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The New Economy: Age of Creation Intensification
THE NEW ECONOMY: AGE OF CREATION INTENSIFICATION - Collaboration, Communication and Innovation CHINMOY SARKAR Author of AXELL, Asset Excellence Model <chinmoy.sarkar@assetexcellence.com>
Abstract The modern trade and industry landscape is recognized by the spread of market forces, deregulation of economic affairs and the global dimension. The spirit of the success is captured by the force beyond capital and energy and adds value to object converting mineral ore to metal. The culture is represented by collaboration, communication, innovation that develops data and information to a level of knowledge and inteligence. As an enabler, Information and Communication Technology (ICT) has fostered an unprecedented capacity for individual, organization and businesses to capture, organize, store, retrieve, and manage potential for sustainable competitive advantage. The gradual change in the structure and style has forced every business to empower professionals with passion and dream to act as a liberating force to make a difference in the domain. Constant innovation and thinking ‘beyond the obvious’ advances the outlook further in developing an economy based on creative spirit. All of these have expanded the possibilities of business to constantly enhance both the range and the value of their products. Researched data reveals that the trend is finally emerging which the creative age can explain, especially when organizations deal with the word ‘productivity’. Usage of known and tangibles tend to restrict the potential of human race; but the stress on new economy and its stress on ‘unknown’ becomes the domain of intangibles that empower human to act as ‘assets’ in the organization and business. Individuals with innovative spirit develop intangibles that enhance the performance of every link in the hard world value chain.
INTRODUCTION In our daily interaction as individual, organizational and business entity, we are experiencing a revolution in the workplace. Successful organizations are crumbling; traditional ideas about work are dissolving.
Human society is witnessing a dynamic and radical change in meaning, purpose and security in their existence. There is thirst amongst professionals to align individual aspirations with domain existence to make both more meaningful. Organizations are trying to explore and integrate unique talents
Note: To connect the article with mining industry, please download: <http://www.assetexcellence.com/documents/mining.html>
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Chinmoy Sarkar to add quality to products and services. Creativity motivates professionals to innovate a world that they want. Innovation helps all to thrive in the changing environment. In the age of agriculture-based economy, water and land provides value to farmers. People having land are valued in the society. In the Age of Industry, factory workers depend on electrical energy; machines based jobs that require little thinking, dominate the economy. Capital is termed as the scarce resource, corporations having them are valued. Industrial age has been identified by the notion of scarcity and employment is based on the belief of control. Productivity is a concern and the value is derived from the profit of total production and skill development, job security, capital equipment and bureaucratic organization give it direction. The sluggishness of the industrial age sets off the Information Age. With technology as an enabler, the age saves all from the drudgery of work and allows more time for linear thinking. Information, computers and telecommunication network connecting them are valued. The old model of machine based work is replaced by work that depends more on information-based decision making. It has created another step of human development in the form of collaboration amongst stakeholders. Internet users with the bandwidth communicate with each other and help the organization and business to extract maximum reproducible capabilities. Information economy sets off the current age, “age of creation intensification,” according to the Nomura Research Institute of Japan. The age of creation Intensification value concepts, ideas, knowledge; human brains having them are considered the most important assets. At the core of this creative
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class, there are the scientists, engineers, architects, designers, educators, artists, musicians and entertainers whose economic contribution comes from the creation of new ideas, new technology, or new content. The creative age is based on innovative mind of individuals to translate entities into intangible assets for the organization. Imagination allows work to be competitive. The creative age needs brain to create ability to manage knowledge to become a product with power. There are components that are being developed to allow innovation to flourish. Google is an example of innovation in action constantly reinventing itself, dissolving old ideas and creating new models and new forms. The new asset is the human imagination growing in a non-linear fashion. . In the creative age, individuals in network seek to develop capabilities that can be tapped in a particular domain. Together, they create a human system to align combined performance for the development of a domain. As the corporate world learns to use imagination, it usher a new organizational age of human enlightenment. The economy represents a set of structures and arrangements that move focus from tangible to intangible assets. THE NEW ECONOMIC AGE New Economy is about innovation in cost structures, selling, marketing, sales, and supply chain; it is about integration of business processes for the innovation to be effective. It tends to abandon highly ‘successful known’ to cultivate alliances to seek unknown. It develops new capabilities and network to create new products and services for the new markets and business model depends on digital content and virtual world. Computers and networks enable
