Category Archives: Innovation

Dysfunctional, “Disinterested” and Disenfranchised

…and some would add it is a Disaster!

The fact is that in a Digitised Economy with control as the key behavioural modification tool utilised in organisational context; the more ‘control’ and micro management we apply, the more dysfunctional, disinterested and disenfranchised employees and collaborators become.

Now the terms employee and collaborator used in such close proximity should create a slight twinge of cognitive dissonance, but do we really pick up on the subtleties of the situation? Possibly not, however this thought piece is an extension of our initial thoughts on [the Future is collaboration], publish a week ago.

Logo Open Source Initiative
Logo Open Source Initiative (Photo credit: Wikipedia)

With collaboration and an Open Source or purely OPEN philosophy to achieving value creation for individuals and society in large, the biggest ‘contractual challenge’ of the beginning of the 21st Century is the revolution in the engagement process.

No longer a process purely dominated by an HR focus, but more around our key concept of CLUSTERS OF SKILLS & EXPERIENCE.

Creating the environment and framework that supports the ability of market participants to ‘cluster’ around skills bases and then for willing procurers of those clustered skills to engage in such a market is the cornerstone of the Digitised Economy in the third wave of ‘Industrialised Revolution’. In fact the word Industrial Revolution is a disingenuous statement to make, as the third wave of prosperity should be called the DIGITAL EVOLUTION.

Open Source Media Framework Icon
Open Source Media Framework Icon (Photo credit: Wikipedia)

theMarketSoul ©2013

Symbolism and more…

Behavior change (James)
Behavior change (James) (Photo credit: James BonTempo)

A recent assignment at a customer in London made us sit back and wonder: ‘How important are symbols in corporate life to your experience or interactions in a corporate environment?’

A lot has already been written about the subject of symbols, rituals and culture in organisations. Our own contributions on [culture] and [behaviours] are embedded in the linked terms.

Gesture, attitude, behaviour
Gesture, attitude, behaviour (Photo credit: Marc Wathieu)

What we are focussing on today is a question of the small symbols and gestures individual participants in organisations make. A misspoken word in frustration, jest, malice or innocence can have enormous impacts on others, without us even realising it.

How often do you pay attention to these outward signs and symbols of behaviour that affects interactions with and behaviours towards others?

theMarketSoul ©2013

The Inverse Relationship

Inverse Relationships
Inverse Relationships (Photo credit: Thomas Hawk)

We have always been fascinated by the Inverse Relationship between the Experience Curve and Cost.

Pure logical would dictate that (and indeed a convex demand curve) that as you ‘slide’ down the curve, the price / cost would become lower. Yet in practice, this hardly ever happens? Big Question mark…

Is this because the further we slide down the Experience Curve, the more utilitarian (fancy economic term we used there!) the benefit becomes? Yet, it also adds to the overall risk of the Experience or Value being added.

English: An example of the relationship betwee...
English: An example of the relationship between the IS-LM and Aggregate Demand curve in Economics. (Photo credit: Wikipedia)

Is this a counter intuitive argument or are we just getting plain confused by the inverse relationship?

theMarketSoul (c) 2013

DUO
DUO (Photo credit: Fabrizio Aiana (AKA trystan_o))

The Future is Collaboration

The future of work and engagement has already begun. That is stating the blatantly obvious, but are we really prepared for it, yet?

A Spinning Jenny, spinning machine which was s...
A Spinning Jenny, spinning machine which was significant in the beginning of the Industrial Revolution (Photo credit: Wikipedia)

Here is a little taster of what we think the future of work will look like for most individual participants in the labour and skills supply market.

The key is that the industrialised ‘factory’ and production line models are now slowly but surely falling apart. The expectation for grown up individuals to turn up 5 days a week and sit at ‘battery hen‘ cubicles and perform tasks a ‘production line’ manager allocates and oversees are numbered.

The slow revolution was unleashed in the third industrial revolution or rather the digital age revolution at least 20 years ago when personal computers become more prevalent. We wrote about this HERE.

This image was selected as a picture of the we...
Clusters (Photo credit: Wikipedia)

The fundamental problem today is that no one has yet effectively resolved the ‘contracting’ and hence TRUST problem of delivery on a large scale. We can do it effectively on the micro level, with freelancers selling there individual skills on small tasks and projects, where the risk of failure or an adverse outcome is mitigated. However, we have not yet evolved far enough up the trust hierarchy to fully outsource mission critical projects to ‘clustered’ skills and solution provider hubs, in remote and distant locations, far removed from the core.

