Beruflich Dokumente
Kultur Dokumente
JSC
CURIOUS
there are many ways of ORGANISING activities
why are some COMPANIES more successful than others?
why are some MANAGERS more successful than others?
can we LEARN from & IMITATE successful organisations?
OPTIMISTIC
the JSC is SURPRISINGLY successful
success is not random there is a PATTERN
take a DIFFERENT look at an old institution
unusual insights emerge & lead to a better UNDERSTANDING
BENEFICIARY
LEARNING, INNOVATION and ASPIRING trying to understand the JSC
WEALTH is important more CHOICES seem to result in less infant mortality
VICTIM
wealth creation isn’t easy WHO is tying our shoe laces together?
who is to blame for this CONSPIRACY?
STUDENT
what is going on??
ECONOMIC REALITIES
ESSENTIAL CO-OPERATION
JSC
from
LEARNING &
INNOVATION WEALTH
to
CREATION
?
EVOLUTION or PLANNED DESIGN
CUSTOMER CHOICE or EXPERT REGULATION
ENTREPRENEURS or BUREAUCRATS
HEURISTICS or ALGORITHMS
CO-OPERATION or COERCION
????
or PLANNED DESIGN ?
MARKETS ?
FOCUS on the -
JSC
LEGAL
UTOPIAN
KNOWLEDGE CONTR
BLISS
ACTS
IGNORANCE
? NAÏVE
TRUST
TREACHERY CO-OPERATION
‘We are ignorant of what it is we do not know,
even though we know more than we can ever say’
John Gray
‘From the bowels of Christ, I beseech you,
think that you may be mistaken’
Oliver Cromwell
‘Organisations based on trust and good intentions are very fragile & easily
invaded & exploited by opportunistic agents’
Oliver Williamson
‘Evolutionarily stable strategies are stable because they are immune from
treachery’
Richard Dawkins
JSC WEALTH
MACHINE
BUSINESS ACCOUNTS
BUSINESS STRATEGY
MARKETING
TECHNOLOGY
ECONOMIC ANALYSIS -
SATISFICING
SUPPLY & DEMAND
COMPARATIVE ADVANTAGE
TOTAL FACTOR PRODUCTIVITY
ENDOGENOUS GROWTH
NATURE of PROFIT
SAFEGUARD of COMPETITION
INDIVIDUALITY of REALITY
MAGIC of PROPERTY
CORP
ORAT
E
WEAL
PR
TH OFI
E T!
A LU
G V E RS
M
D DIN S TO
A
for
CU
JS ENTREPRENEURS with
INVESTORS with
C! IDEAS
CAPITAL
INNOVATION
INVESTMENT REWARDED
ENCOURAGED ■ Finance available
■ Limited liability
■ Stakes can be cashed
■ Anyone can join
DRIVEN by PROFIT
OWNED by SHAREHOLDERS
SOURCES of FINANCE
OWNERS
LOANS CAS DEBTORS
CASH
H
POO
L
CREDITOR
S COST
S
FIXED ASSETS
VARIABLE
FIXED
MATERIALS DIRECT
DEPRECIATION INDIRECT
DISTRIBUTIO
N
FACTORY
SALE !
STOCKS
FINANCIAL ITEMS PR
OF
IT
TAX
DIVIDENDS
RETAINED PROFITS
CUSTOMERS
RESOURCES IN CASH
SUPPLIERS
EMPLOYEES
SALES
ASSETS
WEALTH OUT
THREE REPORTS
■ PROFIT & LOSS ACCOUNT HOW MUCH PROFIT not CASH?
■ BALANCE SHEET SPENT on CAPITAL or REVENUE?
■ CASH FLOW STATEMENT WHERE IS IT GOING?
DIFFICULTIES
■ Income fluctuates TIMING is not consistent
■ Assets must be VALUED and there are no market prices
■ Costs must be ALLOCATED and there are no invoices
■ Uncertain future ESTIMATES are never ‘correct’
PRINCIPLES
■ CONSISTENCY for comparison
■ PRUDENCE for safety
■ ACCRUAL for timing
■ GOING CONCERN for clarity
but the ACCOUNTS tell only HALF THE STORY with focus on -
■ COSTS but not QUALITY / SERVICE / SKILLS
■ YESTERDAY but not TOMORROW
■ COSTS of DOING but not COST of ALTERNATIVES
■ RULES but not LEARNING / INNOVATION
CREDITOR COST
S S
VARIABLE
DEPRECIATION FIXED
MATERIALS DIRECT CASH
INDIRECT SALES &
DEBTORS
DISTRIBUTIO
STOCKS N
SALE !
