Beyond Classic Economic Thoughts and Rules
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Thoughts (models, means, tools, inspirations...) for a complementary view to the Classic Economic Mindset. Integrates subjective value metrics, intellectual assets, economic energy and power... Part of "Project NEMO" (New/Next Economic Model) http://project-nemo.org
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Beyond Classic Economic Thoughts and Rules
- 1. Thoughts for a complementary view to the Classic Economic Mindset Peter Bretscher © 2012 www.bengin.com www.insede.org Google+
- 2. • Documents are part of «Business Engineering Systems», registered Copyright TXu 512 154 • Consulting license No. CG01120612 (for enduser). (Attendees ickc June 12, 2012) • Updates and further information see: http://bengin.net/12/ickc_e.htm
- 3. Agenda • Peter Bretscher Practical need for model that integrates intangibles • Findings & Project • 3 Levels of Enterprise • Values, Visuals & Framework beyond Smith & Co • Links
- 4. PETER BRETSCHER, PRACTICAL NEED FOR MODEL THAT INTEGRATES INTANGIBLES
- 5. • Professional Mechanician (Handwork) • Professional Engineer (Mindwork) (R&D, Production, Marketing, IP-Rights, transdisciplinary trouble-shooting, special tasks....) •∆ between real live and (business) theory • Technology & Knowhow Transfer - no books, no theory, no best practise.... - need for inventing a model realize T’Transfer (one that includes knowledge and other intangibles)
- 6. Obstacles – why? World 1 World 2 World 3 real reality experienced reality explained reality
- 8. 1. Bottom up structuring reality, 3D-Models 2. Metrics that enables quantifying subjective dimension of value
- 9. 1. Structuring the Elements of a Corporation Three levels: Offerings, Processes, Prerequisites Primary- Resources: Products BusinessMeans Documents Know-How Rights Finance Departments: Marketing & Sales Research & Development Fabrication & Procuring Quality & Environment Personnel & Services Logistic & Finance 3 types of processes: Management – Offerings – Background (= „leading“) creating fostering - Products / Goods - Services - Rights / Licences Type of Business Processes Departments of enterprise Primary-Resources 2. Quantifying means (numbers and indicators) - from P&L account to the P&L profile - numbering system for tangible and intangible values tangible Value Products BusinessMeans Documents Know-How Rights Finance Sales Expenses intangible Value Vector iV tV total Value 3. Development of Enterprise (Strategies, options....) - Market-oriented (outside-in) and offerings-oriented (inside-out) „Outside-In“ „Inside-Out“ Compying need of customers/ markets efficiently Solving customer’s needs Making markets for existing potential Four main views be4d0014_2012_e.vsd© 2012, Peter Bretscher, peter.bretscher@bengin.com 4. Closed Loop Business Relations - planning, design, optimize Value Adding Net [VAN], beyond borders - from the supplyer of the supplyer to the customer of the customer System No. System No. Goods Services Rights Goods Services Rights Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance 1. Level: Systems 2. Level: Type of Business 3. Level: Primary Resources Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance after optimizing Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance Products BusinessMeans Documents Know-How Rights Finance before optimizing
- 10. • Economic theory is a product, a tool that no longer fits the needs. • Task Develop a new theory from bottom up that includes (tangible and intangible assets) and that makes subjective valuation quantifyable. • Huge preliminary work 3D Models, 300 GB Registered Copyright INSEDE (open) Institute for Sustainable Economic Development (open) R&D Next economic reasoning system INSEDE
- 11. 3 LEVELS OF ENTERPRISE
- 12. 1. Structuring the Elements of a Corporation Three levels: Offerings, Processes, Prerequisites Primary- Resources: Products BusinessMeans Documents Know-How Rights Finance Departments: Marketing & Sales Research & Development Fabrication & Procuring Quality & Environment Personnel & Services Logistic & Finance 3 types of processes: Management – Offerings – Background (= „leading“) creating fostering - Products / Goods - Services - Rights / Licences Type of Business Processes Departments of enterprise Primary-Resources