Some of the critical inhibitors are these:

  • Immigration policies
  • Commercial legal frameworks
  • Fiscal constraints

Some of the important contributors are:

  • Digitisation and speed of the Internet
  • Platforms where suppliers and demanders of services can be matched
  • A common global business Lingua Franca

These are only a few of the factors either contributing or detracting from moving the revolution on in significant leaps and bounds.

Therefore, to conclude this first stab at a look at the future world of work, we hypothesis that the future will have large groups (what we will call CLUSTERED SKILLS HUBS) of skills pools bidding for contracts to supply services and solutions to leaner and meaner multinationals in cross border transactions and flows that are worth trillions of dollars annually.

Right now, we can’t see any major G20 sovereign government dealing effectively with this challenge, to ensure that they contribute and facilitate the move towards the new future of COLLABORATION.

theMarketSoul ©2013

An Ownership Revolution is required

We have been following the G20 ‘get those naughty multinationals in the tax tent’ debates raging for a few months now, with amusement we have to add; here at theMarketSoul and have the following short thought piece to contribute to the debate.

We know the ‘outrage’ really is all about the what the OECD calls the ‘general erosion of the tax base’, which in our opinion is just a distraction for proper structural reforms in the western democracies contributing to the G20 and OECD coffers.

English: The logo of the Organisation for Econ...
English: The logo of the Organisation for Economic Co-operation and Development (OECD). (Photo credit: Wikipedia)

The real issue is the power of civil society structures, such as multinational corporations, versus nation states. We constantly get an earful on how undemocratic corporations are from a liberal social leftist media and how dangerous unfettered corporate power is.

Yet, multinationals are far more democratic, in both structure and performance, than any sovereign government will ever be. If the corporate governance structure is correctly set up, then every corporate entity has an annual AGM at which point the corporate leaders have to resign, on a rotational basis, depending on individual Articles of Association or Memorandum ofIincorporation provisions (depending in which jurisdiction the corporate entity ‘resides’). How often does a sovereign leader stand down, in comparison and leave it to the popular vote to be re-elected? Certainly not on an annual basis, as is the case for most corporate leaders.

Civitas Foundation for Civil Society logo
Civitas Foundation for Civil Society logo (Photo credit: Wikipedia)

This leads us to the real thought piece of this article, namely the fact that corporate ownership and access to corporate ownership should really be extended to as wide a base as possible, rather than a few ‘monied’ or opportunist participants in the market.

Legislation around employee share ownership schemes are still very cumbersome and rules, rather than principles driven.

The real revolution we require is not around a new tax base or recapitalizing democratic bankrupt nation states; however we require a revolution of democratic corporate ownership to sweep the length and breadth of the land, in order to spread the risk, add additional wealth creation opportunities (and hence a widened wealth tax base) for smaller, leaner and meaner governments to address. This a cry from civil society to the inner ‘goodness’ of political society to sit up, take serious stock and work on longer-term solutions to the erosion of their tax bases, rather than the usual headline grabbing short-termist market distorting interventions the G20 governments are so infamous.

theMarketSoul ©2013

In the Cloud, Structure is everything!

We have been having several conversations with colleagues and practitioners in both the Enterprise Strategy and Architecture space around both Cloud Computing and the Integrated Service IT delivery space.

Our brief conclusion is that Organisational Structure is everything.

We believe that you cannot effectively move IT Service delivery into the ‘Cloud’ and / or integrate some of the hybrid Cloud solutions and other architecture requirements, without fundamentally adjusting / realigning your organisational structure to fit the new model or modus operandi.

Therefore, the first item on the IT Change Management agenda should be a fundamental rethink and adjustment of Structure.

What usually happens is that once IT Services gets delivered into divisionalised organisations, the service quality and cost gets fragmented and ‘scope drag’ and loss of focus and control occurs.

This makes us conclude that maybe the same approach utilised in Natural Gas extraction, namely ‘Fraking’ should be utilised in IT Service delivery, in the absence of Organisational Structure change:

Go in deep and then cut across the silos in order to get to the core solution (service) delivery, because in the absence of structural service alignment, the only other option is to be as scientific and innovative as you possibly can.

theMarketSoul ©2011

An Insight into Cloud Computing

It strikes us that managing IT Service delivery maturity is a bit like the ‘Clouds’ before the major storm.

