The post Constructing Innovation as Value Management first appeared on Building Your Innovation & Ecosystem Intelligence.

The opening post is entitled “the interplay surrounding innovation”. Please take a read

Our opening argument revolves around the recognition of change as part of an interplay

We argue that we are failing to manage the different and multiple interplays that are constantly taking place when innovation occurs. We are often ignoring them and failing to extract the best or optimal value out of the innovation we are introducing. The change effect is often being ignored.

You can download this whitepaper on this site within my newly created “Insights and Thinking” tab on this site.

In this paper we discuss the dynamics and focuses of its impact on all three constituents involved when innovation occurs; of the customer, the market or industry itself and the innovator itself. We used the “lens” of the three horizon model to demonstrate and frame the interplay between innovation, business models and change.

We are providing a series of posts on this through Innovation Excellence in the coming weeks which build from and on this White Paper. We both feel this has far more to explore in practices, frameworks and thinking and we hope you share this view, as it builds.

We initially chose change over transformation.

Clearly the emphasis is to encourage transformation to meet the unrelenting disruptions going on all around us makes sense. I certainly believe we have to become far more comfortable with change, before we attempt anything transformational and that in itself is not easy at all.

We seem hard-wired to resist change until we are forced to accept it and that is a real pity and loss within ourselves. We need to see a change in different ways, through the lens of discovery and learning, and then we transform.

Change always feels painful.

Change is notoriously hard to achieve both within ourselves and especially in organizations. The reality is we want to resist change, it makes us feel uncomfortable, often raising the fear of the unknown. We form habits that we find hard to shake free of.

Often we invested a fair amount of time in learning, it then becomes even tougher to start unlearning but that is what we must do, unlearn, to then open up our minds to relearn. We worry about are we losing something of value, is the change going to feel better or just increases our insecurity even further.

The level of failed change or transformations undertaken has been put at somewhere between 70 to 80% in falling short on the initial targets or aspirations that drove change. The value generated from change often falls below the expectancies visualized when the organization embarked on the change program. So why do we put ourselves through this level of pain, disruption, uncertainty and potential risk of failure?

We do get caught up in interchanging change and transformation and believe it is the same.

It is not! In my research on change, I altered my own understanding with a range of thinking I explored.

Change tends to focus on making the existing system better.
You use this as your framing point and the level of efficiencies and improving effectiveness is judged as the success or not of the end result.

You actually are ending up with a reconditioned model of your past as you have mainly dealt within the boundaries and constraints to make this (often) well-defined shift in the way things have worked.

Transformation is a different matter. You are attempting something far more radical and disruptive.

It is aiming to reinvent the organization, and significantly challenge and change the practices that are in place. It places far more at a higher risk as it is more unpredictable, iterative and often a series of experiments to learn and adapt. It often feels you are entering the unknown as it can become a real process of discovery, experimentation and adjusting execution.

Transformation is far more dynamic and far-reaching. It is often looking to design for the future as you release the shackles of the past, bound up in existing processes, behaviours and thinking. You are looking to invest far more as you learn, clearly more radical new business models would have this ‘transformational’ effect.

Both change and transformation need to deeply understand the “as is” and those committing to make a change or transformation need to share the goals and understand the reasons for undergoing such a conversion from the existing state to a different one. There are considerable risks associated with both.

What might help flip the odds?

I would argue that most change or transformation initiatives attempted are far to piecemeal, they address only certain known parts and fail to address the ‘whole’ that is actually affected by the change.

Any change program needs a far more holistic approach than often we give this, we get caught up in the project management, we focus too much on one side of the change equation and either get caught up in the people side or favour the structural side of processes and functional design.

Undergoing any change required dramatically rethinking the reasons for this, the effects this will seem to have on the operating and business model. Will the effort yield a more positive result?

We are facing unprecedented disruption

Externally we are seeing increased volatility, complexity in regulations, the impact of geopolitics, constant pressures in public spending and shifts in demand, the digital disruptions and social media influences forcing a greater need to dialogue with stakeholders, customers and new entities and finally, our employee base is questioning and demanding in unprecedented ways.

