Thursday, November 03, 2005

The thinking continues

This post continues where an earlier one left off.

It's about value.

Here are some words that need to be removed from the language of management:

Assets, stakeholders, marketing.

They need to be replaced by values, groups and relationships.

Then we know the value of people in creating enterprise.

Now add back asset, stakeholder and market and you know what you are dealing with as an investor, customer, worker, supplier, neighbour and all the other groups that make the enterprise tick.

Now apply that thinking to Glaxo, Barclays, Department of Health, Homeland Security and Oxfam.

As a 'stakeholder' (person?) you can now make better decisions about organisations.

If we look at the word asset first. Think money. Money is a metaphor for relative value. I can exchange a money unit for labour or products or services.

If we replace the word money for value it only works if we can compare one value with another and money is often used to do just that. But in a global, networked society, money is a bit clumsy.

If we want to use money to measure things like reputation or love, it is out of its depth. If we want to use money to measure the value of an idea, it has its limitations and using money to value relationships is just not possible.

For a long time this did not matter a lot but in the 'weightless economy' it is an issue. In the kick and fumble economy (so called tangible economy that you can kick or drop on your foot - is this a Kumble economy I wonder?) money is used a lot. It is how our accounting systems work.

What we now need is a form of 'money' that can compare the value of, say, reputation in the weightless economy with a tangible machine in the Kumble economy.

Perhaps we can if we look at relationship dependencies, then there is a glimmer of hope. For example, a big generator that creates electricity for a city is a big tangible asset. It goes onto a balance sheet with no trouble and is written off over a number of years. Its value can also be summed up in the relationships that its energy consumption and outputs create, sustain and add to relationships. These include the direct relationship between the vendors, operator and customers and indirect relationships that also accrue.

The extent to which the the thing, the generator (token) has material values (relevant values in a social group) is a measure of its real value. But these values are significant in their relative aspects. Just like using money, there has to be a form of exchange value and this means that the values need to be comparable.

Having the lights on is relatively more valuable if you are cooking compared to sleeping. The relationship value between the generator and the social group will, therefore, change under different circumstances.

The value is then dependent on the environment, at a specific time.

It is also dependent on the extent to which there is knowledge about the benefit of the light and its dependence on the generator and the extent to which awareness is exercised in the brain. Such aware social groups may appreciate put a value on the generator directly or indirectly. But the value will change dramatically when there is an issue (change of circumstance). If the generator stops and the light goes out, the social group will become active. They will want information and a reason for the loss of value. And the value of the generator will decline.

There is no money involved in this it is simply the value of tangible asset in the raw.

So far so good.

More thinking is still needed to be able to identify and measure values.

Picture: Parker Hannifin Corporation is the world's leading diversified manufacturer of motion and control technologies