Do we face a drop in living standards?

October 23, 2011 by · Comments Off 

I have had some interesting behind-the-scenes conversations with Michael Mandel about the guest post he asked me to write about the post-industrial production economy. (I hope that you will read and comment there)

Here, I would like to take a deeper dive on a question Michael asked me about the the scenario I paint of this knowledge economy production–whether it matches up with today’s goods-based world and whether it might feel like a drop in living standards for some or many people. It’s a goodquestion and here are some thoughts. Read more

Making things and the future of the U.S. economy, A Reading List

April 23, 2011 by · Comments Off 

I have been very absorbed in what (finally) seems to be an accelerating conversation in the media about the future of the U.S. economy. The catalyst is the budget story in Congress but even more, the fact that the recovery doesn’t feel that strong. And the fundamentals are still pretty scary.

U.S. policy and business practice have not focused on the role of manufacturing in our economy. I think there is a lot here we need to understand. Here’s my recent reading list on this subject: Read more

The way knowledge management should be understood – a new book recommendation

April 5, 2011 by · Comments Off 

I first met Edna Pasher last year and was happy to receive a review copy of her new book with Tuvya Ronen, The Complete Guide to Knowledge Management: A Strategic Plan to Leverage Your Company’s Intellectual Capital. Here’s the review that I just posted at Amazon:

I have to admit that when I hear Knowledge Management, I used to think of the technical side of this discipline, the many experts I know in cataloging, storing, accessing and sharing knowledge, especially in its digital form.

This book is an effective reminder that the essence and the urgency of Knowledge Management is not in these technical skills but in the power of the people and shared experiences within organizations across the globe. The stories of successes and failures make a convincing case for the urgency of changing our management attitudes and practices.

It is so powerful because the book is built primarily on stories amassed over the fruitful careers of the two authors. The stories are synthesized in the accompanying text and through simple bullets at the end of each chapter. I’ll probably go back and review the bullets later but what sticks with me are the stories.

The authors don’t hit the reader over the head with this message—but the truth is that the process of knowledge management is actually subversive to industrial-era top-down practices. Rather than threatening us, the authors gently remind us the wisdom of shedding these old practices and adopting new ones that allow knowledge and innovation to flow freely—and fuel growth and the financial results that are still the measure by which business must be measured.

This is a great book that every modern manager should have by their desk—to pick up and flip to the applicable chapter when the old ways of doing business just aren’t panning out.

Reputation and Intangibles – Connecting the dots

February 15, 2011 by · Comments Off 

My last few posts have been about reputation. There are some out there that would ask what the big deal is. What’s different now? Companies have always had employees and customers. Why do they have more influence now?” Why do I need to think about reputation more than before? There are actually several forces driving this change.

The first driver is the shift in the control of the means of production. In the industrial era, a company’s profits were driven by what it owned. Workers had to come to the employer to get access to the means of production. It gave companies a greater level of control over its workers. With the rise of the knowledge economy, however, the knowledge held by employees and, indeed, external stakeholders have become an important part of a corporation’s “means of production.” The knowledge factory relies on the unique contribution of human and relationship capital elements. This shift in the balance of power means that companies have to pay more attention to the interests and priorities of their stakeholders as “partners” in the success of the knowledge factory.

The second driver of the increased focus on reputation is the acceleration of communications. If you didn’t understand this before, you certainly do now given the events of wikileaks, Tunisia, and Egypt. Blogs, Twitter, Facebook and other social networks are just the latest developments in a society that had already developed 24-hour news. It is easier than ever before for anyone to get a message out. Sometimes all it takes is a blog post or a YouTube video by one disgruntled customer to go viral and threaten your reputation in an instant.

The third driver is an increased interest in sustainability and corporate social responsibility. Sustainability is an umbrella term for a number of related trends including corporate social responsibility and triple bottom line. CFO magazine defines sustainability as “the practice of publicizing a company’s environmental and social risks, responsibilities and opportunities…it can be thought of as an environmental-impact statement for the entire corporation, with ‘environment’ defined not only in terms of natural resources and climatological effects but also the economic and social impacts of labor practices, charitable endeavors and governance structures.”

The fourth and final driver is the lack of transparency of intangibles. There is a shocking lack of information available to internal and external stakeholders about the knowledge side of business. So when news does get out about a problem or a failure, then the reaction is swift and often very negative. If your stakeholders don’t understand how your business works and don’t receive periodic information beyond just the financials, then bad news is a warning to get out. The less your stakeholders understand about your business and the less you share about non-financial aspects of it, the more vulnerable you are to severe reactions to bad financial news.