FINANCIAL ITEMS
PR
OF
TAX IT INCOME
DIVIDENDS COMING IN
RETAINED PROFITS
EXPENDITURE
GOING OUT
OWN
DEBTORS
OWNERS EQUITY CAS & prepayments
DEBT H
FIXED ASSETS
CREDITOR - DEPRECIATION
S
& accruals
SALE !
STOCKS
FINANCIAL ITEMS
DEFERRED INCOME GOODWILL
PROVISIONS
PR
OF
TAX
IT
DIVIDENDS
RETAINED
PROFITS
NB. WHO PAYS HOW MUCH WHEN ? jpb
THE CASH FLOW STATEMENT 12
STREAMS POOLS & LEAKS
REAL ISSUES
CAS
H
COST
CREDITOR S LEAKING OUT !
S VARIABLE
FIXED
DIRECT
INDIRECT
FIXED ASSETS
MATERIALS
DISTRIBUTIO
N
SALE !
STOCKS
FINANCIAL ITEMS PR
OF
TAX
DIVIDENDS
IT
NB. YOU CAN’T EAT PROMISES ! jpb
BUSINESS STRATEGY 13
DISCOVERING MARGIN & SPEED
SHAPING CURVES
SPEED
REVENUE
££’ss PROFIT
MARGIN
COSTS
PRICE
VOLUME
what BUSINESS STRATEGY delivers the MAXIMUM PROFIT ?
where does MC = MR ?
ACQUISITION of SKILLS
FOCUSED EXPERTISE
SKILLS FULLY UTILISED
DIVISION of LABOUR
NB. PRACTISE MAKES PERFECT ! jpb
COSTS 15
SPECIALISATION & COST BEHAVIOUR
COMPLEXITY COSTS
PARADOX INDIRECTS
££’s ££’s relentless
‘Hawthorn
’ effect increase
bureaucracy
& restructuring
COMPLEXITY VARIETY
££’s ££’s
complex
% waste intermittent
simple
continuous
time number of varieties
star
growth
development
problem dog
Profit
Costs critical -
Capacity critical - divest?
Technology critical - milk? acquisition?
critical - invest? relaunch?
innovate? advertise? drive down the learning curve?
find the niche? promote?
market research?
COMPETITORS are
COMPETITION?
PACE SETTERS
NOT WINNERS!
CUSTOMER VALUE
PRICE? DECISION
QUALITY?
INNOVATION
SPECIALISATION
■ PERFORMANCE
COSTS SERVICE?
■ PRESENTATION
VOLUME
■ PACKAGING
RESPONSIVENESS ■ CONSISTENCY
■ COURTESY ■ CHOICE
■ AVAILABILITY ■ ADVERTISING
■ RELIABILITY
■ EFFICIENCY of DISTRIBUTION CHANNELS
MARKET RESEARCH -
■ INFORMATION to reduce risk (about yesterday?)
■ REAL BEHAVIOUR (not saying but doing)
■ JUDGEMENT CRITERIA (technical specification?)
■ MATCHING customer & product
■ TESTING (not subterfuge and intrigue)
■ BEWARE of ‘me toos’ (competitors do market research)
■ NB the best info comes from your existing customers !
OR real products at real prices against real competition in real markets !!??
NB. THE CUSTOMER IS KING ! jpb
QUALITY 18
BRAND POSITION & ADVERTISING
PRODUCT DIFFERENTIATION
QUALITY
VALUE BEST CHANCE
■ PREMIUM
■ MARKET NORM
ALWAYS RISKY
■ ECONOMY
STANDARD QUALITY NEVER
AT A DISCOUNT
BUT IS IT JUST A COMMODITY ?
saturation
advertising
spend effective spend
££
volume
them
Quality
Service
Price oh dear !
index
us
A CONTROL SYSTEM !
