A SCVA Investment Thesis. Congratulations! Barbara Gray and Brady Capital

Figure1-Performance-vs-Benchmarks-11-13

At various times on this blog and in the ebook I have thanked my MBA classmates and professors. Way back in 2007, they let my interests in social capital invade every conversation and assignment.

In one such case, in our Portfolio Management course, I persuaded my group to adopt a Social Capital Value Add investment thesis. We ended up being over weighted in banks because of the deep data that these companies have on the life cycle of consumers. But we did not have a lot of data to go on and it was a six week experiment. We were outperformed by at least half of our competitors.

Nevertheless, there is a difference between a weak thesis and poor execution. So I am pleased to share this update from Barbara Gray and Brady Capital.

On November 15th last year, we launched our Customer Value Index 200 (CVI 200), a research-based analysis, based on my social capital investment thesis, that provides investors with exposure to the top 10% of North American-listed companies with a market capitalization over $1 billion that score the highest in terms of competitive strength, social attributes, and authentic core values.

.. the CVI 200 (www.cvi200.com) came in with stellar performance in its first year – rising by 41.3% compared to the 32.1% gain in the S&P 500 over this period – an outperformance of 920 basis points. And as shown in Figure 1, the CVI 200 shone against the resource-laden Canadian S&P/TSX Index, which gained only a paltry 12.7%, outperforming it by 2,880 basis points.

To be clear CVI does not employ SCVA’s valuation method, but it is nevertheless, trying to focus on the same drivers and defenders of value.

See the full update here. Congratulations Barbara and Brady Capital!

Social Media for Government Conference, Toronto

Thank you to the organisers of the Social Media for Government Conference in Toronto this week for inviting me to kick things off by leading a three hour workshop.  Thanks also to the folks who attended.  Here are my slides:

It was an interesting challenge to lead an “Introduction” to Social Media. Two years ago when I led a similar workshop in Ottawa, 90% of the room would have had mostly fear and virtually no personal exposure in using social media. This morning, only 10% of the room would have fit this description, yet feedback was that the definitions and strategic frameworks that we went through together were still useful in helping participants process their experiences and adjust their traditional notions of brand and communications for the network era.

For the last 30 minutes we went through this “map” that was developed by Jody Radzik at the Institute for the Future. I did not set out to deliver a full understanding of each of the 13 trends in Government 2.0 that are highlighted during this time (impossible) but this piece is the best that I have seen that encapsulates the overall context of changes shaping up. I asked participants to share a project that they are envisioning or initiative that they have read about that prompted them to decide to come to a conference like this. While this map is a projection out to 2020, we were able to quickly establish that in all of these areas, the future is already here, it is just unevenly distributed.

Collaborative Consumption by Rachel Botsman & Roo Rogers

Entertaining video here and their Booktracker campaign is an interesting memetic approach.

Eric Berlow: How complexity leads to simplicity

The Corporate Spark

Thank you to Social Capital Blog and @peterwmcmahon for bringing Frank Koller’s first book to our attention.  I am looking forward to giving a read.

Here is the Wall Street Journal’s review of Spark. How Old-Fashioned Values Drive a Twenty-First Century Corporation:Lessons from Lincoln Electric’s Unique Guaranteed Employment Program.

The Social Capital Blog and WSJ reviews focus on the issue of guaranteed employment because that is the tack that Koller has taken with the book.  But guaranteed employment is just one of James Lincoln’s four organizational pillars that remain in place to this day.

The others were a management advisory board made up of employee representatives; wages based on piecework, so that the quality and quantity of individual workers’ output can be monitored; and annual performance-based bonuses.

Here is the quote from Lincoln that inspired Koller to explore this story:

“The only way we’ll have any kind of widespread job security in today’s business environment is if we change our thinking as to what makes good management.

Instead of praising corporations that downsize, we need to look at their actions as admissions of failure.

We don’t need layoffs – we need creativity.”

It is easy enough to see why Koller has headed in the direction of job security and guaranteed employment, but I wonder if he zeros in on the wrong point.

It seems to me that Lincoln took his strategy to develop trust with workers.  The most important elements of the quote in my opinion are not the reference to job security but the call for a “change in thinking” and recognition that trust is a critical prerequisite to the organizational creativity needed to maintain sustainable competitive success.

In other words …

We must manage to optimize our enterprises for social capital to thrive in

the new economic model.