All of these are having a significant impact on our organizations and they have not responded and are often stuck in those past times where these forces of real change were simply not built into the system.

Equally most organizations are losing any significant competitive advantage as the competition has intensified, the design and adaptability of others to challenge the existing incumbent is being made easier through the internet, reducing global barriers and high level of mobility, operating often at much lower operating costs, free from legacy.

The final imperative for change comes from our present poor levels of growth and innovation.

Innovation requires managing differently, to function and yield those higher results we would like and this becomes part of the dilemma within organizations. Yet innovation is also badly constrained because change is not considered as having this symbiotic relationship with innovation.

Innovation being designed and produced are mostly new to the world (or should be) and these confront customers, markets and the innovator themselves in making change.

The higher the scope of impact of innovation the more we do need to address change yet we can’t often grasp the nature and amount of change that the innovation unleashes. We should think about innovation and change together.

This is where Jeffrey and I are focusing our thinking at present

Change is all around us as a constant-  we need to simply get used to it
We can’t escape change; we can’t transform ourselves without a clear holistic model of its impact across the whole organization.

Change and transformation require us to be dynamic, constantly exploring, adapting and learning, it cannot be refrozen as was the thinking of the past. Nothing is stable; we need to build it as fluid, agile and constantly adapting through our learning.

We need to generate a far more highly dynamic environment, one where we are constantly being challenged and seeking out answers through discovery, experimentation and constant execution.

We need to become excited about change, each of us becoming innovation change leaders.

Change today is about building a change capacity that is constantly evolving.

We need to see change as pursuing new opportunities, exploring different horizons and thinking. We need to become far more energized in trying out new things, in experimenting or prototyping, to learn and advance.

We must retool ourselves as change not only leads to transformation but it will allow us to explore all the interplays we can find within and around innovation and those can lead to great things.

To obtain the White Paper you can go to my insights-thinking page, where you can download or view the paper “the critical interplay among innovation, business models and change”

The post The ongoing challenge is making change our constant first appeared on Building Your Innovation & Ecosystem Intelligence.

I had previously provided a review more on the Strategic and readiness part of the Imaginatik report, in my post “The coming age of innovation in 2014 and beyond” and less so on the other part discussed, the Process and Execution part.

It is the process and execution side that have more of the deeper issues to tackle and more importantly, the one’s that take considerable time if you are tacking culture and the environment to allow for innovation. They are far more complicated to provide answers too. I feel like pushing this along, here goes:

The process and execution of innovation is actually more challenging, it is where value creation lies or not.

As Imaginatik comment in their report: “developing an organization’s operational capacity for innovation is challenging” as it is the translation and organizational understanding that makes it work or not. You achieve or fail in the values creating process and that influences the commitment to innovation.

Although I’d firstly argue we need to fix the top of organizations far more initially, simply as if we can’t get the essentials right from this top viewing perspective, you simply can’t get the organization to respond.

If you lack good engaged leadership committed to innovation and a well thought through alignment of strategic and innovation objectives you will end up with often mediocre and disappointing results and an organizations puzzled and left in ‘fuzzy innovation land’.

Organizations will also never get into any  consistent “innovation rhythm” unless you really get down and get your hands thoroughly dirty in fixing the organization’s capacity for innovation and that takes a long time of dedicated effort and deep understanding.

Fixing it means it has to become aligned, to run at least in parallel with other systems, it has to show its worth and to do this, you must know innovations real value and contribution. You simply can’t be ‘airy fairy’ about this.

Until we recognize fixing organizations capacity to generate that good, highly prized consistent performance and expected value required, it will remain tenuous in the judgement of innovation’s value contribution at C-level and those competing for scarce resource.

If we can’t describe the benefits and its value contribution constantly, innovation remains as being constantly questioned and certainly resource-stressed, often out of ‘whack’ with the rest of the organizations structures and systems. Innovation needs to constantly demonstrate ‘return’

Innovation will continue to struggle unless we really understand its capital.

If we don’t understand where the innovation value resides we will certainly struggle to continue to build innovation’s position in the organization.