CUSTOMER
DECISIONS PRICE
INVESTMENT QUALITY
RESPONSE SERVICE
INFO
ENCOURAGING LOYALTY
■ COURTESY COMMUNICATION
UNDERSTANDING
HELP with a SMILE
■ AVAILABILITY FAST
ON TIME
WHEN WANTED
■ RELIABILITY PREDICTABLE
FLEXIBLE
LOYAL CUSTOMERS
■ FREE ADVERTISING
■ NO GO AREA for COMPETITORS
■ SPEND MORE
■ LOW RISK
diminishing returns
5% they don’t like the product !
4%
3%
small discounts
2%
big incentives
1%
0
loyal customers
SCIENTIFIC METHOD
■ OBSERVATION
■ MATHEMATICAL THEORY
■ TESTABLE HYPOTHESES
■ EXPERIMENTAL VALIDATION
■ PEER REVIEW
no one can claim superior access to wisdom but the process of science and
it’s application as technology is the best bet
‘KNOW HOW’ = ‘SURVIVAL VALUE’
GROWTH OPPORTUNITIES –
SCALE –
GLOBALISATION !
SPECIALISATION – TECHNOLOGICAL
INNOVATION !
■ PRODUCTS R&D
JSC
■ PRODUCTION FACTORIES
■ PEOPLE HUMAN CAPITAL
■ INVENTION
■ MARKET RESEARCH
■ DEVELOPMENT
■ TEST MARKET
■ ADVERTISING
■ PRODUCTION
■ DISTRIBUTION
■ SALES
INNOVATION FUNNEL
MANY
MANY PROJECTS COMPETE
SELECT FEW
IDEAS for SCARCE RESOURCES
REACH the MARKET
BUZZ & MOST FAIL
AROUND
S
ER
M
A COMPLEX INTERACTIVE LOGISTICAL SYSTEM
TO
S
CU
PROCUREMENT OPERATIONS DISTRIBUTION
SALE!
S
COST
TS &
INPU
INFORMATION
SERVICES
ENERGY
LABOUR
FIXED ASSETS
MATERIALS
! CONVERSION PROCESSES
E SS
EN ADDING VALUE for CUSTOMERS
I V
NS MAXIMISING SALES REVENUE
S PO
R E
ORGANISING COMPLEXITY
SIMPLIFY SEPARATE DOWNSIZE
REDESIGN AUTOMATE
PROBLEM BETTER
MODEL
LEARNING
BEST OPTION
AVAILABLE AT INNOVATIVE
THE TIME UNDERSTANDING
EVIDENCE CREATIVE
OF INNOVATIVE
OUTCOMES EXPERIMENT
INVESTING in PEOPLE
■ SPECIALISED SKILLS ACCOMPLISHMENTS & APTITUDES
■ EDUCATION EDUCATION EDUCATION
■ EXPERIENCE been there seen it done it bought the T-shirt
■ SELF CONFIDENCE for experiments & failures
■ FLEXIBILITY
MOBILITY
RISK THRESHOLD
HEALTH
STRENGTH
ENERGY
EMERGENT
PATTERN
unexpected
FEEDB
ACK
FEEDB
ACK
LOCAL
ACTIVITY
simple rules of
behaviour
UNINTENDED CONSEQUENCES
UNEXPECTED RESPONSES
CO-OPERATION EMERGES
from LOCAL ACTIVITY in the JSC !
OM ERS
C U ST
SALE !!
THE W
HEEL
FELL
OFF
BUREAUCRATIC REGULATION :-
■ inhibits INNOVATION as change & flexibility are reduced
■ drives CAPITAL & investment overseas or underground
■ diverts resources from CUSTOMERS to the ‘rules’
■ incurs COSTS of quangos, red tape & small print
■ provides CARTELS ‘legal’ protection from competition
■ replaces CAVEAT EMPTOR with a false sense of security
■ separates RESPONSIBILITY from control
■ confronts the innocent instead of THE GUILTY
■ presents opportunities for BRIBERY, CORRUPTION & COVER UP
■ encourages INTERVENTIONIST instincts & delusions of control &
hinders CO-OPERATION & local KNOWLEDGE
SURVIVAL
the EDGE of CHAOS
EFFICIENCY
= CREATION = the EMERGENCE of ORDER !
