WO2000034911A2 - System for modeling, measuring, managing, and depicting the effects of business decisions on market value - Google Patents

System for modeling, measuring, managing, and depicting the effects of business decisions on market value Download PDF

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Publication number
WO2000034911A2
WO2000034911A2 PCT/US1999/029467 US9929467W WO0034911A2 WO 2000034911 A2 WO2000034911 A2 WO 2000034911A2 US 9929467 W US9929467 W US 9929467W WO 0034911 A2 WO0034911 A2 WO 0034911A2
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Prior art keywords
business
asset
assets
value
market
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PCT/US1999/029467
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French (fr)
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WO2000034911A3 (en
Inventor
Barry D. Libert
Edward J. Giniat
Madhu S. Nott
Richard E. S. Boulton
Robert Hodgkinson
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Arthur Andersen Llp
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Priority to AU21765/00A priority Critical patent/AU2176500A/en
Publication of WO2000034911A2 publication Critical patent/WO2000034911A2/en
Publication of WO2000034911A3 publication Critical patent/WO2000034911A3/en

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    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q10/00—Administration; Management
    • G06Q10/06—Resources, workflows, human or project management; Enterprise or organisation planning; Enterprise or organisation modelling
    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q30/00—Commerce
    • G06Q30/06—Buying, selling or leasing transactions

Definitions

  • the present invention concerns business information, accounting, and management systems and methods.
  • Business information and accounting systems are typically computer-based systems that assist in the financial operation and management of businesses These systems facilitate accounting based on generally accepted accounting principles Implementing these principles entails classifying and reporting financial data as itemized income statements and balance sheets.
  • Income statements report income and expenses of the business, for example, sales revenue and employee wages
  • Balance sheets report physical and financial assets and liabilities, such as inventory value, real estate value, bank account balances, and total debt.
  • the difference between total assets and total liabilities on the balance sheet defines the net worth, or book value, of the business.
  • This accounting definition of business value treats financial and tangible assets as the only assets affecting how much a business is actually worth.
  • a market-to-book multiple measures the gap between the book value of a business and the market value of the business. For instance, a market-to-book multiple of five means that the market value, or total stock value of a business, is five times the book value of the business. In other words, the book value of this business underestimates its market value by a factor of five.
  • the inventors have devised methods, software, and systems that assist users, such as business executives, to see how market value is created and diluted, to measure the impact of operating decisions on market value, and ultimately to make operating decisions that consistently enhance market value.
  • the original core premise of the invention is that business operating decisions reflect or imply investments mto specific categories of assets that in turn govern or affect the market value of a business.
  • the inventors devised the following primary embodiments of the invention.
  • a first embodiment of the invention classifies business assets and information into tangible and intangible assets.
  • the primary asset categories include physical and financial subcatego ⁇ es, and employee and customer subcatego ⁇ es. These asset categories form an exemplary framework for modeling the market value of a business.
  • a second embodiment ofthe invention classifies business assets and information from multiple business entities, including both the business user's company and other companies, according to the physical, financial, employee, and customer categories. Combining the business users information with information about other companies according to the classification framework provides a more accurate model of market value.
  • a third embodiment of the invention allows the business user to simulate and display the effect of operational decisions on market value.
  • the system uses a number of advanced mathematical techniques such as regression analysis, and other analytical devices such as neural network technology and system dynamics.
  • a fourth embodiment of the invention allows a business to calibrate the model based on the effect of similar investments in other companies. Consequently, this recahbration allows the business user to measure its operational and investment decisions based on anticipated market value responses and to integrate this information into its decision making
  • a fifth embodiment of the mvention automates the transfer of information from a business accounting system into the market-value model, allowing regular updates of projected market performance based on daily, weekly, or monthly accounting and market data.
  • these market projections can be integrated mto the decision making process of a business to allow for continual tuning of business operations to maximize market value
  • a sixth embodiment of the invention provides a visualization system which not only illustrates market value components based on the asset categories and overall market value but also their trajectories over time.
  • the trajectories are particularly useful for charting a history of operating decisions and correlating these decisions or changes m market value to events internal and external to a business. Several business can be tracked for comparative strategic analysis. Thus, this embodiment provides insights into how internal and external events affect market value.
  • these and other embodiments of the mvention allow business decision makers to project how operating decisions, such as decisions to hire or fire workers or to buy equipment or to back buy stock or to spend more on advertising, are likely to affect market value.
  • these and other embodiments provide market-sensitive guidance for making business management decisions.
  • Figure 1 is a block diagram of a business information and management system embodying the present invention.
  • Figure 2A is a block diagram of an asset categorization scheme including tangible and intangible assets of an operating business.
  • Figure 2B is a block diagram of another asset categorization scheme including tangible and intangible assets of an operating business.
  • Figure 3 is a diagram illustrating layers of the asset categorization scheme of Figure 2A.
  • Figures 4Aa* ⁇ Hfere block diagrams illustrating acquisition and staging of data from external sources.
  • Figure 5 is a block diagram of a market valuation engine based on categorized assets.
  • Figure 6 is a block diagram of a high-level stock and flow of the engine of Figure 5.
  • Figure 7A is a diagram showing details of the physical portion of the exemplary high-level stock and flow diagram of the engine of Figure 5.
  • Figure 7B is a diagram showing details ofthe financial portion of the high-level stock and flow diagram of the engine of Figure 5
  • Figure 7C is a diagram showing details of the employee portion of the high-level stock and flow diagram of the engine of Figure 5.
  • Figure 7D is a diagram showing details of the customer portion of the high-level stock and flow diagram of the engine of Figure 5.
  • Figure 8 is a listing of simultaneous equations which are the mathematical equivalent of the stock-and-flow diagram of Figure 7
  • Figure 9 is a facsimile of a unique tetrahedronal graphic aid showing the relative contribution of physical, financial, employee, and customer assets to the market value of a of publicly traded companies.
  • Figure 10 is a facsimile of a unique tetrahedronal graphic aid showing the relative contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset contributions to market value.
  • Figure 1 1 is a facsimile illustrating rotation of the unique tetrahedronal graphic aid of Figure 10 about several of its axes.
  • Figure 12 is a block diagram of a heat map graphic aid used to visualize the contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset contributions to market value.
  • Figure 13 is a block diagram of the heat map graphic aid of Figure 12 showing members of a selected cluster, a first pie chart representing the average contribution of asset categories to market valuation of the selected cluster and a second pie chart showing the asset-category contributions for a particular selected business within the cluster.
  • Figure 14 is a facsimile of several heat map graphic aids illustrating a historical asset- contribution tracking feature of the heat map graphic aid of Figures 12 and 13.
  • Figures 15-23 are facsimiles of graphic aids incorporating teachings of the present invention.
  • Figure 24 is a diagram showing a side-by-side comparison of conventional book value and market value, both depicted according to teachings of the present invention.
  • Figure 25 is a diagram illustrating the difference between a book value of a software company and its market value.
  • Figure 26 is a set of graphic aids depicting market value of typical businesses in various industries, according to teachings of the present mvention.
  • Section 1 describes an exemplary computer system which is linked, or networked, with several sources of business information.
  • Section 2 describes an exemplary asset (or business data) classification schemes which provides a foundation for modeling market value and the effect of business decisions on market value.
  • Section 3 desc ⁇ bes exemplary market value models and systems dynamics simulations for dissecting the components of market value and estimating the effect of business operating decisions on market value.
  • Section 4 describes several unique visual displays based on a four- and fi ⁇ e-asset classification schemes
  • Section 5 is a glossary which defines several terms important to the description
  • Section 6 includes appendices A, B, C which provide details of va ⁇ ous actual or potential implementations, or embodiments, of the invention
  • Section 7 is a conclusion which highlights some functions and benefits of exemplary embodiments of the mvention
  • Section 1 Exemplary Computer System
  • Figure 1 shows an exemplary networked computer system 110 comprising a standard personal computer 1 12 coupled via a local area network to a server computer 1 14
  • computers 110 and 112 include processors which cooperate with electronic, magnetic, optical memo ⁇ es, and/or other information storage devices, to execute stored computer programs and related methods of the invention
  • computer 112 includes or accesses functional block 1 15 which itself includes a content block 115a and an analytic block 115b
  • functional block 1 15 includes computer programs, data, and data structures that enable the system to model and estimate market valuations or direction of market- value changes
  • content block 1 15a includes news and contextual analysis data as w ell as accounting data and other information indicative or representative of business operating decisions
  • Functional block 115 is shown separate from server 114 and computer 1 12 to represent that the functions can be implemented on a computer singularly or in a distributed manner
  • Server 114 is also coupled to a host system 116 residing at a customer site and having access to an associated customer database 117 which contains accounting data and other data indicative or representative of business operating decisions Server 1 14 is further coupled to a data warehouse 120 which includes one or more data storage and management devices Such devices comprise both a customer data warehouse and an extracted-information-provider-data warehouse
  • Data warehouse 120 in the exemplary embodiment, comprises one or more computer systems having network connection capabilities, allowing it to obtain further information from one or more external information providers through a wide-area network 130
  • Wide-area network 130 comp ⁇ ses one or more communication mediums, such as fiber optics, Internet-based networks, satellite communications, and va ⁇ ous other high bandwidth communication devices, such as Tl and T3 lines
  • a data collection and analysis system 140 for collecting business items and other business operational decision information related to internal and external businesses
  • Collection system 140 interfaces with several external sources of business information, compiling it in storage devices 142 and a data warehouse 144
  • database 146 collects customer raw data related to operating decisions of a customer business
  • the customer raw data includes business information related to four categories of assets physical assets, financial assets, employee assets, and customer assets (Some embodiments further include analogous mechanisms and system for collecting information related to other categories of assets, such as organizational assets )
  • collection system 140 resides at a provider site, that is, with an entity that advises businesses m making business decisions
  • system 140 is a logical collection point for business information from external providers
  • external providers include a financial- information provider 150, an employee-information provider 152, a customer- information provider 154, and a physical-information provider 156
  • the exemplary embodiment depicts a single-entity provider for each of the four categories, other embodiments of the invention rely on one or more providers for each category and/or several providers for one or more of the information categories
  • Collection system 140 further comp ⁇ ses a functional block 148 which mirrors or corresponds to functional block 1 15 Block 148 evidences the notion that such functionality can reside entirely or partially withm collection system 140 as well as within computer 112
  • Figure 2 A shows a unique asset (or business-information) classification scheme 210 for use with system 1 10
  • Classification scheme 210 classifies both tangible and intangible assets into a four-class system including at least two classes for tangible assets and at least two classes for intangible assets More particularly, the scheme classifies tangible assets into respective physical and financial categories 212 and 214, and intangible assets into respective employee and customer categories 216 and 218
  • Examples of physical assets include inventory, production capacity, and equipment, and examples of financial assets include operating capital, cash flow and investor return
  • Examples of customer assets are buyers or customers, channels, and brand, and examples of employee or provider assets are organization capital, human capital and supply chain Detailed definitions of these categories (as well as other terms) are included in the glossary section of this description
  • Appendix A also includes a catalog of business data which can be classified according to the classification scheme
  • Figure 2B shows another unique asset (or busmess- ⁇ nformat ⁇ on)class ⁇ ficat ⁇ on scheme 220, similar but distinct from that shown in Figure 2A.
  • Classification scheme 220 includes catego ⁇ es for tangible and intangible assets (at least two for tangible assets and at least two classes for intangible assets) as well as an mterrelational, binding, or hub, category, which the inventors call an organizational (and structural) asset category
  • scheme 220 classifies tangible assets into a physical category 222 and financial category 224, and intangible assets mto respective employee, customer, and organizational asset catego ⁇ es 226, 227, and 228.
  • Physical asset category 222 includes property, plant, equipment and inventory.
  • Financial asset category 224 includes cash and equivalents, short- and long-term investments, accounts receivable, debt and equity, and prepaids and other.
  • Employee (or human) asset category 226 includes employees, suppliers, and partners.
  • Customer asset category 227 includes customers, distribution channels, and alliances.
  • Organization asset category 228 includes organizational and structural asset sub-catego ⁇ es.
  • the organizational sub-category includes leadership (the guiding role of management to direct, command, and influence an organization), strategy (the organization's business and operational plans for attaining the organization's objective), knowledge (the individual and collective familiarity, awareness or competencies acquired through expe ⁇ ence or study), and values (the organization's p ⁇ nciples, standards or qualities regarded as worthwhile or desirable).
  • the structural sub-category of organizational assets includes reputation (the belief about the organization, its brand and its products or services and brands), innovation (the expertise, resources, methodology, creativity, discipline, risk-taking, planning, timelines, budgeting, that are directly or indirectly employed in the creation of the organization's processes and product and service offerings), systems (the organization's set of interrelated, interacting or interdependent mechanical, electrical, electronic or logical components and rules), and processes (the organization's series of operations, methods, actions, tasks or functions).
  • Figure 3 shows a chart 310 which embodies the premise that the market value of a business depends on assets in the four asset categories shown m Figure 2A, namely physical, financial, employee, and customer Chart 310 also shows that the assets in the categories can be measured directly or indirectly using specific business information
  • chart 310 shows that the customer catego ⁇ es includes customers, brands, and channels, and that these assets can be measured, for example, using data representative or indicative of the number of active customers, propensity of customers to purchase from the business, market share of the business, propensity of the business to leverage outbound partners, propensity of the business to leverage knowledge of customers, and the strength of one or more brands (trademarks.)
  • propensity and strength factors can be based on actual statistical measures or on crude relative rankings.
  • measures or proxies are described below m conjunction with an analytic engine which incorporates these measures to determine the effect of operational decisions as categorical investments or divestments and the effect of implied investment or divestment decisions on market value.
  • Appendix B includes a questionnaire and associated chart for implementing a relative scheme not only to assess or appraise the effective cont ⁇ bution of assets or the asset categories to market value, but also to comparatively analyze the relative effectiveness of one company's asset effectiveness to that of another.
  • This questionnaire and charting scheme can be implemented with or without a computer.
  • Figures 4A and 4B show a data collection system 410 facilitating the collection of information for use by a user executing the Appendix B procedure or by a computer implementing an automated modeling or simulation process as desc ⁇ bed below.
  • Data collection system 410 interfaces with external data sources comprising a financial-information provider 412, a customer-information provider 414, a physical-information provider 416, and a labor- information provider 418 to provide batch transfer via respective data transfer devices 422, 424, 426 and 428 to respective staging-area storage devices 432, 434, 436, and 438.
  • the staging-area storage devices perform data validation, including, for example, clearing, business-rules checking, and format checking and correcting.
  • data now termed operational data
  • operational data passes to operational data storage devices 442, 444, 446 and 448.
  • the data is then subject to an aggregation and derivation process, which aggregates the data, for example, according to business name, industry, total revenues, size, or so forth, and which derives other proxy or derivative data. For example, one derivation, in the exemplary embodiment, derives total market value from total number of shares outstanding and a share price.
  • aggregated information passes to a financial data warehouse 452, a customer data warehouse 454, a physical data warehouse 456, and labor (employee or provider) data warehouse 458.
  • the data of the financial, customer, physical, and employee data warehouses then passes to respective pairs of data marts 462a and 462b, 464a and 464b, 466a and 466b, and 468a and 468b.
  • the data marts are organized optionally as pairs m the exemplary embodiment for enhanced bandwidth and redundancy.
  • Figure 5 shows an exemplary market-valuation engine 510 which is coupled to data collection system 410 via an information interchange block 512.
  • Market- valuation engine 510 uses the exemplar)' asset-classification scheme of Figure 2A or Figure 2B as a basis for developing strategically useful models of how business items affect or potentially affect the market value of a business. (The invention, however, is not limited to the particular assets or categories of this scheme.)
  • market-valuation engine 510 exists withm one or more business consulting centers withm a unique business consulting system.
  • the consulting centers collect and processes data in accord with system similar to those in Figures 1 and 4.
  • Two or more business client computer systems couple to each consulting system via a wired or wireless public or private local- or wide-area network, such as the Internet.
  • the businesses communicate relevant business data and advise requests to the business consulting center and the consulting center processes this data along with other relevant market and industry specific data to provide global, regional, industry market value projections and other indications, assessments, and appraisals in accord with various aspects of the present mvention.
  • the business can then use these to guide their business decisions.
  • the exemplary engine implements the following six exemplary market-valuation models.
  • a first embodiment of the model views market value as a function of tangible and intangible business items. This is expressed in mathematical functional notation as
  • MV f(T, I) Eq. 1
  • T denotes one or more tangible business items
  • I denotes one or more intangible business items.
  • This generic formulation encompasses the representation of market value as the sum of book value, that is, tangible assets, and a gap-filling number representative of goodwill).
  • the inventors model the market value MV of a business as
  • MV f(K,T, K.I) Eq. 2 where K t and K, are market-oriented weighting factors.
  • K t and K are market-oriented weighting factors.
  • the actual model could be an additive, multiplicative, or mathematical combination.
  • a particular implementation of this model views the market value MV as a linear combination ofthe K,T and K,I constituents, or m mathematical terms as
  • K K,T + K.I + K Eq. 3
  • K is a constant
  • regression analysis refers to a well-known mathematical methodology of relating observed variations m a quantity or variable to variations in other quantities or variables
  • One specific type used in the exemplary embodiment is least-mean-squares regression analysis.
  • the market data can be accessed or generated in any number of ways, for example, via a computer link to an on-line database
  • the model can be used to project or estimate a new market value based on investment or divestment in the tangible or intangible business item (which is representative of an asset or operational decision). For example, one can double the value of investment into both of the tangible and intangible business assets and compute the new market value based on the determined or selected modeling parameters.
  • Graphs of these market value trajecto ⁇ es can easily be developed using any number of o ⁇ gmal or off- the-shelf computer software tools.
  • the inventors use ITHINKTM visual dynamics and visual simulation software and a conventional personal computer. ITHINK software is available from High Performance Systems, Inc. of New Hampshire.
  • the inventors model the market value MV of a business as a function of physical, financial, employee, and customer business items. Mathematically this is expressed as
  • MV f(P, F, E, C) Eq. 4
  • P denotes a single or aggregate business item from the physical asset category
  • F denotes a single or aggregate business item from the financial asset category
  • E denotes an a single or aggregate business item from the employee asset category
  • C denotes a single or aggregate business item from the customer asset category
  • the inventors model the market value MV of a business as
  • MV f(K,F, K 2 P, K 3 E, K 4 C) Eq. 5 where K, - K 4 are weighting factors.
  • K, - K 4 are weighting factors.
  • a particular implementation of this model treats the market value MV as a linear combination of these four constituents, or mathematically as
  • K K,F + K 2 P + K 3 E + K 4 C + K Eq. 6
  • K is a constant.
  • the model can be used to project or estimate a new market value based on investment or divestment m any one or more ofthe asset categories as represented by its business item Moreover, one can also develop a market value trajectory for a given investment or divestment strategy for each category of the business items Similarly, one can also randomly dither or otherwise temporally vary one or more of the model parameters and graph market value trajectories
  • ASSETS denotes value of total assets from a balance sheet
  • CASHST denotes value of cash and short-term investments
  • PPLANT denotes net total property, plants, and equipment
  • EMPLOYEE denotes the number of employees
  • SGAEXP denotes selling, general, and administrative (SG&A) expenses
  • INTANG is value of intangibles.
  • p ⁇ ce-to-earnings ratio as the market value parameter for the regression analysis.
  • One exemplary set of software tools for performing the regression analysis is the FAME 7 7 software for Windows NT 4.0, and another is FAMES native 4GL software.