You need to consider all four drivers as you think about managing your reputation. But we ask you to pay special attention to the last driver—intangibles reporting. You have a lot of control over your reputation—if you are getting the kind and quality of information to your stakeholders. And very few companies have developed good reporting on intangibles. That means that the 80% of corporate value that is driven by intangibles is invisible. Stakeholders can only guess at it unless you give them the information they need. This is really the goal of Intangible Capital. Helping you see, leverage and communicate about your intangibles. Because it will help you perform better AND because it will help you get the reputation you deserve.

Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization by Mary Adams and Michael Oleksak.

Facebook and Goldman – Why Zuckerberg is putting his company’s reputation and value at risk

January 25, 2011 by · 8 Comments 

As the Goldman Sachs transaction with Facebook has progressed in recent weeks, I kept thinking about the quotes I read in the Time cover story about their Person of the Year, Facebook founder Mark Zuckerberg:

“The thing that I really care about is making the world more open and connected…Open means having access to more information, right? More transparency, being able to share things and have a voice in the world. And connected is helping people stay in touch and maintain empathy for each other, and bandwidth.” (this was in the hard copy magazine which doesn’t seem to be available on Time’s website)

How does this statement stand up against what Goldman’s deal with Facebook? Read more

Design Constraints for a New American Economy: Why Boeing and every other company has no choice but to change

January 13, 2011 by · 6 Comments 

If you follow me on this blog or on twitter, you know that I worry about jobs and the U.S. middle class. That’s why it may seem contradictory to take the position I did in my recent post on Boeing.

Boeing is in the midst of a grand experiment with its 787. It has “outsourced” a greater degree of design on a scale that is unprecedented. What they have essentially done is create a connected community where suppliers of parts and subcomponents of the jet can collaborate. The individual suppliers are empowered to come up with the best designs they can. Boeing’s job is as a convener and catalyst for the network. The approach reflects their belief that their core competency is in design coordination, assembly and marketing of planes. The belief is that each supplier is more expert in their field than Boeing and, therefore, better equipped to optimize and innovate its piece of the overall product.

But the experiment is not going too well. It hasn’t failed but it has had a lot of delays and problems. So there are lots of people critiquing the whole project. Of special note are the critics who fear that Boeing is letting loose the knowledge of how to build big airplanes and that they (and by extension the U.S.) will never get back. This is not that different than so many other U.S. industries that have outsourced and moved more and more of their production off shore.

Here’s my position. Read more

Four reasons why the old accounting models don’t work and won’t ever be enough to measure the intangible economy

December 17, 2010 by · Comments Off 

Today’s accounting systems keep track of certain types of financial transactions. (and mis-reports intangible financial transactions). There is a need to get good financial information about intangibles. But knowledge intangibles are a different kind of asset. It is hard to imagine a time when financial metrics alone will be adequate on their own to measure the health and performance of intangibles. There are several reasons for this: Read more

Remembering the traditional balance sheet: a wonderful, but outdated, tool (in its current form)

December 16, 2010 by · Comments Off 

The roots of the balance sheet go back to 15th century Venice when merchants were building trading businesses that spanned the globe. They developed ways of keeping records for their businesses. These emerging practices were recorded by a monk named Luca Pacioli and his treatises became the foundation of the balance sheet and income statement that are still used today. The model held up remarkably well through many centuries and came into its own as standards for financial statements were codified in the early years of the 20th century. Public reporting of these statements was begun in response to calls for greater transparency following the Great Depression of the 1930s.
Read more

It’s Time for a Knowledge Economy Balance Sheet

December 14, 2010 by · 1 Comment 

The traditional balance sheet is one of the key financial statements produced by every business. It records all the physical assets owned by a company as of a certain date. It also records monetary liabilities and the equity of the corporation. Together, these two sides of a balance sheet served for centuries to demonstrate the health of an organization by reporting the amount of investment the organization makes in its productive capacity as well as the kind and mix of its assets and liabilities.

But today, the average balance sheet explains only 20% of the value of a company. This is due to the growing importance of knowledge assets which usually are not included on the traditional balance sheet. Read more

Use Value Network maps to understand how your organization works from the bottom up

August 23, 2010 by · 4 Comments 

We usually look at organizational networks at three levels. The first (described as a knowledge factory) is at a strategic level, built on the high-level inventory of an organization’s intangible capital. Today, I’ll talk about the next takes the perspective of the knowledge factory down one more level of detail (third perspective, personal networks comes tomorrow).

This perspective looks at the roles people play in your organization. This is the Value Network methodology described by Verna Allee in The Future of Knowledge (still one of my favorite books on the knowledge economy and why I pursued certification in this methodology*).

This approach involves mapping a network where a specific task or process occurs. The nodes in this network are “roles.” A role speaks to the specific function that a person is playing. This is not their title on an org chart—it is usually more descriptive—such as advisor, buyer, designer, marketer, mentor, partner, problem solver. It is common for a person to serve in more than one role. Read more

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