Should we care, does it matter? I would argue it does, increasingly so. Within our innovation capital lies the future of the organisation and holds one of the really important ‘golden keys’ to the sustaining performance of the company and its future growth potential.

We need to find a way to unlock this as we are constantly being pushed for new business models that create, deliver and capture value. It is in the entire makeup, the value structure around the offering, and this is made up of distinct capitals that drive the new business towards success.

How do I define innovation capital?

“Innovation capital is the sum of all that promotes the development and changes required for achieving innovation outcomes, within one organisation or its broader networked environment, for marketplace advantage”.

“These are made up of the resources, processes, knowledge and capabilities, that are constantly evolving and highly dynamic, to build greater innovating capacity.”

The hard part is valuing innovation capital as these are constantly being renewed and evolving.

Innovation capital is a set of renewal capabilities and understanding what these are is critical but today is not well understood. We find it extremely difficult to report clearly on the makeup of our innovating capital and where we should focus in their development

Determining and being able to articulate the value within these capitals would be truly valuable and would help us differentiate between those that are static or simply repeating, and those that are dynamic, ever evolving, searching for new knowledge.

Building stock, generating flows

It is the generating of ‘new stock’ that builds the values of our future capital. It is these unique bundles of an organisations resources and assets that give us our new innovation value, through the process and flow of new knowledge and its value creation, that lead to commercialization. We need to constantly create fresh innovation capital.

It is the dynamic interactions and flows between the different innovation capital assets and the other intellectual assets that innovation requires for successful activity and outcomes. This is where absorptive capacity plays its vital part in structuring this process.

How can we capture and articulate the innovation capital?

So, the key to identifying innovation capital lies in its stocks and knowledge building assets and their uniqueness in the resources that make this up, in constantly evolving and learning, these are the real strategic asset to nurture and build. Leveraging and continually building the ‘stock’ of our innovation capital can render different productive value outcomes.

It is our ability to ‘mix and combine’ the innovation activity that it consists of, in all the decisions and activities that occur, from the recognition of a need or a problem, the decisions and then the activities that occur that build through researching, developing concepts through to the eventual release into commercialization into successful market outcomes that feeds and builds the combined innovation capital.

Knowing this make-up of our innovation capital provides us with the potential for driving our future growth. Identifying the real capital that will drive and sustain the real advantage, providing the future potential for new wealth should be the essential way we measure organisations performance, not on past financial performance or personal perception, built on limited understanding.

Holding the future back if we lack a deep understanding of our innovation capital

If we had a better understanding of the make up the innovation capital, and what makes up its critical enablers, then we are better positioned to qualify and even quantify a more confident future, based on the capital that ‘feeds’ the future potential.

We need to understand the strategic importance and take the time to explore where our innovation capital lies to understand all the value-building points. At present most corporate boards lack any clear line of sight into this, it significantly holds innovation back, it constrains growth, and it can make us all far more cautious of the future, for knowing where to invest and grow as we lack the level of what innovation capital should we be leveraging in our understandings.

I think it is the time we did clarify our innovation capital in far better ways. Need any help?

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The post Is Innovation Capital important to us? first appeared on Building Your Innovation & Ecosystem Intelligence.

Leaders want to hear this, the sad truth is getting a ‘decent ROI’ for innovation constructed (note constructed) is really hard. If the innovation is new to the world, how can it have a clear financial return on investment until much later, much becomes an ‘educated’ guess?

We need to appreciate new innovation balance sheet thinking

Why a balance sheet thinking? There are hard and soft measures to measuring or judging our innovation. It goes way outside financial numbers. Would we have seen the emergence of Facebook, Apple Watches, Uber etc etc if those that were determining success from their investments had actually insisted on guaranteeing the ROI before launch or within short time frames, that many of our established organizations insist upon? No it was the belief and ‘seeing’ the potential that encouraged those investing to make the initial investment and then continue on ‘future’ returns.

There was a growing recognition that a ‘flexible’ and broader set of metrics was needed, to permit time and critical mass to continued to accelerate away, so the eventual returns on the emerging business model would have the time to evolve and provide the valuation potential expected. It was the measuring of value- potential and realized – that along with the beliefs and response provided by the owners that gave ‘investor confidence’

My first thought: do we know enough about the thinking for VC’s on how they judge investment?

Venture Capital is a driving force behind entrepreneurship and innovation. It fuels the economy, creates growth opportunities for companies large and small and, it funds the business development strategies of major corporations. What can we learn to apply in established organizations for judging innovation differently so “risk” becomes higher in factoring in so as not to reject ideas far to early in their life but to encourage them.

Thankfully the venture capital community has a different set of measures to judge the longevity and potential. Clearly financial returns always loom within the thinking, possibly even more so, as those investing funds are highly focused and demanding returns. Yet it is more considered by the VC on where to invest venture capital to gain real ‘return’ becomes a portfolio of investments.

There is this continued recognition that many investments made are lost in a portfolio of risky investments. The thinking is based upon how we assess ‘our’ investment, in how many ventures as ‘we’ recognize many will be losses before we hit the jackpot and recoup all the investment over the one winner to cover all the numerous losers and make significant returns on top.

Why do we not measure the health of our innovation investment far more?