Everyone is rushing around battening down the hatches, because the frameworks and tools are so rigid and require protecting; rather than having ‘modular’ solutions available that are both flexible enough to withstand the battering of the storm; yet can be re-instated very quickly and efficiently, should the storm have managed to ‘flatten’ the landscape.

We will begin to explore some of the Cloud Computing economic and philosophical issues in a series of new articles to follow.

theMarketSoul ©2011

The Seven Deadly Sins of the Market

As if last week’s (week ending 23 September 2011) turbulence on the world’s stock markets wasn’t enough of an emotional rollercoaster for millions of market participant’s, we will offer only one bit of reflection this morning on the market conditions.

Remember, the markets live, breath and die by the age old human conditions (seven deadly sins) of:

  • Greed / Avarice (Avaritia)
  • Envy (invidia)
  • Gluttony (gula)
  • Sloth (acedia)
  • Wrath (ira)
  • Pride (superbia)
  • Lust (luxuria

Therefore, the markets are Harsh, as we have written about before, however markets are still the most open, free and fair way to allocate resources, as we are reaching out to establish with our ‘The Market eQuation’, investigation.

All this activity we hope and trust will lead to a new understanding of the market which we will call:

Unbounded Market Rationality

theMarketSoul ©2011

The Ice Age is Cometh

Originally published 4 October 2009:

Information Asymmetry is what drives the market. We alluded to this in an earlier blog posting (see Market Responsibility, Saturday, 18 October 2008). Yet we still hear the socialist agenda mention regularly that if it wasn’t for the recent government interventions to ‘save the market’, the market would have collapsed. We are sorry, but we just don’t buy this. Yes it is true that individual institutions in the market would have failed, but as a mechanism, the market would have wobbled and other participants would have picked up the distressed bits and pieces and carried on.

True, there was a crisis of liquidity in the system, with severe knock on effects, but as a mechanism for allocating resources, effort and reward, we still believe the market would have survived, with or without the ‘nuclear’ option intervention we saw. The moral of this tale is that unfortunately the socialist elite now believe and make the rest of the market believe that they hold the moral high ground and can dictate the agenda for the next several years. Oh well and so the pendulum swings…

Which was entirely a side track to the real intention behind this posting.

‘The Ice Age is Cometh’ was an article headline in the Radio Times edition of 16 – 22 November 1974. A friend of ours came out with the rank smelling edition of the Radio Times of late 1974, that he discovered stuffed in the chimney breast of his new home. Stuffed in that chimney-breast to obviously keep the cold draughts out, as according to the subtitle the next 1,000 years could be very, very cold, with an advance of the polar ice caps and glaciers. Did we blink or something? We will challenge the BBC to dig out the programme aired in the week of 16 – 22 November 1974 on BBC 2, so that we can be reminded how quickly the agenda and the focus can shift, if we take our eye off the ball and let information asymmetry spin the agenda out of our control.

And we suppose we cannot deny the evidence currently in front of our eyes. Polar ice caps are retreating, which is true if you focus purely on an evidence based approach to trying to understand the wider system. But do make your observations and emotive arguments from within the system, or do you need to step outside that system in order to be more objective. And what about intuition? On a purely intuitive level we believe the earth of GAIA is a self correcting system but we do not have enough evidence to conclusively prove this assertion.

So, in the meantime, we swing one generation to the next, waiting for the ‘Information Assymetrists’ (yes our new made up word de jour) to set the agenda and the morals of the market.

As a soul in this market arena we just keep on being amazed, day in and day out. Please just give us the ability to take the long view…

theMarketSoul ©2009

Recapitalising Europe

Forget about recapitalising the French Banks, saving Greece, (or the Euro)….

Euro Dominoes

Continuing our conversation on Innovation

Yes, we admit it! The headline statement above is all about grabbing your attention.  We are not advocating any disorderly default crises.

What we believe is that the ‘agricultural’ economic base and the semi-integration of Europe, via market and monetary union, without going the full circle of political and fiscal union as well, has at this point failed.

Not that a major concerted (and concentrated) effort to ensure it does not fail will end in failure itself.  But has anyone really asked the question:  At what financial cost?

