beyond classic economic thoughts and rules

Thoughts for a complementary viewto the Classic Economic Mindset

Peter Bretscher © 2012www.bengin.comwww.insede.org

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• Documents are part of «Business Engineering Systems», registered Copyright TXu 512 154

• Consulting license No. CG01120612 (for enduser).(Attendees ickc June 12, 2012)

• Updates and further information see:http://bengin.net/12/ickc_e.htm

http://bengin.net/12/ickc_e.htm

Agenda

• Peter BretscherPractical need for model that integrates intangibles

• Findings & Project• 3 Levels of Enterprise• Values, Visuals & Framework beyond Smith & Co• Links

PETER BRETSCHER,PRACTICAL NEED FOR MODEL THAT INTEGRATES INTANGIBLES

• Professional Mechanician (Handwork)• Professional Engineer (Mindwork)

(R&D, Production, Marketing, IP-Rights, transdisciplinary trouble-shooting, special tasks....)

• ∆ between real live and (business) theory• Technology & Knowhow Transfer

- no books, no theory, no best practise....

- need for inventing a model realize T’Transfer(one that includes knowledge and other intangibles)

Obstacles – why?

World 1 World 2 World 3

realreality

experiencedreality

explainedreality

FINDINGS & PROJECT

1. Bottom up structuring reality, 3D-Models

2. Metrics that enables quantifying subjective dimension of value

1. Structuring the Elements of a CorporationThree levels: Offerings, Processes, Prerequisites

Primary-Resources: Products

BusinessMeansDocumentsKnow-HowRightsFinance

Departments: Marketing & SalesResearch & DevelopmentFabrication & ProcuringQuality & EnvironmentPersonnel & ServicesLogistic & Finance

3 types of processes:Management – Offerings – Background(= „leading“) creating fostering

- Products / Goods- Services- Rights / Licences

Type of Business

Processes

Departments of enterprisePrimary-Resources

2. Quantifying means (numbers and indicators)- from P&L account to the P&L profile- numbering system for tangible and intangible values

tangible ValueProducts BusinessMeans Documents Know-How Rights Finance

Sales

Expenses

intangibleValue

Vector

iV

tV

total Value

3. Development of Enterprise (Strategies, options....)- Market-oriented (outside-in) and offerings-oriented (inside-out)

„Outside-In“

„Inside-Out“

Compying need of customers/markets efficiently

Solving customer’s needsMaking markets forexisting potential

Four main views

be4d0014_2012_e.vsd© 2012, Peter Bretscher, [email protected]

4. Closed Loop Business Relations- planning, design, optimize Value Adding Net [VAN], beyond borders- from the supplyer of the supplyer to the customer of the customer

System

No.

System

No.

Goods

Services

Rights

Goods

Services

Rights

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

1. Level: Systems 2. Level: Type of Business 3. Level: Primary Resources

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

after optimizing

Products

BusinessMean s

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Righ ts

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

Products

BusinessMeans

Documents

Know-How

Rights

Finance

before optimizing

• Economic theory is a product, a tool that no longer fits the needs.

• TaskDevelop a new theory from bottom up that includes (tangible and intangible assets) and that makes subjective valuation quantifyable.

• Huge preliminary work3D Models, 300 GBRegistered Copyright

INSEDE (open) Institute for Sustainable Economic Development

(open)

R&DNext economic reasoning system

INSEDE

3 LEVELS OF ENTERPRISE

1. Structuring the Elements of a CorporationThree levels: Offerings, Processes, Prerequisites

Primary-Resources: Products

BusinessMeansDocumentsKnow-HowRightsFinance

Departments: Marketing & SalesResearch & DevelopmentFabrication & ProcuringQuality & EnvironmentPersonnel & ServicesLogistic & Finance

3 types of processes:Management – Offerings – Background(= „leading“) creating fostering