  • An exemplary source for data on which to base the regression analysis is Standard & Poors Compustat annual fundamentals, stored in FAME databases
  • the Compustat database includes income statement, balance sheet, and cash flow data items for more than 10,000 companies, with annual history dating from 1978.
  • the databases offer both a time series and a cross-sectional perspective of the economy, facilitating both historical and snapshot (at a given year end) regression analysis. (See Appendix A for a catalog of data items m this database )
  • the invention is not limited to any particular genus or species of database
  • m reality businesses comprise interdependent relationships not only between one business asset (or item) category and another business asset category, for example, the financial and customer catego ⁇ es, but also among two or more items of a given asset category, such as a decision to sell information about customers and the number of total customers.
  • the interactions or mterdependencies of these elements create positive and negative feedback relationships which are not immediately apparent m the models represented in equations 1-7.
  • the inventors model market value using conventional systems dynamics methodologies and a set of twelve business items representative of the four (PFEC) catego ⁇ es.
  • Figure 6 shows a simplified stock-and-flow diagram which defines the form of a computer- implemented systems dynamics model of the engine of Figure 5
  • the exemplary embodiment uses the concepts and tools of system dynamics to articulate and exercise the following four key principles:
  • the exemplary embodiment is further grounded in the assumption that firms transact m the four distinct, but interdependent, asset markets discussed earlier: Financial; Physical; Employee (Provider); and Customer. In each market category, the firm engages in a se ⁇ es of two-way exchanges to secure and leverage the assets that determine its market value.
  • this section explains the principle of multi-market exchange by first examining the four market sections depicted m Figure 6 and then explains, at least in part, their cross-market mterdependencies.
  • the key relationship is that of the firm to its investor. This two-way relationship hinges on a firm's ability to attract capital from its investors, a subset of the investing public. The investors provide the firm cash to expand, and in return, the firm offers financial investment products, debt, equity, or some combination m between to investors. At least two enabling factors affect the efficiency of this relationship: the quality and convenience ofthe cash flows the firm produces Properly regulated, these factors enhance the efficiency and effectiveness of capital flows mto and out of the firm.
  • Figure 6 also shows that a business interacts with a physical market to regulate its physical asset holdings.
  • the business after acqui ⁇ ng capital from investors, traditionally has entered into a relationship with one or more natural resource markets to acquire or build physical assets.
  • the business In its two-way relationship with this asset market, the business ordinarily exchanges dollars, or capital, for fixed physical assets, which supports its capacity to produce goods and services. Enabling factors, which are often reflected in specific business operating decisions and related information, in this relationship are based upon technology and process knowledge. New technology allows for a more efficient use of dollars throughout the business, and process knowledge, on the other hand, allows the business to use all assets more effectively, for example, to reduce production costs and/or to increase production rates.
  • Figure 6 also shows a third important relationship, the two-way relationship of a business to its employees or providers.
  • the employees provide labor, time and ideas m exchange for dollars and benefits These include not only the traditional benefits, such as health insurance, paid vacation, and so forth, but also benefits such as training and networking. These benefits in turn enable the enterprise to be more effective in the marketplace. Enablers for this relationship include the firm's ability to tram new employees, and the size ofthe its supplier network.
  • the supplier network includes both the suppliers to the firm and the firm's alliance partners. These relationships enable it to draw upon the contacts of a larger network, which in turn facilitates finding and hiring new employees. Likewise, potential employees will be attracted to firms that provide a large network of contacts. This becomes a ⁇ ch source of both new ideas and future leads and contacts.
  • Figures 7A-7D shows interactions among the different asset markets and catego ⁇ es, implicit to the elementary stock-and-flow diagram of Figure 6. More specifically, Figures 7A-7D shows a detailed stock-and-flow model 510 which describes mathematical dependencies of various business items in the financial, physical, employee, and customer asset categories. The nomenclature or vocabulary of stocks and flows is known; so a detailed explanation is not included here.
  • the diagram graphically represents a set of simultaneous equations, with variables in one equation affecting variables m other equations.
  • Figure 8 the mathematical equivalent of Figure 7, shows some of these equations. These equations are implemented by a systems dynamics module of engine 510 (shown in Figure 5.)
  • the exemplary embodiment of the invention implements this model using ITHINK visualization and simulation software.
  • the invention is not limited to this genus or species of software platform; indeed, other embodiments of the invention can be developed on other commercial systems, dynamics software platforms, or as specific PC or web-server-based application programs for a vanety of operating system environments.
  • Section 4 Visual Displays Based on Asset Classification
  • Figures 9-25 show va ⁇ ous visual representations of business valuation information produced by the engine of Figure 5
  • Figure 9 shows a unique two-dimensional rendering of tetrahedronal graphic aid 910 showing the relative contribution of physical, financial, employee, and customer assets to the market value of a number of publicly traded companies.
  • the exemplary embodiment represents market value using return on investment over a one-, five-, or ten-year period.
  • graphic aid 910 includes four independent axes: a physical axis, a financial axis, an employee axis, and a customer axis.
  • Each axis has a scale ranging from zero at its intersection with the other axes to a maximum value.
  • engine 510 uses equation 7 and regression analysis techniques to model the market value of each of a number of publicly traded companies for a particular year. These weighting factors K, - K 4 are then taken as indicators of the relative contribution of each asset to the market value and plotted on the four tetrahedronal axes.
  • One technique for rendering the four- dimensional plot m two dimensions is to compute the average of specific pairs of the four weighting factors and to thus reduce the four tetrahedronal coordinates to two planar coordinates.
  • Figure 10 shows an exemplary three-dimensional rende ⁇ ng of a unique tetrahedronal graphic aid 1010 showing the relative contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset cont ⁇ butions to market value.
  • Neural network technologies are employed by engine 510 to determine clustering of the weighting coefficients.
  • this embodiment can display one or more company names next to their associated clusters
  • Figure 1 1 shows rotation ofthe unique four-dimensional tetrahedronal graphic aid of Figure 10 Through a graphical user interface to engine 510, a user interacting with the tetrahedron rotates it to gam additional insight into the relative value contribution of each asset on the market value of a cluster of companies. Though not visible in Figures 10 and 1 1, the exemplary embodiment provides color coding of the points to indicate relative or absolute market value of the cluster Individual cluster metrics, statistics, and member businesses can be accessed by "double-clicking" on a particular cluster
  • Figure 12 shows an exemplary heat map graphic aid 1210 which indicates the relative contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset cont ⁇ butions to market value
  • heat map 1210 in this embodiment includes a ten-by-ten grid or matrix of squares, with the position of each square representing a particular combination of weighting factor ranges The correlation of ranges to square position is based on a four-axes arrangement similar to that shown m Figure 9
  • heat map 1210 is a "smeared” and "flattened” version of the tetrahedronal graphic aid shown in Figure 10
  • Each square has a color and/or tone indicating the relative market value of its associated cluster of companies or that it has no associated cluster of companies
  • a graphical user interface one can select one ofthe squares to view (or to otherwise analyze or direct computer operations on) the members of its associated cluster
  • the system allows one to select one or more of the constituent firms and to view corresponding pie charts that show relative contribution of the selected firm's physical, financial, employee, and customer assets to its market value.
  • Figure 13 shows a pie chart for a selected company below a pie chart representing the average distribution of market value for members of the selected cluster.
  • other embodiments permit a side-by-side nume ⁇ c as well as pie chart compa ⁇ sons
  • the exemplary embodiment also allows one to view the relative cont ⁇ bution of each asset category using unique aids or displays like those depicted m Figures 15-25.
  • Another feature not explicitly shown is that, again with the aid of a graphical user interface, one can invoke a three-dimensional rendering of the heat map that shows the relative market values of each square of the map, which in essence is a "city scape" view of the map Market value components, for example, the physical or customer components, can be similarly viewed
  • Figure 14 illustrates a strategic tracking feature of heat map graphic aid 1210. More precisely, the heat map (and also the tetrahedronal graphic aid) can be used to track the changes m the weighting factors for one or more selected companies In doing so, the system correlates each set of weighting factors for a time-specific market value to a position on the heat map and marks the position, thereby creating a trail showing to some degree the strategic operating decisions of a firm, particularly those strongly affecting its physical, financial, employee, and customer assets Figure 14 shows the trail as a dashed line.
  • a user can select a point on the trail to determine not only the associated time and weighting factor values, but also to direct the system to correlate the point with relevant archival accounting data or news concerning the company, its industry, or the economy in general Further external factors are also available for analysis as potentially affecting the course of the asset values
  • this tracking and histo ⁇ cal data correlation feature allows one greater insight into the strategic thinking and operational behavior of any number of publicly traded companies.
  • Figures 15-26 show other exemplary graphic aids (or displays) in accord with the invention
  • graphic aids which in some embodiments also serve as graphical-user interfaces to accounting or business data derived and/or organized in accord with the invention, rely on color (or other indicia) and spatial arrangement to depict an economic position or market value of a business.
  • the value and thus the area of each component are based not only on business data representative of investments in each of the categories but also on regression coefficients or weights indicative of the contribution of each category of assets to the total market value.
  • the market value and the regions affected by the addition or substraction will illustrate the change through both a change in the affected category and m the total market value
  • each exemplary display includes up to five regions, with each region having a color or other indicia and position (relative the other regions) which identify its associated asset category and an area or size related to the actual or estimated contribution of the associated asset category to the market value of the business.
  • the actual or estimated cont ⁇ bution of each asset category is determined as described above.
  • the total area ofthe aid is substantially proportional in actual and/or apparent area to the market value of the business.
  • each category has a consistent position withm the display.
  • each category has a token place-holder m the display.
  • the token placeholder is an icon, for example, a circle filled in with the color (and/or other indicia) representing the associated asset category
  • add a mnemonic such as alphanumeric character to the circle to further aid comprehension.
  • Figure 15 shows a graphic aid or display template 1500 which as a generally square shape. Aid 1500 has an outer perimeter or periphery 1502 which defines an area representing a market value of a business.
  • Each of the five asset regions has an associated asset category and an area related to the cont ⁇ bution of its asset category to the market value.
  • Each asset region also has a distinctive color (and/or other indicia, such as cross-hatching or other pattern) and position relative to the other regions to identify its associated asset category.
  • Regions 1510, 1520, 1530, 1540, and 1550 are associated with respective asset-category icons (or points of origin) 1512, 1522, 1532, 1542, and 1552, which not only aid in identifying the asset category associated with each region, but also function as placeholders for categories with zero or negative cont ⁇ butions to the market value
  • the exemplary icons are equi-sized circles filled in with the color ofthe associated asset category
  • the icons are mcongruent and/or include mnemonics or alphanume ⁇ c characters to facilitate identification ofthe associated catego ⁇ es.
  • the table below identifies an exemplary arrangement and color coding of the regions
  • each ofthe five asset catego ⁇ es is shown as contributing one -fifth, or 20 percent, ofthe total market value.
  • the angle between the sides of the perimeter 1502 and those of region 1550 is 45°.
  • the relationship between x and y is given by the formula, x - 5y j vhere x denotes the length of the sides of the outer square and y denotes the length of the sides of the inner square, or region 1550
  • the market value is five times the value of the assets associated with asset-region 1550, the center asset region.
  • the total visible area of each region is equal.
  • region 1550 overlaps a portion of each of the other four other regions, so that only three-fourths of the other four regions is visible.
  • the market value display m Figure 15 can be viewed as recording:
  • I an equity subscription comprising assets in each asset category with the same monetary value.
  • V the realization of equal amounts of financial assets from each asset category.
  • the exemplary embodiments uses the following rules to render a display depicting the market value: 1 Render the total market value using a first (or outer) square ⁇ ith side length x
  • center asset category was rendered according to rule 3, render the other four asset regions such that: a) the area of each region, for example, financial, physical, customer, and employee asset regions, is actually or apparently proportional to its respective positive value and connects with its respective icon (points of o ⁇ gm); and b) any border between regions 1510 and 1540 (P and F) or between regions 1520 and 1530 (C and E) is ho ⁇ zontal and any border between regions 1510 and 1520 (P and C) or between regions 1530 and 1540 (E and F) is vertical.
  • Figures 17-19 illustrate application of rule 4
  • Figure 17 shows asset regions 1520 and 1530 as making no contribution to the market value, regions 1510 and 1540 as both making 30% contributions, and center region 1550 as making a 40% contribution.
  • Figure 18 shows asset regions 1510 and 1540 as making 5% cont ⁇ butions to the market value, regions 1520 and 1530 as both making 40% contributions, and center region 1550 as making a 10% contribution.
  • Figure 19 shows asset regions 1510 and 1530 as making 40% contribution to the market value, regions 1520 and 1540 as both making 5% contributions, and center region 1550 as making a 10% contribution.
  • FIG. 20 shows center asset region 1550 as contributing 60% ofthe total market value, and asset regions 1510-1540 as each contributing 10% to the market value.
  • center asset region is rendered according to rule 5 then render the other four regions according to rules 4(a) and 4(b), with one or more of the regions possibly divided into two or more parts separated by one or more portions of the center asset region
  • Figure 21 shows center asset region 1550 representing a contribution of 60%, regions 1520 and 1540 both representing 3% cont ⁇ butions, and regions 1510 and 1530 each representing 17% cont ⁇ butions Regions 1510 and 1530 are each divided into two non-contiguous parts by respective portions of center regions 1550, in accord with this rule.
  • the asset catego ⁇ es has a negative value or negative cont ⁇ bution to the market value, render the positive values or contributions of the other asset categories according to applicable ones of rules 2-6 and render each negative asset region as a square or rectangular (or other regular or irregular) inclusion or indentation in a contrasting or otherwise visible outline of the first square, with the inclusion or indentation o ⁇ ginating from the associated icon (or point of o ⁇ gm) and defining an area actually or apparently proportional to the negative value or contribution of the asset region
  • the area enclosed by the black line represents the total value after allowing for negative items.
  • Figures 22 and 23 show aids which depict market values resulting from positive and negative asset contributions.
  • region 1510 representmg a 30% contribution
  • region s 1520 and 1530 each representmg a 30% contribution
  • region 1540 (shown as an indentation or cutout or notch in pe ⁇ phery 1502) representing a negative or minus 20% cont ⁇ bution
  • region 1550 representmg a 30% cont ⁇ bution.
  • Icon 1542 as well as the position ofthe indentation in the lower left corner identify it as being associated with the financial asset category.
  • Figure 23 shows a market value with regions 1510-1520 each representing 30% contributions and center region 1550 representing a negative 20% contributions.
  • the negative 20% cont ⁇ bution is denoted with a distinctive outline of the center region and an omission of the interior filling.
  • Some embodiments represent a negative contribution as unfilled regions outlined or defined in one or more lines of the relevant color or other indicia associated with the asset category.
  • the total area of the filled blocks represents the total market value including the (one or more) negative cont ⁇ butions.
  • two separate aids, one with positive cont ⁇ butions and the other with negative contributions are presented side by side in some embodiments, with the negative, for example, being distinguished with approp ⁇ ate labeling or with unfilled regions.
  • Figures 24 and 25 further illustrate the explanatory power of graphs made m accord with p ⁇ nciples ofthe present invention
  • Figure 24 shows two displays 2410 and 2420
  • Display 2410 illustrates the conventional accounting practices of computing book value as the sum of physical and financial assets, igno ⁇ ng any cont ⁇ bution from intangible assets.
  • Display 2420 illustrates that actual market value is not only much greater than the book value of a business represented in display 2410, but also accounts for the contributions of previously unreported and unevaluated customer and employee assets.
  • the inventors also view displays 2410 and 2410 has highlighting an economic shift from the industrial age to the so-called information age
  • Figure 25 shows a similar display 2500 which supenmposes a conventional book value (consisting of physical and financial assets) on a market value
  • the space between the pe ⁇ phe ⁇ es ofthe bookvalue and the market value indicate the difference between them.
  • Figure 26 shows four displays 2610, 2620, 2630, 2640 illustrating potentially characte ⁇ stic roles of the five asset catego ⁇ es m cont ⁇ butmg to the market value of business in particular business sectors.
  • Display 2610 shows a market value decomposition for businesses m the service sector;
  • display 2620 shows a market value decomposition for businesses in the financial services sector;
  • display 2630 shows a market value decomposition for businesses in the information services sector;
  • display 2640 shows one for businesses m the manufacturing sector.
  • Value displays of the exemplary embodiment as well as those of other embodiments in accord with the invention have a wide number of uses.
  • a first use is to record the following types of economic events either individually or in combination for any period: equity investment, asset investment, value creation, value reduction, value realization, other value exchanges, and value dist ⁇ bution.
  • the exemplary embodiments assume that there are eight types of economic event which can affect an entity's economic position or market value: I. equity investment, II. asset investment, III. value creation, IV. value reduction, V. value realization, VI. value exchange, VII. value distribution, and VIII. equity exchange.
  • the exemplary embodiment defines an equity investment as any exchange of an asset from any one of the asset categories in exchange for an equity interest m the entity receiving assets.
  • An asset investment occurs when an entity make an investment by providing financial assets to others in exchange for the receipt of assets in any ofthe asset categories.
  • Value creation for an entity occurs when the value of any asset category increases.
  • Value reduction for an entity occurs when the value an asset in any category falls.
  • Value realization for an entity occurs when an entity receives financial assets m exchange for any of its assets
  • Value exchanges other than asset investments and value realizations that involve no financial assets are defined as other value exchanges.
  • Value distribution occurs when an entity distnbutes assets to others without directly receiving any assets in exchange.
  • An equity exchange occurs when a holder of an equity interest in an entity exchange all or a portion of its equity interests for other assets held outside the entity.
  • a second use is to combine economic event types I to VII above for the entire history of an entity to give its economic position at any point in time and show a total entity value for comparison and reconciliation to the value evidenced by equity exchange transactions (economic event type VIII).
  • a related third use is to use these displays to report an entity's economic position and performance to both internal and external users
  • a fourth use is to create displays that provide an alternative presentation of the information presented by entities in the balance sheets and income, cash flow and other statements required under generally accepted accounting principles. For example, one can use the representation principles to represent conventional book value.
  • a fifth use is to present the alternative business model designs (or combinations of assets) that are central to an entity's strategy using relative or absolute asset values
  • a sixth use is to prepare hypothetical and prospective information for internal use by the management of an entity and for use by people external to the entity.
  • a seventh use is to support an entity's strategic decision-making and risk management by modeling the potential impact of events in the entity's economic environment and the entity's own asset management processes on the value ofthe entity.
  • An eighth use is to compare the economic position and performance of different entities or the same entity at different points in time and analyze the differences using value displays.
  • a ninth use is to highlight and analyze differences between the economic position and performance of an entity as evidenced by the entity's own reporting and by the values at which equity exchanges occur.
  • a tenth use is to illustrate gene ⁇ c differences between the business models (or combinations of assets) employed by entities in different industries and m different periods of economic history using relative or absolute asset values.
  • An eleventh use is to present hypotheses ofthe contributions made by different asset categories to the total value of an entity.
  • a twelfth use is to show the evolution of an entity by presenting a time series of ⁇ alue displays in real or accelerated time.
  • Business refers broadly to any operating business such as any commercial, industrial, financial, or service activity in an economy.
  • the term also refers to specific organizations, m the sense of a "business," operating as a "going concern” that manufactures or sells products or services to customers, and generates economic value by maximizing profits and shareholder wealth as opposed to conventional investment management or portfolio management.
  • Equivalent terms used herein include firm and company.