In many ways our established organizations can move far more into a portfolio of investments as they should have the confidence in their knowledge, competencies and people to make ‘greater’ investment. The problem is they most probably don’t have this confidence and part of this reason does lie in a narrow range of measurements they are taking of the ‘return’ on their investments and not looking much harder at the ‘heath’ of the organization to give this confidence.

Why do established businesses ignore the investment rationale for delivering real innovation winners that can change the fortune of their business? They often leave this ‘venturing’ to others to search and achieve transformational solutions, ones that can even radically alter existing business value propositions and then we hear them ‘crying’ over being disrupted or ‘we’ did not innovative enough? Something needs to change.

But while Venture Capital is an integral part of the global economy , the unique inner workings of venture capital firms and their processes are sometimes suggested are a well-guarded secret, so we need to tease these out and find ways to adopt many of them in our established organizations thinking as well. There is perhaps no ‘secret sauce’ just investor confidence and the imperatives to make returns or be themselves out of business.

I know some of our established organizations are attempting to do this ‘venturing’ yet we do need to ‘pool this thinking’ to open up the measurement for innovation investment in the future to be part of each organizations mind-set for measuring success.

Here are my contributing thoughts to take the health of innovation as more central in our measures.These are not VC related but underscore believe, commitment and the drive towards structured learning, in a more balanced way.

Measuring more of the ‘health’ of innovation within established organizations

Shown below are a list of the factors I feel can be major contributors (far from exhaustive), firstly into the soft side of our balance sheet that is made up of culture, climate and environment as our creative and engagement capacity. This side of the innovation balance sheet gives the commitment and sense of belief that can encourage investment, as the people side equates to the measurement of the team within a new venture. It determines much of the belief this is worth investing in.

Some of these initial suggestions of course are inter-changeable or become reliant on each other, but it gives a decent understanding of what makes up the balance sheet needs we all must have in place to have a thriving innovation organization. It needs to address the creative, engagement and relationship part that innovation always needs.

Informal mechanisms (the contributors to the left side of our innovation balance sheet)

Those that are leading to improving the softer aspects of innovation (our left side of the innovation balance sheet) that would contribute to its build and health.

• Uncovering good and emerging practices in innovation
• The value of good leadership & distinct culture creating the linkages
• Targets and partner identification for relating and collaborating
• Skill of working together effectively – team building, encouraging diversity
• Integrating external parties to leverage through networks and relationships.
• Framing ambitions and plans of strategic targets and relating those to individuals
• Engaging the outer peripheries to capture insights and needs to drive engagement
• Exchanging expertise and seeking synergy in exchanges
• Story telling/ narratives, those relating and explaining, sharing and extending
• More bottom up engagement in formulation – sharing and informing
• Seeking individual insights, encouraging an open learning environment
• Developing the agility to quickly react to changes, effective and decisive intent
• Work on speed, external orientation and improvisation,flexible and adaptive
• To promote “doing more with the same”, less rework.
• The CEO acts as the central source of encouragement and determination
• Encourage informally at all levels in exchange

The formal mechanisms (the contributors to the right side of the innovation balance sheet)

Those that contribute to the make-up of the harder aspects of innovation or our right side of the innovation balance sheet that build this part, beyond ‘just’ financial.

• Ingraining innovation as a corporate function
• Determining how you lead and manage this, how you develop this out in its parts
• Identify the constraints , articulating the resolutions, recognizing the boundaries
• Optimizing the process and structures, constantly reviewing to improve
• Determining the allocation of funds to offer the balance needed to achieve the goals
• Innovation portfolio management designed
• Type of openness to innovation flows to encourage and drive outcomes
• Embedding technology and capacity for rapid experimentation, and discovery
• Rapid ideas, discard failing ones & triple investment on good ideas
• Distance from Customer – determining the importance and setting about the connecting
• Ingrain as a corporate functionality the need to always be conscious of greater alignment
• Determining how you lead and manage through governance and design.
• Identify the constraints and boundaries, pushing and probing
• Optimizing the process and structures on an ongoing basis
• Determining the allocation of funds into the different framing activities
• Innovation portfolio management, striving for value, impact and return
• Type of openness to innovation flows and external engagements needed
• Embedding technology and capacity for rapid results and early wins
• Rapid ideas, discard failing ones & triple investment on good ideas, experiment and explore
• Involvement from both Customer and other stakeholders within your innovation process

Irrespective, for me, the health measuring equation you decide to follow has to be robust

It clearly has to account for a more holistic view of innovation – a more balance view of what ‘makes up innovation’. We need to constantly focus on the outcomes, less on the inputs or outputs, as although these are valuable to measure the effort being put in, it is my believe we should be mostly focusing on measuring the outcomes, those that are successful in learning and advancement, ones that lead to real new innovation outcomes. Those outcomes that give return, both immediate and for the future.

This can offer a different risk and opportunity assessment that can be underpinned by this ‘health’ innovation that builds what is ‘sound’ and ‘solid’ to invest onto as the metrics build more on the dynamic innovation capabilities.

This measuring of the ‘health’ of our innovation across a balanced view will give a growing confidence by the board to invest, by providing more leading indicators and engagement justifications will potentially encourage investment into a more riskier level of initiatives. Confidence grows with learning, discovery and engagement.