I am not interested in reading Koller out of nostalgia for “Old Fashion Values”.  I find it easier to relate to James Lincoln as a visionary, ahead of his time … which explains why so few have followed his example.

My interest in reading Koller’s Spark comes from the opportunity to learn more about experiments in maximizing corporate social capital.

On the other hand, if we need to look at Lincoln as a throw back to mystic better times to sell entrenched aging management, I am all in.

New Section on Internet and Social Capital at Social Capital Gateway

Fabio has launched an new section that highlights only papers that focus on the Internet and Social Capital.

Most of this work has been done over the last few years.

This a great resouce:

http://www.socialcapitalgateway.org/internet.html

Once again, if anyone would like to read and write a review for www.socialcapitalvalueadd.com of any of the papers that you find there, please do not hesitate to contact me.

Crowd Building: 2020 Media Future @ OCAD

Thanks to Walter Derzko for inviting me to join yesterday’s 2020 Media Futures Workshop at the s-Lab (Strategic Innovation Lab) at OCADSuzanne Stein and Greg Van Alstyne did a great job of moderating and facilitating a fairly free wheeling group of thinkers.

It looks like I was the only one using twitter during the workshop or maybe I had the wrong tag? Here are a few thoughts that emerged that could each be turned into a blog post:

  • We think about discontinuity as a threat but the new global success stories will have discontinuity at the heart of a new approach.  Are the incremental gains achieved through “baby steps” and the “go slow”, “fast follower” practices of Canadian business enough to maintain Canada’s position in the world moving forward?  At the moment many are quick to heap praise on the stability of our financial sector.  I remember a few observers noting that growth in Nova Scotia was not effected by the global downturn.  Hmmm. When achieving global success requires embracing discontinuity, what design approaches should we advocate and adopt?
  • How do digital connections qualify/disqualify people for precious face to face time?  Many of us have now experienced the little thrill of having connected with someone online via twitter or a blog exchange and then met them in real life.  As we become more connected, how will the productivity of our face to face time be impacted.  Is it a sign of disrespect if you have not bothered to “google” someone before attending a scheduled meeting with them?
  • Does copyright transform into “identity right”?  Copyright was established to protect the investment and intellectual property of creators for a reasonable time period.  Online is “busting through to reality” (pick up Jesse Schell’s talk on the Future of Gaming at the 10:56mark).  Is the final produced piece of art or software code the point where we need these protections?  When our life stream is “sensed” and iterative design is key to progress, do we need an entirely different set of rights to ensure that individuals have the ability to profit from the digital footprints that they cast off or in other words, how they direct their lives?
  • We must integrate consumers into design & production.  This generalizes to “crowd sourcing” or making sure that we make corporate decisions, not based upon the smartest person sitting at the table at that moment, but based upon having the smartest thinking anywhere available at the table for the moment of the decision.  It is the kind of motive behind the idea for a Seedling Prediction Market that initially drew me into MDes’ (i.e. Masters of Design in Strategic Foresight and Innovation) orbit. This is not really a question for 2020.  I think it is a question that we need to be answering right now to maintain Ontario/Canada’s position in the world.
  • So some “Crowd Building” related design thinking …
  • MIT Tech TV

SCVA in Government: The Value Proposition for Gov 2.0

While SCVA is a corporate valuation and management method, its principals equally apply to government, health care, education and beyond.  All of our traditional institutions are being re-architected around broadband empowered individuals.

Last week I hosted a discussion about how to advocate for the adoption of more productive government that utilizes the full potential of the internet at GovCamp Toronto.  Thank you to Julia Stowell, Omar Rashid and Mark Kuznicki for inviting about 125 of us across the community to come together.

There was great representation from the City of TorontoHere is a shot of city CIO Dave Wallace sitting beside me while I invited participants to join in my discussion thread:

The Value Proposition for Gov 2.0: Outsourcing Risk

The description:

Governments are risk averse . Traditionally there has been very little upside potential for those involved in public service to attack something out of the ordinary. Change is methodical, reactionary – made by attrition. This is the world of late adoptors.

This is a difficult mode for coping with the complex problems of our times and rapid change required to embrace Gov 2.0 (if we would would like to, for example, take advantage of moments of change to maintain or improve Canada’s position in the world).

Perhaps there is an appeal in the prospect of open data?