If an US Treasury Secretary, Timothy Greitner, has to take the unprecedented step of flying across the Atlantic to come and join a European Union Finance Ministers meeting, then something big must be on the cards!

Is he going to come and tell Germany and France in person to just let Greece go?

This reminds us of a stanza from Felix Dennis’ poem “How to Get Rich” about timing:

“Good timing? To win it
You gotta be in it.
Just never be late
To quit or cut bait.

This might just as well be the message for Europe:  How not to get Poor.  The key words are “Never be late to quit or cut bait”.

What we believe is happening behind the scenes is the planning for an orderly default mechanism and Euro ‘disbanding’.

The more Angela Merckel’s resolve hardens around saving the Euro, the less we believe Europeans themselves are warming to this concept.

 So what about Innovation then?

We started this article with the intention of continuing our conversation on Innovation.

So, what we mean by Recapitalising Europe actually is related to addressing the culture of decay that has enveloped Europeover the last few decades.  If Europe is referred to as the ‘Sick Man’, then there must be something behind that statement.

And we believe that it is the general lack of support for invigorating Europe that is a key driver.

What do you mean, we hear you ask?

In the quest to unite Europe, we have built a framework of a European parliament, a Council of Europe, a judicial system, etc.

With these institutions have come regulation, rules and edicts.  Sometimes messy, sometimes helpful.  But at this juncture, we are so overrun by nonsensical regulation that the will and spirit to be creative and innovative has drained away from the general citizenry.

This is a very, very sad state of affairs.  The young European citizens have lost their ‘psychological contract’ with the wider Europe and European integration goal.  High rates of youth unemployment across Europe is breeding a generation of disengaged European citizens and ultimately is an opportunity and efficiency waste in the medium term.

But how do we Recapitalise a spirit of Innovation in Europe?

This is a key question we are going to ask of our network and as part of our general ‘outreach series’ and report back on our progress towards establishing an Innovation Framework for Recapitalising Europe.

Please ‘tune-in’ again soon for a status and progress up date.

theMarketSoul ©2011

Funky New Job Titles

Below is an extract from a posting we made back in 2008.  Maybe still relevant today:

In this new, new world of work

What titles are there yet to lurk?

The new MD

He or she or it could be:

Maverick Director;

Not your average reflector!

The IM is the person

Where intuition is the key

Or are they the Ideas Merchants

or just another fee?

IT stands for Interesting Thing

Technology drives the process

And we are told that knowledge

Must definitely be better than porridge!

The SD drives the sales

Or Sets Deception

Yet revenue collection

their fortunate projection

The HR director,

You’d better respect ‘er

Yet Human Potential

Sounds much more consequential?

Or politically correct,

You OLD cynical fool!

Now even that word

We must reject!

Where am I heading?

With this you ask

Must there be an end?

Or just another bend?

Charisma, inspiration

Or just hyper inflation?

Inspired Profit Mechanic

just more rats running manic?

But to get to the point

I forgot my route

Just tinkering

Under this hood.

I look forward

For backwards is hard

Because of this strain

And a lot of neck pain

Yes, its true!

In the race of life

Looking over my shoulder

I had it all misconstrued

No matter what you call yourself

As long as you with hand on heart

Can jump and not worry, off that shelf

Look out below!!! I’ve made my start!

theMarketSoul © 2008

The Boardroom Incubator

We have just created a new group on LinkedIn, namely ‘The Boardroom Incubator’.

The Boardroom Incubator is aimed at encouraging and developing women to become business leaders and board members in either listed and non listed organisations.  Our aim is to create a ‘risk-free’ educational, training and development resource for women aspiring to gain their rightful places in Boardrooms and be accepted as peers amongst other Boardroom members.

It is a member led resource and forum to help redress the imbalance that currently exists within the corporate and civil society leadership arena and to ensure that we build and sustain healthy governance frameworks for the future.

Our aim at this early stage is just to gauge the interest and ‘proof of concept’ in order to see in what strategic direction the new group will head.

Please feel free to drop in and send any questions to:

Click to send us an Email

theMarketSoul ©2011

Collaborative nano and micro business ventures

Don’t waste a good crisis” – not entirely sure who first uttered these immortal words, although a Google search on initial analysis seems to attribute it (or some very similar words) to Rahm Emmanuel, the current Chief of Staff of the White House, part of the Barack Obama administration.  The actual phrase might be attributed to an economist called Paul Romer.