Pushing  for more ‘measured’ risk it certainly makes a ‘innovation portfolio’ more demanding to manage but potentially far more rewarding in its total returns in learning, in advancement, in capability and capacity building and in growth potential. Having measurements that ‘push’ learning and discovery can reveal more distinctive and radical innovation potential through greater engagement. The outcome is relating more by looking  out into the world. providing solutions that customers relate too and are more prepared to provide the stronger financial returns we want from innovation, as they see the different increasing value that is being offered.

Yes, our measurements do make a difference, it is time we took a fresh look at providing new ways to measure the health and potential to encourage greater innovation investment we need.

The post Rethinking the measuring of innovation first appeared on Building Your Innovation & Ecosystem Intelligence.

Not understanding what makes up the capital is holding innovation back. We are actually constraining growth through this lack of understanding as it makes us all cautious of the future.

If we don’t fully understand the make-up of all our capital should we invest or divert resources to delivering on it? I think it is high time we did.

So what makes up our innovation capital and why is it important to know?

Should we care, does it matter? I would argue it does, increasingly so. Within the innovation capital lies the future of the organization and holds one of the real golden keys to the sustaining performance of the company, or not.

The generally accepted view is that Innovation boosts a company’s earnings, speeds growth, ensures an advantage over competitors, and greatly appeals to shareholders. Put another way, businesses that deliver earnings growth based on a continuous stream of new products and services and new ways of doing business capture the innovation premium.

So tell me, why are we seemingly so bad at identifying what actually makes up our innovation capital, apart from some sweeping generalised statements attached in the accompanying comments within the financial result statements?

We need to find a way to unlock this as we are constantly being pushed for new business models that create, deliver and capture value. It is in the entire make up, the value structure around the offering, and this is made up of distinct capitals that drive the new business towards success.

How do I define innovation capital?

“Innovation capital is the sum of all that promotes the development and changes required for achieving innovation outcomes, within one organization or its broader networked environment, for market place advantage”.

“These are made up of the resources, processes, knowledge and capabilities, that are constantly evolving and highly dynamic to build greater innovating capacity.”

We are searching for what makes-up and provides the true value creation in successful outcomes; in final product, services, knowledge understanding or executing within further business models.

We need to understand what makes up innovation capital far more in the future.

Mostly this innovation capital comes from the different intellectual capitals, those unique sums within each organization, of knowledge made up of our human assets, organizational structures and social partners making up the organizations eco system.

It is when we bring these together in different, evolving ways we transform the knowledge into new economic value, through this organization and personal actions. Financial capital cannot do that; it can only fuel the other capitals, it lies idle until we employ the other capitals.

The hard part is valuing innovation capital as these are constantly being renewed and evolving.

Innovation capital is a set of renewal capabilities and understanding what these are is critical but today is not well understood. We find it extremely difficult to report clearly on the makeup of our innovating capital yet investors are increasingly attributing more to the intangibles, based on limited knowledge.

Determining and being able to articulate the value within these capitals would be truly valuable and would help us differentiate between those that are static or simply repeating, and those that are dynamic, ever evolving, searching for new knowledge.

How can we capture and articulate the innovation capital?

I believe we can. One of the big key’s to identifying innovation capital lies in its stocks and knowledge building assets and their uniqueness in the resources that make this up, in constantly evolving and learning, these are the a real strategic asset.

Leveraging the ‘stock’ of our innovation capital can render different productive value outcomes.

It is our ability to ‘mix and combine’ the innovation activity that it consists of, in all the decisions and activities that occur, from the recognition of a need or a problem, through research, development and commercialization of an invention into successful market outcomes builds the capital.

Knowing this make-up of our innovation capital provides us the potential for driving our future growth. Identifying the real capital that will drive and sustain real advantage, providing the future potential for new wealth should be the essential way we measure organizations performance, not on past financial performance or personal perception, built on limited understanding.

We need greater insights into all our organizations ‘collective’ capitals

It is the ‘combination effect’ of leveraging all our capitals that yields the real lasting sustaining values. Today, we are lost in numbers and details, financials dominate most discussions, we need to encourage exploration into the make up of all our capitals.

Until we can peer under the organizations ‘hood’ a little more and understand the make up of all the capitals then we will continually fail to understand the real innovation activity that generates the value.

We need to know more on what can and does ‘drive’ future performance, what lies at its core or is being built-in for new capabilities and capacities to innovate, looking to secure the future.

If we had a better understanding of the make up the innovation capital, and what makes up the critical enablers, then we are better positioned to qualify and even quantify a more confident future, based on the capital that ‘feeds’ this future potential.

The post Holding the innovations of the future back first appeared on Building Your Innovation & Ecosystem Intelligence.

I expect you could answer this fairly comfortably.

It might need a little added help from your finance department but you could produce and show significant details that we are all ‘schooled’ to understand and generally have accepted, under common definitions and standard practice.

Our businesses are measured constantly on their financials, we produce a constant flow of reporting documents that provide useful insight and allow for a more informed judgement by present and future investors on the health of the company. We are ‘wedded’ to our financials and ignore the real value within our organizations of all the other critical capitals that generate and strengthen the business.

