained organic growth (see [[concept-multiple-expansion]]).

**Why it matters:** Without understanding multiple expansion, leaders wrongly weigh a dollar saved via efficiency ([[concept-efficiency-ceiling]]) equally against a dollar earned via organic growth — the exact error behind the [[concept-growth-blindspot]].