Think Bigger. Aim Higher. Go Further.

Month: June 2012

How To Overhaul GDP

Self-imposed exile, or land of opportunity?

Gross Domestic Product (GDP) refers to the market value of all officially recognized final goods and services produced within a country in a given period.  Simon Kuznets first developed the concept of the GDP for a US Congress report in 1934.  He immediately said not to use it as a measure for welfare. He later elaborated:

“Distinctions must be kept in mind between quantity and quality of growth, between costs and returns, and between the short and long run. Goals for more growth should specify more growth of what and for what.”

Sheer Madness at best

Today, the concept of Gross Domestic Product is vastly flawed to the point where the tail now wags the dog.  GDP now determines what we produce, who produces it, where it is produced, when and how it is produced.  Further, GDP snuffs out vast amounts of intangible value simply because it cannot be measured as GDP.

Global Policy is not enough

Recently, The G-20 meetings resolved to a very interesting point; to redefine GDP by a new set of metrics.  This will be a long hard journey if done solely in the political domain.   However, if we can make a business case for it, the entrepreneurs will jump on board.  Then, and only then, can the landscape change as rapidly and drastically as will be required to turn civilization around equitably and peacefully.

Corporate Policy is not enough

The irony is that those who perpetrate GDP metrics may be those who would benefit the most from dumping it.  In the following article from FastCompany, How Intangible Corporate Culture Creates Tangible Profits, companies who learn to transform intangible assets to tangible value become more competitive over companies that do not.  The article cites Southwest Airlines as the first airline to strip down all “tangible” amenities, yet they succeed by replacing them with intangible value such as superior customer experience.

Policy, Corporations, Culture and Entrepreneurs need to act as one:

Interestingly, the FastCompany article talks a great deal about culture.  They also use the terms; “information, knowledge, innovation, and wisdom” liberally throughout the text.  This is very inspiring to us at The Ingenesist Project because we use similar language to design and deploy business methods in industries as diverse as Aviation, Construction, and Philanthropy that readily convert between tangible and intangible value.

For Example:

  • The objective of Zertify is to replace the competitive incentives among communities and replace them with a knowledge inventory that matches mentors to protégé.  Teachers and students do not compete, they collaborate in order to be successful.
  • The Value Game creates an environment where one acting in the best interest of their collaborator, acts in their own best interest of value creation.
  • Our Exoquant algorithm provides a direct relatedness between information, knowledge, innovation, and wisdom.

The New Value Movement

When we talk about the New Value Movement, we are trying to specify a new class of business methods that can literally “manufacture” the things that people actually need without any distinction between tangible and intangible.  People need a game that they can win playing by the same set of rules. People need food as much as the need love – there is no walled garden of human needs, except the planet we share.

Then we can measure what people actually produce with it

Gyroscopic Effects And The Tangibility of Intangibles

Countless examples abound where the forces of INTANGIBLE assets align is ways that allows them to detach from their shackles and float like a gyroscope. Invisible internal forces allow new social entities to organize, travel, produce, and consume seemingly without structure or anchors. Yet they influence the most tangible of assets in their path.

Next Economic Paradigm

The next step is to harness this social energy toward sustainable productivity.  Then, and only, then can we arrive at the new economic paradigm (albeit one that may be largely unrecognizable from what we know of today).

The United States has a skills crisis

Millions of smart, motivated, and skilled people are out of work. Meanwhile companies complain that they cannot find the skills that they need to fill open positions.  Predictably, the arguments rage polarized; companies are unwilling to train, the education system is unwilling to teach, etc.  But I don’t think that is the problem.

A Function of Time

The lag time in the traditional competitive cycle remained the same; measured in months for a marketing campaign, or years with a product development cycle, or even decades as with an aircraft program.  Government is also slow to act with election cycles, public debate, and assorted diversions. Likewise, education system curricula can take 3 to 5 years to go through the release process.

Like car crashes, bubbles pop when the system is too slow to respond.

Meanwhile machine enabled social technology is developing so fast that companies do not have time to respond in competitive manner.  Everything becomes a bubble as companies find themselves playing in a game that can crush them at any moment by any number of forces; financial, economic, political, regulatory, public relations, wiki leaks, Facebook, YouTube, Smart Phones, etc.  Even strategic partnerships can unnecessarily and irrevocably tie an institution to the possible misfortunes of associates, with no prior predictability or analysis – until it is too late.