What if that same person came to you and asked instead: “what makes up the innovation capital of the company?’” could you answer this as clearly as the financial one – I would suggest most probably not. (By the way, if you feel you can then please let me know I would be more than interested).

We are focusing more on past performance and not future generating potential by staying fixated on just the financials within all that makes up our organizational  capital

So what makes up our innovation capital and why is it important to know?
Should we care, does it matter? I would argue it does, increasingly so. Within the innovation capital lies the future of the organization and holds one of the real golden keys to the sustaining performance of the company, or not.

The generally accepted view is that Innovation boosts a company’s earnings, speeds growth, ensures an advantage over competitors, and greatly appeals to shareholders. Put another way, businesses that deliver earnings growth based on a continuous stream of new products and services and new ways of doing business capture the innovation premium.

So tell me, why are we seemingly so bad at identifying what actually makes up our innovation capital, apart from some sweeping generalised statements attached in the accompanying comments within the financial result statements?

We need to find a way to unlock this as we are constantly being pushed for new business models that create, deliver and capture value. It is in the entire make-up, the value structure around the offering, and this is made up of distinct capitals that drive the new business towards success.

How do I define innovation capital?

“Innovation capital is the sum of all that promotes the development and changes required for achieving innovation outcomes, within one organization or its broader networked environment, for marketplace advantage”.

“These are made up of the resources, processes, knowledge and capabilities, that are constantly evolving and highly dynamic to build greater innovating capacity.”

These innovating capitals build upon the capabilities of ‘sensing, seizing and transforming‘ so as to build new capital that focuses more on the dynamics within innovation.

You are searching for what makes up and provides the true value creation in successful outcomes; in the final product, services, knowledge understanding or executing within further business models”

We need to understand what makes up innovation capital far more in the future.
Mostly this innovation capital comes from the different intellectual capitals.

Those unique sums within each organization, of knowledge are made up of our human assets, organizational structures and social partners making up the organization’s ecosystem.

It is when we bring these together in different, evolving ways we transform the knowledge into new economic value, through this organization and personal actions. Financial capital cannot do that, it can only fuel the other capitals.

Within these capitals lie the three primary components of intellectual capital: human capital, structural capital and relational capital. These do the heavy lifting to generate the value in the capital.

Human Capital is perceived as the knowledge and learning abilities of the human resources, it primarily as comprising knowledge (explicit and tacit), skills, intellect and talent of individuals.

Structural Capital provides the organizational mechanisms and architecture for retaining, packaging, reinforcing and transferring knowledge along with business activities.

Relational Capital represents a firm’s accumulated knowledge and ability to absorb, exploit and extend knowledge from its relationships to create, develop and maintain conditions that serve the interests of both the firm and increase its principal external partners.

Increasingly other capitals are being given the increased focus

Technological Capital includes efforts in R&D, technological infrastructure, and intellectual and industrial property.

Organizational Capital includes elements such as organizational culture, values, attitudes, information and telecommunications capability and organizational structure.

Strategic Capital that builds up the layers to offer a viable business, it provides increasingly the logic and purpose that ‘connects and attracts’ and ‘accounts’ for delivering the business model, that provides to the market and delivers on the need to build and sustain the organization and keeps it viable and evolving..

We need to make greater efforts to measure these capitals, as they possess the value of all the knowledge used, combining human with physical capital to generate outputs that drive progress and future outcomes.

We are highly vulnerable unless we know what makes up our capital stock.

Financial Capital is useless on its own to generate growth unless it has its ‘feeding stock‘ and that is within the other capitals.

It is the ‘stock’ of these that generates the values. It is these unique bundles of a organization’s resources and assets that give us our new innovation value, through the process and flow of knowledge and its creation, leading to commercialization. We need to constantly create fresh innovation capital.

It is the dynamic interactions and flows between the different innovation capital assets and the other intellectual assets that innovation requires for successful activity and outcomes. This is where absorptive capacity plays a vital part in structuring this process.

The hard part is valuing innovation capital as these are constantly being renewed and evolving.

Innovation capital is a set of renewal capabilities and understanding what these are is critical but today is not well understood. We find it extremely difficult to report clearly on the makeup of our innovating capital yet investors are increasingly attributing more to the intangibles, based on limited knowledge.

Determining and being able to articulate the value within these capitals would be truly valuable and would help us differentiate between those that are static or simply repeating and those that are dynamic, ever-evolving, searching for new knowledge.

Perhaps a good example here is to think of Apple and its innovation premium.

Apple delivers on its innovation promise in products, we, as customers seem to want. They have mastered the convergence of ‘breaking’ technology, placing a significant emphasis on design, user experience, combining materials to deliver products that make that statement of quality, fulfill our increasing appetite for technology we see as increasingly valuable to our daily lives.

Then they bundle it by providing ease of use within the make-up of the product, offering closed platforms to enhance individual experiences and deliver this ‘bundle’ through the sheer generation of excitement and buzz.

They seem to be able to leverage all their different capitals. They build in the emotional capital, the reputation, a trust factor, raising our expectations of a future promise. They are leveraging all parts of their capital stock extremely well, on a constantly evolving platform of knowledge and learning. Can others emulate this combination effect?

How can we capture and articulate the innovation capital?