- 13. VALUES, VISUALS & FRAMEWORK BEYOND SMITH & CO Vector Type 1
- 14. 2. Quantifying means (numbers and indicators) - from P&L account to the P&L profile - numbering system for tangible and intangible values tangible Value Products BusinessMeans Documents Know-How Rights Finance Sales Expenses intangible Value Vector iV tV total Value
- 15. Vector Type 1 i$ $ Qualitative metric © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type10001_2012_e.vsd % meter sec gallons manhour Subjective metric Objective metric Quantitative metric Metrics Units pounds squaremeter Number of pieces Enterprise
- 16. Vector Type 1 i$ $ Qualitative metric © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type10001_2012_e.vsd % meter sec gallons manhour Subjective metric Objective metric Quantitative metric Metrics Units pounds squaremeter Number of pieces Clusters Business units Countries Products Sales regions Functional departments Balanced Scorecard
- 17. Vector Type 1 © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type10002_2012_e.vsd No rectangle For more complex visualizations For comparison with other vectorprofiles
- 18. Vector Type 1 4 cluster X – axis Y – axis
- 19. Vector Type 1 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 0 50 100 150 200 250 Number of People [mn] ControlUS$[trn] Global Wealth Vectorprofile lowest low high highest Vectorprofile Average-Vector http://bengin.net/beta/04_global_wealth_vector_cs_e.xlsx
- 20. Vector Type 1 http://bengin.net/beta/05_cost_value_vector_e.xlsx 0 10 20 30 40 50 60 70 80 90 100 0 20 40 60 80 100 120 Spending on Customer Service [%] Customer'sperceptionofvalue[%] Cost-Value Vector Manual availability Hotline support Help locate repair service Manual updates Respond to letters Vektorprofil Average-Vector
- 21. Vector Type 1 http://bengin.net/beta/10_global_workplace_gallup_2011_e.xlsx 0 25 50 75 100 125 150 0 50 100 150 200 250 Engaged in % ActivelyDisengagedin% State of Global Workplace (Country-Level Engagements) India China Germany Switzerland Austria USA Australia United Kingdom Croatia Costa Rica Vektorprofil Average-Vector
- 22. Vector Type 1 http://bengin.net/beta/10_fortune500_energy_rect_e.xlsx 0 20 40 60 80 -4 -3 -3 -2 -2 -1 -1 0 1 1 2 Revenues ($ billions) Profits($billions) First nine of Fortune 500 (Energy 2011) AES American Electric Power Constellation Energy Williams NRG Energy Energy Future Holdings Global Partners Calpine UGI none Vektorprofil Average-Vector
- 23. Vector Type 1 0 2,500 5,000 7,500 10,000 12,500 15,000 17,500 20,000 22,500 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 GDP [€ bn] Foreigndebt[€bn] Vector Profile Eurozone, US & Japan (GDP and Foreign debt) US France Spain Portugal Italy Ireland Greece Japan Germany Greece Portug al ©2012INSEDE,IngenieurbürofürWirtschaftsentwicklung,peter.bretscher@bengin.com Spain
- 24. Vector Type 1
- 25. Vector Type 1 http://bengin.net/beta/pwc_ey_2_performancevector_d.xlsx 0 100 200 300 400 500 600 700 0 500 1000 1500 2000 2500 3000 Umsatz[MioCHF] Anzahl Mitarbeiter Performancevector: Vergleich PwC 2011 mit Ernst & Young 2006 PwC Wirtschaftsprüfung PwC Steuer und Recht PwC Wirtschaftsberatung PwC Interne Dienste PwC Summe E&Y Audit and Assurance E&Y Tax and Legal E&Y Advisory Services (C) 2011 peter.bretscher@bengin.com www.performancevector.net E & Y PwC
- 26. VALUES, VISUALS & FRAMEWORK BEYOND SMITH & CO Vector Type 2
- 27. Vector Type 2 i$ $ © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type20001_2012_e.vsd invest expected earnings Business potential of a project
- 28. Vector Type 2 i$ $ © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type20001_2012_e.vsd invest expected earnings Business potential of a project
- 29. Vector Type 2 i$ $ © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type20001_2012_e.vsd invest expected earnings Business potential of a project
- 30. Vector Type 2 i$ $ © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type20001_2012_e.vsd invest expected earnings Business potential of a project
- 31. Vector Type 2 i$ $ © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type20001_2012_e.vsd invest expected earnings (implicit) businesspotential Business potential of a project