However, irrespective of who uttered the words initially, it is true that borne out of crisis the spirit of innovation always seem to rise like a new Phoenix bringing both hope and opportunity with it.

That is the great gift that the ‘study of scarcity’ that is economics provides us with.

We have the chance to think creatively about new platforms of collaboration and how Charles Handy‘s ‘Shamrock Organisation’ will eventually play out.

At the moment we are conducting a research study into how nano and micro businesses might find new routes to market and sustain themselves during these strained economic times as part of the extension of the outsource provider to the Shamrock Organisation.  We will be trying to uncover some of the factors that lead to collaboration and other forms of formal and informal business structures that promote and underpin this form of collaboration.

Please watch this space for updates in the very near future.

theMarketSoul ©2010


Random Collisions of Chance

Chance and spontaneity are two interesting phenomenon required for innovation and creativity.

We were reminded of this in an interview recorded of a LinkedIn executive recently*.  He stated that chance encounters are “where we make some of our most significant connections“, be it your life partner, business associates, etc. and that speeding up those chance encounters was one of the fundamental principles and aims of social networking.

That idea struck a chord with us.  Like our free market principle of ‘Spontaneous Order’, random collisions and network creation, leading to opportunity exploitation and ultimately wealth and welfare maximisation is intuitively an attractive proposition.

The Free Market: A False Idol After All?

So, we have the mechanisms in place, with online tools and social networking sites, but how much of this activity is outward focussed revenue and income generating?  What is meant by this is that the revenues are not focussed on increasing advertising and network operator revenues, but individual participant to participant’s opportunity flows.

And beyond building an online presence with followers and individuals being influencers and thought or trend leaders in their domains, how many of us focus on being revenue leaders and wealth and welfare ‘maximisers’ in this space?

Do you have personal metrics of success, which help inform and modify and moderate your personal behaviours to ensure that you maximise your ‘Return on Ether-time’? [ROET]

Maybe it is well worth a thought because in the neo-classical world of market participation, if you aren’t in the market and making a living (or a half descent living) from it, you might get marginalised and lose out on the wave that hit us when Web 2.0 arrived.

English: A tag cloud (a typical Web 2.0 phenom...

theMarketSoul ©2010

* We are searching for a link / reference to this interview.  Once we have found it, we will update this post


Risk-Based Change Management

Introduction

Cost cutting has been a priority in the private sector, ever since the financial credit quake started in 2008, yet the words currently are ‘austerity measures’ and budget cuts in the public sector.

Most of the cost cutting in organisations has been along the tactical and operational lines and we believe that in the ‘age of austerity’ we are within, revisiting cost cutting from a more strategic perspective would add significant value to both the private and public sector organisation alike.

Budgeting
Budgeting (Photo credit: RambergMediaImages)

A Zero Based Approach

Within most organisations budgeting and budget setting is an incremental affair.  It is very much focused on a business as usual mentality and the status quo is rarely questioned or scrutinised with any level of depth and rigour, as long as the financial plan delivers the numbers senior managers anticipate and the investor community expects.

Yet this is exactly the kind of ‘tyranny of the status quo’ that has destroyed a significant proportion of value in organisations over the past two years.

A zero based approach addresses some of the short comings associated with incremental budgeting and financial planning.  It is by no means a perfect replacement for incremental budgeting, it cannot address all the strategic issues and it is fraught with its own pitfalls, yet we assert that a focus on some recent lessons learnt in organisations that have implemented cost cutting via a zero based approach can add value to our clients budgeting and financial planning systems.

Zero-based budgeting can be summarised as the process of preparing financial plans from a change perspective, normally building the financial plan from scratch (the zero base), viewing the process as if the organisation has not delivered the particular service of product in focus before.

Some of the lessons learnt are briefly listed below:

  • Many versus few – Instructions and the interpretation thereof by individual users

    Journal of Human Capital
    Journal of Human Capital (Photo credit: Wikipedia)
  • Focus on the Full Time Equivalents (FTEs)  and people cost early in the process
    • Check Payroll Data integrity
    • Understand thoroughly the organisational restructuring issues (get Human Resources understanding the financial budgeting language early in the process)
    • Ensure a distinction between building a Business Case versus Budgeting
    • Confidentiality (how, who, what and staff and managerial morale implications)
  • Education process and ensuring skills, knowledge and information convergence to ensure the budget is delivered as a value added ‘conversation’
  • Appreciation of management style versus timetable for budget delivery
  • Over communicate (more information is better than more or inadequate assumptions)
  • Concentrate on the budget story (strategy and changes) and ‘hang’ the budget numbers on the end of the storyline (Making the budgeting process less ‘threatening’ to budget owners)

These lessons can be separated into two distinctive themes, namely the Human Capital dimension and the Systems issues.