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The New Economy: Age of Creation Intensification business to leverages power and accelerate growth. Organizations are compelled to accept new wave of challenges to develop ‘dynamic capabilities’ that help to address the changing environment. The outlook emphasizes on the excellence and continuous value creation for the customers. The obsession is with “innovation” as the presumed path to riches for people and organization. Since the key generator of innovative spirit is the knowledge and the key implementer is business, there is an everincreasing demand of making the balance of tangibles and intangibles assets. Their partnership has never been so relevant with constant effort from the both sides to change the culture of the organization and bridge gap between the needs of the individuals, organization and aspirations of domain. The economy invests in knowledge as a source of value creation and the focus shifts from physical goods and products to services, information, relationships and influence. The new structures, new control practices imbibe the sense of self-worth for professionals to value possession of knowledge more than materialistic values. The economy creates a separate identity for individuals. The skills of interpreting situations, needs, possibilities and procedures for generation of alternatives get priority over others to ‘knowledge into products and services’. The potential of individuals is identified based on their abilities to create value from the infrastructure, work environment and market dynamics. It bestows freedom to individuals with intellect and brainpower and grants personal liberty to them leading to action beyond the known boundaries. Defining Success in the Creative Age Processes have always been the main focus
of the industrial age. Creative age focuses more on knowledge based activities to create superior quality products and solutions surpassing expectations of the market. It is essential for organization to engage itself in the production of information and see how it creates knowledge and value. The information is transformed into knowledge by gaining a context of the circumstances surrounding it. It achieves relevance and gains implications by outlining options and alternatives. Success is attained when the knowledge is transmitted into intelligence by someone with the capability of acting on it. Definition of success allows the organization to rely more on knowledge, technology to remain competitive. Investment in knowledge is the criteria and a crucial factor for sustained economic growth, job creation and improved living standards. Value Creation Value is the economic sum of a stream of benefits and can come from productivity gains of capital, people, practices, structure, utilization of capacity and adaptability at firm level. It can also come from innovation through technology adoption, design, R&D. Business value, in larger sense, refers to the amount of money customers are willing to pay for the goods or services and stretches beyond organizational premises into the space of the customers. The value is derived from the collaboration of humans, knowledge, relationships and business partners as it interprets situations better creating needs, thinking new possibilities, generating alternatives for innovative solutions and ideas. An organization unlocks value in steps with the help of distinct assets and capabilities and delivers them to the
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Chinmoy Sarkar customers through outstanding product quality or features. ROLE OF INDIVIDUALS IN THE CREATIVE AGE As knowledge thrives and ideas flow, the economy develops. Based on this notion, creative age describes the system of efficient use of resources that thrives upon inventiveness, innovation, imagination, inspiration, ingenuity and uniqueness related to the production, distribution, exchange, and consumption of goods and services. Creativity is the ability to see what others don’t see. Business needs imaginative and creative individuals to create nutrition value of food that assures growth but it also needs smart skillful people to deliver the goods that satiate hunger, as shown in fig 1. The concept of human as a resource in organizational premises has changed in this age as organization needs to foster a “culture” of nurturing intangible assets to develop new ideas that strengthen business seeking to expand. There is the revival of learning culture that like never before, encourages scholarship in business life. It is awakening from the patterned way of thinking that propagates power to achieve breakthrough vision to change the domain competition up side down.