- 32. Vector Type 2 i$ $ © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type20001_2012_e.vsd invest expected earnings (implicit) businesspotential Business potential of a project 𝑏′𝑝𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙2 ≥ (𝑒𝑥𝑝. 𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠)2 − (𝑖𝑛𝑣𝑒𝑠𝑡)2 𝑏′𝑝𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 ≥ (𝑒𝑥𝑝. 𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠)2 − (𝑖𝑛𝑣𝑒𝑠𝑡)2
- 33. usevalue[i$] economic value [$] McDonalds $ 3 Starbucks $ 5 uv Use value for coffee at Starbucks instead McDonalds? ($ 5) ($3) 𝑢𝑣2 ≥ (5)2 − (3)2 𝑢𝑣 ≥ (5)2 − (3)2 𝑢𝑣 ≥ 25 − 9 𝑢𝑣 ≥ 16 𝑢𝑣 ≥ 4 𝑢𝑣 = 4 𝑖$
- 34. Vector Type 2 i$ $ © 2012 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 vector_profiles_type20002_2012_e.vsd invest expected earnings (implicit) businesspotential Business potential of several projects
- 35. IBMMicrosoft McDonald’s Ford Coca-Cola Imaginary / immaterial Value [i$] 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Monetary Value [$]
- 36. „likely-standard“ Upper limit Standard Implicit Potential [i$] 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Monetary metrics [$] Lower limit
- 37. WHAT TO MAKE WITH POTENTIAL
- 38. Image Flow of Information Transparence Know-How Goodwill Sense, Climate Identification Work with joy Patents Copyrights Brands Intangible means of production Imaginary Balance intangible assets „subjective“ O I Dismissals - Engagements + Outsourcing - Absences - Death -- Intell. prop ++ Profit-/Loss ---------------------------- Sum + - O In Rawmaterial - Tools, Means - Wagues Mind - Wagues Hand - Sales Rights + Sales Services + Sales Products + P/L ---------------------------- Summe + - Headwork Handwork Tools Manufacturing Original cost Margin Net SP Margin ------------------------ Gross SP Hidden reserves Current assets Fixed Assets ____ Outside capital Equity capital Security Praise, thank Education Enlightening Acceptance Transparence production Designed for Designed for Designed for user’s needs quality Hidden reserves Classic balance of tangible assets „objective“ „subjective“ Values, not tangible, but real „objective“ Values [$, £, ¥. €, CHF] Imaginary P&L of potential Classic P&L „imaginary“ business economics „traditional“ business economics Design of products (properties) Product calculation Rights Products Services © 1985 / 2008 Peter Bretscher © 1985/2010 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 c_map000_2010_e
- 39. Image Flow of Information Transparence Know-How Goodwill Sense, Climate Identification Work with joy Patents Copyrights Brands Intangible means of production Imaginary Balance intangible assets „subjective“ O I Dismissals - Engagements + Outsourcing - Absences - Death -- Intell. prop ++ Profit-/Loss ---------------------------- Sum + - O In Rawmaterial - Tools, Means - Wagues Mind - Wagues Hand - Sales Rights + Sales Services + Sales Products + P/L ---------------------------- Summe + - Headwork Handwork Tools Manufacturing Original cost Margin Net SP Margin ------------------------ Gross SP Hidden reserves Current assets Fixed Assets ____ Outside capital Equity capital Security Praise, thank Education Enlightening Acceptance Transparence production Designed for Designed for Designed for user’s needs quality Hidden reserves Classic balance of tangible assets „objective“ „subjective“ Values, not tangible, but real „objective“ Values [$, £, ¥. €, CHF] Imaginary P&L of potential Classic P&L „imaginary“ business economics „traditional“ business economics Design of products (properties) Product calculation Rights Products Services © 1985 / 2008 Peter Bretscher © 1985/2010 Peter Bretscher www.bengin.com – peter.bretscher@bengin.com Part of Business Engineering Systems – Registered Copyright TXu 512 154 c_map000_2010_e
- 40. Economic Value Architecture & Engineering © 2000/2012 Peter Bretscher, www.bengin.com peter.bretscher@bengin.com, www.insede.org, part of Business Engineering Systems, registered Copyright TXu 512 154 ecoval_pc000158_2012a_e.vsd 1. Stock exchange 2. Enterprise potential 3. Communicating values and progress
