advanced tools for visualizing, measuring and managing intangibles

bengin

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© 2009 benginMapping values

benginAdvanced Tools for Visualizing,

Measuring and Managing Intangibles

5th European Institute for Advanced Studies in Management (EIASM), Workshop on

Visualizing, Measuring and Managing Intangibles and Intellectual CapitalDresden (Germany), 8-9 October 2009 – © 2009 [email protected] – www.bengin.net

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Speaker

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Peter Bretscher,Founder and owner,Engineering Office for Business DevelopmentIngenieurbüro für Wirtschaftsentwicklung, Eggersriet / Switzerland

Function in the Ing.Büro: Advisor to organizations in the design of economic steering and management systems that integrate the intangible perspective

Engineering background (worked 20 years in several functions along the whole value chain of an international R&D and manufacturing company based in Switzerland)

Developed over the last 20 years the “Business Engineering System” (Tools for Business Administration)a MindSet and models for structuring and quantifying the tangible and intangible resources.

In addition he is supporting companies, consultants, and other organizations in innovation and project management, in intellectual property and patent management, and in setting up business plans and defining enterprise strategy

He has initiated and is leading the “bengin” project. Its mission is to facilitate the awareness for and further development of management concepts that enhance the traditional economic model

Since 1994 he is teaching business engineering und business planning at the University of Applied Sciences in St. Gallen, Switzerland. E-Mail: [email protected], Website: http://www.bengin.com/, Blog: http://www.bengin.net/wp/, Twitter: http://twitter.com/peterbretscher

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Agenda

Development of Economy

Innovation of Products- and Economic MindSet as a Product

Two Outpaced Paradigms

The Vector Solution

Conclusion and Outlook

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Development of economic assets

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Relative significanceof economic goods

100

60

80

40

Low middle high state of economic development

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intangible goods

tangible goods

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Development of Business Offerings

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Development of Business Offerings

Business offerings(percentage)

100

60

80

40

20

Low middle high state of economic development

Services

Licensing

Products

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Summary

This are two developments we see in the real reality. Intangibles are (and will be) more and more important.

Intangibles in a form of knowledge (use-how, make-how, think-how) and in a form of intellectual property rights.

In order to enable a sustainable development we need an enhanced theory that has the means for structuring and quantifying this (new) reality.

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«Many of the patterns of nature we can discover only after they have

been constructed by our mind.»

Friedrich von Hayek

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Agenda




The Vector Solution


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Idea to Innovation

Phase of incubation: 70%

Phase of invention: 25%

Phase of innovation: 5%

Examples:Concrete 40 28 20 yearsInforced concrete 22 7 18 yearsAluminium 29 53 26 yearsTelephone ? 14 2 yearsRadio 56 13 2 yearsRadar 29 2 1 yearsTV 22 22 8 yearsComputer 115 9 5 yearsICs 40 2 3 years

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Development of Business Theory(S-Curve of Product Development)

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1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759

Wealthof Nations1776

Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:

· Tangible Assets· Monetary Value Metric

Additional:

· Intangible Assets· Subjective Value Metric

Mises

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Three Worlds – trigger for invention?

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intangible,nonmonetary

Focus: tangible, monetary

Virtual Realities (World 3)Doctrines, Teachings, MindSets, Rules

Real Reality (World 1)

Personal experience (World 2)Subjective worldReal for one person

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World 3: Six interdependent fields

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1776 2000

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1. Political Economies, „Wealth of Nations“, Ground – Work – Capital




1776 2000

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

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2. Business Economies, „Wealth of Enterprises“





1776 2000

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

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3. Teachings to the ManagementBusiness ModelsConsultants






1776 2000

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Additional:


Mises

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4. Bookkeeping






1776 2000

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Additional:


Mises

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5. Laws (legal, paralegal)

4. Bookkeeping






1776 2000

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Additional:


Mises

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6. Chartered Accountants

5. Laws (legal, paralegal)

4. Bookkeeping






1776 2000

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Mises

1750 1800 1850 1900 1950 2000 2050

MoralSentiments

1759


Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:


Additional:


Mises

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Summary

Tools for mapping economy and the rules for planning and reasoning business objects are divised in six interdependent specialized fields of profession.

In order to have an reasonable impact all areas/fields have to work on solutions.

Even if a coordinator would be an idea....I expect, that the development will follow a „swarm behaviour“.

The direction is driven by the need for: (i) a framework that structures the intangibles and (ii) a value-metric that allows calculation with subjective values.

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«Count what’s countable. Measure what’s measurable. Make measurable what’s not measurable.»

Galileo Galilei

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Agenda




The Vector Solution


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Enhancing Paradigms

Deeply ingrained assumptions, teaching programs, mental models, „taken as granted“. They determine how we are aware of the reality and influence our behaviour.