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Human Asset There is a domain from which all knowledge emerge and which, in its commercial state fills the requirements of the business world. The passion to serve and enrich the domain with knowledge leads to the spirit of innovation. Without innovation and creativity, a human resource undervalues his potential and restricts his movement in the known space with limited capabilities; and by following the organizational functions in a ritual manner, he has allowed himself to degenerate with inconceivable rapidity. If an individual has a strong belief in his passion, he can initiate within himself the spirit of contribution to the domain and become a human asset for the organization. The economy allows individuals to collaborate with the brightest minds around the globe to harness creative energies for value creation. As creative age inspires intrinsically motivated individuals, organizations cannot address their needs with the philosophy of ‘coloring within the lines’ and the key challenge lies in using tools and techniques that can assess individuals based on their intension to decipher unknown. The information age belongs to the software people who could write programming codes and MBAs who could manipulate situations to his favor, but in the creative age, organizations need to identify and motivate individuals who believe in following the call of heart and passion dominating their life. They can contribute as they are willing to take risks for their dreams. Unfortunately, very few organizations put in place a structure to address these needs of human assets that encompass an organization’s competencies, intangible resources, the
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The New Economy: Age of Creation Intensification
In a highly competitive business landscape, every organization wants to achieve and sustain its business success. Such business success is acquired when the firm secures a ‘competitive advantage’ over its rivals and sustains it in the long run. Starting from the mid 1930’s, when experts first hinted at sustained competitive advantage (SCA) by saying that the objective of a firm is to acquire unique characteristics that differentiate it from its rivals, many management thinkers have contributed to the literature of SCA. While management experts have identified the types of strategies like low cost and differentiation that help a firm to achieve SCA, others have identified the resources and ways in the organization by which firms can achieve excellence. New organizations in the new economy believe in open communication and less of bureaucratic control. They are fast to respond and like to concentrate more on core activities. They develop the notion of partnership and focus on creativity and managing ideas and work in groups linked by networks. They are continuous learners and place of work becomes meaningless to them. An organization depends on its resources for performance and thus makes strategic decisions to decide on what it can do with these resources to form capabilities.
benefits are expected to flow. Assets that have physical existence, such as cash, equipment, and real estate are tangible assets. Something of value that has no physical properties and that cannot be physically touched are intangible assets. Since intangible assets are often difficult to value accurately. Intangible assets are defined as those non-monetary assets which are created through time and/ or effort. They may include but are not limited to patents, knowledge, goodwill, Intellectual property. As the wealth in this new regime flows directly from innovation (unknown) and not from optimization (known), sustainable competitive advantage (SCA) is gained by imperfectly seizing the unknown and not by perfecting the known. This is the reason for the significance rise of importance of intangible assets in today’s knowledge based economy. But, they require specialist management and communication skills. It is both an art and science for organization to actively manage their intangibles in today’s market. Organizations frequently expend resources on the acquisition, development, maintenance or enhancement of intangible assets. Common examples of intangible assets encompass marketing, customer, contract, technology. Marketing includes trademarks, internet domain names, noncompetition agreements; Customer includes customer lists and contract details, relationships; Contract includes licensing agreements, (mining) lease, franchise, employment contracts; Technology includes computer software, technology know-how, databases, formulas, processes and recipes.
Tangible and Intangible Assets
ASSET EXCELLENCE MODEL
An asset is a resource controlled by an organization from which future economic
The phrase ‘asset excellence’ is opted for the depiction of the blend of new
capabilities of organizations, customers, partners and the knowledge, skills, and potential of its employees and other stakeholders. ORGANIZATION IN THE NEW ECONOMY