Governments are the custodians and regulators and third parties are the innovators and risk takers. Whatever works governments can follow and the essential experiments that turn out to be learning experiences will be played out with the investment of third parties, not tax payers.

Are any of these assumptions true? What is the right language to frame these dynamics in terms acceptable to everyone involved?

The session was an opportunity to continue the conversation along these lines that have evolved as a consistent theme for me since the first ChangeCamp.

I had great exchanges with about a dozen different open gov enthusiasts from across government.  I feel comfortable in reporting that yes, this notion that embracing Gov 2.0 as a risk averse strategy, has the potential to resonate within bureaucratic and political circles.  It could be part of messaging that will appeal to late adopters and perhaps get those first trials off of the ground.

What’s next? Was the question that we bounced around the room to wrap up the three hour unconference.

Here are the additional thoughts that emerged at our table:

1. “We have a full plate.” or “We just do not have resources to try that.” These are likely the number one kind of objection that you will hear across departments.  Listen carefully.

Gov 2.0 offers the promise of solutions that share and scale.  Most often, Gov 2.0 is not about adding new lines of service, it is about doing the same things in different, more productive ways.  In most cases, it would be a waste of resources to roll out another year of doing the same old thing without looking for ways to incorporate the internet into routines.

What you may be hearing is code for, “We don’t know how.”, “That sounds risky.”, “We don’t get rewarded for taking on things that are new.”.

2. In his opening comments David Eaves pointed out, there is a long history and many cases where governments have committed to a policy of transparency and/or public reporting in Canada.  Perhaps the #govcamp community can make an effort to examine the decisions that were made to release data and become more transparent in the past, note the reasons why and look for opportunities to apply that rationale to convince governments to apply it in new areas.

3. Tabling an ill considered RFP can be a public relations disaster for government.  Opening up the development of the RFP can help reduce this risk and lead to more progressive ideas being incorporated into governments’ competitive processes.

4. A few times our discussion came back to the need for boiler plate policy and guidelines that can be adopted across government.  We talked about why it is unlikely that anything like Obama’s Memorandum on Transparency will materialize in Canada in the immediate future and there was some enthusiasm that the #govcamp community could lead the development of expectations through the creation of open source guidelines, similar to the resources developed in corporate American by the Social Media Business Council.

Social Capital Value Add in Health Care: Mom’s Losing Battle with Cancer

The principals of Social Capital Value Add have wide application and I think that the health care sector, due to a combination of necessity and opportunity, is going to experience some remarkable changes.

As many close to me know, I dedicated as much time as possible last year to support my Mother (and my Dad) through her losing battle with lung cancer.

It was an eye opening experience.

(Side note: It was also the reason why blogging here was scarce & my personal investment in the development of SCVA has been put on the back burner.)

How little we really know.

How, despite noble intentions, the health care system we experienced ultimately leaves the patient and family responsible for managing care or at least they need to be their own champions in the positioning for limited resources and attention to detail.

I am sure that you can imagine how I felt about the inefficiencies of simple information sharing across nursing shifts.  Now consider this against the backdrop of governments banning use of social media in the workplace and more critically, the possibility of having real time, universal authorized access to all patient information across several hospitals, doctors’ offices, diagnostic and treatment centres.

In truth, outcomes for my Mother would not likely have been dramatically different.  We do not have a cure for cancer.  Through a lot of old fashioned community support, everyone pulled together and I feel she received excellent treatment.  For that I am very grateful to everyone involved.

Nevertheless, it is obvious that as the we try to attend to more people with limited resources there are going to be completely new methods or increasingly gaping failures of our health care system.

I would encourage everyone to take time out to watch this video of Canada’s perennial tech talk master, Don Tapscott.  It was my Mom who way back when gave me Don’s first book, Paradigm Shift as a Christmas gift and in a way turned me on to all this “junk”.  It is the first time that he presented the key ideas from his forthcoming book, “MacroWikinomics“.

In particular, I suggest that those of you who are interested in learning more about the change unfolding within the health care sector pick up Don’s talk at the 52:00 mark.  He opens by describing the health care system as the number three killer in the United States.  He then goes on to describe a collaborative health care system. He finishes with health care at 59:50.

It is an eight minute vision of how health care is going to change.  Must change.

Key elements:

1. Patients get to engage in rich communities related to their health. Isolation is a risk factor.

For more insight on this you should check out Dr. Nicholas Christakis’ 2010 TedTalk on how social networks shape our lives or his book Connected.