  • Market Value refers to the value of a publicly traded company based on its rice per share multiplied by the total number of shares outstanding For p ⁇ vate companies and non-profit organizations, the term means a reasonable estimate of "implied market value " It also refers to other market-based parameters, such as p ⁇ ce-to-earnmgs (P E) ratio, total shareholder return (return per share times total number of shares) over a defined period, market-to-book (M/B) multiple, or any other indicator of economic value of a business or a component or division of a business.
  • P E p ⁇ ce-to-earnmgs
  • M/B market-to-book
  • Business item refers to any data or information that can be nume ⁇ cally represented and that can be shown to be statistically significant or otherwise relevant to the market value of a business.
  • Business items can be assets, liabilities, or hybrid asset-liabilities which behave as assets under certain circumstances and as liabilities under others
  • Business items can be fixed or variable For examples of actual or potential business items, see Appendix A
  • Tangible Business Item refers to any data or information concerning financial capital and physical assets, such as inventory, property, plants, and equipment, which are conventionally listed or reported on a balance sheet pursuant to Generally Accepted Accounting Principles (GAAP). Tangible business items include both current and non-current physical and financial assets. Certain types of physical and financial assets, like inventories and accounts receivable, are defined as current because of the expectation that they will be converted to cash withm a given operating year or operating period. Other tangible assets, like property, plant, and equipment that are used for longer periods of time, are generally defined as non-current.
  • Intangible Business Item refers to any business item that is not a tangible business item.
  • intangible assets include customers, existing customer relationships, knowledge of customers, employees, existing employee relationships, knowledge of employees, organizational knowledge, ability to perform processes, brand or trademark strength, research and development
  • the term intangible asset also generally encompasses business items which are not typically reported or quantified as assets on conventional balance sheets or which are considered as contributing to "goodwill.”
  • GAP accounting rules
  • goodwill generally recognized only at the time of a business acquisition, is the amount paid for a business m excess of the fair market value of its (tangible) assets, minus any liabilities assumed m the acquisition.
  • Physical Assets includes business items related to physical business resources Examples include physical assets such as inventory, property, plant, and equipment More generally, the physical assets category encompasses fixed assets Property, Plant and Equipment (PP&E) - which are depreciated using va ⁇ ous depreciation methods and depreciation schedules, and short-term physical assets, or inventory
  • PP&E Plant and Equipment
  • physical assets and their associated liabilities relate to an organization's infrastructure to acquire, manufacture, or dist ⁇ bute raw mate ⁇ als and finished products.
  • Physical business items also characterize a company's ability to secure raw mate ⁇ als cost effectively, its production capacity, and its management of finished goods and distribution.
  • Financial Assets includes business items related to assets and liabilities associated with financial position, such as accounts receivable, accounts payable, cash on hand, mortgages,. Specific examples of financial assets include a company's financial base (that is, the number of investors, their propensity to invest more in the business and the company's relationships and communications with them). It also includes cash and cash reserves, operating capital, marketable secu ⁇ ties and other financial instruments (Financial asset refers debt, equity, cash flow.)
  • Assets comp ⁇ ses business items related to individuals and entities involved in producing and distributing the products or services of a business.
  • the category thus includes not only the company's management team and employees, but also suppliers-alliance partners and their management and employees. This category also comp ⁇ ses brands created, and the intellectual capital and intellectual property supporting the processes of a business.
  • the category also includes assets and associated liabilities in an in-bound supply chain for a business — in other words, what is required to produce its products or services, as well as the offering itself. Information concerning labor costs and statistics is also included in this category
  • Customer Assets includes business items related to individual and business buyers and channels of dist ⁇ bution, which include the va ⁇ ous ways that companies deliver products and services to customers (for example, physical outlets or storefronts, telephone sales, direct mail, Internet sales, and so forth).
  • the customer assets category contains assets and associated liabilities ofthe out-bound supply chain, including market share and sales and dist ⁇ bution partners.
  • the asset category also captures factors related to the strength of a company's relationships with customers in terms of repurchase behavior. And it includes as an asset a company's ability to leverage its customers, to use information about customers to encourage more purchasing, and to improve or expand product and service lines to gam market share
  • Appendix B Exemplary Asset- weighting Questionnaire and Assessment Procedure
  • Appendix C Va ⁇ able Definitions and Equations for Exemplary System Dynamics Model m Figures 6 and 7
  • Appendix A Table Illustrating Exemplary Classification of Business Data and Exemplary Catalog of Business Data
  • MMS SALESR Sales (Restated) MMS SPSIN Secondary S&P Index Identifier SGAEXP Selling, General, Administrative Expenses MMS SGAEXPR Selling, General, and Administrative Expenses (Restated) MMS DEBTSTAIR Short-Term Borrowings- Average Interest Rate %DEBTSTAVG Short-Term
  • Scoring reflects a measure of "goodness” or “effectiveness” in each of these categories on the scale of "0" to "10 " Assessing the number of investors, for example, does not involve an actual count of investors. Rather, it compares the effectiveness or "goodness” of the investor base of both companies in terms of size.
  • An Asset Map is scored for a target business entity and optionally a benchmark company across 20 questions.
  • the following summary includes: 1) the data field/row or area of investigation, 2) the question to ask of yourself and the benchmark; 3) common measures that provide performance information on this element of value; and 4) a short description of issues related to it.
  • Section B 1 Financial Assets Data Field: Number of active investors Question: How many active investors do you have? Measures: Number of entities and individuals that bought shares in last 12 months. In the case of a public company, assess your total shareholder base In the case of a private company, look to your collective sources of capital, including lending institutions, limited partners and other types of equity partners
  • Section B2 Physical Assets Data Field: Security of supply of raw materials Question: Do you have good control of the supply of raw materials?
  • Section B3 Provider or Employee Assets Data Field: Management expertise
  • a company requires a workforce that is appropriate m size - not too large or small. Appropriateness of size, for example, requires a balance between "lean” and sufficient elasticity to respond to change.
  • the product and service offerings become an asset or liability depending on such factors as suitability, pricing to market, appropriateness for task (e.g., fit for pu ⁇ ose), and customer/market perceptions of all of these factors. Score this category according to the collective strength or weakness of these factors.
  • Measures % of customers satisfied on first call. Level of customer satisfaction. Customer service costs/customer. Employee and customer satisfaction with service processes.
  • Customer service includes the company's culture of service, training, information systems used to support it and the effectiveness of using information to improve customer service processes.
  • the breadth and depth of customer service processes and the information system are important factors in effectiveness.
  • Compensation effectiveness relates to a combination of factors, including salary, bonuses, equity and other forms of ga -sharing that motivate performance and align the goals of individuals and the company. Effectiveness of compensation is reflected in employee loyalty and turnover rates, as well as recruiting and retraining costs Productivity levels by mdividual/teams may be a useful, indirect measure
  • In-bound partners include all those companies and individuals who support the production of products or services. In-bound partners, for example, would include a company's major suppliers They also include services, like an accounting firm or management consulting advising on internal processes. Ask to what degree and depth a company makes use of these relationships. In the case of an accountant, for example, ask if that person is simply used for routine bookkeeping or tax work? Or does the company leverage that person's knowledge m more depth to support value creation?
  • Section B4 Customer Assets Data Field: Number of customers Question: How many active customers do you have? Measures: # of customers purchasing m the last year.
  • Measurements include numbers of customers and proportion of vital few customers to total customer base.
  • Out-bound partners are all those companies and individuals who support the marketing and sales process m delivering products/services to market They include the channels of distribution, field sales forces of partners or intermediaries, wholesalers, marketing consultants, franchisers, and advertising, public relations and marketing firms Effectiveness of cross-selling strategies to amplify the impact of sales forces is one example of strength this area Strategic marketing of products/services of two companies to increase value with more comprehensive offerings to customers is another Developing formal "feedback" processes to capture knowledge of wholesalers and other intermediaries about the marketplace also reflects a company's propensity to leverage out-bound partners
  • Weighted Averages An additional exercise involves a self- weighting of assets on their relative important to the total value of each category. For example, some assets overlap in value with others, or are of less significance to the total. To weight scores, assign weighting of 100 to the most important asset in each of the four categories. Then assign appropriate weightings to the remaining items to represent their significance relative to the top item. You can then calculate a "weighted average" by multiplying the scores by their weighting, then dividing by the number of assets to obtain the average for each ofthe four categories - Financial, Physical, Provider and Customer.
  • Calibration An additional exercise involves a self-calibration of assets on their relative important to your company or marketspace For example, some companies require large numbers of customers to sell volume to. The number of customers is thus more important than to another company that focuses on a vital few.
  • To calibrate scores assign calibration of 100 to the most important asset m each of the four categories. Then assign appropriate calibrations to the remaining items to represent their significance relative to the top item. You can then calculate a "calibrated weighted average" by multiplying the scores by their weighting and by their calibration, then dividing by the square of the number of assets to obtain the calibrated average for each of the four categories - Financial, Physical, Provider and Customer
  • Section B Asset Category Averages
  • BE Best Estimate (variable that is not captured and/or measurable; proxy unlikely; correlation analysis may be useful)
  • base_KoC_per_trans This is the base amount of Knowledge BE action of Customers gained per transaction.
  • the quality of the firm's Customer Support Technology modifies this factor to determine the actual amount of knowledge gained per transaction.
  • base PE mult The base price to earning ratio of the CR firm.
  • base worn The base word of mouth' multiplier (i.e., BE number of new Customers each current Customer 'recruits' per unit of time). This number is modified by several other factors to determine the actual 'worn mult'. book value The equity of the firm, in millions of CR dollars.
  • Brand_building_from The rate at which Brand recognition is X _brand_spending built as a result of spending on Brand- building.
  • Brand_building_from This is the rate at which Brand ND sales recognition is built as a result of selling the product.
  • Brand_built_per_$ The non-linear degree to which the rate ND, BE of Brand-building per $k spent depends on Knowledge of Customers. Firm's with a low Knowledge of their Customers will gain less brand recognition per $k spent than firm's with a high Knowledge of their Customers.
  • CST _obsolescing The rate at which Customer Support ND, BE Technology obsolesces or otherwise loses its functional value. cust loss frac The fraction of current Customers lost CR, BE per unit of time. This fraction decreases non-linearly as the firm's Knowledge of its Customers increases, debt service The amount of interest accumulated by CR the current Debt per unit of time. delivering_by_internal The rate at which the firm delivers CR, BE units. delivehng_by_networ The rate at which the supplier network CR, BE k delivers units. earnings_from_sales The revenues from selling Knowledge CR, BE of KoC of Customers per unit of time.
  • Fixed Asset shortfall The shortfall in amount of Fixed Assets CR necessary to eliminate the sales backlog. fixed costs The cost of maintaining the current CR base of Fixed Assets. gaining_Customers The rate at which the firm gains new CR customers. gross_earn ⁇ ngs The gross earnings of the firm, CR measured in dollars per year. impact_of_Brand_on The impact of Brand recognition on the BE worn 'worn mult.' impact_of_CST_on_ The impact of the firm's Customer BE KoC_per_transaction Support Technology on the Knowledge of Customers gained per transaction. impact_of_cust_relati The non-linear impact of the firm's BE ons Knowledge of Customers on the number of units demanded per customer per time.
  • impact_of_KoC_on_ This determines the impact that the BE worn firm's Knowledge of Customers has on the 'worn mult.' impact_of_lead_time The non-linear impact that lead time BE on sales has on the number of units demanded per customer. As the lead time increases, Customer tend to order fewer units each per unit of time.
  • Alliance_Partners(t) Alliance_Partners(t - dt) + (change_in_AP) * dt
  • DOCUMENT The number of Alliance Partners the firm has.
  • Avg_Deliveries(t) Avg_Deliveries(t - dt) + (chg_avg) * dt
  • DOCUMENT The average rate of delivery of goods by the firm and its Supplier
  • Backlog(t) Backlog(t - dt) + (transactions - delivering_by_network - delivering_by_intemal) * dt
  • DOCUMENT The number of units which have been ordered but not yet delivered.
  • Brand(t) Brand(t - dt) + (Brand_building_from_sales +
  • DOCUMENT This is the amount of Brand recognition of the product.
  • DOCUMENT The number of Customers who purchase from the firm.
  • DOCUMENT The quality of the firm's Customer Support Technology.
  • Debt(t) Debt(t - dt) + (acquiring_debt) * dt
  • DOCUMENT The amount of Debt currently held by the firm.
  • DOCUMENT The number of Employees in the firm.
  • Fixed_Assets(t) Fixed_Assets(t - dt) + (adding_Fixed_Assets - losing_Fixed_Assets) * dt
  • DOCUMENT The amount of Fixed Assets owned by the firm.
  • Knowledge_of_Customers(t) Knowledge_of_Customers(t - dt) +
  • DOCUMENT The level of knowledge the firm has about its customers wants, needs, and desires.
  • Natural_Resources_Available(t) Natural_Resources_Available(t - dt) + (- adding_Fixed_Assets) * dt
  • DOCUMENT The amount of Natural Resources available for producing Fixed
  • Supplier_Network(t) Supplier_Network(t - dt) + (building_supplier_network - losing_supplier_network) * dt
  • DOCUMENT The number of Suppliers to which the firm can outsource to supply its product.
  • Working_Public(t) Working_Public(t - dt) + (losing_Employees - attracting_Empioyees) * dt
  • DOCUMENT The number of potential Employees who are not currently employed by the firm.
  • DOCUMENT The rate of spending on building Brand name.
  • DOCUMENT The rate of spending on Customer Support Technology.
  • DOCUMENT This element equals '1' if the firm does not engage in outsourcing activities, '0' otherwise.
  • DOCUMENT The ability of the firm to attract and retain Employees.
  • acquiring ⁇ paying_down_capital acquiring_debt+buying_back ⁇ selling_equity
  • DOCUMENT The rate, in dollars per year, at which capital is acquired or paid down.
  • DOCUMENT The equity of the firm, in millions of dollars.
  • Brand_building_from_brand_spending Brand_spending*Brand_built_per_$ DOCUMENT: The rate at which Brand recognition is built as a result of spending on Brand-building.
  • Brand_building_from_sales 5 * transactions/20000 DOCUMENT: This is the rate at which Brand recognition is built as a result of selling the product.
  • DOCUMENT The non-linear degree to which the rate of Brand-building per $k spent depends on Knowledge of Customers. Firm's with a low Knowledge of their Customers will gain less brand recognition per $k spent than firm's with a high Knowledge of their Customers.
  • building_supplier_network (Alliance_Partners+Supplier_Network) * suppliers_added_per_Supplier_or_AP_per_time
  • DOCUMENT The rate, measured in dollars per year, at which equity is bought or sold.
  • cap_adjust Fixed_Asset_shortfaH*Traditional_Firm
  • cap_util GRAPH(lead ime)
  • DOCUMENT The amount of interest accumulated by the current Debt per unit of time.
  • delivering_by_internal Fixed_Assets * cap_util DOCUMENT: The rate at which the firm delivers units.
  • delivering_by_network min(Fixed_Asset_shortfall,Supply_from_Network)
  • DOCUMENT The rate at which the supplier network delivers units.
  • eamings_from_sales_of_KoC (selling_KoC*margin ⁇ unit_of_KoC_sold)
  • DOCUMENT The revenues from selling Knowledge of Customers per unit of time.
  • DOCUMENT The combined value of the firm's physical and financial assets minus the amount of Debt held by the firm.
  • impact_of_cust_relations GRAPH(Knowledge_of_Customers) (0.00, 0.4), (10.0, 0.625), (20.0, 1.00), (30.0, 1.38), (40.0, 1.73), (50.0, 2.10), (60.0, 2.43), (70.0, 2.68), (80.0, 2.85), (90.0, 3.00), (100, 3.00) DOCUMENT: The non-linear impact of the firm's Knowledge of Customers on the number of units demanded per customer per time.
  • impact_of_KoC_on_wom GRAPH(Knowledge_of_Customers)
  • impact_of_supplier_network_on_wom_mult GRAPH(Supplier_Network/10000) (0.00, 1.00), (1.00, 1.00), (2.00, 1.16), (3.00, 1.31), (4.00, 1.46), (5.00, 1.59), (6.00, 1.71)
  • DOCUMENT The impact of the Supplier Network on the 'worn mult'. In other words, the ratio of the 'worn mult' to what the 'worn mult' WOULD BE in the absence of a Supplier Network.
  • impact_on_PE_mult GRAPH(tot_inv)
  • DOCUMENT The rate at which Customer Support Technology is improved by the firm.
  • DOCUMENT The rate at which the firms knowledge of its Customers becomes obsolete or otherwise worthless.
  • KoC_per_transaction base_KoC_per_transaction * impact_of_CST_on_KoC_per_transaction
  • DOCUMENT The average time that elapses between the sale of a unit and the time of its delivery.
  • losing_Customers Customers*cust_loss_frac*1.15 DOCUMENT: The rate at which the firm loses Customers.
  • losing_Employees (0.2/Ability_to_Attract_&_Retain) * Employees DOCUMENT: The rate at which the firm loses Employees.
  • losing_Fixed_Assets Fixed_Assets/10
  • DOCUMENT The gross revenues (earnings) of the firm minus the firm's spending.
  • PE_mult base_PE_mult * impact_on_PE_mult
  • DOCUMENT The actual PE ratio of the firm.
  • DOCUMENT The combined value of the firm's physical and financial assets.
  • DOCUMENT The value of all physical assets owned by the firm.
  • potential_selling_of_KoC GRAPH(Knowledge_of_Customers)
  • DOCUMENT The number of dollars earned per dollar value of each unit sold.
  • DOCUMENT The number of new Suppliers each current Supplier or Alliance
  • DOCUMENT The capacity the Supplier Network has to supply units to the firm's
  • DOCUMENT The total number of 'market value'-building activities engaged in by the firm.
  • total_deliveries delivering_by_internal + delivering_by_network DOCUMENT: The total rate at which units are delivered to Customers by both the firm and the supplier network combined.
  • transactions Customers * units_demanded_per_cust DOCUMENT: The rate at which units are sold.
  • u n i t s _ d e m a n d e d _ p e r _ c u s t
  • PR Public Records includes industry averages
  • BE Best Estimate variable that is not captured and/or measurable; proxy unlikely; correlation analysis may be useful
  • X Not applicable to this embodiment or involves direct user input
  • Fixed__Asset_utilizati The percent utilization of Fixed Assets CR on owned. fixed costs Costs assessed each time period on CR the firm's Fixed Assets. frac Rwl lost Fraction of Relationship with Investors ND, BE lost each time period. gaining_Contacts When a supplier comes on board, they ND, CR bring with them a certain number of contacts the firm will be able to use. gaining_Customers The amount of new customers gained CR over a given time period. The process is a word of mouth process. The more effective the firm is at developing brand recognition, the supplier networks, customer knowledge, and customer relationships, the more customers it can gain. Loyal Customers are assumed to have a higher word of mouth multiplier than New Customers.
  • impact_of_AAR_on The impact of the ability to attract and BE retention retain on keeping Experienced Employees. The greater the ability, the easier it is to retain them.
  • impact_of_AP_on_s The impact of the Alliance Partners on BE up the ability to add suppliers. The more Alliance Partners, the easier it is to add suppliers.
  • INIT Ability_to_Attract_&_Retain 0DOCUMENT: The ability of the firm to attract new employees and keep current employees. This is on a scale of 0 (no ability whatsoever) to 100 (couldn't be more able to).
  • DOCUMENT The ability of the firm to raise capital and make deals happen.