Today innovation is still regarded as ‘expendable’, sacrificed on the altar of short-termism.  This creates a growing uncertainty, often reducing innovation down as that no real ‘sense of urgency’ and becomes ‘contained’ in discrete projects, failing to offer that real, substantial, ongoing value for the enterprise.

We simply don’t ‘unlock’ the real value of innovation. If we lack the understanding and abilities to build this sustaining operational capacity for innovation we have ongoing problems.

There is the need as its longer term goal, to be simply fully embedded inside the organization that it ‘resides’ and simply becomes indistinguishable, it becomes the operating core, constantly aligned to the strategic needs and goals. Innovation’s benefits must be outstanding.

The Imaginatik report commented “When asked what benefits their respective organizations have received from innovation, nearly one-third of respondents said benefits were either non-descript and intangible, or were self-referential nods to improvements in the innovation process itself. Thus, the single most common answer avoided mention of any tangible, proof-positive business results from innovation efforts whatsoever.”  Surely this does not help the longer term health of innovation?

The report suggests three main conclusions that can be drawn from these findings.

“First, innovation can generate real, and sometimes very substantial, value for the enterprise – capable of adding hundreds of millions, sometimes billions, to the bottom line. However, many organizations have failed to unlock any tangible value from innovation – and therefore instead cite advancements in innovation’s cultural relevance, or process sophistication, as “benefits” in lieu of anything more substantive”

So why was it in this report that the most commonly mentioned innovation benefits were made around cost savings and efficiency gains? There are some real dangers in this in my opinion.

Innovation needs to substantiate itself, in its importance, its role and its enabler to create growth, wealth or shareholder returns and underlying value creation.

If it cannot or we fail to articulate it, innovation will remain “expendable,” it will remain vulnerable to the whims of the short-term as it is not ‘validating’ itself enough. The value from innovation needs better articulation.

Let me offer a place to begin on value creation.

Value creation should be a core business strategy.

Why do we have such difficulties explaining the value and benefits from innovation? We need to tackle this, the earlier the better. Innovation is made up of both tangible and intangible value. It is until we recognize the underlying capitals that make innovation capital; we will always fall short on providing its real worth.

Innovation outcomes are far more explicit if you understand these capitals that make up innovation. These are often called the intellectual capitals or stocks of (potential) value. These can be financial, manufacturing but more the human, social and relationship capitals.

These capitals transform raw ideas into the commercial outcomes. Working these capitals the value of an organizations stock can be enhanced or simply preserved and can equally diminish if not managed well and thoughtfully.

How best can we explain value / value creation?

Firstly value is the total of all the capitals I mentioned above; we need to understand what ‘makes these up’ in our organization. These are unique and when applied generate new innovation capital

Also value is the benefit captured by the organization, it is outcomes (of innovation and other things) to generate the market value and present and future cash flows within organizations.

Value can also be the essential achievements of the organizations objectives, it can be value created by the organization itself or by combining with others.

Failing to articulate the value creation of innovation

So if we can’t explain the make-up of the intangibles within innovation we often simply fall back on generalizations, non-descriptive and self-referral nods to ‘improvements’ and ‘cost savings’ and that tends to group ‘benefits and value creation’ into incremental gains. Surely we can do better than this?

We must start looking for more strategically important outcomes; we must unlock the knowledge and raw data and translate this into tangible results that can be clearly seen. To achieve this innovation needs to align itself to strategy and the organizations objectives.

Innovation needs to be a mix that has growing substantive benefits; otherwise it will remain on the periphery of the organizations activity. To become central, to drive growth, to create wealth innovation needs to be seen and clearly demonstrates its value.

Leaders, shareholders, stakeholders, employees all need tangible proof-positive benefits from the business results that can be directly attributed back to the innovation efforts. Innovation efforts need to be better understood and we gain a clearer understanding of where the value resides.

Innovation will remain tentative, always stuttering along, lacking this absolutely organization innovation rhythm if it is not fully understood in where it generates it capital from and what new capital and stock it provides.

Where should we start in putting the value into our innovation efforts?