So the key to identifying innovation capital lies in its stocks and knowledge building assets and their uniqueness in the resources that make this up, in constantly evolving and learning, these are the real strategic asset. Leveraging the ‘stock’ of our innovation capital can render different productive value outcomes.

It is our ability to ‘mix and combine’ the innovation activity that it consists of, in all the decisions and activities that occur, from the recognition of a need or a problem, through research, development and commercialization of an invention into successful market outcomes builds the capital.

Knowing this make-up of our innovation capital provides us the potential for driving our future growth. Identifying the real capital that will drive and sustain real advantage, providing the future potential for new wealth should be the essential way we measure organizations performance, not on past financial performance or personal perception, built on limited understanding.

We need greater insights into all our organizations ‘collective’ capitals
It is the ‘combination effect‘ of leveraging all our capitals that yields the real lasting sustaining values. Today, we are lost in numbers and details, financials dominate most discussions.

Until we can peer under the organization’s hood a little more and understand the makeup of all the capitals then we will continually fail to understand the real innovation activity that generates the value and we will always have a lack of measuring an organization’s performance in any comprehensive way.

We rely too much on historical numbers, alongside a judgement of the rhetoric offered by the board about the promise of future performance. Judging innovation’s performance is based partly on current product launches and announced future pipelines where the board is typically cautious.

It often makes us as those investors equally cautious. We need to know more on what can and does ‘drive’ future performance that lies at its core or is being built in new capabilities and capacities.

If we had a better understanding of the make up the innovation capital, and what makes up its critical enablers, then we are better positioned to qualify and even quantify a more confident future, based on the capital that ‘feeds’ the future potential.

Holding the future back

We need to understand the strategic importance of the make-up of the innovation capital and presently most corporate boards lack any clear line of sight into this.

It holds innovation back, it constrains growth, it makes us cautious of the future, if we don’t fully understand the make-up of our capital. I think It is time we did.

The post What makes up your innovation capital? first appeared on Building Your Innovation & Ecosystem Intelligence.

It seems to have the same ‘heady vaulted position’ as innovation in that we all talk far more about the ‘promise’ of it. So what is behind value creation?

What drives it? What will allow us to stand out as the place to invest in?

So what is value creation?

Value creation is highly dynamic, it is going on all the time and can increase, decrease or transform in different ways when you exploit your different capitals that will change and reflect your organization’s business activities and eventual outputs.

This is when you can begin to see the value created by the use of deploying all the capitals.

Value is not just from within, it is the links our organizations are constantly making with others, in the interactions, relationships and the combining of the activities. The important need is to manage the stocks and flows of the capitals

The role of all the capitals is crucial to understand, they create or destroy value. It is the constant flow between all the capitals deployed that makes up the value creation process.

Our management within our organizations needs to know where this real value creation resides.

Understanding all the make up of capitals needs to be approached in practical ways.

The place to focus is on recognizing the material components of what is making up the specific value creation aspects that will provide benefits that have been captured, understood, maintained and then enhanced for the additional value creation

Clearly the ultimate objective is to enhance the organizations abilities in the longer-term to appreciate the growth strategy. The more we know as outsiders of the value creation process the more likely this will attract a greater investment. Often this is determined by the final product, service or business model outcome.

Today we lack the measures to judge longer-term adequately enough and organizations are judged on their innovation activity going through the pipeline and that judgement often lacks the real make up of the application of the different capitals.

Greater engagement or not?

We can leave this to the management, just sit back and simply expect increased dividends but will not enjoy many of those nasty surprises when the results fail to materialise.

The argument is that the investors, the stakeholders within a business, need to understand the business logic far more, to make a more informed decision to continue to invest or partner with a particular organization.

Knowing the successful generation of all the intangible values and their transformation into tangible forms and how this is systematically being harnessed tends to confirm the realization of the business goals or what the possible risks are.

Organizations are certainly fairly reluctant to discuss these except behind closed doors to selected investment parties in their investors briefings.

Making these more visible, leads to greater accountability and to be ‘accountable’ you need to understand the make up of your capitals.

The present incentive for business organizations to become more vocal in explaining their business models, their process for value creation and offering more insight on all their capitals is their need to grow and that comes from investors wanting to invest!

 Exposing the softer side of value creation is the key.

The need is to understand value creation is coming from the ‘softer’ side, the often intangibles that remain hidden for the real value enhancing aspects of a business.

These need drawing out more.
The real capital that contributes to value creation is coming from knowing answers to these questions offered below.

Many of these can be reported upon and that would enhance the understanding and attract investment.

Thoughtfully measuring and reporting upon these builds that external confidence that the business is focusing on the sustaining values relevant to its goals and growth objectives.

These can include but are not limited to:

• The ways an organization is setting about combining and utilizing networks and relationships
• How are they actively advancing their creative and innovation capabilities and competences? Are there specific frameworks and approaches.
• The ways they are actually seeking out in explicit ways that deepening of customer understanding

• The purposefully ways that reputation is being protected, quality in being enhanced
• How are the brands protected, enhanced and improved to add increasing value
• How they are capturing new knowledge internally and the ways this flows and gets translated into new value through specific value enhancing stores.