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Chinmoy Sarkar mindsets and methods to manage dynamic capabilities in the organization. It presents a view of the maturity level of internal assets responsible for the survival of an organization. Asset-excellence view is a contemporary perspective that explains the survival of competing organizations based on nurturing of intangible assets. The perspective emphasizes on the maturity of value in various stages. Personal value is intrinsic to the resource and occurs in virtually all exchanges. Organizational value is built upon the context of the exchange within the limited premises. Domain value is derived from the experiences and relationships involved in the exchange in the domain. While domain and organizational value accrues to the firms involved in a commercial exchange, personal value accrues to the individual. The view is gaining interest as the essence of new economy spreads. Asset excellence is a better characterization to infer a more gradual infusion of new mindsets and methods to manage business. Intangible assets are the key enablers for innovative capabilities in an organization for the pursuit of leading edge business value. Knowledge enablers are thus empowered by the economy to continuously create value in their service space. All deliveries at service space are of three kinds distinguished by their objectives, 1) contribution to a body of knowledge (domain spirit), 2) fulfilling primary targets (organizational spirit), and 3) focus on self-development (personal spirit). Domain spirit is what lifts the value creation mindset, organizational spirit is what keeps us tied to process centric work environment and personal spirit is what maintains the status quo in the journey. A clear-cut demarcation as pure domain, organizational or personal spirit does
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not exist. A knowledge worker is never devoid completely of his desire to rise up in the organizational space. There is always the influence of this desire in all his actions. Therefore every service, when critically scrutinized shall have all three spirits present in them. Their relative proportions may vary. Eventually no individual can tolerate a journey devoid of innovation too long; thus, he sometimes revolts saying ‘this can not go on’. And then the ego-self says ‘I must do something about it’. This awakening of ego is the awakening of professional state. If a professional is prone to inaction and negative contribution it is because of dominance of domain spirit. If the individual is running constantly after gains and profits in the organizational space and generally unhappy about something that organization cannot offer to him, it is the organizational spirit that is riding. With positive thoughts towards domain, finding happiness in thinking of the value creation individual is said to be under the influence of the domain spirit. In the creative age, the message is loud and clear; the message is clear; without innovation and insight, professionals are just ‘human resources’. With them, they become dominating force and ‘human assets’. The author has developed an Asset eXcELLence model (AXELL) to address this. The model aims at nurturing individuals and organizations towards growth and prosperity. The main objective of the model is to develop a roadmap for both to transform from the current state of resource to a desirable state of asset. An individual and an organization regain lost curiosity and benefits from the renewed capabilities that can help
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The New Economy: Age of Creation Intensification in seeing the working domain in details and innovating a world beyond its usual boundaries. Individuals use their intuition to create a thought or even a possibility that transforms their revolutionary ideas into something besides marginal improvements of their business space. The perspective, in turn leads to a strategic insight in the form of intangibles to change the rules of the game. They may use it not to compete but to create and make sense to the world around them. AXELL focuses on the processes through which value is created, accumulated and put to use in the knowledge-driven creative age. The unique perspective stems from its tetrahedron framework to examine how individuals, organizations and host industries reciprocally influence each other in the course of knowledge work. The philosophy behind the model captured with a mathematical statement. Asset Excellence = Human Assets + Relational Assets + Structural Assets
Where: o Human assets comprise the formalized knowledge and experience, competencies, and expert knowledge, etc. of the individual asset. o Relational assets comprise the business relationships (such as those with the customers, suppliers and other stake holders, the reputation, image, customer loyalty, etc.). o Structural assets relate to the processes as employed to the organizations systems (such as internal processes, procedures, administrative systems), organizational values, innovation and technol-
ogy resources, R&D expenditure, staff involved in innovation and new product development, etc. The model addresses a very relevant question of how an organization can put in place an operational framework to monitor the progress of individuals and organizations towards their commitment towards excellence. What kind of outlook should the individuals have in the organization to enhance its current capabilities with business insight that enriches service delivery and satisfy their customers? Integration is required to balance the personal, organization and domain prints. AXELL, A Model for Business Transformation AXELL is a step by step guide for an organization to transform its ‘rent seeking ’human resources (inputs in the production process) to ‘rent generating’ assets (source of competitive advantage & value) for its business survival. It is a system whose application can transform the human resource or an organization engaged in the new economy into ‘asset’ first with regard to aligning the individual or organization to the goals and finally with regard to the domain at large. At the highest maturity level, it can help to develop capabilities towards fullest potential. AXE LL is a management engineering perspective that presents a comprehensive view of the enterprise linking mission, vision with value creating entities like resources and capabilities linking strategy to the goals. Through AXELL an individual or organization can: Understand the series of changes re-