Our innovation value needs to come from our abilities to articulate the business case, an area of notorious weakness for most organizations and its alignment into the strategic direction and goals the organization needs to pursue.

Not a bad place to start is constructing the business case on four value creation pillars, shown here:

Need– We need to always understand the place and value of innovation from the customers perspective. They ‘attribute’ value, we in organizations then set about convincing them it meets their needs.

We always need to search for the customer jobs they are looking to be done. This is where the real innovation value resides. Articulating these needs within the organization and delivering innovation to these needs makes for a more sustaining innovation appreciation.

Uniqueness– innovation to be valuable has to be new; it has to improve on the existing. To achieve this we need to value our other ‘uniqueness’ – the internal innovation capital and how knowledge is translated from the initial idea into a commercial offering. We need to build around uniqueness found in our organizations, but you firstly have to know where it is located!

Strategic direction– the imperative for innovation to be ‘seen’ as successful is to align itself to the strategic direction. We need to know this direction, otherwise innovation remains uncertain, often ad hoc and misaligned. It is incumbent on our leaders to align innovation and strategy.

There is no better place to begin than using the Executive Innovation Work Mat to make this a comprehensive document to give this strategic guidance and create the conditions for innovation to thrive and get into a sustaining rhythm

Core competencies– we need to know what is needed. Firstly to understand the type of innovation we want to achieve to align to the strategic direction and goals.

Again there is no better place to start than work through the “collaborative innovation framework” provided in a open commons platform. Building the core innovation competencies requires building the capacity to innovation, the capabilities and competencies to make successful, sustaining innovation to happen.

Value creation comes from understanding where it resides.

So to understand value you need to have a well thought through strategy. Briefly it consists of

1.  Recognizing opportunities that are going to create new value
2. You need to recalibrate your innovation radar and be selective on what offers new value, not just sustaining existing value,prune your pipeline to give additional ‘weight’ to what gives new value,
   
3. Organize the organization into having a distinct, unique and consistent innovation rhythm of research, develop and then repeating this, time-in and time-out. 
4. Lay in the essential rewiring the organization always needs for aligning innovation to strategic goals, by making important organization changes and rock- solid comprehensive governance structures and metrics that seek to measure ongoing value from cradle to grave and finally,
5. Reinforce the value by knowing the success factors within the make-up of value- exploring all the capitals and stocks.

Ultimately value creation has transformation power.

Value creation is a core need both in innovation and strategy. We do need to align our value creation story far better from our innovation activities. This is one of the critical sources of misalignment innovation leadership needs to address.

Understand the make-up of value creation, in the capital, stocks and flows and capture both the intangibles and tangibles better for the value creation story. If this is well seen, understood and determined, it will deliver more on that promise that innovation does provide.

We do need to work on the benefits and value story so much more, otherwise, innovation remains outside the core of organizations, always lagging behind the huge effort to support the business as usual

*What was useful was a framing article by Accenture: “*Business at its Best” Published in 2011

The post Where innovation value resides first appeared on Building Your Innovation & Ecosystem Intelligence.

Are we working towards understanding the material sustainability issues better and linking them to financial drivers and where we fit within these complex issues?

There is such an increasing need to develop or simply updating our business language to build stronger cases for change, improvement and broader community engagement but these still seem to be missing.

How are organizations aligning their organizations not just with their own strategies but those in the wider world that contribute into a more sustaining future? We are needing to answer a fair few of these questions in my opinion.

The lack of engagement, of common understanding

Within each corporation there is this overwhelming need and growing concern to engage, to engage our employees, provide them a clearer sense of purpose and offer a better understanding of what a ‘higher’ purpose they are working towards looks like in their language not just through the eyes of the corporate board.

How does the external world perceive us, how do we attract new investment, greater stakeholder engagement.  How can we achieve this in better ways than we are doing today?

Many of those traditional measures of purpose left over from the 20^th century are simply not working. The social contract between employer, employee and their communities has broken down and this ‘sense of drift’ is certainly making it far more difficult to galvanize each part of the renewing growth equation – including government – to fix it, to be part of a common united sense of solution that connect and resonate across all ‘vested’ parties.