  • Ability_to_Train(t) Ability_to_Train(t - dt) + (changing_training_ability) * dt INIT
  • Ability_to_Train 50DOCUMENT: The ability of a firm to train its employees. It is on a 0 (it can't train) to 100 (couldn't be more able to train) scale.
  • Alliance_Partners(t) Alliance_Partners(t - dt) + (change_in_AP - losing_APs) * dt
  • INIT Alliance_Partners 100DOCUMENT: Number of strategic partners for R&D, marketing, etc.
  • Brand(t) Brand(t - dt) + (brand_building - brand_decaying) * dt
  • INIT Brand 20DOCUMENT: Measures brand recognition on a scale of 0-
  • Buying_Public(t) Buying_Public(t - dt) + (losingjoyals + losing_new_custs - gaining_Customers) * dt
  • INIT Buying_Public 10000DOCUMENT: The total buying population that is not currently a customer of the firm.
  • Channels(t) Channels(t - dt) + (adding_Channels - losing_Channels) * dt
  • DOCUMENT The number of channels a firm has.
  • Cume_Transaction_Data(t) Cume_Transaction_Data(t - dt) + (acquiring_transaction_data) * dt
  • Customer_Relationship(t) Customer_Relationship(t - dt) + (building - weakening) * dt INIT
  • Customer_Relationship 50DOCUMENT: Measures strength of customer relationship on a scale from 0-100%.
  • Fin_Asset_$_Val(t) Fin_Asset_$_Val(t - dt) + (gross_earnings + acquiring ⁇ paying_down_capital - capital nvestment - spending) * dt
  • INIT Fin_Asset_$_Val 1 e6DOCUMENT: Total financial assets of the firm.
  • Fixed_Assets(t) Fixed_Assets(t - dt) + (adding_Fixed_Assets - losing_Fixed_Assets) * dt
  • INIT Fixed_Assets 20000DOCUMENT: Measure of functional, on-line capital goods used to make finished units.
  • Inventory(t) lnventory(t - dt) + (producing_by_internal + producing_by_network - transactions) * dt
  • INIT Inventory ODOCUMENT: Amount of finished goods available for delivery.
  • lnvesting_Public(t) lnvesting_Public(t - dt) + (losingjnvestors - attractingjnvestors) * dt
  • INIT lnvestment_Transaction_Data ODOCUMENT: The amount of relevant transaction data a firm holds.
  • Knowledge_of_Customers(t) Knowledge_of_Customers(t - dt) + (building_KoC - KoC_obsolescing) * dt
  • INIT Knowledge 3f_lnvestors ⁇ Place initial value here... ⁇ DOCUMENT: The Knowledge of Investors a Firm has. This is on a 0 (no knowledge) to 100 (omniscient) scale.
  • Loyal_customers(t) Loyal_customers(t - dt) + (becomingjoyal - losingjoyals) * dt
  • INIT Loyal_customers ⁇ Place initial value here... ⁇ DOCUMENT: The number of customers who have been with the firm long enough to be considered loyal customers. Loyal customers are considered a significant asset to the firm.
  • Natural_Resources_Available(t) Natural_Resources_Available(t - dt) + (- adding_Fixed_Assets) * dt
  • Network_Contacts(t) NetworkjContacts(t - dt) + (gaining Contacts - losing Contacts) * dt
  • INIT NetworkjContacts ⁇ Place initial value here... ⁇ DOCUMENT: Contacts gained and lost through the Supplier Network.
  • New_Customers(t) New_Customers(t - dt) + (gaining Customers - becomingjoyal - losing iew -usts) * dt
  • DOCUMENT The total amount of knowledge the firm has concerning it processes, customers, and investors.
  • Outstanding Shares(t) Outstanding_Shares(t - dt) + (sellingjshares - buyingj ack) * dt
  • DOCUMENT Outstanding shares that have been sold to the market.
  • Processj nowledge(t) Processj nowledge(t - dt) + (building_PK +
  • DOCUMENT The amount of Process Knowledge a firm has about its core processes.
  • ProductionjData(t) Production_Data(t - dt) + (acquiring_PD) * dt
  • DOCUMENT Data collected regarding a firm's production experience.
  • Relationship vithjnvestors(t) Relationship_with_lnvestors(t - dt) +
  • DOCUMENT The strength of the firm's relationship with its investors. It is on a 0 (no relationship) to 100 (couldn't be stronger) scale.
  • RequestsjBacklog(t) Requestsj3acklog(t - dt) + (buildingj acklog - delivering - losingjjnfilled j-equests) * dt
  • SupplierjNetwork(t) Supplier_Network(t - dt) + (buildingjsupplier_network - losing supplierj ⁇ etwork) * dt
  • Working_Public(t) Working_Public(t - dt) + (losingj ⁇ mployees - attracting) * dt
  • CST_spending lndicated CST_Spending * CST_Spending_switch DOCUMENT: Spending on Customer Support Technology for a given time period.
  • customerjnvesting brand spending+channeljspending+CST spending DOCUMENT: Total amount of investment in the customer sector.
  • debt_equity_ratio ⁇ Place right hand side of equation here... ⁇ DOCUMENT: This is the debt equity ratio the firm can choose.
  • DOCUMENT This is a switch signifying a firm's decision to sell units of
  • DOCUMENT The price the firm charges for each transaction.
  • sellingjshares capitalj ⁇ eeded * (- debt_equity_ratio)/effectivej rice_per_share
  • DOCUMENT The amount of shares sold by the firm in a given time period.
  • supplierjnvestment ⁇ Place right hand side of equation here...
  • DOCUMENT The amount of investment in the supplier network for a given time period (in dollars).
  • tech_spending ⁇ Place right hand side of equation here... ⁇
  • DOCUMENT The amount of investment in technology requested in a given time period.
  • DOCUMENT The total amount the firm could produce if necessary.
  • acquiring ⁇ paying_down_capital DOCUMENT: The net acquiring and paying down of capital.
  • acquiring ⁇ payingJransactions borrowing/10 + buying J->ack/10 + paying down/10 + selling _shares/10
  • DOCUMENT The number of transactions calculated from acquiring and paying down capital. This is used to determine how much transaction data is gathered over a given time period.
  • acquiring_PD producing_byj ' nterna PDjper_unitjproduced
  • DOCUMENT The rate at which Production Data is acquired each time period.
  • acquiring Jransactionjdata transactions * TD_gained_perJransaction DOCUMENT: The amount of transaction data acquired in a given time period.
  • adding_Channels channel 3pending * cj er $ * impact Df_ARCDD Dn_ch * impact_of_SN 3n_ch
  • DOCUMENT The amount to deliver is determined through analyzing the
  • attracting investing Jnj3mployees*base 3mpj er $ * impact Df_AAR_on attracting DOCUMENT: The amount of new employees the firm attracts over a given time period.
  • attractingjnvestors lnvestors*base attract_womJrac * impact_of_RljDn attracting DOCUMENT: The number of Investors a firm attracts over a given time period. This is done through word of mouth in the marketplace.
  • avg_Fin_A_$ 7al ⁇ Place right hand side of equation here... ⁇ DOCUMENT: The average financial assets.
  • avgjOK 50
  • DOCUMENT The number of Alliance Partners an experienced employee can add to the firm over a given time period. This is more than what a new hire can add.
  • base_APs_added_per_New_Hirej erJime ⁇ Place right hand side of equation here... ⁇
  • DOCUMENT The number of Alliance Partners an experienced employee can add to the firm over a given time period.
  • base 3ttract_womj ⁇ ac GRAPH(net_earnings)
  • DOCUMENT The base word of mouth fraction is determined solely by the net earnings of the firm.
  • base auxjselling ⁇ Place right hand side of equation here...
  • DOCUMENT The normal amount of auxiliary selling.
  • base_CRJ->uilding ⁇ Place right hand side of equation here...
  • DOCUMENT The base loss fraction is determined solely by the net earnings of the firm.
  • basejoyaljossjrac ⁇ Place right hand side of equation here...
  • DOCUMENT The normal percentage of loyal customers the firm would lose each time period if there was no impact of Customer Relationship.
  • basejicjoss rac ⁇ Place right hand side of equation here...
  • DOCUMENT The percentage of New Customers the firm would lose each time period if there were no impact of Customer Relationship.
  • DOCUMENT Base time it takes to adjust the firm's ability to attract and retain to its potential.
  • base imejojaxp ⁇ Place right hand side of equation here...
  • DOCUMENT The average time it takes for a New Hire to become an Experienced Employee.
  • base ime ojoyal ⁇ Place right hand side of equation here...
  • DOCUMENT The average time it takes for a New Customer to become a Loyal Customer.
  • becoming j ⁇ xperienced (New_Hires/baseJimeJo 3xp)*impact -)f_AT DOCUMENT: The number of New Hires who become Experienced Employees in a given time period.
  • becomingjoyal (NewjCustomers/baseJimeJoJoyal) * imp_of_CR_onJimeJoya imp_of_KoC_onJimeJoyal
  • DOCUMENT The number of New Customers who become loyal in a given time period.
  • DOCUMENT This is the cumulative rate of building of Brand recognition.
  • brand j uildingJ ⁇ om_Brand_spending brand_spending*brand -.uiltjper_$k
  • DOCUMENT The amount of brand recognition generated by investing money in developing this recognition.
  • Brand jDuilding_from sales transactions * Brandj uiltjperJransaction
  • Brandj uiltjper $k GRAPH(Knowledge_of_Customers) (0.00, 0.105), (10.0, 0.645), (20.0, 0.945), (30.0, 1.13), (40.0, 1.26), (50.0, 1.35), (60.0, 1.44), (70.0, 1.48), (80.0, 1.53), (90.0, 1.54), (100, 1.58)
  • DOCUMENT The amount of brand recognition built per dollar spent. Knowledge of the customer influences this amount.
  • DOCUMENT Customer Relationship strength is built through interacting with the customer (through employee transactions). The amount this strength is built up is impacted by the number of Channels, the Supplier Network, the amount of transactions, the strength of Brand, and the Customer Support
  • DOCUMENT The amount of units ordered each time period.
  • buildingj oC acquiring Jransaction ata * ease_ofj uilding_KoC * impactj3f_CST_onj oC_ building*impact Df_Relationshipj uilding Dnj oc
  • capitaljnvestment customerj ' nvesting+tech 3pending+FAj ' nvesting_cost+investingj ' nj3mploy ees+supplierjnvestment
  • DOCUMENT Expenditures from investing in customers, providers, and physical assets in a given time period.
  • capitaljieeded ⁇ Place right hand side of equation here... ⁇ DOCUMENT: The firm can analyze its performance and determine what capital (if any) is needed.
  • changej ' n_AP
  • DOCUMENT The number of Alliance Partners added to the firm each time period.
  • changejn_ARCDD (potential_ARCDD- AbilityJo_Raise_Capital ⁇ DojDeals)/timeJo adjust_ARCDD DOCUMENT: The change in a firm's ability to raise capital and do deals. This is determined through a potential (based on Organizational Knowledge) and the amount of time it takes to realize this potential.
  • changej ' nj ⁇ mployees attractingj ⁇ mployees-losingj ⁇ mployees DOCUMENT: The net change in the number of employees for a given time period.
  • changeJnJTD acquiring ⁇ payingJransactions * ITDjperJrans * impact Df_Rl 3n_chgj ' n_ITD DOCUMENT: As a firm acquires and pays down capital, it gathers transaction data.
  • changing_AAR (potential_AAR-AbilityJo_Attract_&_Retain) / (baseJimeJo adj_AAR*impact DfjNC_onJimeJo adjust_AAR)
  • DOCUMENT The amount of investment in developing channels.
  • CR_per ⁇ mployee_per_transaction base_CRjDuilding * impact_ofj3rand_on_CR * impactjDf_CST_onj uild * impac t_ofjC_on_CR*impact Df_SN Dn_CRj3uilding*impact Df_TD DOCUMENT: The amount of customer relationship units gained per employee per transaction.
  • DOCUMENT The amount of Customer Support Technology obsolescing each time period.
  • CST_per_$ ⁇ Place right hand side of equation here... ⁇ DOCUMENT: The units of Customer Support gained per dollar spent.
  • DOCUMENT Technology becomes obsolete.
  • delivering amountJo_deliver
  • DOCUMENT The amount of units delivered each time period.
  • demand unitsj emandedjper_cust * (New_Customers+1.5 * Loyal_customers)
  • DOCUMENT The total units desired per time period. It is a function of the number of customers and the average demand per customer. Loyal customers are assumed to want more in this calculation.
  • earningsJ ⁇ om_sales -if_KoC sellablejjnitsj oC*pricejperjjnit Df_KoCj5old*sell_units
  • DOCUMENT The firm earns money from selling its Knowledge of Customers.
  • ease_of_improvingj3R GRAPH(Customerj elationship) (0.00, 0.04), (10.0, 0.44), (20.0, 1.01 ), (30.0, 1.31 ), (40.0, 1.47), (50.0, 1.51 ), (60.0, 1.46), (70.0, 1.37), (80.0, 1.23), (90.0, 1.01 ), (100, 0.00) DOCUMENT: The greater the customer relationship the firm has with customers, the easier it will be to build increase the relationship-except near the 100% threshold, where it will become increasingly difficult to build a stronger relationship, since the firm already would have such a good relationship.
  • DOCUMENT The amount of new customers gained over a given time period. The process is a word of mouth process. The more effective the firm is at developing brand recognition, the supplier networks, customer knowledge, and customer relationships, the more customers it can gain.
  • imp_of_CR_onJimeJoyal GRAPH(Customer_Relationship) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46)
  • DOCUMENT The impact of Customer Relationship on the time it takes to become loyal.
  • imp DfjKoC GRAPH(Knowledge DfjCustomers)
  • imp_of_Rwlj3nj rice GRAPH(Relationship_with_lnvestors) (0.00, 0.35), (10.0, 0.42), (20.0, 0.54), (30.0, 0.66), (40.0, 0.83), (50.0, 1.00), (60.0, 1.21 ), (70.0, 1.39), (80.0, 1.51 ), (90.0, 1.58), (100, 1.60) DOCUMENT: The impact of the Relationship with Investors on the price per share. The better the relationship, the greater the price per share.
  • impact_of_AAR_on_retention GRAPH(AbilityJo_Attract_&_Retain) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46)
  • DOCUMENT The impact of the ability to attract and retain on keeping Experienced Employees. The greater the ability, the easier it is to retain them.
  • impact_of_APj3n 3up GRAPH(Alliancej°artners)
  • impact_of_ARCDD_on_ch GRAPH(AbilityJo_Raise_Capital ⁇ Do_Deals) (0.00, 0.37), (10.0, 0.45), (20.0, 0.55), (30.0, 0.67), (40.0, 0.83), (50.0, 1.00), (60.0, 1.17), (70.0, 1.32), (80.0, 1.42), (90.0, 1.51 ), (100, 1.57)
  • DOCUMENT The impact of the ability to raise capital and do deals on adding channels.
  • impact Df_ARCDD DnJntj-ate GRAPH(AbilityJo_Raise_Capital ⁇ Do_Deals) (0.00, 0.37), (10.0, 0.45), (20.0, 0.55), (30.0, 0.67), (40.0, 0.83), (50.0, 1.00), (60.0, 1.17), (70.0, 1.32), (80.0, 1.42), (90.0, 1.51 ), (100, 1.57)
  • DOCUMENT The impact of the firm's ability to raise capital and do deals on the interest rate it will be charged on debt. The greater the firm's ability to raise capital and do deals on the interest rate it will be charged on debt. The greater the firm's ability to raise capital and do deals on the interest rate it will be charged on debt. The greater the firm's ability to raise capital and do deals on the interest rate it will be charged on debt. The greater the firm's ability to raise capital and do deals on the interest rate it will be charged on debt. The greater the firm's ability to
  • DOCUMENT The impact of Channels on building Customer Relationship.
  • impactjDfjCRjDn auxjseliing GRAPH(Customer_Relationship) (0.00, 0.12), (10.0, 0.14), (20.0, 0.18), (30.0, 0.34), (40.0, 0.5), (50.0, 1.03), (60.0, 1.45), (70.0, 1.70), (80.0, 1.81 ), (90.0, 1.82), (100, 1.84)
  • DOCUMENT The impact of Customer Relationship on the rate of auxiliary selling. The stronger the relationship, the greater the rate.
  • impact_ofj3R_on_loyal_lossJrac GRAPH(CustotnerjRelationship) (0.00, 1.99), (10.0, 1.68), (20.0, 1.51 ), (30.0, 1.30), (40.0, 1.16), (50.0, 1.00), (60.0, 0.78), (70.0, 0.56), (80.0, 0.45), (90.0, 0.4), (100, 0.39)
  • DOCUMENT The impact of Customer Relationship on the percentage of loyal customers who leave each time period.
  • impactjDfjCR onjicJossJrac GRAPH(Customer_Relationship) (0.00, 1.99), (10.0, 1.68), (20.0, 1.51 ), (30.0, 1.30), (40.0, 1.16), (50.0, 1.00), (60.0, 0.78), (70.0, 0.56), (80.0, 0.45), (90.0, 0.4), (100, 0.39)
  • DOCUMENT The impact of Customer Relationship on the percentage of New Customers lost in a given time period.
  • impact_of_CR Dn_wom GRAPH(Customer_Relationship) (0.00, 0.00), (10.0, 0.51 ), (20.0, 1.00), (30.0, 1.30), (40.0, 1.52), (50.0, 1.70), (60.0, 1.85), (70.0, 1.93), (80.0, 1.98), (90.0, 1.99), (100, 2.00) DOCUMENT: The impact of Customer Relationship on the word of mouth multipliers for gaining customers.
  • impactjDfjCSTjDn Duild GRAPH(Customer_Support_Technology) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46)
  • DOCUMENT The impact of the Customer Support Technology on Customer Relationship units built. The more technology the firm has, the easier it is to build the relationship.
  • impact Df_CST Dnj oC_building GRAPH(Customer_Support_Technology) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46)
  • DOCUMENT The impact of the Customer Support Technology on Customer Relationship units built. The more technology the firm has,
  • DOCUMENT The impact of Customer Support Technology on the ability to retain Knowledge of Customers. The better the technology, the easier it is to retain.
  • impact Df_custj"elationship GRAPH(Customer_Relationship) (0.00, 0.4), (10.0, 0.625), (20.0, 1.00), (30.0, 1.38), (40.0, 1.73), (50.0, 2.10), (60.0, 2.43), (70.0, 2.68), (80.0, 2.85), (90.0, 3.00), (100, 3.00)
  • DOCUMENT The impact of the strength of customer relationship on the number of units desired per customer.
  • impact_of_ej ' nv GRAPH(investingJn 3mployees)
  • impact_ofjMC DnJimeJo adjust_AAR GRAPH(NetworkjContacts) (0.00, 5.97), (10.0, 5.49), (20.0, 4.98), (30.0, 4.35), (40.0, 3.87), (50.0, 3.45), (60.0, 3.06), (70.0, 2.61 ), (80.0, 2.10), (90.0, 1.71 ), (100, 1.26)
  • impact_of_OKj--nJech GRAPH(Organizational_Knowledge) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the organizational knowledge on the ability of the firm to improve technology.
  • Df_Relationshipj uilding_on_Koc GRAPH(Customer_Relationship) (0.00, 0.41), (10.0, 0.45), (20.0, 0.53), (30.0, 0.65), (40.0, 0.82), (50.0, 1.00), (60.0, 1.15), (70.0, 1.28), (80.0, 1.39), (90.0, 1.46), (100, 1.50)
  • DOCUMENT The impact of Customer Relationship on building customer knowledge.