Themes to be aware of

As far as the Human Capital dimension is concerned the major lesson is to ensure that both the budget holders and prepares are fully cognisant and understand the language of both budgeting and what the inherent risks and concerns around a zero-based approach is.

Key issues and risk are around work stream teams from different disciplines (HR, Finance, Operations, IT and marketing) not always having a common language and frame of references for similar linguistic terms and phrases.  Ensure that potential for misunderstanding the objectives and delivery mechanisms are addressed early in the Zero Based Budgeting approach.

Foster a culture of empathy within the management ranks and never underestimate the emotional impact that getting rid of people can have on both the managers having to make the tough calls and both the staff being called upon to leave and the staff morale of the people earmarked to remain behind and deliver the business as usual processes.

As far as the Systems issues are concerned, ensure that enough time and preparation goes into the planning and delivery of the Zero Based Budgeting mechanisms and tools, as you will be running a process that has not been utilised and thoroughly tried and tested under operational conditions before.  There are risks in the following areas to be aware of:

  • Data integrity
  • Spreadsheet modelling and calculation errors
  • Documentation and the support services (handling budget holder queries and concerns)
  • Skills and knowledge of the budget holders and preparers might be limited
A diagram showing the flow of knowledge in the...
A diagram showing the flow of knowledge in the Financial Planning Profession (Photo credit: Wikipedia)

Conclusion

As was suggested in the Lessons Learnt listing above, over communicate with managers, budget holders and preparers and staff.  Ensuring that adequate information is made available in comprehensible and non-technical language is the key to success.  Too often we have seen ‘lazy’ and shortcut assumptions being made, when a little bit of extra effort, ‘digging’ and asking the right people with the operational knowledge the right questions would ensure a more robust and rigorous budget.

Finally, ensure that both the process and outcomes are well documented and articulated as they serve as your shield and defence when the reality does not turn out as the best laid financial plan might have anticipated.

We view Zero Based Budgeting as a risk-based change management tool that assists and informs the senior managers in any organisation of the opportunities and risks inherent in designing and building innovative change processes to help add value to the organisation’s overall performance.

At theMarketSoul ©1999 – 2011 we have practitioners available who can assist you on a consultancy basis to operationalise the full 360 degree Financial Management practices most organisations require in order to ensure that they remain competitive, profitable and continue to create value.

Risk Management Ideas

Risk has as one of its essential elements TRUST as a foundation.

Trust on the other hand has many other factors that interplay and interact on it.

Markets are created when there are needs that are not immediately met from you local environment and therefore scarcity exists.  Market participants step in to fill this ‘needs’ void.

English: Risk management sub processes
Image via Wikipedia

As for any subset of Risk, either Operational, Market, Liquidity, Interest, etc. a big part of the assessment process it not just about looking inward and assessing the risk profiles, risk attitudes, risk systems, etc., but an important part of the process is stepping into the realm of uncertainty and looking outwards and the wider market context we find ourselves in.

Being too prescriptive about the individual risk profiles and control systems will only stifle innovation and growth.  Some say we need a very healthy dose of growth right now, whereas others are content with the new world order of the ‘anti growth economic’ bias (our description of austerity) we have already entered in the Western Hemisphere.

Our positive risk management framework, also known as Value Oriented Risk Management encapsulates both risk and uncertainty management and combines it with the best offerings of Value Based Management.  (For more information or to contact us, please click on the Contact us link or read the article entitled “The Intersection – Where Risk, Value & Reward link by clicking on the embedded link.

Our Value Oriented Risk Management is the positive Risk Management focus, acting as an enabler ensuring that you unlock value in your organisation a midst the regulatory compliance constraints added to your management agenda.

TheMarketSoul ©2010


Sustainability I

The focus on sustainability and sustainable practices is a self defeating objective.  Sustainability means that business leaders take their eye off the equity holder’s value creation ideal, as it flies in the face of self-interest as promoted by Adam Smith some 234 years ago (The Wealth of Nations , 1776).