2. Idea whose time has come: When you are born the system opens up a web page for you that is sort of like a Facebook for healthcare … half healthcare file and half social network.

3. These health care networks will generate massive amounts of new data to aid the advancement of science and treatment.

4. Healthcare workers (doctors & nurses) engage in communities in a new way.  Less parochial.  To enable this you would need to solve the threat of litigation.  Patients become active and accountable for their health care and they will be very willing to do so.  Being involved is part of getting better.

The example that Don gives: http://www.patientslikeme.com.

The example that I have mentioned while teaching classes or leading workshops is Upopolis at Sick Kids Hospital.

Intel Fellow Eric Dishman has another great health care TedTalk that is well worth watching here.

7 Conditions for Creating Social Capital … Unanticipated Gains book review

Thank you to Sam Ladner, PhD for this! Pay attention to the list of factors ….

Book Review

Small, Mario Luis. 2009. Unanticipated Gains: Origins Of Network Inequality In Everday Life. New York: Oxford University Press.

Reviewed by Sam Ladner, PhD

Can organizations create social capital? Recent research says yes, but such ability comes from an expected place: daycare centres. In his book Unanticipated Gains, sociologist Mario Luis Small comes close to revolutionizing scholarship on social networks and social capital by arguing the daycare centres exemplify the best kind of organization to nurture social capital for its members.

Small investigates whether childcare centres are “effective brokers” of social capital. Social capital refers to the social connections and capabilities people can draw upon. Social capital can include a network of alumni from a prestigious university or knowing which fork to use at the dinner table. Small argues that social capital theorists James Coleman and Nan Lin view involvement in social networks solely as “investments” chosen by rational actors. He even argues that Pierre Bourdieu, the French founder of the term “social capital,” undertheorizes the structural aspects of network membership.

In other words, Small argues that social network theorists have, to date, underestimated the effects of belonging to organizations or institutions when it comes to developing social capital. This represents an opportunity for scholarship. Small argues that actors get involved in networks in particular ways that are structured by the organizations themselves. What are the effects of organizational involvement on social capital? And how can organizations nurture the development of social capital?

Small employs qualitative and quantitative methods to answer this question. He finds broad evidence that using local childcare centres does improve women’s self-reported well being, and he goes on to find out more through in-depth interviewing and ethnography of childcare centres in various neighbourhoods in New York City. Small finds 7 key characteristics for what constitutes an “effective broker” of social capital, or the process by which an individual is connected to another individual or organization.

His findings are somewhat surprising. Social capital is best formed when these 7 conditions are fulfilled.

1.      There are frequent opportunities for interaction. Daycare centres have frequent opportunities for women (and some men) to meet each other.

2.      These interactions are regular. It’s not enough to have frequent interactions; they must be organized around regular and predictable time schedules, such as picking up the children everyday at 6 p.m.

3.      Interactions must be long lasting. Picking up the children was not enough either. Parents who earned the most social capital were those that spent longer periods of time, such as going on field trips, with other parents.

4.      Interactions are minimally competitive. Parents gathering together to plan Christmas parties for their children earned social capital, in part because they were not in competition with others.

5.      Interactions are maximally cooperative. Many of these parents were required to work collaboratively to organize the children’s social events. This collaborative requirement made it possible for parents to learn more about each other.

6.      Interactions involve motivations internal to the organization to maintain these ties. Interactions that were not directly related to daycare business were not as effective in bulding social capital, in part because there was extra social “work” parents would have to do to maintain ties with other parents.

7.      Interactions must involve external motivations to maintain these ties.  Parents who found external motivations, as well as motivations intrinsic to the childcare centre, we more likely to have ties to other parents and other organizations.

Small’s book is not a compelling read. There is a not-so-subtle wonkishness about its depth of methodological detail and engagement with theoretical debates. This should not be too surprising, given Small’s stated purpose of moving social network theory forward. Those interested in social capital would do well to tough out the details, however, for they will find insights about how to develop and nurture social capital through organizational design. Social capital is not finite; Small shows effectively that it can indeed be built.

About Sam Ladner

Sam Ladner currently runs her own firm, Copernicus Consulting Group. She specializes in uncovering insights for organizations designing products, services, or processes. She holds a PhD in sociology from York University. She blogs at http://designresearch.wordpress.com