  • impact_of_RI_on attracting GRAPH(Relationship_with_lnvestors) (0.00, 0.37), (10.0, 0.47), (20.0, 0.58), (30.0, 0.67), (40.0, 0.83), (50.0, 1.00), (60.0, 1.20), (70.0, 1.34), (80.0, 1.44), (90.0, 1.53), (100, 1.58) DOCUMENT: The impact of Relationship with Investors on the ability to attract new investors. The greater the relationship, the easier it is to attract new investors.
  • impact_of_RljDn_chgj ' n_ITD GRAPH(Relationship_with_lnvestors) (0.00, 0.33), (10.0, 0.38), (20.0, 0.45), (30.0, 0.58), (40.0, 0.75), (50.0, 1.00), (60.0, 1.23), (70.0, 1.38), (80.0, 1.48), (90.0, 1.56), (100, 1.60) DOCUMENT: The impact of Relationship with Investors on the ability to gather transaction data. The greater the relationship, the easier it is to get data.
  • impactjDf_RI_onJosing GRAPH(Relationship_with_lnvestors)
  • impact_of_SN_on_ch GRAPH(SupplierjNletwork)
  • DOCUMENT The impact of Transaction Data on Customer Relationship units built. The more data the firm has, the easier it is to build the relationship.
  • impact_of_Technology_onjproductivity GRAPH(Technology) (0.00, 0.00), (10.0, 0.00), (20.0, 0.00), (30.0, 0.00), (40.0, 0.00), (50.0, 0.00), (60.0, 0.00), (70.0, 0.00), (80.0, 0.00), (90.0, 0.00), (100, 0.00)
  • DOCUMENT The impact of Technology on internal productivity.
  • impact DfJs GRAPH(techjspending)
  • DOCUMENT The amount the firm's technology is improved in a given time period.
  • interestj-ate basej ' nterest_rate*impact Df_ARCDD
  • Dnj ' ntj-ate DOCUMENT: The interest rate the firm is charged on its debt.
  • i nte rn a I jp rod uctivity basej roductivity * impact Df_PDjDnj3roductivity*impactjDf_TechnologyjDn_ productivity
  • DOCUMENT Actual internal productivity is determined by base productivity and the impacts of Production Data and Technology.
  • ITDjperJrans ⁇ Place right hand side of equation here... ⁇
  • DOCUMENT The amount of transaction data gathered for each transaction.
  • DOCUMENT An amount of Knowledge of Customers will become obsolete each time period.
  • DOCUMENT The number of channels lost in a given time period.
  • DOCUMENT The rate at which the firm loses Fixed Assets, for whatever reason.
  • losingjnvestors lnvestors*baseJoss_frac * impactjDf_Rl DnJosing DOCUMENT: The number of Investors lost over a given time period.
  • losing JTD lnvestment_TransactionjData/4
  • DOCUMENT The natural loss of relationship that occurs from atrophy per time period.
  • losing supplierjnetwork SupplierjNetwork/suppliersj-esidenceJime DOCUMENT: The number of suppliers the firm loses in a given time period.
  • losingj-infilledj-equests Requestsj3acklog/4
  • DOCUMENT The number of orders lost each time period as customers take their requests away for whatever reason.
  • Loyal_wom ⁇ Place right hand side of equation here... ⁇

Abstract

The market value of a business depends on many factors: the age and capacity of its factories, the popularity of its brandnames, the ingenuity of its workers, and so forth. These tangible and intangible factors, or assets, reflect that a business has made decisions to invest or allocate its resources in particular ways. In this sense, all business operating decisions, such as hiring or firing employees, selling or buying back stock, buying or selling plants, or spending more on advertising, are investment decisions that affect market value. Based on these insights, the inventors devised a computer system that models the effect of business decisions on the market value of a business. The system classifies assets and other data representative of business decisions into tangible and intangible asset categories and models market value as a function of items in these categories. The system also allows businesses to simulate the effect of their operational decisions on market value, and displays, through unique graphic aids, the relative contribution of the associated assets to that value. Ultimately, the invention provides market-sensitive guidance for making business management decisions that optimize returns and reduce business risk.

Description

SYSTEM FOR MODELING, MEASURING, MANAGING, AND DEPICTING THE EFFECTS OF BUSINESS DECISIONS ON MARKET VALUE
Technical Field.
The present invention concerns business information, accounting, and management systems and methods.
Background of Invention:
Business information and accounting systems are typically computer-based systems that assist in the financial operation and management of businesses These systems facilitate accounting based on generally accepted accounting principles Implementing these principles entails classifying and reporting financial data as itemized income statements and balance sheets. Income statements report income and expenses of the business, for example, sales revenue and employee wages Balance sheets, on the other hand, report physical and financial assets and liabilities, such as inventory value, real estate value, bank account balances, and total debt. The difference between total assets and total liabilities on the balance sheet defines the net worth, or book value, of the business. This accounting definition of business value treats financial and tangible assets as the only assets affecting how much a business is actually worth.
However, recent years have seen the emergence of an information economy, m which informational or intellectual business "assets," such as technical and marketing know-how, are eclipsing tangible assets in business importance, particularly m determining the market value of businesses For evidence, one need only consider the trend toward ever greater market-to-book multiples for businesses listed on public stock exchanges A market-to-book multiple measures the gap between the book value of a business and the market value of the business. For instance, a market-to-book multiple of five means that the market value, or total stock value of a business, is five times the book value of the business. In other words, the book value of this business underestimates its market value by a factor of five.
To account for this large gap, financial analysts and investors generally view market value as the sum of book value and another plug-m number. This other number, often termed "blue sky" or "good will," is generally assumed to represent the current lump-sum value of income streams, growth potential, and other factors affecting profitability of the business. However, other than this acknowledgment of the difference between what accountants see as valuable in their books and what markets see as valuable in stock pnces, there has been little, if any, progress m developing effective ways of measuring and incorporating intangible assets into an overall business accounting system and market valuation technique.
This failure has lead many business investors and lenders to overemphasize tangible assets (such as real estate, plants, and equipment) m evaluating both the growth potential and credit- worthiness of many businesses. This ultimately encourages imprudent loans and investments Additionally, many business executives, lacking accurate, comprehensible data on intangible assets and their effects on business success (measured as stock value), fail to effectively understand and manage them and thus to unnecessarily jeopardize shareholder investments and employee livelihoods.
Accordingly, there remains a need for business accounting methods and systems, business valuation methods, and strategic management aids that not only classify and account for intangible assets but provide an effective and convenient framework for modeling and understanding how tangible and intangible assets interact to affect market value.
Summary of the Invention:
To address these and other needs, the inventors have devised methods, software, and systems that assist users, such as business executives, to see how market value is created and diluted, to measure the impact of operating decisions on market value, and ultimately to make operating decisions that consistently enhance market value. The original core premise of the invention is that business operating decisions reflect or imply investments mto specific categories of assets that in turn govern or affect the market value of a business. In putting the premise to work, the inventors devised the following primary embodiments of the invention.
A first embodiment of the invention classifies business assets and information into tangible and intangible assets. The primary asset categories include physical and financial subcategoπes, and employee and customer subcategoπes. These asset categories form an exemplary framework for modeling the market value of a business.
A second embodiment ofthe invention classifies business assets and information from multiple business entities, including both the business user's company and other companies, according to the physical, financial, employee, and customer categories. Combining the business users information with information about other companies according to the classification framework provides a more accurate model of market value.
A third embodiment of the invention allows the business user to simulate and display the effect of operational decisions on market value. The system uses a number of advanced mathematical techniques such as regression analysis, and other analytical devices such as neural network technology and system dynamics.
A fourth embodiment of the invention allows a business to calibrate the model based on the effect of similar investments in other companies. Consequently, this recahbration allows the business user to measure its operational and investment decisions based on anticipated market value responses and to integrate this information into its decision making
A fifth embodiment of the mvention automates the transfer of information from a business accounting system into the market-value model, allowing regular updates of projected market performance based on daily, weekly, or monthly accounting and market data. In addition, these market projections can be integrated mto the decision making process of a business to allow for continual tuning of business operations to maximize market value
A sixth embodiment of the invention provides a visualization system which not only illustrates market value components based on the asset categories and overall market value but also their trajectories over time. The trajectories are particularly useful for charting a history of operating decisions and correlating these decisions or changes m market value to events internal and external to a business. Several business can be tracked for comparative strategic analysis. Thus, this embodiment provides insights into how internal and external events affect market value.
Ultimately, these and other embodiments of the mvention allow business decision makers to project how operating decisions, such as decisions to hire or fire workers or to buy equipment or to back buy stock or to spend more on advertising, are likely to affect market value. In short, these and other embodiments provide market-sensitive guidance for making business management decisions.
Brief Description of the Drawings.
Figure 1 is a block diagram of a business information and management system embodying the present invention. Figure 2A is a block diagram of an asset categorization scheme including tangible and intangible assets of an operating business. Figure 2B is a block diagram of another asset categorization scheme including tangible and intangible assets of an operating business. Figure 3 is a diagram illustrating layers of the asset categorization scheme of Figure 2A.
Figures 4Aa*<Hfere block diagrams illustrating acquisition and staging of data from external sources. Figure 5 is a block diagram of a market valuation engine based on categorized assets.
Figure 6 is a block diagram of a high-level stock and flow of the engine of Figure 5.
Figure 7A is a diagram showing details of the physical portion of the exemplary high-level stock and flow diagram of the engine of Figure 5. Figure 7B is a diagram showing details ofthe financial portion of the high-level stock and flow diagram of the engine of Figure 5 Figure 7C is a diagram showing details of the employee portion of the high-level stock and flow diagram of the engine of Figure 5. Figure 7D is a diagram showing details of the customer portion of the high-level stock and flow diagram of the engine of Figure 5. Figure 8 is a listing of simultaneous equations which are the mathematical equivalent of the stock-and-flow diagram of Figure 7 Figure 9 is a facsimile of a unique tetrahedronal graphic aid showing the relative contribution of physical, financial, employee, and customer assets to the market value of a of publicly traded companies.
Figure 10 is a facsimile of a unique tetrahedronal graphic aid showing the relative contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset contributions to market value.
Figure 1 1 is a facsimile illustrating rotation of the unique tetrahedronal graphic aid of Figure 10 about several of its axes.
Figure 12 is a block diagram of a heat map graphic aid used to visualize the contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset contributions to market value.
Figure 13 is a block diagram of the heat map graphic aid of Figure 12 showing members of a selected cluster, a first pie chart representing the average contribution of asset categories to market valuation of the selected cluster and a second pie chart showing the asset-category contributions for a particular selected business within the cluster.
Figure 14 is a facsimile of several heat map graphic aids illustrating a historical asset- contribution tracking feature of the heat map graphic aid of Figures 12 and 13.
Figures 15-23 are facsimiles of graphic aids incorporating teachings of the present invention.
Figure 24 is a diagram showing a side-by-side comparison of conventional book value and market value, both depicted according to teachings of the present invention.
Figure 25 is a diagram illustrating the difference between a book value of a software company and its market value.
Figure 26 is a set of graphic aids depicting market value of typical businesses in various industries, according to teachings of the present mvention.
Detailed Description of the Invention:
The following detailed descπption, which references and incorporates the Figures 1 -26, descπbes and illustrates specific embodiments ofthe invention. These embodiments, offered not to limit but only to exemplify and teach the invention, are shown and descπbed in sufficient detail to enable those skilled m the art to implement or practice the invention. Thus, where appropriate to avoid obscuring the invention, the descπption may omit certain information known to those of skill m the art. The descπption includes the following eight sections:
Section 1 describes an exemplary computer system which is linked, or networked, with several sources of business information. Section 2 describes an exemplary asset (or business data) classification schemes which provides a foundation for modeling market value and the effect of business decisions on market value. Section 3 descπbes exemplary market value models and systems dynamics simulations for dissecting the components of market value and estimating the effect of business operating decisions on market value Section 4 describes several unique visual displays based on a four- and fi\e-asset classification schemes Section 5 is a glossary which defines several terms important to the description
Section 6 includes appendices A, B, C which provide details of vaπous actual or potential implementations, or embodiments, of the invention Section 7 is a conclusion which highlights some functions and benefits of exemplary embodiments of the mvention
Section 1 — Exemplary Computer System
Figure 1 shows an exemplary networked computer system 110 comprising a standard personal computer 1 12 coupled via a local area network to a server computer 1 14 Though not shown explicitly, computers 110 and 112 include processors which cooperate with electronic, magnetic, optical memoπes, and/or other information storage devices, to execute stored computer programs and related methods of the invention
In addition, computer 112 includes or accesses functional block 1 15 which itself includes a content block 115a and an analytic block 115b These blocks include computer programs, data, and data structures that enable the system to model and estimate market valuations or direction of market- value changes More specifically, content block 1 15a includes news and contextual analysis data as w ell as accounting data and other information indicative or representative of business operating decisions Functional block 115 is shown separate from server 114 and computer 1 12 to represent that the functions can be implemented on a computer singularly or in a distributed manner
Server 114 is also coupled to a host system 116 residing at a customer site and having access to an associated customer database 117 which contains accounting data and other data indicative or representative of business operating decisions Server 1 14 is further coupled to a data warehouse 120 which includes one or more data storage and management devices Such devices comprise both a customer data warehouse and an extracted-information-provider-data warehouse
Data warehouse 120, in the exemplary embodiment, comprises one or more computer systems having network connection capabilities, allowing it to obtain further information from one or more external information providers through a wide-area network 130 Wide-area network 130 compπses one or more communication mediums, such as fiber optics, Internet-based networks, satellite communications, and vaπous other high bandwidth communication devices, such as Tl and T3 lines
Coupled to wide-area network 130 is a data collection and analysis system 140 for collecting business items and other business operational decision information related to internal and external businesses Collection system 140 interfaces with several external sources of business information, compiling it in storage devices 142 and a data warehouse 144 Withm collection system 140, database 146 collects customer raw data related to operating decisions of a customer business The customer raw data includes business information related to four categories of assets physical assets, financial assets, employee assets, and customer assets (Some embodiments further include analogous mechanisms and system for collecting information related to other categories of assets, such as organizational assets )
In the exemplary embodiment, collection system 140 resides at a provider site, that is, with an entity that advises businesses m making business decisions As such, system 140 is a logical collection point for business information from external providers These external providers include a financial- information provider 150, an employee-information provider 152, a customer- information provider 154, and a physical-information provider 156 Although the exemplary embodiment depicts a single-entity provider for each of the four categories, other embodiments of the invention rely on one or more providers for each category and/or several providers for one or more of the information categories Collection system 140 further compπses a functional block 148 which mirrors or corresponds to functional block 1 15 Block 148 evidences the notion that such functionality can reside entirely or partially withm collection system 140 as well as within computer 112
Section 2 — Exemplary Asset Classification Schemes
Figure 2 A shows a unique asset (or business-information) classification scheme 210 for use with system 1 10 Classification scheme 210 classifies both tangible and intangible assets into a four-class system including at least two classes for tangible assets and at least two classes for intangible assets More particularly, the scheme classifies tangible assets into respective physical and financial categories 212 and 214, and intangible assets into respective employee and customer categories 216 and 218
Examples of physical assets include inventory, production capacity, and equipment, and examples of financial assets include operating capital, cash flow and investor return Examples of customer assets are buyers or customers, channels, and brand, and examples of employee or provider assets are organization capital, human capital and supply chain Detailed definitions of these categories (as well as other terms) are included in the glossary section of this description Additionally, to further illustrate use of this exemplary classification system, the inventors provide a table m Appendix A which organizes a number of data items, available m the FAME database, according to the classification system Appendix A also includes a catalog of business data which can be classified according to the classification scheme
Physical and financial assets have been valued and reported on balance sheets according to ages- old accounting pπnciples and tax rules However, previous accounting systems fail to provide a systemic methodology for assessing the market value of tangible assets, relying instead of their depreciated values Moreover, previous accounting systems have never provided a systemic classification scheme for intangible assets nor any systemic methodology for valuing these assets with any degree of confidence Indeed, accounting systems generally only account for intangibles after a business is bought or sold, to explain the entire difference between book value and sale pπce ofthe business. In Sections 3 and 4, the inventors descπbe an exemplary market-oπented approach to valuing both tangible and intangible assets.
Figure 2B shows another unique asset (or busmess-ιnformatιon)classιficatιon scheme 220, similar but distinct from that shown in Figure 2A. Classification scheme 220 includes categoπes for tangible and intangible assets (at least two for tangible assets and at least two classes for intangible assets) as well as an mterrelational, binding, or hub, category, which the inventors call an organizational (and structural) asset category
More particularly, scheme 220 classifies tangible assets into a physical category 222 and financial category 224, and intangible assets mto respective employee, customer, and organizational asset categoπes 226, 227, and 228. Physical asset category 222 includes property, plant, equipment and inventory. Financial asset category 224 includes cash and equivalents, short- and long-term investments, accounts receivable, debt and equity, and prepaids and other. Employee (or human) asset category 226 includes employees, suppliers, and partners. Customer asset category 227 includes customers, distribution channels, and alliances.
Organization asset category 228 includes organizational and structural asset sub-categoπes. The organizational sub-category includes leadership (the guiding role of management to direct, command, and influence an organization), strategy (the organization's business and operational plans for attaining the organization's objective), knowledge (the individual and collective familiarity, awareness or competencies acquired through expeπence or study), and values (the organization's pπnciples, standards or qualities regarded as worthwhile or desirable).
The structural sub-category of organizational assets includes reputation (the belief about the organization, its brand and its products or services and brands), innovation (the expertise, resources, methodology, creativity, discipline, risk-taking, planning, timelines, budgeting, that are directly or indirectly employed in the creation of the organization's processes and product and service offerings), systems (the organization's set of interrelated, interacting or interdependent mechanical, electrical, electronic or logical components and rules), and processes (the organization's series of operations, methods, actions, tasks or functions).
Figure 3 shows a chart 310 which embodies the premise that the market value of a business depends on assets in the four asset categories shown m Figure 2A, namely physical, financial, employee, and customer Chart 310 also shows that the assets in the categories can be measured directly or indirectly using specific business information For example, chart 310 shows that the customer categoπes includes customers, brands, and channels, and that these assets can be measured, for example, using data representative or indicative of the number of active customers, propensity of customers to purchase from the business, market share of the business, propensity of the business to leverage outbound partners, propensity of the business to leverage knowledge of customers, and the strength of one or more brands (trademarks.)
Some of these, for example the propensity and strength factors, can be based on actual statistical measures or on crude relative rankings. Such measures (or proxies) are described below m conjunction with an analytic engine which incorporates these measures to determine the effect of operational decisions as categorical investments or divestments and the effect of implied investment or divestment decisions on market value.
Appendix B includes a questionnaire and associated chart for implementing a relative scheme not only to assess or appraise the effective contπbution of assets or the asset categories to market value, but also to comparatively analyze the relative effectiveness of one company's asset effectiveness to that of another. This questionnaire and charting scheme can be implemented with or without a computer.
Figures 4A and 4B show a data collection system 410 facilitating the collection of information for use by a user executing the Appendix B procedure or by a computer implementing an automated modeling or simulation process as descπbed below. Data collection system 410 interfaces with external data sources comprising a financial-information provider 412, a customer-information provider 414, a physical-information provider 416, and a labor- information provider 418 to provide batch transfer via respective data transfer devices 422, 424, 426 and 428 to respective staging-area storage devices 432, 434, 436, and 438.