The Integrated Reporting movement (www.theiirc.org )

I’m not sure how aware we all are on the work being undertaken under the auspices of the integrated reporting movement .  This  is a process that results in changing the communication mechanisms provided by an organization, most visibly a periodic integrated report, about value creation over time.

An integrated report is a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the short, medium and long-term.

Arguable much of the change to achieve Integrated Reporting needs to be driven by companies themselves and the development of the IIRC framework is enabling companies to shape the process based on their own experiences.

A useful starting place to pick up on this

A useful report to initially read is ‘Understanding transformation: Building the business case for Integrated Reporting’ that set out to understand the processes that companies go through as they move towards Integrated Reporting. The organisations participating in the research are at different stages but all are involved in the IIRC’s Pilot Programme, which aims to help develop an International Integrated Reporting Framework

The work being presently undertaken

Over 100 global businesses and 50 institutional investors are directly involved in the IIRC’s work. This includes some of the world’s most iconic brands, such as Coca-Cola, Clorox, Microsoft, Hyundai, Tata, Unilever, Marks and Spencer, SAP and National Australia Bank.

Their engagement within the Pilot Programme are trialling the principles, content and practicalities of the Framework for two years to provide feedback and build business momentum towards its implementation.

By tracking their experiences over the two-year duration of the pilot, the aim is to capture the changes and benefits of adopting Integrated Reporting. This will help to build the business case for a wider shift towards Integrated Reporting and help to generate support among key stakeholders, including internal audiences, boards, investors and regulators.

The business and investor benefits of <IR> are seemingly compelling.

According to latest reports, the empirical evidence from the IIRC Pilot Programme shows that enables the articulation of strategy and how the business is creating value over time.

This information potentially provides the new lifeblood of capital markets. enables a better communication of the material factors that create value over the short, medium and long term. It works towards investor decision-making and the efficient allocation of capital, essential aspects needed for us all to understand.

The next step of a Consultation Draft of the International <IR> Framework

According the website after a successful three months of engagement and the launching the Consultation Draft of the International Framework at events in 10 of the world’s largest capital markets, extensive consultation has taken place with organizations across the world.

From South Korea to Sweden, Italy to Indonesia, and the Netherlands to New Zealand people have evaluated and commenting on the Consultation Draft.

The IIRC are using received submissions to shape the Framework which will be published in December 2013.

We certainly require more integrated thinking for us to all gain this greater sense of identity.

 If we can achieve a means of presenting the material about the organization’s strategy, governance and performance on commercial, social and environmental issues then this is a significant step forward. By the ability to effectively connect these often siloed areas, businesses are able to provide not only an update on past performance but also a long-term perspective of future value generation.

Integrated Reporting is, therefore, potentially moving us to good, or at least, better reporting. It provides and equips companies to manage their operations, brand and reputation strategically and to manage better any risks that may compromise the long-term sustainability of the business.

If this initiative does allow organizations to present their material information about the organization’s strategy, governance and performance on commercial, social and environmental issues in an integrated fashion

 Regaining engagement through in integrated reporting will benefit many.

I think this collaborative work can potentially advance some of the important areas we need, to regain the engagement within communities. Of course this integrated reporting will have far more initial value to the financial markets and direct investors but if we can begin to see a better, cohesive, articulated business story provided by organizations then it can begin to ‘flow through’ in many different ways.

Beyond the financial community, I think we can all gain by understand the specific business models better, we can begin to appreciate the assets that make up value creation far more and these will be far more based around the intellectual capital assets within organizations and we will begin to gain a higher sense of where innovation is contributing within this integrated reporting.

The value for us all is to become engaged in this work

I think this is a body of work that is well worth exploring and keeping engaged with, it may be a good catalyst for changing our thinking and attitudes and partly help us move finally away from antiquated reporting based on the last century and reporting on assets that are extremely limited on what is making up the real worth of one organization over another.

It is certainly about time that reporting within organizations became significantly better to understand where the real value creation is derived.

If the IIRC can offer a better integrated framework for reporting, something that offers a more cohesive reporting structure that is sadly lacking today, thirteen years into a new century, then we can all benefit from this better understanding.

