Sibos (3)

innotribe_tubemap-01.jpg?width=700This is the fourth in a series of posts leading up to our upcoming sessions at Sibos. In the first posts in this series I talked about how the basic model of value creation is shifting from extraction to attraction, what this means for management and how technology is ensuring that these changes are irreversible.

The message is that technologies are empowering employees, customers and investors both individually and collectively. This trend ensures change will come from the bottom up, not just the top down. You won’t always be in control of the changes. And you’ll see that corporate value creation will shift from being extractive to being attractive.

In our session on Monday, I’ll have the opportunity to explain what we are doing at Smarter-Companies. We are a global network of consultants who share a common viewpoint and toolset to help companies and their stakeholders create organizations better suited to value creation, not just value extraction.

We are creating a movement to arm businesses with practical tools to model value creation, to see their intangibles and to be able to measure them—a system of open source and proprietary tools we call ICounts. The people we train are called ICountants. Our ICountants have all kinds of backgrounds: finance, valuation, IP, risk mgmt, innovation, growth. Some day every businessperson will have basic ICounting skills. Because ICounts will provide information on the intangibles that drive value creation and create competitive advantage.

The investment management industry can use ICounting to better analyze your portfolio companies. And if you want to create value for them, you can teach them ICounting to help them manage better and to communicate more effectively with you.

You can also put ICounting into place to manage your own businesses so that you are focused on not just extracting, but also creating value with your stakeholders.

In the Thursday session at Sibos, we’ll help you get started. We’ll be running live exercises using a couple of the open source ICounts tools that help you understand the importance of intangibles in a business and see what the specific intangibles are that are critical to the business’s ability to create value for its stakeholders.

If you are at Sibos, I hope you’ll join us on the Value Track (by the way, as you can see in the graphic it’s all organized like a subway map, we’re the Orange Line!) If you can’t be with us, I hope that you’ll share your thoughts here. It’s going to be a fun journey. I expect to learn an incredible amount along the way. I promise to share my thoughts live and more upon my return.

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Investment Management 2.0

Tslide32.jpg?width=350his is the second of a series of post leading up to our upcoming sessions at Sibos. In the first post in this series I talked about how the basic model of value creation is shifting from extraction to attraction. This shift demands dramatically different ways of thinking about management in general and investment management in particular.

In the industrial era, the name of the game was productivity. If I am the head of the factory, I will find the most efficient way to do things and tell you how to do it. I use automation to minimize labor cost. To track how I’m doing and what excess goes to the shareholders, I use accounting.

Today, the name of the game is creativity. If I am the head of a company, I will create an environment where smart people tell me how to do things better. It’s about listening, supporting, engaging not only employees but also customers and partners. I use automation to make people smarter.

A simple example of this is Google: their capital is their people, the users of their search engine, their software, their famous culture and their advertising business model. Most of that exists because its employees, its partners, its users are engaged. They have to be getting value from Google to stick around. Value has to be created for all the stakeholders, not just the shareholders.

This doesn’t just apply to companies like Google. It also applies to any business that wants to innovate and grow. You can’t grow for long by just thinking about maximizing short-term profits. You have to think about how you’re creating value for all your stakeholders and keeping them engaged so your organization if constantly learning.

So to measure your success in this digital era, I can’t use accounting, I have to use ICounting. Basically it’s the same process: inventory, classify, measure. We’re just focusing on intangibles, not tangibles. And we measure these assets not by how much they cost but how much value they create for stakeholders. We measure this by asking the stakeholders. It’s the ultimate leading indicator. To generate future profits, you have to create value for your customers and employees. Track the value and the profits will follow.

What's the lesson for investment managers?  Follow the value in your own company and in your portfolio companies.

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Today, we had an amazing day with our partners in Holland, IPR Plaza, TPA and i2c.  We took video and photos and will share more soon.

Now it's on to Dubai!

This is actually the third in a series of posts leading up to our upcoming session at Sibos. In the first posts in this series I talked about how the basic model of value creation is shifting from extraction to attraction and what this means for management in general and investment management in particular.

Remember how I talked about the shift in Boston from an industrial to a digital economy? This whole shift is caused by technology: computers, the internet and social technologies. This latest step, social technologies is a tipping point. Social technologies are not just Twitter and Facebook, but all also all the tools that empower customers, consumers, partners and employees to share, learn and control conversations. These tools give them unprecedented powers that will only grow. And they will fuel alternatives like crowd funding that can replace you completely.

What does that mean for investment managers? It means you have to look at companies differently. But it also means that you need to manage your own business differently. You can’t just think about extracting value, asking what do we get out of owning your stock? You have to think about attraction: why someone would want your money rather than someone else’s money?

This means that you have to ask yourselves questions like: What value do we bring to the system? How do we support a company’s ability to create value for its stakeholders? Remember, your financial capital isn’t as important to the creation of value was when companies needed massive amounts of money to build railroads and factories. They can start those with less financial and more intangible capital.

Think about Facebook. They got some venture capital but not the kind of numbers that you saw in the industrial era. Facebook was built on intangible capital, attracting smart people, partners and knowledge. They only used the public markets to partially cash out the founders. I actually think that Facebook could have and maybe should have skipped the capital markets and raised money from their users. Once they went to Wall St, they ensured that they would be an extractive business, focused on how they can take as much value out of the network without losing members—rather than how can we create the most value for everyone in the network? Their goals are not as well aligned with their users. Some day, someone will replace Facebook with a network where the users get a return on their contribution to the network, where the financial and management systems are aligned around attraction, not extraction.

Technology is behind the changes facing the global investment management industry. The power of this technology is in how it empowers employees, consumers, companies and investors to connect directly. To remain relevant in this market, you have to think about creating value, not just extracting it.

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