The Tangibility Of Tangibles

The corporate structure that is supposed to be the MOST TANGIBLE assets that an institution can hold is what effectively nails them to the floor.  The bottom line is exactly that, the bottom of the value barrel.  Companies that cannot see past the bottom line, can only see the bottom – and that is where they are staffing today.

The Value Game

Although developed independently, The Value Game (described herehere, and here) resembles a form of Michael E Porter’s 5 forces of corporate competition – except moving at hyper-speed to generate internal forces like a gyroscope.  Players have neither the time nor the incentive to compete with each other, rather, they compete with a game that produces both tangible and intangible assets in a common accounting system creating new value at an astonishing speed.

Of course, the corporation will not disappear any more than industrial revolution eliminated the agrarians. However, you can bet that the differences will be equally profound.

The New Value Tool

The New Value Tool is a repetitive simulation of The Value Game (described herehere, and here) that may be used to determine in advance the true value that may be created when people interact with each other around a shared asset.

The Social Charter

This should not be too difficult to envision since The Value Game plays out daily in the modern corporation where workers acting in the best interest of the corporation (the shared asset) interact with each other in various departments to preserve the asset rather than consume the asset – this is how corporations create social value; through the employment of people and the social utility of their products.

Obviously, corporations that fail to fulfill their social charter likewise fail to sustain value creation in a community.  Those that do, tend to thrive in the Internet Age. The objective of the New Value Platform is to enable communities to organize, as do corporations, except without the burden of corporate governance or the priorities of outside investors.

Drag, Drop, and Dream

The New Value Tool is simple to use; just drag and drop from the Zertify Personal Knowledge Inventory into The Value Game and see what the Exoquant dashboard tells you about your simulation. It may take some practice at first to see how to make the numbers move, but soon it will become intuitive which scenarios create lots of New Value – and will likely sustain themselves in practice.  Scenarios that do not, will likely fail in a particular community and ought not be ventured to practice.

Community Algorithm

Exoquant provides a very simple algorithm relating the creation of data, information, knowledge, innovation and wisdom that govern the Value Game.  However, the weighting of these elements is a component of the “fuzzy math” that entrepreneurs bring to the game.  The empirical data resulting from the application becomes property of the players (community) as their “Secret Sauce” of value creation in their own uniquely optimum economic game.

On the path to a Social Currency

The New Value Tool May become an important system for analyzing existing ventures for optimum social value creation as well as predicting how collections of knowledge assets in a community can optimize their social value in collaboration with each other.  Eventually, the predictability of the outcomes will improve while diversification of projects will eliminate risks such that a social currency can be capitalized and securitized.

Where Competition Has Met It’s Match

(update; as of November 2012, The Monitor Group headed by Michael E. Porter, the subject of this article, declared bankruptcy ending an era of C-Suite omnipotence strategy thinking.  This article compares competitive strategy to collaborative strategy)

***

The B-School staple “Porter’s 5 Forces” has been the mainstay of corporate competitive analysis since it’s creation in 1979 by World regarded Harvard Business School Professor, Michael E. Porter. Porter developed a model of industry analysis in his seminal book,  Competitive Strategy: Techniques for Analyzing Industries and Competitors

In short, a competitive company’s position in a market is threatened by five main forces acting on the corporate asset:

  • new competition,
  • substitute products or services,
  • bargaining power of customers,
  • bargaining power of suppliers,
  • intensity of competitive rivalries.

Any changes in these 5 forces would be cause for the company to re-evaluate their place in the market … thus leading to healthy consulting practices for strategists the world over.

The Rate of Change

In the 1990’s critics began to argue that Porter’s 5 Forces thesis assumes that the forces are static and non-related.  At the time, the world was becoming more dynamic and more interrelated. For example:

  • Buyers, competitors, and suppliers can interact, and even collude.
  • Value cannot be created in the long run by constantly introducing barriers to entry
  • Participants in a market have the ability to plan and respond to competitive behavior.

As a result, they added another Force called “complementors” while introducing rudimentary game theory to explain the role of strategic alliances to the analysis.