At least 17 paradigms to be revised.

1.Ground, Work, Capital (as resources)... to be substituted by a framework that is based on tangible and intangible resources.

2.Value paradigmValue – as a result of a valuation process – has objective AND subjective aspects / dimensions.A scientifically correct value metric system has to reflect this necessity. Therefore it has to be multidimensional.(Linear measure vaporises the essence.)

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Objects, Attributes, Value-Measures

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Imaginary Numbers

Imaginary Numbers

Unit:iCHF, i$, i€ Subjective Numbers

RealNumbers

RealNumbers

Unit:CHF, $, € Objective Numbers

ResourcesResources

ObjectsObjects

NumbersNumbers tangibletangible intangibleintangible

Complex Numbers

Complex Numbers

Unit:CHF/iCHF, $/i$, €/i€ Vector

Implicit Values

Explicit Values

combined

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Summary

Enhancing this two overhauled paradigms is possible.

(Even if it takes some time.)

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«It is the theory which determines what we can observe.»

Albert Einstein

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Agenda




The Vector Solution


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The Vector

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Value b

Value a

Vector = a + b

Single 2D-Vector4 vectorsof objects

Addingvectors

y

x

y

x

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Vector Type 1

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More samples:http://bh.bengin.com http://www.bengin.net/soft/vektorbeispiele01_d.htm

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Vector Type 1 (Aggregation and Drilldown)

Engine

Chassis

Body / Design

Brand / Image

Functionalitysubjectivecustomer value (of the product)

R&D effectiveness

R&D expenditures / input ressources R&D efficiency

qualitative / subjective

qu

an

titative

/ fina

ncia

lTotal (Compound) P

erform

ance

Drill-Down

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Vector Type 1 (Public Service Departments)

0

20

40

60

80

100

120

0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000

9 Police&Justice

Public Service Departments

Effe

cts

(su

bje

ctiv

e c

itize

n p

ers

pe

ctiv

e

Costs

Performance (of public service departments)

8 Others

7 Healthcare

6 Economy

5 Education

4 Infrastructure

3 Finance

2 Defense

1 Foreign Affairs

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Vector Type 1 (practical application)

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Asking customer(Internet)

Decision cockpit(links internal economic data with answers of customers)

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book value

use value of investment for

investor A

price investor B is willing to pay

price investor A is willing to pay

subjective (intangible) view

objective (financial) view

use value of investment for

investor B

intrinsic value

price

uv B = (p B)2 – (bv)2uv B = (p B)2 – (bv)2

uv A = (p A)2 – (bv)2uv A = (p A)2 – (bv)2

Vector Type 2: Linking „objective“ with „subjective“ axis

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Overpriced Papers? Is the Vector a prognostic tool?

Stock Exchange Value

0

2000000000

4000000000

6000000000

8000000000

10000000000

12000000000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

96

97

98

99

Value Vector

0

1000000000

2000000000

3000000000

4000000000

5000000000

6000000000

7000000000

8000000000

9000000000

0 2E+09

4E+09

6E+09

Explicit Values

Imp

licit

Val

ues

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

96

97

98

99

....a year before the downturn of the classic curve.... ...the Vector Map indicated a change of Coca Cola Amatil.........

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0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

0.00 20.00 40.00 60.00 80.00 100.00 120.00 mV

Food

Media

Services

Electronic

Information Technology

Mechanical Industries

Insurance

Steel

Electricity, Gas

Wood Industries

Bank

Automobil

Real estate

Health

iV

Source: Morgan & Stanley Capital International World Index; Cited in: Sveiby, Wissenskapital; Seite 23; Mi-Verlag 1998

14 types of industry (Sveiby)

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Intangible Assets or Shareholders Profit Expectation?

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80

80

75

70

65

60

55

50

45

40

35

30

25

20

15

10

5

implicit value [i - Mia]

explicit value [Mia]

-

McDonald's

Microsoft IBM

Ford

Coca Cola

The explicit Value and the implicit Value together draw a complete picture about the company’s value and its development.

The question remains:Is the implicit Value given by the real Value of the company?Is it given by some marketing tricks?Which part of it is made by the Shareholders Value Expectation?

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A better model for new decisions

Value Points of 75 enterprises

0

1'000

2'000

3'000

4'000

5'000

6'000

7'000

8'000

9'000

10'000

0 1'000 2'000 3'000 4'000 5'000 6'000 7'000 8'000 9'000 10'000

explicit Values

imp

licit

Va

lue

s

Investors: Attention!

Management could use the potential more effective.

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Tracking the development of an enterprise

Pointer of vector for five years

0 200 400 600 800 1'000 1'200 1'400 1'600

explicit axis [Mio CHF]

0

200

400

600

800

1'000

1'200

1'400

imp

lici

t ax

is [

Mio

iC

HF

]

96

93 94

92 95Question:"What happened in the year 1996?“

Answer:Part of enterprise sold.