The staging-area storage devices perform data validation, including, for example, clearing, business-rules checking, and format checking and correcting. From the staging areas, data, now termed operational data, passes to operational data storage devices 442, 444, 446 and 448. The data is then subject to an aggregation and derivation process, which aggregates the data, for example, according to business name, industry, total revenues, size, or so forth, and which derives other proxy or derivative data. For example, one derivation, in the exemplary embodiment, derives total market value from total number of shares outstanding and a share price.
After the aggregation-derivation process, aggregated information passes to a financial data warehouse 452, a customer data warehouse 454, a physical data warehouse 456, and labor (employee or provider) data warehouse 458. The data of the financial, customer, physical, and employee data warehouses then passes to respective pairs of data marts 462a and 462b, 464a and 464b, 466a and 466b, and 468a and 468b. The data marts are organized optionally as pairs m the exemplary embodiment for enhanced bandwidth and redundancy. Section 3 — Market Value Modeling and Simulation
Figure 5 shows an exemplary market-valuation engine 510 which is coupled to data collection system 410 via an information interchange block 512. Market- valuation engine 510 uses the exemplar)' asset-classification scheme of Figure 2A or Figure 2B as a basis for developing strategically useful models of how business items affect or potentially affect the market value of a business. (The invention, however, is not limited to the particular assets or categories of this scheme.)
In some embodiments, market-valuation engine 510 exists withm one or more business consulting centers withm a unique business consulting system. The consulting centers collect and processes data in accord with system similar to those in Figures 1 and 4. Two or more business client computer systems couple to each consulting system via a wired or wireless public or private local- or wide-area network, such as the Internet. The businesses communicate relevant business data and advise requests to the business consulting center and the consulting center processes this data along with other relevant market and industry specific data to provide global, regional, industry market value projections and other indications, assessments, and appraisals in accord with various aspects of the present mvention. The business can then use these to guide their business decisions. The exemplary engine implements the following six exemplary market-valuation models.
A first embodiment of the model views market value as a function of tangible and intangible business items. This is expressed in mathematical functional notation as
MV = f(T, I) Eq. 1 where MV denotes market value; T denotes one or more tangible business items; and I denotes one or more intangible business items. When more than one business item are used they are aggregated m some fashion. (This generic formulation encompasses the representation of market value as the sum of book value, that is, tangible assets, and a gap-filling number representative of goodwill).
In a second embodiment, the inventors model the market value MV of a business as
MV = f(K,T, K.I) Eq. 2 where Kt and K, are market-oriented weighting factors. The actual model could be an additive, multiplicative, or mathematical combination. A particular implementation of this model views the market value MV as a linear combination ofthe K,T and K,I constituents, or m mathematical terms as
MV = K,T + K.I + K Eq. 3 where K is a constant To distinguish from the conventional approach of filling in a gap-filling number representative of cumulative goodwill, K, and K, are not equal to positive one and/or K is non-zero.
Although the invention is not limited to any particular technique for calculating or selecting the weighting factors or the constant K, the inventors use regression analysis techniques, historical market data for a given business or groups businesses, and actual historical business data for tangible variable T and intangible variable I (Regression analysis refers to a well-known mathematical methodology of relating observed variations m a quantity or variable to variations in other quantities or variables One specific type used in the exemplary embodiment is least-mean-squares regression analysis.) The market data can be accessed or generated in any number of ways, for example, via a computer link to an on-line database
After determination or selection of the model parameters, the model can be used to project or estimate a new market value based on investment or divestment in the tangible or intangible business item (which is representative of an asset or operational decision). For example, one can double the value of investment into both of the tangible and intangible business assets and compute the new market value based on the determined or selected modeling parameters.
Moreover, one can also develop a market value trajectory for a given tangible or intangible investment or divestment strategy implemented over time by computing new market values for a series of different tangible or intangible business items representative of the temporal strategy. Similarly, one can also randomly dither or otherwise temporally vary one or more of the model parameters K,, K„ and K. Graphs of these market value trajectoπes can easily be developed using any number of oπgmal or off- the-shelf computer software tools. For example, the inventors use ITHINK™ visual dynamics and visual simulation software and a conventional personal computer. ITHINK software is available from High Performance Systems, Inc. of New Hampshire.
In a fourth embodiment, the inventors model the market value MV of a business as a function of physical, financial, employee, and customer business items. Mathematically this is expressed as
MV = f(P, F, E, C) Eq. 4 where P denotes a single or aggregate business item from the physical asset category, F denotes a single or aggregate business item from the financial asset category E denotes an a single or aggregate business item from the employee asset category, and C denotes a single or aggregate business item from the customer asset category
In a fifth embodiment, the inventors model the market value MV of a business as
MV = f(K,F, K2P, K3E, K4C) Eq. 5 where K, - K4 are weighting factors. A particular implementation of this model treats the market value MV as a linear combination of these four constituents, or mathematically as
MV = K,F + K2P + K3E + K4C + K Eq. 6 where K is a constant. As m the previous model, one can simply select arbitrary values for the K parameters or use conventional regression analysis to determine values based on simulated or actual market value data for one or more businesses.
After determination or selection of the model parameters, the model can be used to project or estimate a new market value based on investment or divestment m any one or more ofthe asset categories as represented by its business item Moreover, one can also develop a market value trajectory for a given investment or divestment strategy for each category of the business items Similarly, one can also randomly dither or otherwise temporally vary one or more of the model parameters and graph market value trajectories
The following table summarizes the business items employed m several exemplary implementations of not only this fifth embodiment but also one or more of the earlier embodiments
Figure imgf000013_0001
In the table, ASSETS denotes value of total assets from a balance sheet, CASHST denotes value of cash and short-term investments; and PPLANT denotes net total property, plants, and equipment Additionally, EMPLOYEE denotes the number of employees; SGAEXP denotes selling, general, and administrative (SG&A) expenses; and INTANG is value of intangibles. Although not shown explicitly m the models of this table, the exemplary embodiment normalizes each model by total sales; m other words, each term m the model is divided by a business item representing total sales of a company to remove or at least ameliorate factors related to size of a business Equation 7 illustrates how the business items m the Table, specifically its first row, can be integrated mto the fifth embodiment MV = K, CASHST + K2PPGROSS + K-EMPLOYEE + K4SGAEXP + K Eq.7
Other embodiments use pπce-to-earnings ratio as the market value parameter for the regression analysis. In these instances, one can exclude companies with zero or negative earnings, or companies from the best and/or worst deciles of pπce-to-earnmgs performance. Also, one can restπct the underlying data for the regression analysis to companies reporting a minimum number of years to avoid or reduce the data volatility that start-up companies could induce. For example, the exemplary embodiment rejects data from companies that are less than three years old
One exemplary set of software tools for performing the regression analysis is the FAME 7 7 software for Windows NT 4.0, and another is FAMES native 4GL software. An exemplary source for data on which to base the regression analysis is Standard & Poors Compustat annual fundamentals, stored in FAME databases The Compustat database includes income statement, balance sheet, and cash flow data items for more than 10,000 companies, with annual history dating from 1978. The databases offer both a time series and a cross-sectional perspective of the economy, facilitating both historical and snapshot (at a given year end) regression analysis. (See Appendix A for a catalog of data items m this database ) The invention, however, is not limited to any particular genus or species of database
The previous models are conceptually quite simple, however, the inventors appreciate that m reality businesses comprise interdependent relationships not only between one business asset (or item) category and another business asset category, for example, the financial and customer categoπes, but also among two or more items of a given asset category, such as a decision to sell information about customers and the number of total customers. The interactions or mterdependencies of these elements create positive and negative feedback relationships which are not immediately apparent m the models represented in equations 1-7. Accordingly, in a sixth embodiment, the inventors model market value using conventional systems dynamics methodologies and a set of twelve business items representative of the four (PFEC) categoπes. Figure 6 shows a simplified stock-and-flow diagram which defines the form of a computer- implemented systems dynamics model of the engine of Figure 5 The exemplary embodiment uses the concepts and tools of system dynamics to articulate and exercise the following four key principles:
1. Firms, or businesses, transact in four distinct, but interdependent, markets (or asset categoπes) and need to manage those interactions m strategic concert to maximize value.
2. The mateπal transactions or operational decisions, of everyday business have coincident "shadow" transactions of information that create scalable, valuable information assets.
3. The processes that create and leverage different assets are interdependent and operate with differing "rhythms" that, depending on how they are managed, can increase or reduce market value.
4 Coupling these insights with market-valuation models, such as system-dynamics-based tools, allows decision makers to manage for, or "engineer," value by strategically investing in, and managing, their portfolio of tangible and intangible assets.
The exemplary embodiment is further grounded in the assumption that firms transact m the four distinct, but interdependent, asset markets discussed earlier: Financial; Physical; Employee (Provider); and Customer. In each market category, the firm engages in a seπes of two-way exchanges to secure and leverage the assets that determine its market value.
One at a time, this section explains the principle of multi-market exchange by first examining the four market sections depicted m Figure 6 and then explains, at least in part, their cross-market mterdependencies. In the financial market, the key relationship is that of the firm to its investor. This two-way relationship hinges on a firm's ability to attract capital from its investors, a subset of the investing public. The investors provide the firm cash to expand, and in return, the firm offers financial investment products, debt, equity, or some combination m between to investors. At least two enabling factors affect the efficiency of this relationship: the quality and convenience ofthe cash flows the firm produces Properly regulated, these factors enhance the efficiency and effectiveness of capital flows mto and out of the firm.
Figure 6 also shows that a business interacts with a physical market to regulate its physical asset holdings. The business, after acquiπng capital from investors, traditionally has entered into a relationship with one or more natural resource markets to acquire or build physical assets. In its two-way relationship with this asset market, the business ordinarily exchanges dollars, or capital, for fixed physical assets, which supports its capacity to produce goods and services. Enabling factors, which are often reflected in specific business operating decisions and related information, in this relationship are based upon technology and process knowledge. New technology allows for a more efficient use of dollars throughout the business, and process knowledge, on the other hand, allows the business to use all assets more effectively, for example, to reduce production costs and/or to increase production rates.
Figure 6 also shows a third important relationship, the two-way relationship of a business to its employees or providers. The employees provide labor, time and ideas m exchange for dollars and benefits These include not only the traditional benefits, such as health insurance, paid vacation, and so forth, but also benefits such as training and networking. These benefits in turn enable the enterprise to be more effective in the marketplace. Enablers for this relationship include the firm's ability to tram new employees, and the size ofthe its supplier network. The supplier network includes both the suppliers to the firm and the firm's alliance partners. These relationships enable it to draw upon the contacts of a larger network, which in turn facilitates finding and hiring new employees. Likewise, potential employees will be attracted to firms that provide a large network of contacts. This becomes a πch source of both new ideas and future leads and contacts.
The last important two-way relationship shown m Figure 6 is the customer-to-busmess relationship. Traditionally, the buyers have provided dollars to the enterprise in exchange for products and services. One enabling factor that facilitates the relationship is strong brand reputation or product quality Another concerns the channels of product or service distribution.
Figures 7A-7D shows interactions among the different asset markets and categoπes, implicit to the elementary stock-and-flow diagram of Figure 6. More specifically, Figures 7A-7D shows a detailed stock-and-flow model 510 which describes mathematical dependencies of various business items in the financial, physical, employee, and customer asset categories. The nomenclature or vocabulary of stocks and flows is known; so a detailed explanation is not included here. The diagram graphically represents a set of simultaneous equations, with variables in one equation affecting variables m other equations.
Figure 8, the mathematical equivalent of Figure 7, shows some of these equations. These equations are implemented by a systems dynamics module of engine 510 (shown in Figure 5.) The exemplary embodiment of the invention implements this model using ITHINK visualization and simulation software. However, the invention is not limited to this genus or species of software platform; indeed, other embodiments of the invention can be developed on other commercial systems, dynamics software platforms, or as specific PC or web-server-based application programs for a vanety of operating system environments. The definitions of the business items and derivative variables of these equations as well as explanatory comments for the equations are provided in Appendix C Some embodiments of the mvention use the weighting factors or coefficients from equations 1-7 for a given business or group of businesses or analogous information to further inform and enhance accuracy of the system dynamics model. In general, this would entail adjusting the magnitude and/or sign of one or more coefficients of the model.
Section 4 — Visual Displays Based on Asset Classification
Figures 9-25 show vaπous visual representations of business valuation information produced by the engine of Figure 5 In particular, Figure 9 shows a unique two-dimensional rendering of tetrahedronal graphic aid 910 showing the relative contribution of physical, financial, employee, and customer assets to the market value of a number of publicly traded companies. The exemplary embodiment represents market value using return on investment over a one-, five-, or ten-year period.
More particularly, graphic aid 910 includes four independent axes: a physical axis, a financial axis, an employee axis, and a customer axis. Each axis has a scale ranging from zero at its intersection with the other axes to a maximum value. Although not visible in the black-and-white figure, each point on the graphic aid can have an associated color based on the market value of its associated publicly traded company. In the exemplary embodiment, engine 510 uses equation 7 and regression analysis techniques to model the market value of each of a number of publicly traded companies for a particular year. These weighting factors K, - K4 are then taken as indicators of the relative contribution of each asset to the market value and plotted on the four tetrahedronal axes. One technique for rendering the four- dimensional plot m two dimensions is to compute the average of specific pairs of the four weighting factors and to thus reduce the four tetrahedronal coordinates to two planar coordinates.
Figure 10 shows an exemplary three-dimensional rendeπng of a unique tetrahedronal graphic aid 1010 showing the relative contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset contπbutions to market value. Neural network technologies are employed by engine 510 to determine clustering of the weighting coefficients. Moreover, although not shown, this embodiment can display one or more company names next to their associated clusters
Figure 1 1 shows rotation ofthe unique four-dimensional tetrahedronal graphic aid of Figure 10 Through a graphical user interface to engine 510, a user interacting with the tetrahedron rotates it to gam additional insight into the relative value contribution of each asset on the market value of a cluster of companies. Though not visible in Figures 10 and 1 1, the exemplary embodiment provides color coding of the points to indicate relative or absolute market value of the cluster Individual cluster metrics, statistics, and member businesses can be accessed by "double-clicking" on a particular cluster
Figure 12 shows an exemplary heat map graphic aid 1210 which indicates the relative contribution of physical, financial, employee, and customer assets to the market value of clusters of publicly traded companies having similar relative asset contπbutions to market value More specifically, heat map 1210 in this embodiment includes a ten-by-ten grid or matrix of squares, with the position of each square representing a particular combination of weighting factor ranges The correlation of ranges to square position is based on a four-axes arrangement similar to that shown m Figure 9 In one sense, heat map 1210 is a "smeared" and "flattened" version of the tetrahedronal graphic aid shown in Figure 10
Each square has a color and/or tone indicating the relative market value of its associated cluster of companies or that it has no associated cluster of companies With a graphical user interface, one can select one ofthe squares to view (or to otherwise analyze or direct computer operations on) the members of its associated cluster Additionally, once a square has been selected to reveal the constituent firms of its associated cluster, the system allows one to select one or more of the constituent firms and to view corresponding pie charts that show relative contribution of the selected firm's physical, financial, employee, and customer assets to its market value.
This feature is illustrated particularly in Figure 13, which shows a pie chart for a selected company below a pie chart representing the average distribution of market value for members of the selected cluster. However, other embodiments permit a side-by-side numeπc as well as pie chart compaπsons The exemplary embodiment also allows one to view the relative contπbution of each asset category using unique aids or displays like those depicted m Figures 15-25.
Another feature not explicitly shown is that, again with the aid of a graphical user interface, one can invoke a three-dimensional rendering of the heat map that shows the relative market values of each square of the map, which in essence is a "city scape" view of the map Market value components, for example, the physical or customer components, can be similarly viewed
Figure 14 illustrates a strategic tracking feature of heat map graphic aid 1210. More precisely, the heat map (and also the tetrahedronal graphic aid) can be used to track the changes m the weighting factors for one or more selected companies In doing so, the system correlates each set of weighting factors for a time-specific market value to a position on the heat map and marks the position, thereby creating a trail showing to some degree the strategic operating decisions of a firm, particularly those strongly affecting its physical, financial, employee, and customer assets Figure 14 shows the trail as a dashed line.
In the exemplary embodiment, a user can select a point on the trail to determine not only the associated time and weighting factor values, but also to direct the system to correlate the point with relevant archival accounting data or news concerning the company, its industry, or the economy in general Further external factors are also available for analysis as potentially affecting the course of the asset values Thus, this tracking and histoπcal data correlation feature allows one greater insight into the strategic thinking and operational behavior of any number of publicly traded companies.
Figures 15-26 show other exemplary graphic aids (or displays) in accord with the invention These graphic aids, which in some embodiments also serve as graphical-user interfaces to accounting or business data derived and/or organized in accord with the invention, rely on color (or other indicia) and spatial arrangement to depict an economic position or market value of a business. (In some embodiments the value and thus the area of each component are based not only on business data representative of investments in each of the categories but also on regression coefficients or weights indicative of the contribution of each category of assets to the total market value. Thus, as new assets are added to or subtracted from a category, the market value and the regions affected by the addition or substraction will illustrate the change through both a change in the affected category and m the total market value)
The exemplary embodiment decomposes market value into five categoπes Financial (F), Physical (P),Customer (C), Employee (E), and Organization (O). Accordingly, each exemplary display includes up to five regions, with each region having a color or other indicia and position (relative the other regions) which identify its associated asset category and an area or size related to the actual or estimated contribution of the associated asset category to the market value of the business. The actual or estimated contπbution of each asset category is determined as described above. The total area ofthe aid is substantially proportional in actual and/or apparent area to the market value of the business.
To facilitate consistent use and comprehension of the aids, the exemplary embodiments provides each category with a consistent position withm the display. Moreover, to facilitate comprehension of the displays lacking one or more of regions, the exemplary embodiment in instances where one or more categories lack a region in the display, each category has a token place-holder m the display. The token placeholder is an icon, for example, a circle filled in with the color (and/or other indicia) representing the associated asset category Some embodiments, add a mnemonic such as alphanumeric character to the circle to further aid comprehension. In particular, Figure 15 shows a graphic aid or display template 1500 which as a generally square shape. Aid 1500 has an outer perimeter or periphery 1502 which defines an area representing a market value of a business. Five asset regions 1510, 1520, 1530, 1540, and 1550, one for each ofthe five exemplary asset categoπes, are within perimeter 1502. Each of the five asset regions has an associated asset category and an area related to the contπbution of its asset category to the market value. Each asset region also has a distinctive color (and/or other indicia, such as cross-hatching or other pattern) and position relative to the other regions to identify its associated asset category.
Regions 1510, 1520, 1530, 1540, and 1550 are associated with respective asset-category icons (or points of origin) 1512, 1522, 1532, 1542, and 1552, which not only aid in identifying the asset category associated with each region, but also function as placeholders for categories with zero or negative contπbutions to the market value The exemplary icons are equi-sized circles filled in with the color ofthe associated asset category In some embodiments, the icons are mcongruent and/or include mnemonics or alphanumeπc characters to facilitate identification ofthe associated categoπes. The table below identifies an exemplary arrangement and color coding of the regions
Asset category Color Position
Financial (F) Green Lower left corner
Physical (P) Red Upper left corner
Customer (C) Yellow Upper right corner
Employee (E) Blue Lower right corner
Organization (O) Purple Center
In Figure 15, each ofthe five asset categoπes is shown as contributing one -fifth, or 20 percent, ofthe total market value. In this rendeπng, the angle between the sides of the perimeter 1502 and those of region 1550 is 45°. The relationship between x and y is given by the formula, x - 5y j vhere x denotes the length of the sides of the outer square and y denotes the length of the sides of the inner square, or region 1550 Thus, assuming a stπct direct proportionality, the market value is five times the value of the assets associated with asset-region 1550, the center asset region. Moreover, the total visible area of each region is equal.