quired based on a systemic perspective
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Chinmoy Sarkar Manage benefits that can be realized at
every level Assess how well an organization is using its internal assets Plan and invest in the system and not into a single change driver Ensure all aspects of the organization that are responsible for the change The main purpose of any organization is to create value for its customers and earn profit for its survival. Resources owned or hired by the organization can neither create value nor earn profit on their own. It is essential for the organization to create capacity for resources to work together and develop advantage for the organization to compete and respond to opportunities. AXELL has been developed as an important tool for businesses in the new economy mainly to deal with challenges from competition and “strategic innovation”. As the focus of strategy making is shifted from external environment to internal resources and capabilities, AXELL offers a framework to guide allocation of resources based on their potential to achieve competitive advantage, the desired goal for the organization. The model thus provides a source to seek guidance in the formulation and the implementation of organization resources and capabilities. AXELL recognizes vision as the future state of an organization if it can exploit the complete potential of all professionals whereas it sees mission as a declaration of the organization providing an overall direction on how its capabilities would achieve the goal in future. An organization seeks economic profit by manipulating resources and based on their nature and type, they are deployed and traded. When these resources are transformed into assets, they
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develop dynamic capabilities for the organization to enrich a domain. AXELL proposes a viable architecture for the organization to earn profit in the domain and a roadmap on how to take care of the competition in business. It addresses this with an organized set of components that define the purposes and interrelationships between parts that create a whole. It defines the enterprise service streams as an end-to-end collection of components that creates a result for a “customer,” and their relationships to all other entities. Main elements of the model are components, clusters of coherent business processes. Each component is assigned with specific resources and capabilities; some components are responsible for developing value and some take this value to delivery. The architecture also shows how the strategy is translated to achieve business goals. The architecture is the grouping of strategy, resources, capabilities, goals into clusters (components) of coherent business processes. From an architectural point of view, a component allows linkages that are driving the business. AXELL is a model to manage the dynamic interaction of all these value creating elements (Organization, Business, Capabilities, Resource) for the perpetual movement beyond the organizational boundaries into the customer’s space. The model finds the combined answers of following questions: What objective must the organization have for ensuring sustained competitive advantage?” What business value must the organization develop to achieve the objectives?” What capabilities must the organization build to achieve the business value? How must the resources be developed to build capabilities?
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The New Economy: Age of Creation Intensification AXE LL is generic in nature, being applicable for conversion of a wide range of resources. The model can be characterized by a three-dimensional Pentahedron as shown in Fig 2, bound by the dimensions of Potential (Value creation), Expansion (Value Development), and Accomplishment (Value Delivery). Relevant initially in the context of the individual’s intellectual and domain development, Potential dimension depicts the contribution of the individual to the growth of the organization and to the customer that the organization serves. It charts the growth path of the individual from the Individual domain, to Organization domain and finally to the Customer domain. The novelty of the model is that it aims at ultimately satisfying the needs of the “customer’s customer” and not just the organization’s customer. The model depicts the journey of an individual through 7 phases along the Potential dimension. An individual is considered an organization resource when positioned is in Phase 2 - Phase 4, and is considered an asset in Phase 5 - Phase 7. Expansion dimension provides a process view of continuous and connected actions in
7 phases of the value development cycle and is directed towards acquiring domain knowledge and enriching it. This knowledge, in turn, provides the domain value. Phases 5, 6, and 7 require Innovation demanding novelty in the development of products and services. As individual progresses along the phases of value creation cycle, he acquires knowledge to create domain value. However, such domain value is of worth only when it shapes the product/service to the customers and generates revenue for the organization. The model captures this transformation of domain value into business revenue through Accomplishment dimension that captures the service view of the organization. It is also divided into 7 phases. Phases 5, 6, and 7 refer to Insight that helps to introduce new products and new services that help to earn more revenue. Interaction of Expansion and Accomplishment, in a two-dimensional plane, results in a 7x7 matrix. The three dimensions together define a complete framework, resulting in a Pentahedron structure of AXELL. Each block in the matrix illustrates ‘what customers demand’ in Y axis, and ‘what they get’ in X axis.