Profile of Adam Smith
Image via Wikipedia

Self-interest and the pursuit therefore is being clouded by a multitude of other non value adding factors that is diluting the message and contributing to more uncertainty and risk and therefore capital flight and volatility in the financial and capital markets as we have experienced over the last 2 years.

This process and Zeitgeist will not disappear or be properly understood, unless we develop a deeper understanding and familiarity with uncertainty as a driver of the innovative spirit of human endeavour.

Risk management per se is not the answer and panacea it is held out to be, and if it promotes a more risk-averse society, then we are heading for the middle ground of mediocrity, tyranny and decline in social values and structures that have taken many hundreds of years to create.

Being part of the system with a myopic view, rather than standing outside the system with a holistic and reflective frame of mind is causing more damage than good.

Yet how are we to live and deal with the cognitive dissonance that these two views by the very nature induce?

Let’s open up to good honest debate, search and reflection, rather than to dogma and a narrow focus on defending vested interests and old world models.

We are in the midst of a major cultural, economic and world order paradigm shift and the outcome is uncertain, potentially destabilising, but we must embrace this exploration of uncertainty and chaos the will inevitably ensue.

theMarketSoul ©2010


Short-sighted: Actor behaviour in the market for competitiveness

Competition is a good thing.  Of that we are sure.

It is one of the key ingredients of a dynamic market process, yet is competition and the potential negative consequences of short-sightedness a means or an end in itself?

Today we argue that the unfettered aspiration of competing for competition’s sake and the shedding of what is seen as non-core processes and competencies in organisation, will eventually lead to sub-optimal performance and is an unsustainable practice.

In the unrelenting search for shareholder value creation, which is the fiduciary and main responsibility of the board of any shareholder / equity owned organisation, we believe that sub-optimal decisions are being taken, both because of target operating model enhancements and short-term return of investment (ROI)

 

One of the underlying objectives of International Harmonisation of Financial Regulatory Standards (as currently promoted by the IASB & FASB) is the desire for greater transparency and ultimately more regular and frequent reporting cycles.  The view is that the greater the frequency in reporting, the less information asymmetry will be in the market, thereby eliminating insider trading and other undesirable ‘sharp’ market practices that regulatory bodies such as the SECLondon Stock ExchangeNYSENASDAQ, DAX, etc., are trying to stamp out.

 

But if we extend this logic, or rather shorten the current reporting cycles from the regular quarterly updates to say monthly, weekly , daily or even hourly updates, the already short-sighted mentality will become even more sharply focussed.  And this begs the question:  “How will CEOs and other business leaders have to ‘defend’ their decisions on a minute by minute basis under this unrelenting 24 hour news and sensationalism culture”; thus leading to an even more intense short term focus on their part.  Certainly, this must be the worst of all downward spirals and tyranny of information overload?

 

But, by logical extension, this is exactly where we are heading in a decade or two’s time.

 

So, if the focus is then on more short-term results and ‘core processes’ where does this leave the current wave of outsourcing, off-shoring or near-shoring of non-core processes?

 

We contend that the already well established trend of ‘letting go’ of all non-core processes and competencies has a negative effect on the longer-term sustainability of the organisation.

Succession planning could already be outsourced and thus not on the board’s agenda, as recruitment consultancies now fulfil the non-core ‘attraction of suitable candidates’ services, with the traditional Human Resources fulfilling a more Risk mitigation / management functions of ensuring compliance with Health & Safety Executive , employment law, equality laws, etc.

 

Another unintended consequence is the fact that because organisations more and more frequently utilise professional specialists to deliver projects and programmes, the esprit d corps is disappearing from organisational life.  It is difficult for managers to gain this motivational force of esprit de corps when they are managing ‘virtual teams’ and a cadre of temporary service providers through dysfunctional processes of ‘on-boarding’, induction, project management, quality control, motivational traps, engagement, focus, etc.

Therefore, to conclude this opening article in a new series around the ‘new labour market models [1] [2] [3], currently being practiced in the western free market democracies, let us ask the key question that is one of the foundations of the factors of production in achieving economic advancement:

“How do we recognise, incubate, nurture, develop and sustain talent and talent management in our organisation, when this critical activity is handed over to outside consultants who have a different business model and agenda to our corporate ambitions?”