We can then revise our views on the value and appreciation of what makes up the organization for its value creation – past, present and future – and then decide accordingly, if it has real worth or not going forward, from each of our unique stakeholder perspectives.

The post Shifting attitudes, think responsibly. first appeared on Building Your Innovation & Ecosystem Intelligence.

To achieve this we consciously have to set about the value capture and what contributes to its realization. This is where innovation plays such a vital part. If we don’t build our innovation capital we will certainly have a much harder, perhaps even impossible time of realizing new value.

We are more than likely to just maintain our existing value or see it steadily decline. So a constant focus upon renewal is always needed. Do we consciously do that on a daily basis or just once a year at annual review time?

Value-adding activities need to be central in nearly all of our decisions. The how we can turn our resources into being more productive, more creative is increasingly becoming one our biggest strategic areas of  future investment decision.

Our resources are those all-inclusive assets, capabilities and processes that make up the Enterprise.

Yet it is clear management is spending far more of their discussion time and focus on the ‘harder assets’ that are made up of land, buildings, equipment and machinery – the ‘heavy’ financial capital investment decisions.

Any new investment in IT, processes, software are usually well identified in the accounting or discussed within the narratives that support the reported numbers. We constantly report on these in our annual reports to validate and justify management’s decision.

Where we still seem to remain far too silent upon is our ‘softer capabilities’ Of course we extol the virtues of our employees for their hard work, for their vital role within any result, yet we still struggle to go beyond ‘simple’ articulation and quantify this value. Why is that?

Managing the innovation ‘stock’ and ‘capital’ potential

We do need to know our ‘innovation stock’, a large part of our wealth generating capital and where it can be best put to use. We are valuing the knowledge perspective far more and with this we are increasingly recognizing the importance of the intellectual capital that makes up the organization.

We are still caught in old world value reporting systems. We are not assessing our organizations for their true ‘invested’ worth. As the more intangible side is completely under-reported we make educated guesses.

We are valuing firms on what we ‘feel’ they will generate in future innovation value but those internally as well as us externally lack the real ability to measure this. Yet we can if we took the same amount of time to understand the ‘make up’ of these.

We are needing to value the knowledge perspective far more. Far more intangible assets and the knowledge available is being recognized as the valuable aspects of the potential future of a business.

These are the more ‘dynamic’ parts that come under human capital (competency, sharing, collaborative, learning quickly, collective competence and enduring value for the future), creative capital (creativity, fast prototyping, design and development, replacement & renewal), the relationship capital (responsiveness, retention, absorption, empowerment, networking), customer capital (the customer base, engagement, the potential and the ability to connect), entrepreneurial capital ( risk- taking, venturing and exploring)  and finally, the process capital (productivity, cycle time, process yield, on time delivery) are becoming far highly valued today. It is these contributing capitals that make up the unique mix we find within our innovation capital. These significantly deliver the value creating abilities.

We need to know the multiple capitals that make the true value of a business.

It is these different capitals that together are making up the intellectual, wealth generating parts. It is those that are more dynamic, the contributing parts of our capitals that should be highly prized today for the investment premium.  Yet often this ‘premium’ is often no more than an educated guess on what we suspect on past track records, assumed as the basis for the possible ‘promise’ in the future.

We need to change this guessing into much more harder validation. Lets move away today from those traditional assets ‘seen’ and well measured on a balance sheet (buildings, machinery, the physical more static assets) and capture and report on the real value generating ones that create the innovation growth.

We need to make much more of a concerted effort to identify these intellectual and knowledge providing capitals and perhaps ‘house them’ under this broader innovation capital. As it is innovation that renders that different, unique set of value outcomes far more.

Surely it is this innovation capital that is at the core for future wealth, that value creation potential. Innovation capital must be treated as the essential strategic asset and is it is central it needs to be far more reported upon by the management of organizations.

Of course it constantly gets mentioned within the narratives by management today but often lacks quantifiable and substantive validation.