- 41. REV (Real Enterprise Value) SPE (Shareholders Profit Expectation) REV + SPE = TEV = Total Enterprise Value ≈ |Shareholder Value| Value Track over time (Ortskurve, REV)immat V [i] mat V [$] mat V [$] immat V [i] mat V [$] Time Ic-Function immat V mat V Structure*) *) As for example: BSC, EVA, BIG, UPR, B’E…. Introducing axisfor intangibles M (tangible) P&L M (tangible) BalanceI (intangible) Balance I (intangible) P&L How to explain? Stock exchange enhanced nonmonetary classic monetary Economic Value Architecture & Engineering © 2000/2012 Peter Bretscher, www.bengin.com peter.bretscher@bengin.com, www.insede.org, part of Business Engineering Systems, registered Copyright TXu 512 154 ecoval_pc000158_2012a_e.vsd
- 42. + $ / + i$ Strategic modes – build – grow – reduce – kill - $ / - i$ + $ / - i$ - $ / + i$ + i$ - + $ - grow potentialinvest money build potential make use-value earn money sell table silver show incompetence to use potential build kill reduce
- 43. FURTHER LINKS
- 48. Other slides
- 49. Time · Abolition of inconsistencies · Suiting the terms, wording, metrics, formulas to the new real reality · Joung generation as multiplier · Activity: Solving puzzles 4. „common“ science higher level Base: The Paradigm · Activity: Solving puzzles · Limited catalog of problems · Not radically innovative · Precision of information · Perfecting tools and instruments · Paradigm to be weakened · Insecurity of specific science · Rival theories · Discussion about fundamental principles · Coexistence of supposed incompatible MindSets · Polarisation of opinions · New candidates for paradigm · New paradigm to be conceived Changeofparadigm Switchtoanewpointofview Paradigm shift in economic understanding (Steps in mindware development) 1. „common“ science classic base 2. Crisis in the theory 3. Scientific revolution Anomalies, Crisis in the reality Explanation model fails Literature: Hochuli Gerhard R.: Das Wesen wissenschaftlicher Revolution, Herbsttagung Club NTB, 1983 Kuhn Thomas: Die Struktur wissenschaftlicher Revolutionen, Suhrkamp Taschenbuch 25, Frankfurt 1981 © 2009/2010 Peter Bretscher www.bengin.com peter.bretscher@bengin.com Part of Business Engineering Systems, Registered Copyright TXu 512 154
- 50. 1750 1800 1850 1900 1950 2000 2050 Development of Business Theory (S-Curve of Product Development) Moral Sentiments 1759 Wealth of Nations 1776 Adam Smith Marx Gauss Towne Taylor MS-DOS Keynes Schumpeter Classic: · Tangible Assets · Monetary Value Metric Additional: · Intangible Assets · Subjective Value Metric Mises © 2009/2010 Peter Bretscher www.bengin.com peter.bretscher@bengin.com Part of Business Engineering Systems, Registered Copyright TXu 512 154 s_shape002-01_e.vsd 1782 Anna Goeldin Last witch beheaded (Switzerland) 64 Bit 32 Bit 16 Bit 8 Bit 4 Bit Rational MindSet I Rational MindSet II
- 51. shirtrg_2012_e.vsd Smith: Moral Sentiments Smith: Wealth of Nations Soros I believe that the failure is more profound than generally recognised. It goes back to the foundations of economic theory.... 12. April 2012 – Berlin – www.ineteconomics.org + Intangible Assets + Vector based Value metrics (objective and subjective) http://ineteconomics.org/sites/inet.civicactions.net/files/ Soros%20SpeechBerlin%20INET2012.pdf © 2012 Peter Bretscher, peter.bretscher@bengin.com, www.insede.org
- 52. Limit of new techniques Limit of conventional techniques Use-Value Hand – Work + Head - Work Tangibles + Intangibles Potential with new techniques
- 53. Hardware Operating System Application Application Economic Theory Real Economy Solutions (Form & Content) MindWareSoftWare Professional solutions beyond classic limits Basics new_software_and_mindware_2012_e.vsd© 2012 Peter Bretscher, peter.bretscher@bengin.com Limit of new techniques Limit of conventional techniques Use-Value advanced solutions Hand – Work + Head - Work Tangibles + Intangibles Solutions beyond old limits Objective values + Subjective values