• How the focusing on social issues and values is contributing into society and equally underpinning their value into both local and global communities
• What are the plans and intent to link social, environment and harness the intellectual capitals, to enhance and strengthen society and the organizations linkage, and the outcomes being achieved.
• Where they are recognizing, strengthening and exploiting the value chain linkages

• Providing a greater depth of explaining and extending the organizations skills and capacities to learn and absorb, through advancing specific capabilities, and deepening capacities.
• How it continues to build loyalty and trust and what aspects need repairing or renewing due to difficult decisions or changing circumstances, showing a clear pathway of achieving this responsiveness and flexibility.

• How and where does innovation fit, for achieving the growth perspectives and discussing any shortfalls, through prescribed or alternative actions. Are you building a common sense of innovation purpose?
• Are there explicit innovation competencies, processes and governance actively being managed, that provide support to the activities being undertaken and being consistently risk assessed. What is the risk appetite for innovations? How is this managed?

• Lastly what they are exploring in the different forms of evaluation, experimentation and ongoing assessment to ‘measure’ the real underlying asset wealth of the organization.

This is their learning journey and its growing value to all associated with this to achieve that better visibility into our organizations.

Better outcomes and a greater relationship between investors and the organization needs to be achieved. I think it is possible but it is a journey many are reluctant to travel.

The emergence of the business narrative to help us.

Telling the organization story is becoming important. Our organizations need to shift their orientation and begin to provide a better, more compelling story of their business.

Perhaps the following attributes might be the place to start building a better business narrative for others to understand what is driving value creation.

This can be reflected upon in some of these suggested ways as a guide to begin in telling the unique story that makes up your organization, against another:

• More offering a predictive value that ‘projects’ the future
• Explaining how something is being achieved and will be further strengthened.
• The critical importance of explaining the context that made or makes up decisions
• Placing the emphasis on direction and not precision
• The explicit linking of strategy and execution
• The use of existing systems and processes and their life-cycle
• Offering a view on emerging and perhaps more complex systems and processes with their future fit, and what this might have in organization implications.
• The shaping of the organization’s behaviour, what is influencing and shaping it
• Enough detail to be comprehensive, comprehensible but still delivered with simplicity.

There is a growing public demand to know where the value creation is coming from and what the management of our organizations is doing to protect and enhance it. Knowing the makeup of the material capitals is so important to this.

It is the input of the capital and the processes in place that will provide outputs and eventual outcomes and that broader knowledge about the ‘inner workings’ gives us the deeper belief that value creation has a greater chance of being sustained, allowing us to better judge continuance to invest or to exit.

The post So what drives value creation? first appeared on Building Your Innovation & Ecosystem Intelligence.

Yet do shareholders really have the knowledge to judge the real source of value creation inside our organizations? I think not but they should. Does Management actually themselves, equally I often think not?

We lack a real line of sight into the true value of our organizations.

There is a pressing need to connect the real sources of value creation and these come from all our capitals and bring this clearly into the ‘line of sight’ of the management itself within our business organizations,  as well as the shareholders.

There is this chronic lack of real understanding of where the true value does come from or if it is known, given the public recognition, it deserves beyond the usual “oh, it’s in the business model” or similar assumption- what is?

Where does real value lie?

Let’s begin with the makeup of capitals. Often when you begin to talk of capital, automatically the financials come to mind. The financial decisions and results are an outcome of our ability to leverage all the other capitals making up our organizations. Most of these are intangibles and you often get that glazed look and the standard reply “intangibles are difficult to measure”.

Yet they really do need to be effectively measured and understood. They need to be really understood to know where the value creation potential does actually lie.

Knowing the values of these can determine the gaps that need plugging and the potential that can be leveraged in what you have available to you.

Understanding ALL the capitals within our organizations is essential

Thankfully understanding our capitals, beyond the financials, has been a work-in-progress for many years, we know more about it yet it still remains grossly understated within any of the reporting mechanisms organizations make.

The need to make our intangibles that remain invisible on our present balance sheets has to be addressed. These are the ones that makeup:

1) the internal structures, processes, routines, databases that contribute to the structural capital,

2) the external structures where external relationships, networks and customer capital contribute to the make-up of relationship capitals, and

3) the competencies that include individual experiences, knowledge, competencies, skills, capacity to learn, and the absorption and translation of an idea that all build and contribute to the human capital aspects of our organizations.

Turning the intangible light switch on is becoming essential
Management is still groping in the dark on measuring its intangibles, yet there is this pressing need to find the light switch and through the spotlights on the understanding of all the intangibles that make up our organizations, be these ones regarded as the classics of human, relationship and structured capital.

Often intangibles are fused with intellectual capital in discussions and that makes it often even harder to gain the serious attention of management.

Thankfully this is changing as the realization is growing that organizations must understand where their sources of value creation are actually lying, otherwise they are back in the dark, stumbling around and not sure what they are doing on the true underlying impact of their sustaining performance. It is about time they are ‘called out’ on this.

Making the business impact more explicit is required.
We can go deeper within our organizations to analyse. We can seek out  the non-financial drivers that analysts should focus upon as being measured and reported upon?

Today we are placing high premiums on the intangibles but investors lack the understanding of the value gap and what makes this up. There is a real understanding gap. We need the business to adapt far more too today’s dynamics and explain the ways they are ‘setting about’ this.

