Wednesday, November 23, 2005

In Memory of Peter F Drucker

It time to talk money. Of course there is the folding stuff (cash to most of us) and e-money. The ERSC fumbles with the idea of other forms of money and there is also what Don Tapscott suggested in his 1996 book that the digital economy is a “new economy based on the networking of human intelligence”.

Evans and Wurster identified that information adds value to things in their seminal book.

In 'Blazing Netshine' I noted that we have more accumulated data and information now that at any time in the past and that it can be corrosive (acting as a rip tide that can undermine the stoutest defence).

There is plenty of evidence that this is so. It is common sense. If information adds value, it can also undermine value.

We use money as a measure of many things and, in doing so rely on its robust reputation. But in a era of so much information with its corrosive capability, can we continue to have so much faith.

I think not. We are in danger of missing early signs that money may not be as reliable as it is cracked up to be.

The new financial reporting demands on companies seem like a good idea to many but are, in fact, an expression of doubt about the usefulness of money for valuing companies. Money is still the tool of choice and yet is being undermined by the people who most need to use its capabilities.

These government backed doubts are dangerous in that they undermine the value of money as a reporting mechanism for corporate reporting.

Worst still are those who would pretend that a wide range of intangibles have financial worth. Typical among these are those measures that try to value brands. Companies may (think they) own brands but the nature and value of brands are owned by the consumer.

Baruch Lev has made it quite clear that the intangible values are many times more 'valuable' that the financial metaphor valuation used by accountants and economists.

We must, therefore, have robust alternatives to money for to trade in the market of social development.

Intangible values are information based. Information, as we have seen, can destroy as much as it can create. When information is used as the basis for knowledge, or our view of certainty, it is very powerful indeed.

There is every reason to believe that we have to be much more aware of this significance.

The pound in your pocket, may quickly become valueless. The other values may be sound but our reliance on money as a metaphor for wealth needs a lot more thought to save a lot of angst which our economies may want to avoid.

These thoughts are not some random idea.

Peter Drucker noted that “Mark Hanna in 1896 knew very well that there are plenty of concerns other than economic concerns... But knowledge, the new resource for economic performance, is not in itself economic.”

In effect, he warned that those of us who have an information and knowledge role and responsibility, public relations practitioners, should note that the Hanna certainty cannot be relied upon.

He said: “As soon as knowledge became the key economic resource, the integration of interests--and with it the integration of the pluralism of a modern polity--began to be lost. Increasingly, non-economic interests are becoming the new pluralism--the special interests, the single-cause organizations, and so on.

Newspapers and commentators still tend to report in economic terms what goes on in Washington, in London, in Bonn, or in Tokyo. But more and more of the lobbyists who determine governmental laws and governmental actions are no longer lobbyists for economic interests. They lobby for and against measures that they--and their paymasters-- see as moral, spiritual, cultural. And each of these new moral concerns, each represented by a new organization, claims to stand for an absolute.

There is thus in the society of organizations no one integrating force that pulls individual organizations in society and community into coalition. The traditional parties--perhaps the most successful political creations of the nineteenth century--can no longer integrate divergent groups and divergent points of view into a common pursuit of power. Rather, they have become battlefields between groups, each of them fighting for absolute victory and not content with anything but total surrender of the enemy.

We need systematic work on the quality of knowledge and the productivity of knowledge—neither even defined so far.”

Drucker well understood that we have to go beyond traditional economic thinking in a networked, knowledge society.

He re-enforced the concept:

We also need to develop an economic theory appropriate to a world economy in which knowledge has become the key economic resource and the dominant, if not the only, source of comparative advantage.

Despite my diversions into the world of functional PR, this really what this blog is about. We have to work on our role in deploying the 'key economic resource'. Elsewhere, I explain why Public Relations has a critical role in this endeavour. This is an endeavour towards Drucker's aim:

Organizations must competently perform the one social function for the sake of which they exist--the school to teach, the hospital to cure the sick, and the business to produce goods, services, or the capital to provide for the risks of the future. They can do so only if they single-mindedly concentrate on their specialized mission. But there is also society's need for these organizations to take social responsibility--to work on the problems and challenges of the community. Together these organizations are the community.

This then, is where the need to understand the value of relationships, the tangible and, especially the intangible token and its value is critical.

At the core of this form of economic activity, social cohesion and social advantage is a discipline that can and should spring from the practice of public relations, a discipline that levers wealth or, to put it another way, the management practice that operates in a market place for mutual knowledge trade and advantage.

The Relationship Value Model defines the quality of knowledge and offers the practice that levers the productivity of knowledge which is why we have to look beyond money. It is only then that we can resolve the Drucker's over-riding imperative society's need for organizations to take social responsibility--to work on the problems and challenges of the community.

Drucker, P (1994) The Age of Social Transformation, The Atlantic Monthly,

Evans, P. and Wurster, W. S. (1999) `Blown to bits', Harvard Business School Press.

Phillips, D (2000) Blazing Netshine on the Value Network

Tapscott, D (1996), The Digital Economy: promise and peril in the age of networked intelligence. McGraw-Hill, New York, p. xiii