Archive for the 'Investing in a Changing Enterprise' topic

Investment Analysis is one of the top 10 problems of 20^th century enterprise management

20^th century investment analysis cannot plan the actual return on investments

How does your company analyze strategic investments in capital development? Does your company perform a cost-benefit analysis? Are all the specific investments needed for business success planned? Are the costs of the investment analyzed, itemized, and scheduled? Are the benefits of the investment analyzed, itemized, and scheduled? Is the value to be added to the business planned and set up as goals to menage the return on investment?

For the most part, 20^th century investment management cannot itemize the costs or benefits of investment, particularly investments in management improvement and business change. Costs are project expenditures rather than investments in specifically-identified capital items. Benefits are usually estimates of increases in revenues or reductions in costs.

Identify and value results needed to justify investments and set result goals to manage the return on all investments

21^st century business management manages the economic outputs of the business as specific results and manages the invested capital utilized to produce results as specific capital solutions. [more...]

20^th century enterprise management cannot plan and manage investments for a specific return

20^th century enterprise management used today concentrates on performance and the need for performance improvement. Development planning and execution concentrates on the capital needed for performance. Investments are directed primarily at tangible assets or achieving a project outcome. Return on investments cannot be calculated, since specific capital items and business improvements are not defined. So, potential increases in sales, revenues, etc are estimated to justify the investment. Project management manages the project separate from the business as an entity in itself.

20^th century enterprise management objective is capital development without managing the capital developed

20^th century enterprise management supposedly manages capital development. The managed capital developed is limited to capital that is managed, primarily in assets and employees. Most other capital is not managed or is classified as intangible assets. Development costs are not captured against the specific capital items to be utilized by the business to provide the return. [more...].

All capital development should develop capital, plus business results for return on investment

Every business enterprise must produce output results that lead to goods and service results to create value. An expanding enterprise must produce new results of increasing value. The enterprise needs additional capital in order to produce new results as part of the business. The capital must be acquired or developed, implemented as specific capital solutions, and then utilized to produce improved or new results of increased value. The value added to new business results must justify the capital expenditure to acquire or develop needed solutions and provide the return on investment.

All capital development is really result and capital development to develop capital as solutions to be utilized to create additional value in output results produced by the business. The additional value of output results provides the return on the capital development investment. If the capital solutions utilized and the results produced by business performance are not managed, result and capital development cannot be managed properly and the return on investment cannot be measured. Even physical capital development, like a new building, produces capital solutions to produce results, be it the enterprise office facility solution or a facility solution to produce lease or rental income results.

20^th century enterprise management does not organize or manage results or capital as sets

20^th century management used today does not manage the enterprise business, defined as “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. [more...].

The economic crisis produced large investor losses

Several trillion dollars of investor funds were lost in the past six months. Investors, advisers, and experts point out many mistakes made, poor government oversight, the credit freeze, unknown asset value, investor greed, poor corporate governance, and other symptoms as the cause of investor losses. These mistakes are contributors, but not the cause of investor losses. Investment banks, investment funds, stock brokers, investment advisers, government regulators have demonstrated their lack of knowledge of what is really happening and the real cause of the financial and economic crisis and investor losses. They have demonstrated their inability to manage the problem or to identify real solutions. Blind investment professionals are leading blind investors.

Investors must look deep to understand the cause of loss to avoid future loss

Everyone looks for quick fixes and easy solutions every time there is a crisis, so the real fundamental problems continue unsolved. The fundamental problems require deep analysis and understanding of the actual business. Investors must understand the real reason for their losses. There is only on fundamental reason: the failure of financial institutions and other corporations to manage the business to plan the capital investments they must make to create value, manage the proper utilization of their investments to create value, and manage the results produced from their investments that provide value to investors.  Financial institutions and other corporations are not able to do this systematically. They cannot manage capital worth (often called asset value) in the future result cost absorption and result value-added from the utilization of investments and the result value-added to be available from the sale or disposal of the capital solution asset. They are unable to provide information on the transparent actual business for proper government supervision and informed investor decisions. Accounting accounts for cash in a contrived chart of accounts that is not related to the actual business. Arbitrary accounting principles, such as “mark to market” are employed instead of accounting for the business. Financial and risk models used are arbitrary and are not related to the business. Financial statements produced are inaccurate and limited and do not report the business to reveal problems.

Corporations lay structures over their business and manage the enterprise

All financial institutions and other corporations today employ dead-end 20^th century management. [more...].

Investors are the big losers in the economic crisis

Corporate investors have lost trillions of US Dollars in the current economic crisis. The recession appears to be long and deep delaying any gains in a recovery. Investors need to understand the fundamental problem causing the widespread problems in financial institutions and corporations around the world. Corporate investors are up against conventional corporate management thinking, which propagates dead-end 20^th century management and prevents 21^st century business management. Every business in a corporation must be managed consistently to consolidate into one corporate business. Corporate shareholders must pressure corporate management to manage the actual corporate businesses to eliminate the problems that caused past and present crisis, and surely will cause future crisis.

Investors lose because they invest in corporations that do not organize, plan, direct, or control the business

The business is “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results”. Corporations do not manage the business today. They organize the corporation with an organization structure, plan with strategy and corporate plan structures, direct with function and process structures, control with account and quality structures, report with compliance and financial reporting structures. The structures laid over the business are not related to the business, often are not related to each other, consume enormous IT resources and costs, and do not collect or report actual data concerning the business.< [more...].