- Products / Goods- Services- Rights / Licences

Type of Business

Processes

Departments of enterprisePrimary-Resources

Primary-Resources

VALUES, VISUALS & FRAMEWORK BEYOND SMITH & CO

Vector Type 1

2. Quantifying means (numbers and indicators)- from P&L account to the P&L profile- numbering system for tangible and intangible values

tangible ValueProducts BusinessMeans Documents Know-How Rights Finance

Sales

Expenses

intangibleValue

Vector

iV

tV

total Value

Vector Type 1

i$$

Qualitative metric

© 2012 Peter Bretscher www.bengin.com – [email protected] of Business Engineering Systems – Registered Copyright TXu 512 154

vector_profiles_type10001_2012_e.vsd

%

meter sec

gallons

manhour

Subjective metric

Objective metricQuantitative metric

Metrics

Units

poundssquaremeter

Number of pieces

Enterprise

Vector Type 1

i$$

Qualitative metric



%

meter sec

gallons

manhour

Subjective metric

Objective metricQuantitative metric

Metrics

Units

poundssquaremeter

Number of pieces

Clusters

Business units

CountriesProducts

Sales regions

Functional departments

Balanced Scorecard

Vector Type 1



No rectangle

For more complex visualizationsFor comparison with other vectorprofiles

Vector Type 1

4 cluster

X – axis Y – axis

Vector Type 1

4,5190

50

100

150

200

250

Global Wealth Vectorprofile

lowest low highhighest Vectorprofile Average-Vector

Number of People [mn]

Cont

rol U

S$ [t

rn]

http://bengin.net/beta/04_global_wealth_vector_cs_e.xlsx



Vector Type 1

http://bengin.net/beta/05_cost_value_vector_e.xlsx

75100

100100

0

20

40

60

80

100

120

Cost-Value Vector

Manual availability Hotline supportHelp locate repair service Manual updatesRespond to letters VektorprofilAverage-Vector

Spending on Customer Service [%]

Cust

omer

's pe

rcep

tion

of v

alue

[%]



Vector Type 1

http://bengin.net/beta/10_global_workplace_gallup_2011_e.xlsx

21 95135

0

50

100

150

200

250

State of Global Workplace (Country-Level En-gagements)

India China Germany SwitzerlandAustria USA Australia United KingdomCroatia Costa Rica Vektorprofil Average-Vector

Engaged in %

Activ

ely

Dise

ngag

ed in

%



Vector Type 1

http://bengin.net/beta/10_fortune500_energy_rect_e.xlsx

17 46 56 73 80 93 93

-4

-2

0

2

First nine of Fortune 500 (Energy 2011)

AES American Electric Power Constellation EnergyWilliams NRG Energy Energy Future HoldingsGlobal Partners Calpine UGInone Vektorprofil Average-Vector

Revenues ($ billions)

Profi

ts ($

bill

ions

)



Vector Type 1

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000Vector Profile Eurozone, US & Japan (GDP and Foreign debt)

US France Spain Portugal ItalyIreland Greece Japan Germany UKVektorprofil Average-Vector

GDP [€ bn]

Fore

ign

debt

[€ b

n]

Greece

Portugal

© 2

012

INSE

DE,

Inge

nieu

rbür

o fü

r Wirt

scha

ftsen

twic

klun

g, p

eter

.bre

tsch

er@

beng

in.c

om

Spain

Vector Type 1

Vector Type 1

http://bengin.net/beta/pwc_ey_2_performancevector_d.xlsx

0 500 1000 1500 2000 2500 30000

100

200

300

400

500

600

700

Performancevector: Vergleich PwC 2011 mit Ernst & Young 2006

PwC Wirtschaftsprüfung PwC Steuer und RechtPwC Wirtschaftsberatung PwC Interne DienstePwC Summe E&Y Audit and AssuranceE&Y Tax and Legal E&Y Advisory ServicesE&Y Accounting Services E&Y Corporate Services

Anzahl Mitarbeiter

Um

satz

[Mio

CHF

]

(C) 2011 [email protected] www.performancevector.net Graphics are part of Business Engineering Systems, registered copyright TXu 512 154, LNo 4100001

8mJOkxXXD8ljTkcLPKN72t

E & Y

PwC



VALUES, VISUALS & FRAMEWORK BEYOND SMITH & CO

Vector Type 2

Vector Type 2

i$

$



invest

expected earnings

Business potential of a project

Vector Type 2

i$

$



invest

expected earnings

(impl

icit)

busi

ness

pot

entia

l

Business potential of a project

Vector Type 2

i$

$



invest

expected earnings

(impl

icit)

busi

ness

pot

entia

l

Business potential of a project𝑏′𝑝𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙2 ≥ (𝑒𝑥𝑝.𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠)2 − (𝑖𝑛𝑣𝑒𝑠𝑡)2 𝑏′𝑝𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 ≥ ඥ(𝑒𝑥𝑝.𝑒𝑎𝑟𝑛𝑖𝑛𝑔𝑠)2 − (𝑖𝑛𝑣𝑒𝑠𝑡)2

use

valu

e [i$

]

economic value [$]McDonalds $ 3

Starbucks $ 5

uv

Use value for coffee at Starbucks instead McDonalds?($ 5) ($3)