Other embodiments allow for overlapping of regions. Which can mean, for the equi-contπbution example, that y=0.5x. In other words, region 1550 overlaps a portion of each of the other four other regions, so that only three-fourths of the other four regions is visible.
The market value display m Figure 15 can be viewed as recording:
I an equity subscription comprising assets in each asset category with the same monetary value.
II an investment of equal amounts of financial assets to acquire assets in each asset category.
III the creation of equal amounts of value in each asset category.
IV the reduction of equal amounts of value in each asset category.
V the realization of equal amounts of financial assets from each asset category.
VI the exchange of equal amounts of assets from each asset category for non-Fmancial assets.
VII the distribution of equal amounts of assets from each asset category
VIII the attribution in an equity exchange of equal amounts of value to each underlying asset category.
When the contributions of each asset-category to the market value are unequal, as they will be in most instances, the exemplary embodiments uses the following rules to render a display depicting the market value: 1 Render the total market value using a first (or outer) square \\ ith side length x
2 Determine relative contribution of the asset category associated with region 1550 (the center asset category) to the total market value
3 If its contribution is less than one-half the total market value, render the center asset category as a square of appropriate color and proportional area canted at 45 degrees relative to the first square Note that if its contπbution is 100 percent, then the square will be coincident with the first square Figure 16 illustrates this situation, with icons 1512, 1522, 1532, and 1542 holding places for the other non-contπbutmg asset- categories (Other embodiments present this center category as another quadrilateral or as some other regular or irregular geometric shape.)
4. If the center asset category was rendered according to rule 3, render the other four asset regions such that: a) the area of each region, for example, financial, physical, customer, and employee asset regions, is actually or apparently proportional to its respective positive value and connects with its respective icon (points of oπgm); and b) any border between regions 1510 and 1540 (P and F) or between regions 1520 and 1530 (C and E) is hoπzontal and any border between regions 1510 and 1520 (P and C) or between regions 1530 and 1540 (E and F) is vertical.
Figures 17-19 illustrate application of rule 4 Figure 17 shows asset regions 1520 and 1530 as making no contribution to the market value, regions 1510 and 1540 as both making 30% contributions, and center region 1550 as making a 40% contribution. Figure 18 shows asset regions 1510 and 1540 as making 5% contπbutions to the market value, regions 1520 and 1530 as both making 40% contributions, and center region 1550 as making a 10% contribution. Figure 19 shows asset regions 1510 and 1530 as making 40% contribution to the market value, regions 1520 and 1540 as both making 5% contributions, and center region 1550 as making a 10% contribution.
Render the center asset category as a regular or irregular octagon of proportional area and appropπate color, if its contπbution to the total market value is greater than one half. The octagon is centered with the first square, with each of its sides either parallel or canted at 45 degrees relative the sides of the first square. Illustrating application of this rule, Figure 20 shows center asset region 1550 as contributing 60% ofthe total market value, and asset regions 1510-1540 as each contributing 10% to the market value. If the center asset region is rendered according to rule 5 then render the other four regions according to rules 4(a) and 4(b), with one or more of the regions possibly divided into two or more parts separated by one or more portions of the center asset region Figure 21 shows center asset region 1550 representing a contribution of 60%, regions 1520 and 1540 both representing 3% contπbutions, and regions 1510 and 1530 each representing 17% contπbutions Regions 1510 and 1530 are each divided into two non-contiguous parts by respective portions of center regions 1550, in accord with this rule. 7 If one or more ofthe asset categoπes has a negative value or negative contπbution to the market value, render the positive values or contributions of the other asset categories according to applicable ones of rules 2-6 and render each negative asset region as a square or rectangular (or other regular or irregular) inclusion or indentation in a contrasting or otherwise visible outline of the first square, with the inclusion or indentation oπginating from the associated icon (or point of oπgm) and defining an area actually or apparently proportional to the negative value or contribution of the asset region The area enclosed by the black line represents the total value after allowing for negative items.
Figures 22 and 23 show aids which depict market values resulting from positive and negative asset contributions. Specifically, Figure 22 shows region 1510 representmg a 30% contribution, region s 1520 and 1530 each representmg a 30% contribution, region 1540 (shown as an indentation or cutout or notch in peπphery 1502) representing a negative or minus 20% contπbution, and region 1550 representmg a 30% contπbution. Icon 1542 as well as the position ofthe indentation in the lower left corner identify it as being associated with the financial asset category. Figure 23 shows a market value with regions 1510-1520 each representing 30% contributions and center region 1550 representing a negative 20% contributions. The negative 20% contπbution is denoted with a distinctive outline of the center region and an omission of the interior filling.
Some embodiments represent a negative contribution as unfilled regions outlined or defined in one or more lines of the relevant color or other indicia associated with the asset category. In this case, the total area of the filled blocks represents the total market value including the (one or more) negative contπbutions. Additionally, two separate aids, one with positive contπbutions and the other with negative contributions, are presented side by side in some embodiments, with the negative, for example, being distinguished with appropπate labeling or with unfilled regions.
Other embodiments ofthe invention augment one or more of the exemplary graphic aids with a descπption of the economic events or aggregation of events associated or portrayed by the one or more graphic aids Additionally, some embodiments include an area scale indicating the monetary amounts
Figures 24 and 25 further illustrate the explanatory power of graphs made m accord with pπnciples ofthe present invention In particular, Figure 24 shows two displays 2410 and 2420 Display 2410 illustrates the conventional accounting practices of computing book value as the sum of physical and financial assets, ignoπng any contπbution from intangible assets. Display 2420 illustrates that actual market value is not only much greater than the book value of a business represented in display 2410, but also accounts for the contributions of previously unreported and unevaluated customer and employee assets. The inventors also view displays 2410 and 2410 has highlighting an economic shift from the industrial age to the so-called information age Figure 25 shows a similar display 2500 which supenmposes a conventional book value (consisting of physical and financial assets) on a market value The space between the peπpheπes ofthe bookvalue and the market value indicate the difference between them.
Figure 26 shows four displays 2610, 2620, 2630, 2640 illustrating potentially characteπstic roles of the five asset categoπes m contπbutmg to the market value of business in particular business sectors. Display 2610 shows a market value decomposition for businesses m the service sector; display 2620 shows a market value decomposition for businesses in the financial services sector; display 2630 shows a market value decomposition for businesses in the information services sector; and display 2640 shows one for businesses m the manufacturing sector.
Value displays of the exemplary embodiment as well as those of other embodiments in accord with the invention have a wide number of uses. A first use is to record the following types of economic events either individually or in combination for any period: equity investment, asset investment, value creation, value reduction, value realization, other value exchanges, and value distπbution. The exemplary embodiments assume that there are eight types of economic event which can affect an entity's economic position or market value: I. equity investment, II. asset investment, III. value creation, IV. value reduction, V. value realization, VI. value exchange, VII. value distribution, and VIII. equity exchange. The exemplary embodiment defines an equity investment as any exchange of an asset from any one of the asset categories in exchange for an equity interest m the entity receiving assets. An asset investment occurs when an entity make an investment by providing financial assets to others in exchange for the receipt of assets in any ofthe asset categories. Value creation for an entity occurs when the value of any asset category increases. Value reduction for an entity occurs when the value an asset in any category falls. Value realization for an entity occurs when an entity receives financial assets m exchange for any of its assets Value exchanges other than asset investments and value realizations that involve no financial assets are defined as other value exchanges. Value distribution occurs when an entity distnbutes assets to others without directly receiving any assets in exchange. An equity exchange occurs when a holder of an equity interest in an entity exchange all or a portion of its equity interests for other assets held outside the entity.
A second use is to combine economic event types I to VII above for the entire history of an entity to give its economic position at any point in time and show a total entity value for comparison and reconciliation to the value evidenced by equity exchange transactions (economic event type VIII). A related third use is to use these displays to report an entity's economic position and performance to both internal and external users
A fourth use is to create displays that provide an alternative presentation of the information presented by entities in the balance sheets and income, cash flow and other statements required under generally accepted accounting principles. For example, one can use the representation principles to represent conventional book value.
A fifth use is to present the alternative business model designs (or combinations of assets) that are central to an entity's strategy using relative or absolute asset values
A sixth use is to prepare hypothetical and prospective information for internal use by the management of an entity and for use by people external to the entity.
A seventh use is to support an entity's strategic decision-making and risk management by modeling the potential impact of events in the entity's economic environment and the entity's own asset management processes on the value ofthe entity.
An eighth use is to compare the economic position and performance of different entities or the same entity at different points in time and analyze the differences using value displays.
A ninth use is to highlight and analyze differences between the economic position and performance of an entity as evidenced by the entity's own reporting and by the values at which equity exchanges occur.
A tenth use is to illustrate geneπc differences between the business models (or combinations of assets) employed by entities in different industries and m different periods of economic history using relative or absolute asset values.
An eleventh use is to present hypotheses ofthe contributions made by different asset categories to the total value of an entity.
A twelfth use is to show the evolution of an entity by presenting a time series of \ alue displays in real or accelerated time.
Section 5 — Glossary
The description includes many terms with meanings derived from their usage m the art and/or from their contextual usage within this description. However, as a further aid to understanding the invention, the following term definitions are presented.
Business refers broadly to any operating business such as any commercial, industrial, financial, or service activity in an economy. The term also refers to specific organizations, m the sense of a "business," operating as a "going concern" that manufactures or sells products or services to customers, and generates economic value by maximizing profits and shareholder wealth as opposed to conventional investment management or portfolio management. Equivalent terms used herein include firm and company.
Market Value refers to the value of a publicly traded company based on its rice per share multiplied by the total number of shares outstanding For pπvate companies and non-profit organizations, the term means a reasonable estimate of "implied market value " It also refers to other market-based parameters, such as pπce-to-earnmgs (P E) ratio, total shareholder return (return per share times total number of shares) over a defined period, market-to-book (M/B) multiple, or any other indicator of economic value of a business or a component or division of a business.
Business item refers to any data or information that can be numeπcally represented and that can be shown to be statistically significant or otherwise relevant to the market value of a business. Business items can be assets, liabilities, or hybrid asset-liabilities which behave as assets under certain circumstances and as liabilities under others Business items can be fixed or variable For examples of actual or potential business items, see Appendix A
Tangible Business Item refers to any data or information concerning financial capital and physical assets, such as inventory, property, plants, and equipment, which are conventionally listed or reported on a balance sheet pursuant to Generally Accepted Accounting Principles (GAAP). Tangible business items include both current and non-current physical and financial assets. Certain types of physical and financial assets, like inventories and accounts receivable, are defined as current because of the expectation that they will be converted to cash withm a given operating year or operating period. Other tangible assets, like property, plant, and equipment that are used for longer periods of time, are generally defined as non-current.
Intangible Business Item refers to any business item that is not a tangible business item. Examples of intangible assets include customers, existing customer relationships, knowledge of customers, employees, existing employee relationships, knowledge of employees, organizational knowledge, ability to perform processes, brand or trademark strength, research and development Moreover, the term intangible asset also generally encompasses business items which are not typically reported or quantified as assets on conventional balance sheets or which are considered as contributing to "goodwill." According to conventional accounting rules (GAAP), goodwill, generally recognized only at the time of a business acquisition, is the amount paid for a business m excess of the fair market value of its (tangible) assets, minus any liabilities assumed m the acquisition.
Physical Assets includes business items related to physical business resources Examples include physical assets such as inventory, property, plant, and equipment More generally, the physical assets category encompasses fixed assets Property, Plant and Equipment (PP&E) - which are depreciated using vaπous depreciation methods and depreciation schedules, and short-term physical assets, or inventory Overall, physical assets and their associated liabilities relate to an organization's infrastructure to acquire, manufacture, or distπbute raw mateπals and finished products. Physical business items also characterize a company's ability to secure raw mateπals cost effectively, its production capacity, and its management of finished goods and distribution.
Financial Assets includes business items related to assets and liabilities associated with financial position, such as accounts receivable, accounts payable, cash on hand, mortgages,. Specific examples of financial assets include a company's financial base (that is, the number of investors, their propensity to invest more in the business and the company's relationships and communications with them). It also includes cash and cash reserves, operating capital, marketable secuπties and other financial instruments (Financial asset refers debt, equity, cash flow.)
Employee (or Provider) Assets compπses business items related to individuals and entities involved in producing and distributing the products or services of a business. The category thus includes not only the company's management team and employees, but also suppliers-alliance partners and their management and employees. This category also compπses brands created, and the intellectual capital and intellectual property supporting the processes of a business. The category also includes assets and associated liabilities in an in-bound supply chain for a business — in other words, what is required to produce its products or services, as well as the offering itself. Information concerning labor costs and statistics is also included in this category
Customer Assets includes business items related to individual and business buyers and channels of distπbution, which include the vaπous ways that companies deliver products and services to customers (for example, physical outlets or storefronts, telephone sales, direct mail, Internet sales, and so forth). Overall, the customer assets category contains assets and associated liabilities ofthe out-bound supply chain, including market share and sales and distπbution partners. The asset category also captures factors related to the strength of a company's relationships with customers in terms of repurchase behavior. And it includes as an asset a company's ability to leverage its customers, to use information about customers to encourage more purchasing, and to improve or expand product and service lines to gam market share
Section 6 — Appendices
Other embodiments and/or aspects of the invention are described or implied in one or more of the appendices of this application. The appendices are as follows:
Appendix A' Exemplary Classification and Catalog of Business Data Items Appendix B: Exemplary Asset- weighting Questionnaire and Assessment Procedure Appendix C: Vaπable Definitions and Equations for Exemplary System Dynamics Model m Figures 6 and 7 APPENDIX A Table Illustrating Exemplary Classification of Business Data and Exemplary Catalog of Business Data
Figure imgf000026_0001
Figure imgf000027_0001
Exemplary Catalogue of Business Data
ADR ADR Ratio
ACTCHG Accounting Changes - Cumulative Effect MM$
ACCPAY Accounts Payable MM$
ACCPAYAL Accounts Payable and Accrued Liabilities - Increase (Decrease) MM$
ACCRECV Accounts Receivable - Decrease (Increase) MM$
ACCREXP Accrued Expenses MM$
ACQUISIC Acquisition-Income Contribution MMS
ACQUISSC Acquisition-Sales Contribution MMS
ACQUIS Acquisitions (Statement of Cash Flows) MMS
ADJPAY Adjustment Factor (Cumulative)- Payable Date Ratio
ADJ Adjustment Factor (Cumulatιve)-Ex-Date Ratio
ADVERT Advertising Expense MMS
AMOINTG Amortization of Intangibles MMS
ASSETSNP Assets - Nonperforming MMS
ASSETSLO Assets and Liabilities-Other (Net Change) (Statement of Cash Flows) MMS
ASSETSO Assets-Other MMS
ASSETSOXD Assets-Other-Excludmg Deferred Charges MMS
ASSETSR Assets-Total (Restated) MMS
ASSETS Assets-Total/Liabihties and Stockholders' Equity-Total MMS
OPINION Auditor/Auditor's Opinion Code
CUSIP CUSIP Number
CAPEXPR Capital Expenditures (Restated) MMS
CAPEXP Capital Expenditures (Statement of Cash Flows) MMS