Business owners and corporate shareholders are the big losers from the economic crisis

Corporate management may have lost out on some big bonuses and property owners may have to wait for the worth of their properties to recover. But, the business owners and shareholders have lost trillions of US Dollars on their investments due to the continuing failures of obsolete 20^th century management. They have invested in corporations and institutions that are unable to manage their business in the costs and planned worth of investments, the cost and effectiveness of specific capital solutions utilized in performance, the value and quality of results produced from performance, and the historic return and future solution worth from the value added to results. These failures cause the continuing cycle of corporate management problems.

The corporate management problem must be simplified to manage the actual corporate businesses

The only solution is to simplify business management down to the three components of the business and three additional data entities that must be managed to manage the business effectively. The corporation must organize and manage the actual business to clear away the myriad of enterprise management structures laid over every business. Actual business data, unknown today, must be collected and one consistent set of complete and accurate actual business management information, not available today, must be utilized to manage the business. Each corporate headquarters, division, business unit, subsidiary company, or other venture is a business. Each business is consistently-defined according to 21^st century business management conventions and standards to add up to one consistent corporate business. Any potential problem appearing at the corporate level can be traced to a particular capital solution utilized to produce a result at a business level.< [more...]s

New enterprises must not waste that precious “green field” advantage

Every day new enterprises are being organized around the world. As described in the previous post, enterprises go to the drawing board to organize and manage the start up, but they do not know what to draw. So, virtually all of these new enterprises simply adopt generally-accepted 20^th century management methods and doom themselves to the unsolvable problems discussed here at the Business Change Forum. These enterprises waste the precious “green field” advantage of no legacy structures and the opportunity to do it right from the start.

Conventional wisdom says copy a business model and do not “reinvent the wheel”. The model involves products, marketing, customers, etc but does not provide a real model or organization for the actual business. New enterprises adopt a typical 20^th century organization structure that does not organize or model the business.

Management consultants still recommend that new enterprises lay traditional organization and management structures over the business, rather than organizing and managing the business for significant competitive advantage.

Managers and consultants must employ the best structure available to protect future shareholder worth

Any manager or management consultant involved in organizing a new enterprise has a duty to study all options to protect the worth of the shareholders’ investment.

Most managers and consultants do what everybody else does and erroneously assume that the enterprise organization structure they adopt actually organizes their business. [more...].

Business change and change management are unsolvable problems of 20^th century management used by business enterprises today. The unsolvable problems are caused because the actual business “investments in capital as solutions of worth utilized for costs and effectiveness of performance to produce value and quality in results” is not organized or managed. 20^th century management fails to define, organize, and manage the three components of the business.

• Results: The economic outputs of value produced from business performance
• Capital: Investments in the business to provide capital solutions of worth to be utilized in business performance
• Performance: The specific capital solutions utilized in performance to incur costs and to produce specific results

There are only two entities that change in business change and in capital development – results and capital solutions. All business decisions and changes involve results to produce from the business and the human and other capital solutions to utilize in performance to produce results.

If the business is not defined, organized, and managed it is impossible to change the actual business. Instead of changing the business and managing business change properly, 20^th century management lays structures over the business. The organize structure is laid over the business. This is a fatal error. Once an organization structure is laid over the business, the business cannot be managed. [more...]

R-pM is a breakthrough to manage the actual business and leave 20^th century management problems behind

R-pM organizes and manages the actual business, “the utilization of capital of worth in performance to incur costs and produce value in results”, without 20^th century management problems with reorganization, business change, business and information complexity, complex and costly IT infrastructures, unknown costs and value, unknown capital worth and returns, excessive overheads and costs from overlaid structures, and on and on.

R-pM is a new natural business perspective requiring little investment or risk

R-pM minimizes capital to that required by the business, optimizes business performance to reduce performance costs and increase result value, and manages result value-quality chains to produce customer input results. R-pM provides enormous competitive advantage, while the investment and risk is minimal. R-pM is mainly a change in thinking, which requires time to take hold. Human capital learns to operate and manage the actual business, instead of structures laid over the business. Existing information systems likely can be utilized as business process solutions, if the business is properly defined and organized.

The existing business is gradually redefined into result value-quality chains and one integrated business structure. Obsolete structures laid over the business and unsolvable 20^th century management problems are gradually abolished. As the enterprise learns R-pM, implementation accelerates and the competitive advantage of R-pM increases until the complete business is organized for 21^st Century Management.

Owners, investors, shareholders, lenders and others with a financial interest must lead the way to manage the actual business

Business owners, shareholders, potential investors, lenders, etc have the most to gain by being among the first to use R-pM. [more...].

Business change today is not change to the business, but change to structures laid over the business

When people talk about business organization, business management, or business change they think they are talking about organizing, managing, or changing the actual business. But, the fact is that they are not talking about the actual business. The enterprise business, defined as ‘the activity of providing goods and services“, has never been organized or managed.

They are talking about enterprise structures laid over the business. The organization structure does not organize the business. A structure is laid over the business to organize the enterprise. The business changes while the organization structure remains rigid. Reorganization and related change management is not business change. It is change to the overlaid organization to align a new structure closer to the actual business. The organization structure is the fatal error of 20^th century management that prevents the business from being managed.< [more...].