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Intervention by Denise Caruso Read Intervention by Denise Caruso, Executive Director of the Hybrid Vigor Silver Award Winner, 2007 Independent Publisher Book Awards; Best Business Books 2007, Strategy+Business Magazine

SOCIAL TRUST ONSTAGE AT CATALYST — JUNE 23

by Mike Neuenschwander ~ June 18, 2008

If you’ve got some discretionary travel budget (that is, if you’re paid in Euros or Canadian Dollars), you might want to get over to San Diego next week for Burton Group’s Catalyst conference. Among the compelling topics covered at the conference, ’social trust online” (my term) will be taking center stage—and during prime time for the conference. I’m particularly interested to hear Bob Blakley’s presentation on “A Relationship Layer for the Web.” Here’s the abstract:

In real life, we are introduced, we form relationships, we disclose information in the context of those relationships, and we act.

In the Web 2.0 world, we are introduced, we disclose information, and we act.

The relationships, and the expectations they create and embody, are what keep us safe. The absence of relationships makes us unsafe.

We need a relationship layer for the web. Without it, the Web 2.0 Identity layer will remain a vestigial organ. This talk will describe what relationships look like in real life, how they might be modeled in the online environment, and how they would add value to environments which already have identity built in.

And by the way, for those of you familiar with Bob’s Flickr stream, he’s in fact a keen observer of “real life.” So this should be all the more engaging.

Bob’s presentation is followed by Gail Reynolds of Aetna. I love the title of this presentation: “Who Are You, How Do I Know, And Why Do I Care?” Here’s an abstract of the abstract:

What happens if “your” online presence is your estranged spouse, who wants to introduce your liver-function test as evidence of alcoholism at an upcoming child custody hearing? Or what happens if your daughter’s online presence is really you impersonating her to find out what she’s being treated for? Must each company be an identity provider for its constituents? Will consumer-owned identity trends grow? …. The face-to-face storefront paradigm evaporates with millions of widespread constituents, and one erroneous decision could permanently tarnish a corporate reputation.

Eve Maler will then talk about the Vendor Relationship Management (VRM) project, which is something Doc Searls and his crew at the Berkman Center have been working on for quite a while.

On a side note, I won’t be speaking at the conference — for the first time in 8 years! But I will be doing a lot of talking. Catalyst is great for networking. So if you’re in San Diego next week, look me up!

INTANGIBLES IN ANNUAL REPORTS

by Mary Adams ~ June 16, 2008

Thanks to a Mumblr blog posting by an Indian management consultant, I recently read the Infosys annual report. Most of the report looks like the average annual report. But tucked in the back, they include what they call an “intangible assets score sheet.”

The score sheet (found on page 135) uses numerical proxies to try to get to the core of the three major categories of intangibles, including:

  1. External structure – They focus exclusively on clients, using metrics such as growth in revenue, numbers of clients and revenue from repeat business.
  2. Internal Structure – They focus on R&D, technology investment and efficiency. Efficiency is measures through sales and G&A expenses compared against staff and revenue levels
  3. Competencies – They focus on staff levels, age of employees, attrition and value added for different kinds of employees.

This is an amazing start that begins to show make intangibles more tangible to the average analyst. Given the power of intangible information shown in the contest I described in a recent post on XBRL, companies need to learn how to “show” their intangible value to their stakeholders.

Some additional things that I would like to see in this kind of report:

  • External – Metrics around key external relationships with suppliers and partners
  • Internal – Metrics around internal process strength
  • Competencies – Metrics around training expenses and recruiting costs

Infosys is not the first to do this. I will profile others in the future. Do you know of other cases of intangibles reporting to shareholders? Post a comment or send me an email and I will add them to future posts.

INTANGIBLE INVESTMENTS OR DISCRETIONARY OPERATING EXPENSES?

by Mary Adams ~ June 12, 2008

Business Performance Management magazine recently published an interesting article by Anand Sanwal, about OpEx as Investment   He describes and advocates an approach to managing what he calls “discretionary operating expenses.” These “expenses” include spending on marketing, sales, IT, operations, R&D and innovation.

He shares statistics from the Corporate Portfolio Management Association (CPMA)  that roughly 25-40% of corporate operating expenses are, as Sanwal calls them, “discretionary.”