For years there has been this call for a far more integrated reporting mechanism, one that ‘accounts’ for identifying the intellectual capital to provide this better understanding. The struggle with this argument is it still seems to be a ‘pipe dream’ as management seemingly fails to understand the mechanisms within these. Can this change, if so how?

 Maybe we should reframe the measuring of intangibles differently?

Today we are operating in business environments that are highly diverse, specific and subject to rapid change. This reacting to this volatility and our ability to spot new opportunities is what is often keeping management up at night and certainly giving the investors equally sleepless nights, trying to second guess organization’s performance so as to make the decision to continue to invest or begin to divest.

The value creation being created simply needs articulating better. Markets and investors need the value generating perspective far better framed and explained.

Today this is often random, ad hoc, left to individual interpretation in their presentation; it needs some form of uniformed framework to bring this together to allow for clearer, more transparent comparison and judgement of real value. It does need a more integrated framework of value creation.

The focus should be on value creation through the business model

Last week I read an excellent paper written by Vivien Beattie and Sarah Jane Smith called “Value Creation and Business Models: Refocusing the Intellectual Capital Debate”. I was kindly sent this by Vivien Beattie after the abstract caught my eye. It has triggered much of my thinking in the last week.

Of course! The Business Model, this is the place for us to gauge measure and gather a real sense of the dynamics that are making up the organization. Today there is certainly far more of an emphasis upon understanding the business model, so why not make this even more central to reporting?

The quality of the business models is paramount to the value proposition to the customer and this triggers even more of value identification within the value proposition, so central to the Business model canvas.

Within the business model we need to gain a real sense of the dynamics that make this up. Where is the intellectual capital being applied to create new innovation, where are the new business opportunities?

It is the abilities to ‘connect’ these, in how we acquire, combine and utilize those unique and valuable resources with the business idea. It is this dynamic ‘combination effect’ that delivers the value (proposition) to the customer.

The Business model is the new unit of analysis for evaluating future value

Arguably the business model is holistic and is becoming increasingly the new unit of analysis, that spans the organization and ‘articulates’ its capital and strategic value capturing parts.

Can we achieve a more integrated set of disclosures that combine the Business model, its strategic approach, what makes this up and clarifying its value creating process?

This potential approach does need to place a much heavier emphasis on the innovation capital and all the knowledge creating aspects that make up intellectual capital. It would need a significant shift in management’s understandings as they would need to articulate the critical components far more, they would have to find a common communicating language. Where better than the ‘heavier’ use of the business model canvas or the layering structures that makes this understood?

Externally we can also judge far more the potentials within the stated ‘interactions’ between the critical components of the business model. Management does not have to ‘give the store away’ in their competitive position to its competitors but they certainly can do a better job to convey much of the dynamics that make this up, in better, thoughtful ways. Make this more financial contingent for future investments.

Beyond narrative reporting, we need to push further.

Narrative reporting has been suggested as the step for this to happen. To make the business model an essential mandatory part of the management reporting. I think this can even be pushed further. Whenever management has been ‘pushed’ by regulatory forces it has taken the time to learn and understand the parts that make this up.

Our intellectual capitals are part of this learning as equally knowing the ‘dynamics’ that make up the innovation capital becomes essential.

The business model, the intellectual capital and the innovation capital simply make up such a significant part of the Value Creation process. Realization of this ‘make up’ and understanding its critical connections is needed far more today to understand. Knowing these can move us towards value our organizations far better than we can do at present.

Communicating the value creation and business model is critical today

Today and in the future, it is the ones that can articulate and ‘point towards’ what makes up the value creation will attract and command investors premium. Those that can describe how they are setting about sensing and seizing opportunities by knowing the more dynamic ‘interactions’ will be in a far better shape to exploit and capitalize on them.

The organizations that understand their unique mix of capitals and how it is made up in this broader sense, will be able to deploy their innovation capital towards the ‘value proposition points’ far better.

These will will be through constantly evolving business models, to convert opportunity to their gain, repeatedly by directing their innovation capital far more effectively.

The key today is they need to know what to invest into as the critical resources and this is far less the ‘hard’ assets but more the softer competencies, capabilities and capacity parts that are made up through knowing what contributes into the innovation capital.

