The State of the Union: the new economic modelApril 3rd, 2009 — Michael Cayley
In the conversation afterward, he shared with us a symbol or diagram that has been kicking around in his internal discussions at the office.
Chris also moderated the ROI & measurement panel that I participated in.
I am hoping that Chris will pop by here to explain what the original thinking is behind the symbol.
If you have read “Introducing Social Capital Value Add” or had me talk you through it, feel free to take a shot in the comments.
I will come back and attach my interpretation of the symbol after Chris sets out his thinking.
Every time I look at it, I think it is time to get rid of the dog (don’t be ridiculous, I am kidding, I love the dog!).
UPDATE: Here is Chris’ description from the comment below …
Hi, Michael…was great to see you in Boston!
What we’re starting to get at here is that while the “balance sheet / income statement” side of the world is obviously critical, it’s not the *only* thing that we should be measuring. It’s also not the only thing that companies (or individuals) should have a universally understandable way of measuring.
The questions we’re asking — what is the balance sheet or income statement for “green-ness?” Or for the connections with family and community? Or the influence of an individual’s network?
We not only fail to currently have the ways to measure these things well, we (in many cases) don’t even have words in the language to represent the concepts.
UPDATE: April 6, 2009 …
Thank you Chris for starting this off & Jenny Ambrozek for your contribution in the comments.
Am I seeing everything through SCVA colored glasses?
The quest to measure the factors that contribute to “stable future” earnings or sustainable earnings beyond the balance sheet or income statement is at the heart of value based management methods like brand valuation, Economic Value Added and Social Capital Value Add.
In this diagram I see that people or “Human Capital is the primary source of competitive intangible earnings for today’s corporations” (p. 43, Introducing Social Capital Value Add). Everything evolves from the bottom/base block.
New breakthroughs in productivity and innovation will come when corporations adopt network management methods that enable them to capitalize emergent possibilities. Hence, the network (i.e. Chris’ red network graph on the left) becomes the most important factor of production. These opportunities can not be sufficiently identified & seized through traditional hierarchical corporate organization or process management methods.
In the network age, or the age of networked individualism as Barry Wellman calls it and I describe as the Individual as Medium, the corporation no longer enjoys an unfair advantage in shaping shared perceived value by dominating broadcast media. They must earn access to social media networks powered by people by aligning themselves with shared social values. This includes environmental values highlighted on the right hand side of Chris’ diagram, universal health & relief from poverty, etc. Scale of access to networks is related to scale of the social value appealed to. So for example, “how I smell” still matters but not on the scale that has been institutionalized in many CPG brands. “Do no evil” grants wider access. Altruism matters.
At the top of the diagram is $. There is a populist sentiment afoot at the moment that makes talking about making money a dirty topic. It is a real shame that a few fraudsters have shaken our confidence in market systems that have lifted more people out of poverty than any other approach. I think one of the points of Chris’ presentation is that markets matter. They have always mattered. They are intrinsic to human interaction. I see the $ in this diagram as recognition that currency evolved as a method of standard measurement to improve liquidity. It enables us to trade apples for oranges when we don’t want oranges. Markets and corporations can drive inefficiencies out of networks. They save us from the dark side of social capital. Lots more to elaborate here, but this post is too long already!
Since Jenny & Chris have already seen my “Introducing Social Capital Value Add” presentation they already know that I dare not underestimate the ability of a simple diagram to relate a complex concept. In the presentation I use Leonardo Da Vinci’s simple Vitruvian Man illustration to relate how the scale of mankind or “Canon of Proportions” around which all of our institutions are designed has permanently changed since broadband connectivity overtook slower connections for the first time in 2004. Chris may be a bit more timely with this one. Da Vinci did not come along and draw this fairly widely recognized diagram until 1500 years after a Roman milatary engineer first wrote about it in a way that stood up to the tests of time.