We need to gain a greater insight into many things

Those aspects that make up explicit understanding of strategic execution and organization alignment, the underlying make-up of the governance and management credibility, the quality and consistent ongoing evaluation of the strategy and the operational agility to support any changes.

Also there is a real need to understand the real innovativeness occurring within or around the organization, what is flowing in and out of the organization. Also understanding what mechanisms and structures are specifically in place to attract and retain talented people beyond existing monetary incentives or stock options.

Then what is the possible impact of significant key executive losses ‘just’ underneath the more visible board member that might have a material impact on the business.

Each has a significant impact on future earning and it is the executive that can demonstrate and show their ability to manage ‘forward’ will have the higher value premium placed on their organizations ability to attract greater investment sentiment.

Then we need to explore other dynamic factors that have a substantial impact on potential

How often do you hear thoughtful and coherent explanations of market positions, besides the market ranking, the depth in management experience?

Or the understanding of the quality and ongoing upgrading of major processes that are not generic statements but factual and measurement driven and lastly the progress made in research leadership beyond the top-level picture of “areas of focus” so you can truly assess the innovation pipeline and its potential impact beyond the immediate.

We are rapidly moving from physical to knowledge based, often very intellectual based enterprises and knowing where the real value lies is becoming absolutely essential to understand. This will require a significant shift in existing managerial mindsets.

We need to start asking real questions relating to organizational assets?

What and where are the resources that are expected to generate future sustaining benefits and growth- should they not be more viable within the organizations?

We need to start asking more specific questions:
• Are you measuring the intangible content of your organization and focusing on this strategically?
• What confidence do you have in sustaining the future growth, what are the risks and what would options are you considering for growing in alternative values?
• How do you exploit the tangible assets and relate these with the higher asset values you extract from your intangibles- how are you aligning these efficiently and more effectively?
• If you agree that intangible assets are the or one of the major sources of value, creation and sustainability what explicit plans have you in place for developing and protecting these? What are these plans?
• How do you actually combine all your assets to create existing value, productivity and innovation and where will these be changing in the future to achieve ongoing and sustaining growth?

What are your concerns on this asset combination that needs addressing going forward?

We should seek better visibility into our organizations
Better outcomes and a greater relationship between investors and the organization needs to be achieved.

I think it is possible but it is a journey many today are reluctant to travel.

It is not beyond the capabilities and ingenuity of the organizations themselves, so they can begin to map this new path. A pathway towards generating a better understanding of the non-financial assets that are making up their ongoing real performance.

We simply need to know

Knowing what makes up the real value of an organization’s total assets I think it is possible. We certainly need to go beyond just the present-day financials and some generalised statements that are not real measures of true ‘wealth generating’ understanding.

Will this change happen?

This is, of course, is another story but I believe there is a ‘wind of change’ blowing that might kick-start this dramatic shift to measuring the real value aspects of our organization and those that lie in the intangibles and we can make these far more explicit, that is for sure.

I hope it starts blowing really hard so we can finally clear away the cobwebs of old-style thinking, gathered primarily around financial capital.

The post Are we measuring what really matters? first appeared on Building Your Innovation & Ecosystem Intelligence.

This has fascinated me for what we need to do for achieving any new innovation, it is the ‘work to be done’ that generates and pushes boundaries beyond the existing.  This ‘classic’ book has become regarded as the one that described the birth of modern capitalism as well as economics.

Adam Smith also introduced the concept of ‘the Invisible Hand’ as a core part of his thesis, that man’s natural tendency toward self-interest – in modern terms, looking out for No.1 – results in prosperity, not just for the individual but for society.  ‘The invisible hand’ is essential for free markets and capitalism, through how it generates wealth in competition for scarce resources.

By maximizing their own interest as the direct intention, this ‘invisible hand’ also stimulates those around you and in the society you belong. As you seek to leverage your own assets, you are promoting society as a whole. Today this can be more by design, or through an unintended consequence of how knowledge flows.

Arguably the ‘invisible hand’ can today be seen as realizing all our potential, individual and collective, exploiting all available existing assets for benefit and gain. We call these our tangible and intangible assets.  Often overlooked, or under-appreciated are those more intangible assets, that can significantly differentiate, are surely today’s ‘invisible hand?’

The make-up of intangible assets

There are many thoughts around what makes up our intangible assets but these can be summarized as made up of 1) human assets– the knowledge, skills, experiences, our abilities to organize these within our thinking, 2) structured capital as the pool of knowledge made up in our institutions, our rules, norms, knowledge diffusion across broad communities, 3) the social capital that forms today more around our networking that relies on infrastructure, access to knowledge, exchanges and relationships.

It is the ability to combine our tangibles with our intangible capitals that allows us to think and explore all that is around, to discover and exploit the potentials within this ‘work to be done’.

The volatile world we are dealing with today.

Today we seem to live in more volatile times where it becomes more important for us to focus on the work to be done is, not the work done. We have to keep focusing on the future. The ‘work done’ is the accumulated knowledge; the built up ‘stock’ that has contributed and been embodied in the organizations results to date, seen in the past where innovation has contributed in part to this. We have built up ‘know how’ and competencies in the ‘work done’ but this needs improving upon and challenging.