𝑢𝑣2 ≥ (5)2 − (3)2 𝑢𝑣 ≥ ඥ(5)2 − (3)2 𝑢𝑣 ≥ ξ25− 9 𝑢𝑣 ≥ ξ16 𝑢𝑣 ≥ 4 𝑢𝑣 = 4 𝑖$

Vector Type 2

i$

$



invest

expected earnings

(impl

icit)

busi

ness

pot

entia

l

Business potential of several projects

IBMMicrosoft

McDonald’s

Ford

Coca-Cola

Imaginary / immaterialValue[i$]

80

75

70

65

60

55

50

45

40

35

30

25

20

15

10

5

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Monetary Value[$]

„likely-standard“

Upper limit

StandardImplicit Potential[i$]

80

75

70

65

60

55

50

45

40

35

30

25

20

15

10

5

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 Monetary metrics[$]

Lower limit

WHAT TO MAKE WITH POTENTIAL

ImageFlow of InformationTransparenceKnow-HowGoodwillSense, ClimateIdentificationWork with joyPatentsCopyrightsBrands

Intangible means of production

Imaginary Balanceintangible assets

„subjective“

O IDismissals -Engagements +Outsourcing -Absences -Death --Intell. prop ++Profit-/Loss----------------------------Sum + -

O InRawmaterial -Tools, Means -Wagues Mind -Wagues Hand -Sales Rights +Sales Services +Sales Products +P/L----------------------------Summe + -

HeadworkHandworkToolsManufacturingOriginal costMarginNet SPMargin------------------------Gross SP

Hidden reserves

Current assets

Fixed Assets____

Outside capital

Equity capital

Security Praise, thankEducation EnlighteningAcceptance Transparence

production

Designed for

Designed for

Designed for

user’s needs

qualityHidden reserves

Classic balance oftangible assets

„objective“

„subjective“ Values, not tangible, but real „objective“ Values [$, £, ¥. €, CHF]

Imaginary P&L of potential Classic P&L

„imaginary“ business economics „traditional“ business economics

Design of products(properties) Product calculation

Rights

Prod

ucts

Services

© 1985 / 2008 Peter Bretscher

© 1985/2010 Peter Bretscher www.bengin.com – [email protected] of Business Engineering Systems – Registered Copyright TXu 512 154

c_map000_2010_e

Economic Value Architecture & Engineering

© 2000/2012 Peter Bretscher, www.bengin.com [email protected], www.insede.org, part of Business Engineering Systems, registered Copyright TXu 512 154 ecoval_pc000158_2012a_e.vsd

1. Stock exchange2. Enterprise potential

3. Communicating values and progress

REV(Real Enterprise Value)

SPE(Shareholders Profit Expectation)

REV + SPE = TEV= Total Enterprise Value≈ |Shareholder Value|

Value Track over time(Ortskurve, REV)immat V

[i]

mat V [$]

mat V [$]

immat V[i]

mat V[$]

Time

Ic-Function

immat V

mat V

Stru

ctur

e*)

*) As for example:BSC, EVA, BIG, UPR, B’E….

Intro

duci

ngax

is fo

rin

tang

ible

s

M(tangible)

P&L

M(tangible)BalanceI

(intangible)Balance

I(intangible)

P&L

How to explain?

Stock exchange

enhanced nonmonetary classic monetary

Economic Value Architecture & Engineering

© 2000/2012 Peter Bretscher, www.bengin.com [email protected], www.insede.org, part of Business Engineering Systems, registered Copyright TXu 512 154 ecoval_pc000158_2012a_e.vsd

+ $ / + i$

Strategic modes – build – grow – reduce – kill

- $ / - i$ + $ / - i$

- $ / + i$ + i$

- + $

-

grow

potentialinvest moneybuild potential

make use-valueearn money

sell table silvershow incompetenceto use potential

build

kill reduce

FURTHER LINKS

http://www.youtube.com/peterbretscher

http://www.youtube.com/peterbretscher

http://bengin.net/beta/basic_master_e.htm

http://bengin.net/beta/basic_master_e.htm

http://vimeo.com/38091481

English spoken

Ineteconomics.org Rob Johnson



Questions?