We know that there are some ‘labour supply aggregators’ or forward thinking recruitment consultancies that realise that their own models of engagement has to change, in order for them to move into the value creation and value addition space, but there are still far too many ‘factories’ with conveyor belt mentalities out there.  Not to let the corporate ‘talent managers’ off the hook, because if you don’t have people and processes in place to manage the talent anymore, you only have yourself to blame when the ‘transparency machine’ of financial regulatory reform forces you down the channel of short-term decline…

 

theMarketSoul ©2010


Does Law inform or enforce culture?

If ‘the Law’ is the codification of cultural norms and practices, does the Law then not inform culture?

Policy, social malice and engineering of social outcomes bend these laws into legislative blunt instruments designed to enforce cultural behavioural changes on a grand scale, trouncing the common law of good judgment, neighbourly relations and common sense and thus freedom in their wake?

 

Within the above question and assertion lies the ‘malice of the free market’; where misguided and misinformed regulation channels behaviour and economic interactions in directions and with outcomes not anticipated or foreseen.  Thus unleashing the ‘law of unintended consequences’.

 

Take as an example the economic condition referred to as Moral Hazard.

 

A definition is:

Moral Hazard occurs when a party insulated from risk may behave differently than it would behave if it were fully exposed to the risk.

 

Moral Hazard therefore flies in the face of the principles of personal responsibility and thus accountability for our actions to a wider stakeholder community.

 

Is Moral Hazard perhaps promoted and therefore amplified by the fact that business leaders are not more formally educated in their fiduciary responsibilities?

 

Is this a function of weak or inefficient corporate governance structures and frameworks, or merely an oversight that is readily addressed by ‘occupational licensure’ or the professionalization of directors by only allowing formally qualified persons to serve on certain corporate boards?

 

Would this formalisation process of understanding fiduciary responsibility hinder the spirit of free enterprise and risk-taking or enhance the governance and risk aptitudes in a controlled and more channelled and focussed practice?  Would it have as a positive consequence an amplifier effect for raising the corporate governance and Enterprise-wide Risk Management practices?

theMarketSoul © 2010


The Sustainability Gene

The CBI published a report entitled “The shape of business – the next ten years” in late 2009.

 

The authors identified 5 key drivers affecting the business environment, namely:

 

1.  Changing finance and capital conditions,

2.  The decline of trust in business and markets,

3.  A less benign macroeconomic environment,

4.  Social and demographic change where the recession will have a major influence,

5.  Sustainability and resource issue.

 

We pick up our cue from the fifth driver being Sustainability for today’s post.

 

Our comment serves more as an aide-mémoire to return to in more detail in future articles.  This post also does not serve as a commentary on the CBI’s report, but rather as a general opinion on the nature of sustainability and human a nature and is therefore pure conjecture.

 

We believe that sustainability as understood to mean the impact we have on the planet and the resources we consume, is not a natural human phenomenon, in the face of self-interest (as per the economic definition of the term) and competition for scarce resources.

 

In other words sustainability flies in the face of human kind‘s natural tendencies to compete for resources, either by war and confiscation, or by trade and exchange for those scarce resources.

 

We therefore contend that as human actors interacting with and through the free market mechanism, we do not naturally possess a ‘sustainability gene’, but instead have to develop a new model and framework for ensuring that this objective is effectively pursued and becomes part of the underlying psyche of being in business and discharging our fiduciary responsibilities.

 

Linking to our previous post ‘The Markets do not need certainty’, we contend that it is structure that helps shape markets and creates the conditions conducive to the effective operation of those markets.  Other factors will ultimately affect the efficiency of the markets and some of these factors include Innovation and such like.

 

In conclusion, let us wrap up with a few quotes on sustainability:

  • You can never have an impact on society if you have not changed yourself.  Nelson Mandela
  • The very process of the restoring the land to health is the process through which we become attuned to Nature and, through Nature, with ourselves.  Chris Maser
  • We can learn whatever we need in nature because we are part of nature.  Human beings are part of Creation.  We live by the same laws as all of nature.  Anne Wilson Schaef

And in the final quote above we possibly see a glimmer of hope for a possible answer to our ‘Sustainability Gene’ deficiency.  Somehow Adam Smith’s ‘self interest’ and the modern free(ish) market system require an injection of nature law and justice.

 

Whatever that shall be.

theMarketSoul ©2010