After reading the article, I got on the phone with Anand and had a fascinating conversation. His concepts were developed through his work as VP of Corporate Portfolio Management and Strategic Business Analysis at American Express, Continue reading »

GIVING AWAY INTANGIBLES: WHAT YOU CAN LEARN FROM THE GRATEFUL DEAD

by Mary Adams ~ June 9, 2008

Paul Krugman’s opinion piece in the New York Times, “Bits, Bands and Books”  talks about one of the paradox of the intangibles economy: to monetize intangibles, it is often necessary to give away part of your offering.

He quotes Esther Dyson who said in 1994 that the digital content products such as software, books, music, and movies, would eventually be distributed for “free in order to sell services and relationships.” Krugman marvels at how fast this has happened and explains how the Grateful Dead were pioneers of this new business model because they allowed people to tape their performances in the logic that they would make up the difference through sales of “hats, T-shirts and performance tickets.” This business model is slowly being adopted by many authors and performers.

But Krugman rightly asks the question about what this means to traditional content intermediaries like publishers of books or of newspapers like the New York Times. This kind of business has been basically facilitating the movement of content between creators and consumers. Digital media, including the internet, has disintermediated much of the role of these publishers. Or has it? What is the true function of a publisher in today’s world? Or, put another way, what is their knowledge capital and how could they change the business model and get paid another way? Continue reading »

BLOGGER BEWARE: YOUR REPUTATION IS AT RISK

by Mike Neuenschwander ~ June 6, 2008

The debate over propriety in the blogosphere got just a bit nastier recently in reaction to an article in The New York Times Magazine by Emily Gould. In the article, Emily recounts the experiences that led to both fame and infamy during her stint with Gawker. The piece apparently galvanized a nation. As Simon Dumenco puts it:

A May 25 New York Times Magazine cover story about the hazards of oversharing titled “Blog-Post Confidential” by former Gawker blogger (circa 2006 to 2007) Emily Gould, inspires such vitriol that the Times shuts down the comments function on the online version of her piece after accruing hundreds of frequently vicious comments.

The thing about blogging is that it’s always fun until someone looses an eye… or their identity.

In reflecting on Gould’s and her own experiences, Melissa Lafsky muses whether blogging about your life unavoidably ruins your life-an astute restatement of the observer’s paradox for the Internet age.

One of the best treatments of this topic in publication today is Daniel Solove’s book, “The Future of Reputation.” It’s available online free of charge, so I encourage anyone with even passing interest in this topic to read the book. And you might also want to think twice before mentioning those little details about your life!

THE EFFECTS OF CULTURAL CONDITIONING ON RECIPROCITY

by Mike Neuenschwander ~ June 1, 2008

Friday’s Wall Street Journal included an interesting article by Robert Lee Hotz entitled “Revenge of the Freeloaders.” Hotz discusses the findings of a study that used an economics game to explore the social dynamics of anonymous groups. Apparently, attitudes of free-loaders (those that chose to go-it-alone, rather than join a group) differ widely across cultures. Notably, the study showed how people are often more interested fairness than monetary gain (a concept at the heart of the Law of Relational Risk.) And faced with limited resources, when a loners retaliate against group pressure, they generally target the most generous contributors of the group, assuming them to be the ringleaders.

At first reading, the results of the study may seem foreboding for those of us interested in anonymous (or pseudonymous) online interactions. But in fact I’m thrilled to see this kind of primary research into our instinctual preconditions for collaboration. As I understand it, the researchers in this study used a basic public-good game as the basis for social interactions. So it would be of great value to devise more sophisticated games that can help scientists delve further into the psyches of collaborators and freeloaders. It’s also nice to see this kind of research getting such high level of media attention.

THE MISSING INTANGIBLES INFORMATION IN XBRL

by Mary Adams ~ May 28, 2008

Business Finance magazine recently reported that the Securities and Exchange Commission (SEC) will require that the largest 500 or so companies (by market capitalization) begin to use XBRL by the end of the year with full compliance by 2010.

Extensible Business Reporting Language (XBRL) is a new computer language for the electronic communication of business and financial data. It was developed by an international consortium for open source use for global financial reporting. The hope is to be able to easily access and analyze the written commentary in public filings about the company and its finances. The unstated assumption is that current financial reporting ignores many of the important aspects of business so what a management team says is of growing importance.

But I question whether the information that XBRL and its builders assume is there, really is. That’s because companies are only required to report within the parameters of current accounting practices which were optimized to report on the results and strength of tangibles-heavy industrial companies. These practices do not help much when it comes to reporting on the results and strength of intangibles-heavy companies fueled by knowledge, people, processes, IT and networked business models where key parts of a business may be the responsibility of an external partner.