The post Value realization comes through innovation and our business models. first appeared on Building Your Innovation & Ecosystem Intelligence.

Today that is not the case; it is more the off-balance-sheet bound up in networks, relationships, connections and the ability to manage the fluidity that is occurring constantly around us, and the organization’s ability to respond appropriately in seeking out improved, new value through better innovative offerings.

Intangibles are providing the new value system equation to focus upon

We are valuing the knowledge perspective far more and this is increasingly recognizing the importance of the intellectual capital that makes up the organization.

The more intangible assets are being recognized as the valuable aspects of the potential future of a business.

These are the more ‘dynamic’ parts that come under human capital (competency, sharing, collaborative, learning quickly, collective competence and enduring value for the future), the innovation capital (creativity, fast prototyping, risk taking, empowerment, replacement/ renewal), the relationship capital (responsiveness, retention, connections), and customer capital (the customer base, the potential and the ability to connect) and finally, the process capital (productivity, cycle time, process yield, on time delivery) is perhaps more traditional that has many intangibles that are becoming far  more tangible in outcomes today that are highly valued.

It is these five capitals that together are making up the intellectual, more dynamic, capitals that are valued far more today than traditional assets ‘seen’ on a balance sheet (buildings, machinery, the physical more static assets).

The real value creation capabilities of the five intangible capitals

It is the ability to combine these five capitals (human, innovation, relationship, customer and process) that offers the real value creation capabilities of organizations yet these are the very things ignored in existing current balance sheets, not valued in the assets of the organisation.

Surely this is wrong and indicating we need our accounting systems to catch up and capture the real valuable picture within our organizations?

These ‘capitals’ are often well hidden yet they are the real, ongoing value creation capitals. How can we identify these both internally and externally in better ways to give us a clearer understanding of the investments that are going into developing these capitals to measure against the results?

How can we develop the right story of how the organization creates value? It is by bringing together these more intellectual capitals to reflect the shifts that have been taking place in knowing what is within the organizations actual asset base; the assets that create the wealth.

We need to re-think the old world value delivery systems to assess organizations

The value chain that is good for one day is often not good for another. It needs to be constantly challenged and changed, to meet the consistently ‘disruptive’ conditions being faced.

We need to have an effective ‘innovation machine’, we need to have increasing reliance on open networks as the new key assets and a really clear understanding of the new dynamics of power, the difficult-to-replicate capabilities and competencies that are made up with the five capitals mentioned above.

Within these five capitals lay the unique competitive edges that offer real advantage that cannot be duplicated or replicated or often matched easily. These need increased focus.

An organizations ability to flourish in today’s hyper competitive environment organizations will be totally dependent on their abilities to manage the five capitals that make up most of its intangibles.

Often these are left as not as fully realized in their potential value. Unlocking these you unleash the true potential of organizations to be constantly ‘dynamic’ in their activities to adapt and respond, listen and learn and leverage their unique assets.
Finding the right solutions – moving intangibles to tangibles.

Are we focusing enough on these five capitals of human, innovation, relationship, customer and process? Perhaps until we learn how to capture and measure their true value they will remain hidden from plain sight and still constitute investment risk for many.

This applies to both inside the organization and in external understanding. Internally if you are not consistently measuring your capitals you don’t leverage them fully and as these five capitals are often intangible, they are not well measured.

Equally investors are very reluctant to invest without this necessary insight to judge the organization’s real value creation potential, and so they simply rely on historical data, old formats of accounts and balance sheets and then simply apply selective discounts to the investment premium.

We need to find better solutions to quantifying and qualifying the intangibles within organizations, by making them increasingly more tangible, so all can see and value them for their real wealth-creating potential.

We need to provide tangible outcomes from managing the intangibles, as these are making up the really important wealth-creating capital of the organizations and this is where internal investments need to be well-positioned, clarified and defined.

To create new value you need to innovate, to innovate you need to invest in these five (more) intangible capitals but you need to know where, why and what you are getting for that investment.

You need to understand these capitals and make them tangible for everyone involved, it is the key to unlocking your latent wealth.

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