Thank You

Other slides

Time

· Abolition of inconsistencies· Suiting the terms, wording, metrics,

formulas to the new real reality· Joung generation as multiplier· Activity: Solving puzzles

4.„common“ science

higher level

Base: The Paradigm

· Activity: Solving puzzles· Limited catalog of problems· Not radically innovative· Precision of information· Perfecting tools and instruments

· Paradigm to be weakened· Insecurity of specific science· Rival theories· Discussion about fundamental

principles

· Coexistence of supposed incompatible MindSets

· Polarisation of opinions· New candidates for paradigm· New paradigm to be

conceived

Chan

ge o

f par

adig

mSw

itch

to a

new

poi

nt o

f vie

w

Paradigm shift in economic understanding(Steps in mindware development)

1.„common“ science

classic base

2.Crisis in the theory

3.Scientificrevolution

Anomalies,Crisis in the reality

Explanation model fails

Literature: Hochuli Gerhard R.: Das Wesen wissenschaftlicher Revolution, Herbsttagung Club NTB, 1983 Kuhn Thomas: Die Struktur wissenschaftlicher Revolutionen, Suhrkamp Taschenbuch 25, Frankfurt 1981

© 2009/2010 Peter Bretscher [email protected] of Business Engineering Systems, Registered Copyright TXu 512 154

1750 1800 1850 1900 1950 2000 2050

Development of Business Theory(S-Curve of Product Development)

MoralSentiments

1759

Wealthof Nations1776

Adam SmithMarx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:· Tangible Assets· Monetary Value Metric

Additional:· Intangible Assets· Subjective Value Metric

Mises

© 2009/2010 Peter Bretscher www.bengin.com [email protected] of Business Engineering Systems, Registered Copyright TXu 512 154

s_shape002-01_e.vsd

1782Anna Goeldin

Last witch beheaded(Switzerland)

64 Bit32 Bit

16 Bit8 Bit

4 Bit

Rational MindSet I

Rational MindSet II

shirtrg_2012_e.vsd

Smith: Moral Sentiments

Smith: Wealth of Nations

SorosI believe that the failure is more profound than generally recognised.It goes back to the foundations of economic theory....12. April 2012 – Berlin – www.ineteconomics.org

+ Intangible Assets+ Vector based Value metrics

(objective and subjective)

http://ineteconomics.org/sites/inet.civicactions.net/files/Soros%20SpeechBerlin%20INET2012.pdf

© 2012 Peter Bretscher, [email protected], www.insede.org

Limit of new techniques

Limit of conventional techniques

Use-Value

Hand – Work + Head - Work

Tangibles + Intangibles

Potential withnew techniques

Hardware

Operating System

Application Application

Economic Theory

Real Economy

Solutions(Form & Content)

MindWareSoftWare

Professional solutions beyond classic limits

Basics

new_software_and_mindware_2012_e.vsd© 2012 Peter Bretscher, [email protected]

Limit of new techniques

Limit of conventional techniques

Use-Valueadvanced solutions

Hand – Work + Head - Work

Tangibles + Intangibles

Solutionsbeyond

old limits

Objective values + Subjective values

Plan your work Work your plan

Consulting

Other influences – beyond economic reasoning

© 2012 Peter Bretscherinsede_impact_chart01_e.vsd

1750 1800 1850 1900 1950 2000 2050

Development of Business Theory(S-Curve of Product Development)

MoralSentiments

1759

Wealthof Nations1776

Adam Smith Marx

Gauss

Towne TaylorMS-DOS

Keynes

Schumpeter

Classic:· Tangible Assets· Monetary Value Metric

Additional:· Intangible Assets· Subjective Value Metric

Mises

© 2009/2010 Peter Bretscher www.bengin.com peter.bretscher @bengin.comPart of Business Engineering Systems , Registered Copyright TXu 512 154

s_shape002-01e

1782Anna Goeldin

Last witch beheaded(Switzerland)