STAGNATION CHAOS
EXTINCTION
EXTINCTION
MUTATION RATE
■ INEFFICIENT
■ market information & control are absent
■ INEFFECTIVE
■ KNOWLEDGE for decisions is incomplete
technical detail
innovative alternatives
Joe’s wishes
unintended consequences
■ IMMORAL
■ majorities DICTATE their perspective to minorities
■ interest groups are BRIBED in return for support
■ bequests from tax leads to CORRUPTION
■ VULNERABILITY from dependency on others
■ ALIENATION from remote decisions
■ DEMORALISATION from unfulfilled expectations
■ HELPLESSNESS as one ‘dictator’ succeeds another
■ IMPOTENT
Why did it the jsc evolve when it did where it and why not elsewhere? Why
Western Europe? Why 1500 AD?
But LESSONS -
■ IDEAS have invariably been proved WRONG
■ IDEAS have invariably been IMPOSED upon poor joe
■ DETECTIVE WORK is necessary to reveal a golden thread of BOTTOM
UP DISCOVERY & ACCUMULATION of SURVIVAL SYNERGIES as Joe &
his mates respond to TOP DOWN IMPOSITION by BISHOPS PRINCES
GENERAL & MAJORITIES
MORALITY & LAW = obligation & trust = harms & hards in the warp & weft
of society common law evolved
■ SCIENTIFIC
■ ORGANISATIONAL
■ POLITICAL
■ ECONOMIC
■ SUPPLY & DEMAND
■ COMPARATIVE ADVANTAGE
■ TOTAL FACTOR PRODUCTIVITY
Herbert Simon – ‘we encounter many branches in the maze of life’s path,
we follow now the left fork, now the right. The metaphor of the garden of
forking paths is irresistible to anyone who has devoted their scientific
career to understanding human choice'?
DEMAND SUPPLY
PRICE MARGINAL UTILITY OPPORTUNITY COST
QUANTITY
KEY POINTS –
EVERYONE has different OPPORTUNITY COSTS and a comparative
advantage in something
EVERYONE benefits from SPECIALISATION and trade even when the
gifted are better at all activities
the principle explains TRADE advantages at INDIVIDUAL and national
level, with money or barter
specialisation and trade will EVOLVE because extra 'VALUE' is created, it
does not require understanding or the intervention of the specialists
REAL WAGES are determined by the value of output
PRICES are determined by supply & demand
PRICES & EXCHANGE RATES don’t determine trade, they result from
trade, they are measurements of opportunity costs
OUTPUT
O2
1950
PAUL ROMER and endogenous growth theory lifted some of the gloom of
the ‘dismal science’ by focusing economic analysis on INCREASING
RETURNS and Adam Smith's 'Pin Factory'.
ESSENTIAL PREREQUISITES
■ rules for the definition exchange & protection of private property
■ uninhibited access to customers
■ obligation & trust
UNAVOIDABLE CONSEQUENCES
■ rising prices to pass on information
■ bankruptcies when losers fail to respond
efficiently & effectively
■ unemployment following adjustment to change
OWNERS
HIGH PROFITS
EMPLOYEES
To resolve the conflicts & make the m/c work the Owners must decide
because of –
SENSOR
COMPETING
ALTERNATIVES
- DIVERSITY
SCARCITY
POINT
SET
ALGORITHM
CONFLICT
SYS
MET
COMPLEXITY CUSTOMER
VALUE
CHANGE JUDGEMENTS
- CHOICES
BEST PERCEIVED
OPTION AVAILABLE
AT THE TIME
ACTUATOR
RESOURCES IN
2nd law costs OWNERSHIP
RESPONSES
- PERSONAL RISK / REWARD PROFILES
SPECIALISATION
SCALE
SYNERGY
SCIENCE
IMITATION
INVESTMENT
INNOVATION
MULTIPLE ROLE -
PROFIT is not a part of zero sum games where STEALING is the only
option.
■ FEEDS PROGRESS
■ RESPECT
C ’S
ESTEEM
HY
AR W
ER LO
HI AS
INDIVIDUALITY ■ INITIATIVE
M
FRIENDSHIP ■ CULTURE
SECURITY ■ INDEPENDENCE
R VE D C ED
PRESE & ENHAN
&
EFFOR
T
V E ST MENT
IN
SATISFICING !!
SCALE - more volume lower cost - drive down the learning curve
INNOVATION - make a better mouse trap & the world will beat a track to
your door
Co-operations EVOLVES
in ROBUST institutions - JSC
NB. NO ONE SAID IT WAS EASY ? jpb