- 54. Plan your work Work your plan Consulting Other influences – beyond economic reasoning © 2012 Peter Bretscher insede_impact_chart01_e.vsd 1750 1800 1850 1900 1950 2000 2050 Development of Business Theory (S-Curve of Product Development) Moral Sentiments 1759 Wealth of Nations 1776 Adam Smith Marx Gauss Towne Taylor MS-DOS Keynes Schumpeter Classic: · Tangible Assets · Monetary Value Metric Additional: · Intangible Assets · Subjective Value Metric Mises © 2009/2010 Peter Bretscher www.bengin.com peter.bretscher@bengin.com Part of Business Engineering Systems, Registered Copyright TXu 512 154 s_shape002-01e 1782 Anna Goeldin Last witch beheaded (Switzerland) 64 Bit 32 Bit 16 Bit 8 Bit 4 Bit Rational MindSet I Rational MindSet II INSEDE R&D Next economic reasoning system Accounting Legal Audit VWL Volkswirtschaftslehre / political economy BWL Betriebswirtschaftslehre / Business Administration INSEDE enabling sustainability
- 55. Rational MindSet I Rational MindSet II Techniques Technologies high low low high Methods for Mind, Business Models Two Directions of Innovation (Technology and Techniques) innovation_techniques_and_technologies_e.vsd ©2012 Peter Bretscher innovation_techniques_and_technologies_e.vsd
- 56. target ways means chances Option A Market (land – labor – capital) Resources (tangible & intangible) © 2011 Peter Bretscher, bengin.net, insede.org Option B Enterprise Merry-Go-Round badmin_bengin_002_e.vsd Strategic starting point Strategic variables Strategic variables Strategic starting point needs needs needs factors of production top–down strategy bottom–up strategy The two strategic business options in balance
- 57. Development of (economic) Value-Metrics (2, 3, n-dimensional) $ %|i$ 3. Quantitative Metrics (linear) (linear) $ Why Metrics? - comparing, comprehensible, reproducible - Making rational communication easier. Time axis Measuresreduceneed forinterpretation Strongneedfor interpretation $ %|i$ $ Possible to calculate with (and visualize) 2D-Values Difficult to visualize. No tools and rules for numerical or graphical calculations. 2010 2010 hot, cold ...... AAA, A+, B, C 1. Normative Metrics Principles, ....the xx "Commandments" 4. Quantitative Metrics (multidimensional) 2. Qualitative Metrics pc000224_e Only multidimensional metrics makes it possible to treat multidimensional value aspects in that kind that coherence remains intact and visualizable (even objective and subjective values). © 2009/2010 Peter Bretscher www.bengin.com peter.bretscher@bengin.com Part of Business Engineering Systems, Registered Copyright TXu 512 154
- 58. Engine Chassis Body / Design Brand / Image Functionality subjective customer value (of the product) à R&D effectiveness R&D expenditures / input resources qualitative / subjective quantitative/financial Drill- down à R&D efficiency Total (Compound) Performance
- 59. Potential – Chances – Threats – Consequences – Decision – Measures – Options Triple – A – Strategy Holistic AG INSEDE © 1996, 2011 Field of stress for management Real System Building model Mathematical tools quantitative Decisions- criterion qualitative Decisions- criterion Virtual replacement of model Leadership tools qualitative Models quantitative Models subjective criterion objective criterion Products Services Rights Points of enhanced modeling Improved Business by enhanced models triple_a_e
- 60. The long Road to Post-Capitalism: Schematic of Six Long Waves From 1790 to 2000 New Theory of Numbers (Complex Number = 2D-Vector on a plane with a real and an imaginary axis) Adam Smith 1723-1790 Karl Marx 1818-1883 Nikolai Kondratieff 1892-1938 John Maynard Keynes 1883-1946 Carl Friedrich Gauss 1777-1855 Ernest Mandel 1923-1995 Wassily Leontieff 1905-1999 Alan Greenspan 1926-Present Joseph E. Stiglitz 1943-Present 1790 1840 1890 1930 1960 1980 1990 2010 1800 1850 1900 1950 2000 Innovation: Cotton Railroads Automobiles, World Second Monetary Market Collapse Steel Oil, War Cold Stimulation or Post-Capitalist Electricity II War by Federal Reformation & Reserve & New Theory of Value 1 2 3 4 5 6 Phase 1790-1929 1939-1987 1994-2010 Type of Wave: Labor-Based Long Waves Debit-Based Long Waves Knowledge-Based Long Wave or Stable Input-Output Model? Theory of Value & Aggregate Labor & Aggregate Dept & Aggregate Technical Knowledge & Monetary Value: Capital Capital Cohesive Cultural Base Theoreticians: Smith, Ricardo, Marx Keynes Leontieff, Greenspan & Stiglitz Accumulation Labor & Capital Fiscal Stimulation Monetary Stimulation Model: [War Dept] > [Stock Market] > Labor & Capital Information-Knowledge Based on graph of Reuben L. Norman, Jr. June 11, 1998 Link: June 14, 2011