Constant Change

Now in the year 2012, we routinely assume that all players can instantaneously access the same real-time dynamic market information from the cloud.  We readily accept that all players will collaborate massively with whomever they want from anywhere in the World.  As a result, we must assume that all five forces will change constantly and rapidly in real time.

Now imagine how 1990’s game theory would manage conditions where the company AND their competitors must continuously re-evaluate their position in a market under the circumstances of continuous change.  In effect, nobody has the ability to compete with each other, they are competing with the game, therefore, they are cooperating to keep the game in play.

Is Collaboration Underrated?

If any player tries to introduce a barrier to entry, THEY risk get knocked out while the game continues without them. In fact, value is created by applications that remove barriers … and brokers are punished. All of these factors cause the game to self energize and improve as players preserve the asset rather than consume it.

The Value Game

It should not be surprising therefore that Porter’s 5 forces now resemble what we call the Value Game that we have described here (and here, and here).  In the ultimate manifestation, however, The Value Game will play automatically through multiagent algorithmic game applications where tangible and intangible assets would be accounted equally in a Value Game. Individual would own, manage, and deploy their secret sauce of knowledge assets through their personal API that interfaces with the game that is most relevant to their highest abilities.

Where competition has met it’s match

Remember that little regarded fact of Capitalism: Markets are efficient where there is perfect information.  This means that if everyone involved in a transaction has the exact same information as everyone else, the true supply can meet the true demand.  Nobody ever said that this must be accomplished through competition especially if collaboration can do it better.

A Value Game For The Aerobics Instructor

In yesterday’s post, we outlined The Value Game for University Outreach where the graduate was the shared asset and the school administration, the alumni association, the entrepreneurial community, and the wider community were the players. Now let’s presume that the shared asset is a small business owner specializing in aerobics instruction.

Using the same players:


A Value Game For The Aerobics Instructor

Suppose that a popular aerobics instructor has 20 students and charges 40 dollars for an 8 class sessions. The local health food store will place 10% coupon on store purchases against the 40 dollar tuition for the duration of the class. If the student bought 400 dollars worth of food from the health food store in 8 weeks, their tuition for the aerobics course would be free.  If they spend more, then the aerobics instructor is paid more.

The health food store already spends 10% of sales on advertising.  As such, the coupon is a superior incentive because it provides 100% ROI on the store’s ad spend.

Social Value Outcomes:

  • The health food store gains loyal repeat customers without advertising or spamming
  • The aerobics instructor earns an entrepreneurial wage making similar coupon arrangements with other health services, sporting goods stores, hotels chains, airlines, adventure tourism companies – anyone whose best interest it is to support her clients’ aspiration. They too benefit from loyal customers (anti-Groupon)
  • The Alumni Association would represent a network of clients, business owners, and database of persons likely to provide contacts, references, coupons, and advice to the aerobics instructor
  • The University can provide gym space, sponsorship, health education classes, and collect data such as; which coupons produce the highest yield for a given alumni product or service and player profile.

The Value Game Filters:

This particular value game automatically filters out the players that are not appropriate for the client.  In effect, the donut shop, tobacco store, or video game outlet would not likely benefit from playing this particular value game as their offering would reflect poorly on social values of the instructor and their coupons would not perform well enough vs. traditional advertising.  Instead, these products would find their own value game, if any.

Social Value Index (SVI)

The Social Value Index is a public statistic that compares the economic value (cost/benefit) of the socially integrated value game with the cost/benefit of the disaggregated advertising/spamming model which robs people of their time, passions, and quality of life.

Data as a shared asset

The SVI provides data that rewards this entrepreneur for doing what she is most passionate about; being knowledgeable and supportive of available health resources. The SVI rewards the store for enabling entrepreneurs in exchange for loyal repeat customers.  The Social Value Index rewards the network of alumni who align with their members (aerobics instructor) to deploy social currency to a community instead of spamvertising. The SVI rewards the University Outreach effort for organizing critical data, information, knowledge, innovation, and wisdom in the community.

At the end of the day: 

The Value Game is important because it allows entrepreneurial business plans that would not normally be viable under a purely monetary model, become highly viable when intangible Social Value (New Value) is added to the bottom line.

 

Powered by WordPress & Theme by Anders Norén

css.php