2nd Question:Is this loss of intangible values compen-sated by the price received for the sold part of enterprise.

Answer: ?

Ask Auditor – if he’s still available….

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Summary

With Vector 1 it is possible to show any desired values in context.

With Vector 2 it is possible to introduce a standard for subjective values.

After the relativity of time for the physicists 100 years ago, an analogical step can be made by economists with the relativity of value.

It will enable a more sustainable economy.

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When you can measure what you are speaking about and express it in numbers,you know something about it; but when you cannot measure it, when you cannot

express it in Numbers, your knowledge is of meagre and unsatisfactory kind.Lord Kelvin

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Agenda




The Vector Solution


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Summary

I am very optimistic, that the economic theory will reach a higher level of applicability.

An enhanced economic paradigm (in that intangibles and subjective values will count) will improve the reasoning and decision process and in it‘s consequences will enable a new dimension of wealth.

Tree samples of influence we see at that time:

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«Many of the patterns of nature we can discover only after they have

been constructed by our mind.»

Friedrich von Hayek

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Four Main Points

1. Structure of Enterprise

3 Offerings7 Processes

6 Primary-Resources

2. Measures and Metrics

Enhanced System of Measuresthat Integrates Intangibles

and Subjective Metrics

3. Strategy of Enterprise

Outside-Inand

Inside-Out

4. Optimizing Value Net

Fromsupplier of supplier

tocustomer of customer

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Four Main Points

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Back- and Frontside of the Economics MindSet

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ImageFlow of InformationTransparenceKnow-HowGoodwillSense, ClimateIdentificationWork with joyPatentsCopyrightsBrands

Intangible means of production

Imaginary Balanceintangible assets

„subjective“

O IDismissals -Engagements +Outsourcing -Absences -Death --Intell. prop ++Profit-/Loss----------------------------Sum + -

O InRawmaterial -Tools, Means -Wagues Mind -Wagues Hand -Sales Rights +Sales Services +Sales Products +P/L----------------------------Summe + -

HeadworkHandworkToolsManufacturingOriginal costMarginNet SPMargin------------------------

Gross SP

Hidden reserves

Current assets

Fixed Assets____

Outside capital

Equity capital

Security Praise, thankEducation EnlighteningAcceptance Transparence

Konstruktion

Qualitätsgerechte

Fertigungsgerechte

Benutzergerechte

Konstruktion

KonstruktionHidden reserves

Classic balance oftangible assets

„objective“

„subjective“ Values, not tangible, but real „objective“ Values [$, £, ¥. €, CHF]

Imaginary P&L of potential Classic P&L

„imaginary“ business economics „traditional“ business economics

Design of products(properties) Product calculation

Rights

Pro

du

cts

Services

© 1985 / 2008 Peter Bretscher

Subjective Experiences,

Values and Believes

Classic Rules,

Standards and

Value Metrics and Measures

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Back- and Frontside of the Economics MindSet

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ImageFlow of InformationTransparenceKnow-HowGoodwillSense, ClimateIdentificationWork with joyPatentsCopyrightsBrands

Intangible means of production

Imaginary Balanceintangible assets

„subjective“

O IDismissals -Engagements +Outsourcing -Absences -Death --Intell. prop ++Profit-/Loss----------------------------Sum + -

O InRawmaterial -Tools, Means -Wagues Mind -Wagues Hand -Sales Rights +Sales Services +Sales Products +P/L----------------------------Summe + -

HeadworkHandworkToolsManufacturingOriginal costMarginNet SPMargin------------------------

Gross SP

Hidden reserves

Current assets

Fixed Assets____

Outside capital

Equity capital

Security Praise, thankEducation EnlighteningAcceptance Transparence

Konstruktion

Qualitätsgerechte

Fertigungsgerechte

Benutzergerechte

Konstruktion

KonstruktionHidden reserves

Classic balance oftangible assets

„objective“

„subjective“ Values, not tangible, but real „objective“ Values [$, £, ¥. €, CHF]

Imaginary P&L of potential Classic P&L

„imaginary“ business economics „traditional“ business economics

Design of products(properties) Product calculation

Rights

Pro

du

cts

Services

© 1985 / 2008 Peter Bretscher

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Pricing Values?

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REV(Real Enterprise Value)

SPE(Shareholders Profit Expectation)

REV + SPE = TEV= Total Enterprise Value= „Shareholder Value“

Value Track(Ortskurve, REV)immat V

[i]

mat V [$]

mat V [$]

immat V[i]

mat V[$]

Time

Ic-Function

immat V

mat V

Str

uktu

r*)

*) As for example:BSC, EVA, BIG, UPR, B’E….