64 Bit32 Bit

16 Bit8 Bit

4 Bit

Rational MindSet I

Rational MindSet II

INSEDER&D

Next economic reasoning system

Accounting Legal Audit

VWL Volkswirtschaftslehre / political economy

BWL Betriebswirtschaftslehre / Business Administration

INSEDE enabling sustainability

Rational MindSet I Rational

MindSet II

Techniques

Technologies

high

low

low highMethods for Mind,Business Models

Two Directions of Innovation (Technology and Techniques)

innovation_techniques_and_technologies_e.vsd©2012 Peter Bretscher

innovation_techniques_and_technologies_e.vsd

target

ways

means

chances

Option A

Market

(land – labor – capital)Resources

(tangible & intangible)

© 2011 Peter Bretscher, bengin.net, insede.org

Option B

EnterpriseMerry-Go-Round

badmin_bengin_002_e.vsd

Strategic starting point

Strategic variables

Strategic variables

Strategic starting point

needs

needsneeds

factors of production

top

– do

wn

stra

tegy

botto

m –

up

stra

tegy

The two strategic business options in balance

Development of (economic) Value-Metrics

(2, 3, n-dimensional) $

%|i$

3. QuantitativeMetrics (linear)

(linear) $

Why Metrics?

- comparing, comprehensible, reproducible- Making rational communication easier.

Time axis

Mea

sure

s red

uce

need

fo

r int

erpr

etati

onSt

rong

nee

d fo

r in

terp

reta

tion

$

%|i$

$

Possible to calculate with (and visualize)

2D-Values

Difficult to visualize.

No tools and rules for numerical or graphical

calculations.

2010

2010

hot, cold ...... AAA, A+, B, C

1. Normative MetricsPrinciples, ....the xx "Commandments"

4. Quantitative Metrics (multidimensional)

2. Qualitative Metrics

pc000224_e

Only multidimensional metrics makes it possible to treat multidimensional value

aspects in that kind that coherence remains intact and visualizable

(even objective and subjective values).

© 2009/2010 Peter Bretscher [email protected] of Business Engineering Systems, Registered Copyright TXu 512 154

Engine

Chassis

Body /Design

Brand / Image

Functionality

subjectivecustomer value(of the product)

à R&Deffectiveness

R&D expenditures / input resources

qualitative / subjective

quan

titat

ive

/ fin

anci

al

Drill-down

à R&D efficiency

Total (Compound) Performance

Potential – Chances – Threats – Consequences – Decision – Measures – Options

Triple – A – Strategy

Holistic AG

INSEDE© 1996, 2011

Field of stress for management

Real System

Building model

Mathematical tools

quantitative Decisions-criterion

qualitative Decisions-

criterion

Virtual replacement of

model

Leadership tools

qualitative Models

quantitative Models

subjective criterion

objective criterionPr

oduc

ts

Serv

ices

Rig

hts

Points ofenhanced modeling

Improved Business by enhanced models

triple_a_e

The long Road to Post-Capitalism: Schematic of Six Long Waves From 1790 to 2000

New Theory of Numbers(Complex Number = 2D-Vector on a

plane with a real and an imaginary axis)

Adam Smith 1723-1790

Karl Marx 1818-1883

Nikolai Kondratieff 1892-1938

John Maynard Keynes 1883-1946

Carl Friedrich Gauss 1777-1855 Ernest Mandel 1923-1995

Wassily Leontieff 1905-1999

Alan Greenspan 1926-Present

Joseph E. Stiglitz 1943-Present

1790 1840 1890 1930 1960 1980 1990 20101800 1850 1900 1950 2000

Innovation: Cotton Railroads Automobiles, World Second Monetary Market CollapseSteel Oil, War Cold Stimulation or Post-Capitalist

Electricity II War by Federal Reformation &Reserve & New Theory of Value

1 2 3 4 5 6 Phase

1790-1929 1939-1987 1994-2010

Type of Wave: Labor-Based Long Waves Debit-Based Long Waves Knowledge-Based Long Wave orStable Input-Output Model?

Theory of Value & Aggregate Labor & Aggregate Dept & Aggregate Technical Knowledge &Monetary Value: Capital Capital Cohesive Cultural Base

Theoreticians: Smith, Ricardo, Marx Keynes Leontieff, Greenspan & Stiglitz

Accumulation Labor & Capital Fiscal Stimulation Monetary StimulationModel: [War Dept] > [Stock Market] >

Labor & Capital Information-Knowledge

Based on graph of Reuben L. Norman, Jr.

June 11, 1998Link: June 14, 2011

www.findicons.com

http://www.findicons.com/

beyond classic economic thoughts and rules

Economy & Finance