The importance of this kind of intangibles information was demonstrated by an experiment that was described recently on The PWC Corporate Reporting blog. The experiment involved creating two versions of an annual report Continue reading »

GE’S INTANGIBLES

by Mary Adams ~ May 17, 2008

When I read the report in the Wall St.Journal that GE is going to sell its appliance business, I immediately thought of the great piece in last month’s Strategy + Business entitled Manufacturing’s “Make or Break” Moment.

GE has been in the appliance business since 1907 and was responsible for many firsts: the refrigerator, room air-conditioner and the toaster oven. This sale is happening now as part of the larger story of GE’s earnings troubles and sagging stock price. The idea is to appease investors’ concerns about short-term earnings by generating cash from the sale of this business.

The decision fits the pattern that Kaj Grichnik and Conrad Winkler discussed in S+B (and in their new book Make or Break), that companies see manufacturing as a cash cow and non-core to their business. They ask the question in this article “How important is industrial capacity to a nation’s well-being?” and offer an alternative:

Old, fossilized plant footprints can become nimble networks; confrontational labor relationships can evolve into constellations of joint interest; outmoded supply chains can be transformed into clearly defined, mutually beneficial partnerships; and stolid aging factories can be retrofitted into showcases of lean manufacturing. Only those companies that appreciate manufacturing, invest in technology, and innovate in this field are likely to prosper.

Networks, labor, partnerships, lean manufacturing. These are all intangibles. Yes, the future of manufacturing lies in a company’s ability to manage its intangibles. Continue reading »

IT INTANGIBLES CAN BE MEASURED

by Mary Adams ~ May 6, 2008

I recently read two different blog posts on measuring intangible benefits of IT (information technology) projects. The first by Paul Ritchie More On Intangible Benefits and the other by Tabrez Khan A Case for IT’ s Non-financial ROI.

Both bloggers make the case that intangibles are important but very difficult to measure. I agree that they are important but think it is unfortunate that they are seen as so hard to measure. The field of intangibles and intellectual capital provide a number of important ideas that can be applied in IT business cases. Here are a few.

IT is Intangible: To start with, it is important to recognize that IT is itself a (mostly) intangible investment. I say this because much of IT spending is not capitalized on the balance sheet but, rather, expensed on the income statement. Any analysis of the costs of a project ends up happening outside the accounting system because so much of the spending simply gets expensed.

The only reason for mentioning this is to remind those in IT that intangibles are not something to be ignored or dismissed. They are actually at the heart of almost every business today. Roughly 80% of the value of companies today is intangible, that is, not on the balance sheet. IT is a big part of that. So IT should embrace the study of intangibles.

Intangibles Gain Value From a System: Another important point is that intangibles do not have much stand-alone value. Their value comes as part of a system. Most IT implementations cannot be picked up and moved to another company without a lot of work. This is because they exist in a larger context of the work patterns and skill of the workers that use them. Continue reading »

THE ABSURDITY OF CERTAINTY:BEHIND THE THEME OF INTERVENTION

by Mike Neuenschwander ~ April 18, 2008

I’ve just finished reading Denise Caruso’s book, Intervention: Confronting the Real Risks of Genetic Engineering and Life on a Biotech Planet. I absolutely love it! As the book’s subtitle suggests, Denise recounts the tragedy of how hubris in the biotech industry — compounded by sub-standard risk assessment methods used by government regulators — has blinded us to potentially catastrophic consequences of releasing billions of living, reproducing, evolving man-made organisms the environment, the long-term effects of which are completely unknown.

But Intervention delivers a much broader message, about how the human propensity for hamartia isn’t miraculously expunged by mathematics, statistics, or the scientific method.

In proving her point about assessing the risks of genetic engineering, Denise calls into question the seemingly unassailable position of science in our culture. The book suggests we desperately need “a new kind of science” (to borrow Steven Wolfram’s phrase) — one that accounts for the nature of the beings (i.e., us) who are wielding its increasingly powerful tools. Try as we might, whatever model we create to try and describe reality, our scientific models inescapably say much more about human beings than they do about some objective reality. In the book, Denise exposes our lapses in rationality due to cognitive, social, and technological realities. Such lapses are everywhere in the areas I cover (technology, social trust, and privacy).

So while reading the book, I decided present my views on these issues in a blog post. Admittedly, going into some depth on Denise’s book on the Hybrid Vigor blog (which is Denise’s creation) seems almost self-congratulatory. But I think the larger themes in Intervention are relevant to most of the really difficult problems we’re trying to solve globally today, and understanding these issues will help focus our discussion at Hybrid Vigor. Continue reading »