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Chinmoy Sarkar Use of Color The transformation, along the journey of the resource is monitored by colors, represented by hue, saturation and luminance. Hue (Potential of the resource to create service) distinguishes one color from another based on its tones; (Growth prospect of the resource); Saturation (Expansion of the resource to develop value) represents the richness or purity (Ability of the resource to develop service); Luminance (Accomplishment of the resource to deliver value) represents the brightness (Ability of the resource to deliver service). Varying degree of hue, saturation, and luminance represent the movement of a resource along Potential, Continuity and Delivery dimensions. Various Quality Models and Capacity Maturity Models show that they are basically focused upon developing and maturing certain processes that are necessary for the organizationâ&#x20AC;&#x2122;s maturity with enhancing the quality of the work force. However, past review of the experience of companies implementing these models show that their applications led to limited success. The reason is that they do not provide decision models and analysis tools that can support performance assessment. AXELL tries to tackle these problems of two counts: (i) it deviates from the approach of developing a process through emphasis upon human resources to developing human resources that can ultimately lead to the development of a process, and (ii) it provides a system of decision tools (through the concept of Operational Excellence) with which the development of an individual and the organization can be tracked, and analyzed. Conventional maturity models in organizations have also limitations as they are
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often not synchronized with the overall vision and mission of the organization. Any initiatives for enhancing the utilization of resources do not actually develop the competencies of the human assets that can eventually turn and prove to be the core competency of the organization. Experience the Change The journey of individuals from the Industrial and information mindset to the state of creation Intensification depends more on committing heart and soul and imagination to transform. Spirit of innovation and technology can provide completely new paths to an unknowable future. This will happen at a greater space if one collaborates with all stakeholders to establish communication with the domain and keep faith on innovation for new age solutions to problems. Integrity, transparency, passion will create abilities to survive the transformation process in an enjoyable manner. The change is gradual in steps like:. 1) Beginning to wake up as you appreciate the need to change; 2) Feelings of discomfort as you recognize your potential to transform; 3) Feelings of helplessness as you seek guidance; 4) Feelings of empowerment as you experience the excitement about future possibilities; 5) Feelings of abundance as you realize the power that can give birth to what you want to become. Mineral industry must respond to this change in the environment, otherwise the industry will trail behind the other sectors of economy. The challenge is difficult because collaboration, communication and innovation do not necessarily follow the conventional modes of business structure and operation. They are increasingly dependent on one another for growth and excellence.
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The New Economy: Age of Creation Intensification CONCLUSION Human freedom comes first in the new economy. The rapidly unfolding culture in the way of thinking, spirit of continuous learning, and the new collaborative relationship between individuals is perhaps unprecedented in its depth as well as its breadth. Changes are happening at a rapid pace and organization power structures are threatened by new possibilities of human mind. The paradox is that organizations, with a few exceptions are investing huge dollars towards value creation without realizing that human potential is the source of all value. Leaders need to encourage building new mindsets and spirit to integrate a few essential components to realize its full potential for a long-term profitable growth. New mindset calls for new ways to use power of innovation and technologies, which in turn brings out collaborative intelligence. Human creativity is always at its best and is the ultimate economic resource for individuals, organizations and the business to grow from the current state to a new and vibrant one. We are all on the leading edge of new economic thoughts. The contrasting experience of old and new outlooks is evoking new desires in us. We tend to ask more and more of everything as customers, as employees and sometimes as employers. The easy availability of knowledge gives us the confidence to
ask anything and the domain, the knowledge belongs to comes forth with the solution and fulfills our demands. When we realize that we all work for the organization in the monotony of routines; but actually we belong to the domain that which is the source of knowledge. In our organizational limitations we see ourselves as inferior entities. We see the knowledge inside the domain that is always expanding. The new economic spirit summons all these new things and throws him outside the orbit of known into unknown. In a dynamic and changing environment we continue to launch rocket of expectations. We need to realize that the whole domain is continuously expanding. It is our responsibility to give birth to ourselves in what we want to be. We are awake, energized and alive with new economic spirit. We are magnificent in our professional form. New economy is helpful for us to collect data and information scattered all around us but we only need to decide how we would like to make use of it to meet our desired goals. This is the process of co-creating inside the organization with active participation of domain. We live in an environment of choices. In old economy we indulged in the patterned thoughts and we had aligned ourselves with fewer choices. We need to take the help of roadmap, a guidance system that helps us taking decisions in line with what new economic world expects.
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