Intr

oduc

ing

axis

for

inta

ngib

les

M(tangible)

P&L

M(tangible)

BalanceI(intangible)

Balance

I(intangible)

P&L

How to explain?

Stock - Börse

Imaginäre BWL Klassische BWL

Economic Value Architecture & Engineering

Tangible and intangible

assets of an enterprise,

potential of an enterprise,

values of an enterprise

Market for Papers

(Stock-Exchange)

How to determine „fair value“ (price) for a paper?

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Pricing Values?

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REV(Real Enterprise Value)

SPE(Shareholders Profit Expectation)

REV + SPE = TEV= Total Enterprise Value= „Shareholder Value“

Value Track(Ortskurve, REV)immat V

[i]

mat V [$]

mat V [$]

immat V[i]

mat V[$]

Time

Ic-Function

immat V

mat V

Str

uktu

r*)

*) As for example:BSC, EVA, BIG, UPR, B’E….

Intr

oduc

ing

axis

for

inta

ngib

les

M(tangible)

P&L

M(tangible)

BalanceI(intangible)

Balance

I(intangible)

P&L

How to explain?

Stock - Börse

Imaginäre BWL Klassische BWL

Economic Value Architecture & Engineering

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And now?

You are welcome and invited to take part of that journey.

[email protected]

Mobile: ++41 79 650 49 04

Eggersriet, Switzerland

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A long journey begins with just one step.

Chinese

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Thank You Web http://www.bengin.com

Blog http://www.bengin.net/wp/Twitter http://twitter.com/peterbretscher

Special Website http://www.bengin.net/dresden/

benginBeyond Limits of Classic Business Paradigms

© 2009 bengin

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backing slides

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Transformation(M to I)

Q IQ I: Transform -M / +I- New projects- Revisions of offerings- Insourcing/merging-

+Min

+I

-M

in

out

-Iout

R&DQ II

Q II:Generation +M / +I- Daily business- Selling, dispatch- (Re)Production-

ValueGeneration

Q III

Q III: Transform -I / +M- Outsourcing- Leaner production- Transformation

(I to M)

Q IVQ IV:Degeneration -I / -M- Graveyard-

ValueDegeneration

The four Quadrants of Value generation

© 2009 bengin

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(2, 3, n-dimensional)$

% i$

2. QualitativeMetrics hot, cold ...... AAA, A+, B, C

3. Quantitative Metrics

(linear) $

Why Metrics?- comparing, comprehensible, reproducible- Making rationale (and indirect) communication easier.

1. Normative "Metrics"Principles, ....The xx "Commandments"

Axis of time

Mea

sure

s re

duce

nee

dfo

r in

terp

reta

tion

Str

ong

need

fo

r in

terp

reta

tion

$

% i$

$

Possible to calculate with and

visualize 2D-Values

Difficult to visualize.No tools and rules for numerical or

graphical calculations.

Development of (economic) Value-Metrics(Compound Value-Metric System with the subjective, implicit Value axis)

© 2009 bengin

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Bus. Techniquesnew

new

old

old

Technologies

Innovating Business Models

Products+ Services

Products+ Services+ Rights (IP)

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Measuring performance

http://www.performanceprofile.comhttp://www.balancedscoremap.com © 2009 bengin

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2000

00

551

97

648

97

0

500

1000

1500

2500

3000 Mio

0 10 20 30 MiomV

iV

SPE

Initial Base (Value estimation)

Initial Offer, March 24. 2000

Evening 1st Day

1969

2'520

SP

ES

hare

hold

ers

Pro

fit E

xpec

tatio

n

Value (Price) Development of Paper(Shareholders view)

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Real economy

Solutions(Form & Content)

Hardware

Sof

tWar

e Applikations

Operating System Min

dWar

eApplications

Economic. TheoryBasics

New MindWare & SoftWare quantum leap in the simulation and planning of todays economy.

© 2009 bengin

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Basics of 2D-Value-Vector

x, y = two arbitrary properties of an object

y [i$]

x [$]x1 x2

y

x

Illustration 1

Illustration 2

x y x y

Cost Price Turnover Volume [m3]

Transports initialized

Transports finished

CostDeckungs-

beitrag

Budget Rechnung Price Retouren

Medical Properties

Subjective condition

TurnoverMitarbeiter-

zufriedenheit

TurnoverSparten

gewichtetRetouren

Kunden-zufriedenheit

x, y = explicite ("objective") and implicite ("subjective") Value-Properties as a Multi-Value-Compound.

x1 x2 Samples

Sum of balanceSum of Share

PriceShareholder Value

Wagues Turnover Weighted added Value

Price VW Price Porsche Subjective Added Value

© 2009 bengin

59Mapping values

advanced tools for visualizing, measuring and managing intangibles

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