The ‘work to be done’ is where we push forward and explore greater possibilities. Part of this is focused on how we are going to adapt to change, to add more knowledge. For instance, we have operated in the past in far more of a mass production era, where systems could be designed for stable, more homogenized markets, where we could extract the maximum effectiveness and efficiencies. The ‘work done’ was equivalent to the ‘work to be done’ due to this predictability. This is not the case anymore, markets have fragmented, and we set about to design for the individual’s needs or in modular approaches for example.

We are in a ‘race’ to win

Today much has changed; we are faced with rapidly evolving technology diffusion. There is a race among nations and organizations to ‘win’ in global markets. This is causing increasing disruptive forces to come into play, where constant change is becoming more the norm and the emphasis has changed from ‘just’ efficiency and effectiveness but to be constantly adaptive, fluid and have increasing agility.

We focus far more on building in ‘tailored’ service, based on knowing the customers’ needs and understanding, on designing around new business models and in this, the ‘work to be done’ is becoming far more important than the ‘work done.’ It is the realization that it is the contribution of the intangibles assets, our growing intellectual capital, are becoming the real differentiation point to exploit the future potential.

The intangible assets provide the intellectual capital base, these allow us to react to changing demand for the required future value creation so we can effectively compete and sustain ourselves. This constant search for the ‘work to be done’ is fueling what has to be done.

Work to be done is the make-up of learning new skills, develop a greater dexterity and judgement based on what we need to ‘actively’ go out and seek. ‘Work to be done’ is searching for our future growth and well-being and this is derived through our future innovation activities. So much of this is made up of the intangible parts that can combine with what we know, what we have previously achieved, in work done, to provide the new wealth of organizations, as we participate more actively in the knowledge sharing economy of today and the near future.

We can’t remain islands of limited knowledge, we must seek out others to combine and achieve the work to be done. We are arguably in the network era, yet so many are failing to optimize their intangible assets and exploiting different organization dynamics that would greatly benefit their growth, especially when you operate with scarce resource.

Today’s need is for increasing interactions, linkages and seeking new knowledge to stay competitive in global markets.

As we rely increasingly on our growing ‘interactions and linkages’ we need a system to manage this. Absorptive capacity was introduced as an idea and first explored by Wesley Cohen and Daniel Levinthal in a 1990 article (“Absorptive capacity: a new perspective on learning and innovation”) and can provide us the knowledge learning path for building a real “knowledge exchange” process. Innovation ‘feeds off’ knowledge, they are inseparable, like twins, needing each other.

We can learn to exploit innovation, both in learning internally through the process of purposefully searching, doing and using what we gain and externally, by exploring new discoveries, collaborating, exchanging and generally interacting and so gaining fresh expertise, insight and knowledge.

As organizations seek increasingly outside their own walls, the appreciation of how they are managing knowledge, learning and interpreting this, is becoming a critical aspect of a more ‘open’ collaborative innovation to be successful. There is a growing need to absorb, integrate and apply this in new and novel ways for accelerating the innovation performance.  As we seek out more to compete in global markets, the more the knowledge increases in complexity we add more to the ‘work to be done’.

Markets are in constant flux, rapidly changing and we need to manage all the new insights. The more we are relying on knowledge flowing into the organization the more we have to strength our inter-dependence and collaboration efforts to extract the knowledge we are acquiring for it potential value. There is a consistent self-interest in doing this for our prosperity as well as others – the invisible hand.

Are organizations recognizing the value of structuring their knowledge flows?

This is the make-up of much of the work to be done in managing the knowledge flows. We need to recognize the importance of this shift from (physical) ‘work done’ to (intellectual) ‘work to be done’ and reconfigure the changing capabilities and capacities required, so as to grow our future ‘wealth’ of organizations, of nations and within ourselves to learn and respond. We needs to understand that today’s ‘ invisible hand’ is how our intangible assets are increasingly crucial and need to be actively managed, for this essential work to be done.

Forget ‘work done’, that’s in our past, it is already in the (knowledge) bank, we need to focus on the work that needs to be done so we can compete and thrive, there is so much more to understand and learn from as the challenges become more demanding to deliver on our innovation efforts.

There’s so much work to be done.

Our future progress is tied up in offering meaningful work, providing that sense of purpose. Building greater capabilities to quote Saul Kaplan “are the amino acids of innovation.  They are the building blocks that enable value delivery”. We are looking at increasing “the random capability collisions” where new innovation will happen at different intersections that combine knowledge from global markets, other competitors, different cultures and a variety of disciplines.

We need to build new capabilities that are far more market orientated, from co-creation and knowledge acquisition, from sense making, tapping into collective memories across a vast network of understanding. We need to unlearn, we need to reflect. All of these are in the ‘work to be done’ to stay ahead, be relevant and compete in today’s world. A world that is far, far different from the world seen by Adam Smith and what he saw needed doing.

The value in his observations are still valid today, the ‘invisible hand’ is as important today through our successful utilization of our intangible assets as we exploit new knowledge and apply this to innovating our future. One that combines our need with societies, not just based on growth but also on well-being as well. It is knowing the ‘work to be done’ that is so necessary for innovation and much of this remains hidden, waiting to be discovered.

The post Work to be done is innovations invisible hand first appeared on Building Your Innovation & Ecosystem Intelligence.