CAPSURP Capital Surplus MMS
DIVCASH Cash Dividends (Statement of Cash Flows) MMS
CASH Cash MMS
CASHFF Cash and Cash Equivalents-Increase (Decrease)(Flow of Funds Stmt.) MMS
CASHST Cash and Short-Term Investments MMS
DEBTCHG Changes m Current Debt (Statement of Cash Flows) MMS
CHARGE Charge-Offs (Net) MMS
EQLIQV Common Equity-Liquidation Value MMS
EQCOM Common Equity-Tangible MMS
EQUITY Common Equity-Total MMS
HOLDERS Common Shareholders M
SHARES Common Shares Outstanding MM
SHSCONDEBT Common Shares Reserved for Conversion- Convertible Stock MM
SHSCONOPT Common Shares Reserved for Conversion- Stock Options MM
SHSCONOTH Common Shares Reserved for Conversion- Warrants and Other MM
SHSCON Common Shares Reserved for Conversion-Total MM
SHSTRD Common Shares Traded MM
SHSEPSD Common Shares Used to Calculate EPS (Fully Diluted) MM
SHSEPSR Common Shares Used to Calculate EPS (Primary) (Restated) MM
SHSEPS Common Shares Used to Calculate EPS (Primary) MM
STKCARV Common Stock - Per Share Carrying Value $
STKEQ Common Stock Equivalents-Dollar Savings MMS
STKCOM Common Stock MMS
SHSCONPRSTK Common Shares Reserved for Conversion- Preferred Stock MM
NAME Company Name
COMPBAL Compensating Balance MMS
LIABCGT Contingent Liabilities-Guarantees MMS
DEBTPRSTK Convertible Debt and Preferred Stock MMS
COGSR Cost of Goods Sold (Restated) MMS COGS Cost of Goods Sold MMS
COUNTY County Code of Primary Location
CURTRAN Currency Translation Rate $
ASSETSCO Current Assets-Other MMS
ASSETSCOXP Current Assets-Other-Excludmg Prepaid Expenses MMS
ASSETSC Current Assets-Total MMS
LIABCOTH Current Liabilities-Other MMS
LIABCOXA Current Liabihties-Other-Excluding Accrued Expenses MMS
LIABC Current Liabilities-Total MMS
DEBTSDC Debt-Consolidated Subsidiary MMS
DEBTSDF Debt-Finance Subsidiary MMS
DEBTCL Debt m Current Liabilities MMS
DEBTCAP Debt-Capitalized Lease Obligations MMS
DEBTCON Debt-Convertible MMS
DEBTDEB Debt-Debentures MMS
DEBT1 Debt-Due in One Year MMS
DEBTM5 Debt-Maturing in Fifth Year MMS
DEBTM4 Debt-Maturing in Fourth Year MMS
DEBTM2 Debt-Maturing m Second Year MMS
DEBTM3 Debt-Maturing in Third Year MMS
DEBTMTG Debt-Mortgages and Other Secured MMS
DEBTNOTE Debt-Notes MMS
DEBTSCON Debt-Senior Convertible MMS
DEBTSUBCON Debt-Subordinated Convertible MMS
DEBTSUB Debt-Subordinated MMS
DEBTUA Debt-Unamortized Debt Discount and Other MMS
DEFCHRG Deferred Charges MMS
DEFTAXBAL Deferred Taxes (Balance Sheet) MMS
DEFTAXINC Deferred Taxes (Income Account) MMS
DEFTAXFF Deferred Taxes (Statement of Cash Flows) MMS
DEFTAXCR Deferred Taxes and Investment Tax Credit (Balance Sheet) MMS
DEFTAXFED Deferred Taxes-Federal MMS
DEFTAXFOR Deferred Taxes-Foreign MMS
DEFTAXST Deferred Taxes-State MMS
DEPLETE Depletion Expense (Schedule VI) MMS
DEPREXP Depreciation Expense (Schedule VI) MMS
DEPRACIP Depreciation (Accumulated)- Construction Progress MMS
DEPRABEG Depreciation (Accumulated)-Begιnnιng Balance (Schedule VI) MMS
DEPRABLD Depreciation (Accumulated)-Buιldmgs MMS
DEPRAEND Depreciation (Accumulated)-End g Balance (Schedule VI) MMS
DEPRALAND Depreciation (Accumulated)-Land and Improvements MMS
DEPRALEAS Depreciation (Accumulated)-Leases MMS
DEPRAMACH Depreciation (Accumulated)-Machmery and Equipment MMS
DEPRANR Depreciation (Accumulated)-Natural Resources MMS
DEPRACHG Depreciation (Accumulated)-Other Changes (Schedule VI) MMS
DEPRAOTH Depreciation (Accumulated)-Other MMS
DEPRARET Depreciation (Accumulated)-Retιrements (Schedule VI) MMS
DEPRR Depreciation and Amortization (Restated) MMS
DEPRFF Depreciation and Amortization (Statement of Cash Flows) MMS
DEPR Depreciation and Amortization MMS
DEPRA Depreciation, Depletion, and Amortization (Accumulated) MMS
DISCOP Discontinued Operations MMS
DPS Dividends Per Share-Ex-Date $
DPSPAY Dividends Per Share-Payable Date $ DIVCOM Dividends-Common MMS
DIVPR Dividends-Preferred MMS
DIVPRARR Dividends-Preferred-In Arrears MMS
EPSOP EPS from Operations
EPSDR Earnings Per Share (Fully Diluted)- Excluding Extra. Items (Restated) $
EPSD Earnings Per Share (Fully Diluted)- Excluding Extra. Items $
EPSDIE Earnings Per Share (Fully Diluted)- Including Extra. Items $
EPSDIER Earnings Per Share (Fully Diluted)- Including Extra. Items (Restated) $
EPSR Earnings Per Share (Primary)- Excluding Extra. Items (Restated) $
EPSIE Earnings Per Share (Primary)- Including Extra. Items $
EPS Earnings Per Share (Pπmary)-Excludmg Extra. Items $
EPSIER Earnings Per Share (Pπmary)-Includmg Extra. Items (Restated) $
EMPLOYR Employees (Restated) M
EMPLOYEE Employees M
EIN Employer Identification Number
EQEARN Equity m Earnings MMS
EQUITYFF Equity in Net Loss (Earnings) (Flow of Funds Statement) MMS
XLIST Exchange Listing and S&P Index Codes
EFXRATE Exchange Rate Effect (Statement of Cash Flows) MMS
EXCISE Excise Taxes MMS
EXTRA Extraordinary Items MMS
EXTRADOR Extraordinary Items and Discontinued Operations (Restated) MMS
EXTRADO Extraordinary Items and Discontinued Operations MMS
EXTRADOFF Extra. Items and Discounted Operations (Statement of Cash Flows) MMS
FILECODE File Code
FINAN Financing Activities - Net Cash Flow (Statement of Cash Flows) MMS
FINANO Financing Activities - Other (Statement of Cash Flows) MMS
FYEND Fiscal Year End
CURADJ Foreign Currency Adjustment (Income Account) MMS
FCODE Format Code (Flow of Funds Statement)
FORTUNEI Fortune Industry Code
FORTUNER Fortune Rank Code
FUNDSO Funds From Operations-Other (Flow of Funds Statement) MMS
FUNDS Funds From Operations-Total (Statement of Changes) MMS
GOODWILL Goodwill MMS
INCXE Income Before Extraordinary Items MMS
INCXER Income Before Extraordinary Items (Restated) MMS
INCXEFF Income Before Extraordinary Items (Statement of Cash Flows) MMS
INCXE ADJ Income Before Extraordinary Items- Adjusted for Stock Equivalents MMS
INCXEAC Income Before Extraordinary Items- Available for Common MMS
TAXESRFD Income Tax Refund MMS
TAXESACCR Income Taxes Accrued - Increase/Decrease (Statement of Cash Flows) MMS
TAXESPD Income Taxes Paid (Statement of Cash Flows) MMS
TAXESPAY Income Taxes Payable MMS
TAXESFED Income Taxes-Federal MMS
TAXESFOR Income Taxes-Foreign MMS
TAXESOTH Income Taxes-Other MMS
TAXESST Income Taxes-State MMS
TAXESR Income Taxes-Total (Restated) MMS
TAXES Income Taxes-Total MMS
FINC Incorporation Code - Foreign
INVMFF Increase m Investments (Statement of Cash Flows) MMS
INDNAME Industry Name
INTANG Intangibles MMS INTCAP Interest Capitalized MMS
INTCAPN Interest Capitahzed-Net Income Effect MMS
INTEXPR Interest Expense (Restated) MMS
INTEREST Interest Expense MMS
INTEXPLT Interest Expense on Long-Term Debt MMS
INTEXP Interest Expense-Total (Financial Services) MMS
INTINCNET Interest Income (Net) (Tax Equivalent) MMS
INTINC Interest Income MMS
INTINCTOT Interest Income-Total (Finance Servιces)MM$
INTMAR Interest Margin (Net) (Spread)
INTPD Interest Paid - Net (Statement of Cash Flows) MMS
INVFING Inventories-Finished Goods MMS
INVLIFO Inventoπes-LIFO Reserve MMS
INVOTH Inventories-Other MMS
INVRAW Inventories-Raw Mateπals MMS
INV Inventories-Total MMS
INVWIP Inventories- Work m Process MMS
INVCF Inventory - Decrease (Increase) (Statement of Cash Flows) MMS
INVVAL Inventory Valuation Method Code
INVMCAP Invested Capital-Total MMS
INVMACTV Investing Activities - Net Cash Flow (Flow of Funds Statement) MMS
INVMACTVO Investing Activities - Other (Statement of Cash Flows) MMS
INVMCRBAL Investment Tax Credit (Balance Sheet) MMS
INVMCRINC Investment Tax Credit (Income Account) MMS
INVMEQ Investments and Advances-Equity Method MMS
INVMADVO Investments and Advances-Other MMS
LABOR Labor and Related Expenses MMS
LIABOTH Liabilities-Other MMS
LIAB Liabihties-Total MMS
ASSETSLLP Loan/Assets Losses - Provision For MMS
ASSETSLLR Loan/Assets Losses - Reserved For MMS
DEBTLTISS Long-Term Debt-Insurance (Statement of Cash Flows) MMS
DEBTLTO Long-Term Debt-Other MMS
DEBTLTP Long-Term Debt-Tied To Prime MMS
DEBTLTR Long-Term Debt-Total (Restated) MMS
DEBTLT Long-Term Debt-Total MMS
MARKSEC Marketable Securities Adjustment (Balance Sheet) MMS
MINORBAL Minority Interest (Balance Sheet) MMS
MINORINC Minority Interest (Income Account) MMS
MINORR Minority Interest (Restated) MMS
NETINCR Net Income (Loss) (Restated) MMS
NETINC Net Income (Loss) MMS
NETINCADJ Net Income Adjusted for Common Stock Equivalents MMS
OPLOSS Net Operating Loss Carry Forward- Unused Portion MMS
NOPINCR Nonoperatmg Income (Expense) (Restated) MMS
NOPINCXI Nonoperatmg Income (Expense) Excluding Interest Income MMS
NOPINC Nonoperatmg Income (Expense) MMS
NOTESPAY Notes Payable MMS
OPCF Operating Activities - Net Cash Flow (Statement of Cash Flows) MMS
OPINCAD Operating Income After Depreciation MMS
OPINCBD Operating Income Before Depreciation MMS
BACKLOG Order Backlog MMS
PENOVABO Pension - Accumulated Benefit Obligation (Overfunded) MMS
PENUNABO Pension - Accumulated Benefit Obligation (Underfunded) MMS PENAML Pension - Additional Minimum Liability (Underfunded) MMS
PENOVOA Pension - Other Adjustments (Overfunded) MMS
PENUNOA Pension - Other Adjustments (Underfunded) MMS
PENOVPAC Pension - Prepaid/Accrued Cost (Overfunded) MMS
PENUNPAC Pension - Prepaid/Accrued Cost (Underfunded) MMS
PENOVPBO Pension - Projected Benefit Obligation (Overfunded) MMS
PENUNPBO Pension - Projected Benefit Obligation (Underfunded) MMS
PENOVUPSC Pension - Unrecognized Prior Service Cost (Overfunded) MMS
PENUNUPSC Pension - Unrecognized Prior Service Cost (Underfunded) MMS
PENOVVBO Pension - Vested Benefit Obligation (Overfunded) MMS
PENUNVBO Pension - Vested Benefit Obligation (Underfunded) MMS
PENROR Pension Benefits-Assumed Rate of Return %
PENINFO Pension Benefits-Information Date MMDDYY
PENBEN Pension Benefits-Net Assets MMS
PENPVN Pension Benefits-Present Value of Nonvested MMS
PENPVV Pension Benefits-Present Value of Vested MMS
PENCUPPS Pension Costs-Unfunded Past or Prior Service MMS
PENCUVB Pension Costs-Unfunded Vested Benefits MMS
PENPLOVA Pension Plan Assets (Overfunded) MMS
PENPLUNA Pension Plan Assets (Underfunded) MMS
PENPLRRA Pension Plan- Anticipated Long-Term Rate of Return on Plan Assets %
PENPLIC Pension Plans-Interest Cost MMS
PENPLOPC Pension Plans-Other Periodic Cost Components (Net) MMS
PENPLROC Pension Plans-Rate of Compensation Increase %
PENPLRA Pension Plans-Return on Plan Assets (Actual) MMS
PENPLSC Pension Plans-Service Cost MMS
PENEXP Pension and Retirement Expenses MMS
PENPC Periodic Pension Cost (Net) MMS
PRTMTBC Periodic Postretirement Benefit Cost (Net) MMS
PRTMTBA Postretirement Benefit Asset (Liability) (Net) MMS
PRSTKCARV Preferred Stock-Carrying Value MMS
PRSTKCON Preferred Stock-Convertible MMS
PRSTKLIQV Preferred Stock-Liquidating Value MMS
PRSTKNON Preferred Stock-Nonredeemable MMS
PRSTKRED Preferred Stock-Redeemable MMS
PRSTKREDV Preferred Stock-Redemption Value MMS
PREEXP Prepaid Expenses MMS
PREINCR Pretax Income (Restated) MMS
PREINC Pretax Income MMS
PREINCD Pretax Income-Domestic MMS
PREINCF Pretax Income-Foreign MMS
CLOSE Price-Close S
CLOSEFY Pπce-Close-Fiscal Year-end $
HIGH Price-High $
HIGHFY Price-High-Fiscal Year-end $
LOW Price-Low $
LOWFY Pπce-Low-Fiscal Year-end $
SPPIN Primary S&P Index Marker
PPGROSS Property, Plant and Equipment- Total (Gross) MMS
PPLANT Property, Plant and Equipment- Total (Net) MMS
PPBEG Property, Plant, and Equipment- Beginning Balance (Schedule V) MMS
PPBLD Property, Plant, and Equipment- Buildings (Net) MMS
PPBLDC Property, Plant, and Equipment- Buildings at Cost MMS
PPCAPEXP Property, Plant, and Equipment- Capital Expenditures (Schedule V) MMS PPCIP Property, Plant, and Equipment- Construction m Progress (Net) MMS
PPCIPCST Property, Plant, and Equipment- Construction in Progress at Cost MMS
PPLAND Property, Plant, and Equipment- Land and Improvements (Net) MMS
PPLEAS Property, Plant, and Equipment- Leases (Net) MMS
PPLEASC Property, Plant, and Equipment- Leases at Cost MMS
PPMACH Property, Plant, and Equipment- Machinery and Equipment (Net) MMS
PPON Property, Plant, and Equipment- Other (Net) MMS
PPOC Property, Plant, and Equipment- Other at Cost MMS
PPRET Property, Plant, and Equipment- Retirements (Schedule V) MMS
PPLANTR Property, Plant, and Equipment- Total (Net) (Restated) MMS
PPEND Property, Plant, and Equipment-Ending Balance (Schedule V) MMS
PPLANDC Property, Plant, and Equipment-Land and Improvement at Cost MMS
PPMACHC Property, Plant, and Equipment-Machinery and Equipment at Cost MMS
PPNAT Property, Plant, and Equipment-Natural Resources (Net) MMS
PPNATC Property, Plant, and Equipment-Natural Resources at Cost MMS
PPOTH Property, Plant, and Equipment-Other Changes (Schedule V) MMS
PURSTK Purchase of Common and Preferred Stock (Statement of Cash Flows) MMS
RECVCO Receivables-Current-Other MMS
RECVEST Receivables-Estimated Doubtful MMS
RECV Receivables-Total MMS
RECVTRD Receivables-Trade MMS
DEBTLTRDC Reduction of Long-Term Debt (Statement of Cash Flows) MMS
RISKT1 Regulatory Risk-Based Capital Ratio-Tier 1
RISK Regulatory Risk-Based Capital Ratio-Total
RENTM1 Rental Commitments-Minimum- First Year MMS
RENTMIN5 Rental Commitments-Minimum- Five Years Total MMS
RENTM5 Rental Commitments-Minimum-Fifth Year MMS
RENTM4 Rental Commitments-Minimum-Fourth Year MMS
RENTM2 Rental Commitments-Minimum-Second Year MMS
RENTM3 Rental Commitments-Minimum-Third Year MMS
RENTEXP Rental Expense MMS
RENTINC Rental Income MMS
RESEARCH Research and Development Expense MMS
EARN Retained Earnings (Class A Common Outstanding on Can. File) MMS
EARNR Retained Earnings (Restated) MMS
EARN ADJ Retained Earnings - Cumulative Translation Adjustment MMS
EARNOTH Retained Earnings - Other Adjustments MMS
EARNRSTM Retained Earnings Restatement MMS
EARNUADJ Retained Earnings-Unadjusted MMS
EARNUR Retained Earnings-Unrestricted MMS
SPPAPER S&P Commercial Paper Rating Code
SPCOM S&P Common Stock Rating Code
SPIND S&P Industry Index Code
SPREL S&P Industry Index Relative Code
SPMAJI S&P Major Index Code
SPDEBTSR S&P Senior Debt Rating
SPDEBTSUB S&P Subordinated Debt Rating
SIC SIC Number
SALESTK Sale of Common and Preferred Stock (Flow of Funds Statement) MMS
SALEΓNVM Sale of Investments (Flow of Funds Statement) MMS
SALEPP Sale of PP & E (Flow of Funds Statement) MMS SALEPPI Sale of PP & E and Sale of Investments (Statement of Cash Flows)
MMSSALES Sales (Net) MMS SALESR Sales (Restated) MMS SPSIN Secondary S&P Index Identifier SGAEXP Selling, General, Administrative Expenses MMS SGAEXPR Selling, General, and Administrative Expenses (Restated) MMS DEBTSTAIR Short-Term Borrowings- Average Interest Rate %DEBTSTAVG Short-Term
Borrowings-Average MMS
INVMSTCF Short-Term Investments - Change (Statement of Cash Flows) MMS
INVMST Short-Term Investments MMS
SOURCE Source Document Code
SOURCEFO Sources of Funds-Other (Statement of Changes) MMS
SOURCEFT Sources of Funds-Total (Statement of Changes) MMS
SPECIAL Special Items MMS
STATE State Code of Primary Location
STKOWN Stock Ownership Code
EQSTKR Stockholders' Equity (Restated) MMS
EQSTK Stockholders' Equity-Total MMS
SPSII Subset S&P Index Identifier
TICKER Ticker Symbol
TREASCOM Treasury Stock (Dollar Amount) - Common MMS
TREASPRF Treasury Stock (Dollar Amount) - Preferred MMS
TREASMEMO Treasury Stock (Memo Entry) MMS
TREASSHS Treasury Stock-No. of Common Shares
MMTREAS Treasury Stock-Total Dollar Amount MMS
UPCODE Update Code
USEFO Uses of Funds-Other (Statement of Changes) MMS
USEF Uses of Funds-Total (Statement of Changes) MMS
WCAPBAL Working Capital (Balance Sheet) MMS
WCAPR Working Capital (Restated) MMS
WCAPCHG Working Capital Change-Total (Statement of Changes) MMS
WCAPCHGO Working Capital Changes-Other- ( + / - ) (Statement of Changes) MMS
APPENDIX B
Exemplary Asset Waiting Questionnaire and Analysis Procedures
The following method can be carried out m paper form, and can also be incorporated into a computer system program and run on the system of Figure 1 for which further detail of the components involved in such programs is shown in Figure 5. The following questions and tables for tabulating results are simply one embodiment of the invention. Each of the value factors are scored on a scale of "0" to "10." Here are some rules of thumb in scoring.
Consider measures of effectiveness. Scoring reflects a measure of "goodness" or "effectiveness" in each of these categories on the scale of "0" to "10 " Assessing the number of investors, for example, does not involve an actual count of investors. Rather, it compares the effectiveness or "goodness" of the investor base of both companies in terms of size.
Calculate your score against the market high and low. You can do quick calculations to score yourself and the benchmark based on the high and low in the marketspace. Consider this example of number of customers. Let's say that you have determined that the market leader (or "10" on the scale) has 27,000 customers. The market low (or "0" on the scale) has just 3,000 and the midpoint (or"5" on the scale) is therefore 15,000, If I have 10,000 customers, I am just below the "3" on the scale. If my benchmark competitor has 17,000, that company is above the average, scoring just below the "6" on the scale. Grade your company and the competitor against the market high and low. Then grade your competitor against the market high and low as a second, independent exercise.
More is not always better. In scoring, you also need to remember that "more" is not always better. Consider productive capacity. Effectiveness in this category relates to a company's ability to produce enough, but not too much. Excess capacity can be as costly as under-capacity. It is the same m terms of inventory. Companies need to efficiently produce and distribute finished goods. Too much inventory is costly as it uses up finite resources without returning value, but too little means lost opportunities as the company fails to meet market demand.
Scoring an Asset Map
An Asset Map is scored for a target business entity and optionally a benchmark company across 20 questions. The following summary includes: 1) the data field/row or area of investigation, 2) the question to ask of yourself and the benchmark; 3) common measures that provide performance information on this element of value; and 4) a short description of issues related to it.
Section B 1 — Financial Assets Data Field: Number of active investors Question: How many active investors do you have? Measures: Number of entities and individuals that bought shares in last 12 months. In the case of a public company, assess your total shareholder base In the case of a private company, look to your collective sources of capital, including lending institutions, limited partners and other types of equity partners
Data Field. Propensity to invest m the company
Question: Do the company's existing investors make additional investments?
Measure: % of established shareholders investing more in the last 12 months. Ease of gaining private financing/refinancing
Score the company on the willingness or interest of investors to reinvest in the company. Companies with higher scores inspire confidence in their ability to produce future cash flows and investment returns. They will have greater ease in raising debt or equity.
Data Field: Investor Communications
Question. How effective are the company's investor communications?
Measures: Frequency of communication. Per capita annual expenditures on investor relations. % of investment, or divestiture, decisions that are based on incorrect perception about the company.
Score this question based on how effectively a company communicates value to investors. Score it also on its effectiveness m creating more value due to investor communication. Companies effective in this area take responsibility for "damage control" when needed due to market events. They guard against investor surpnses that can lead to sharp fluctuations in share prices following quarterly earnings reports. Qualitative assessments of communications/content and how companies reach out to investors and use investor feedback are additional measures.
Data Field. Economic performance of financial products Question: What is the company's rate of return to investors? Measures: two-year investor ROI.
Assess the track record in terms of stock pπces, dividends, track record of repaying debt, or other measures revealing "return on investments" in various forms.
Section B2 — Physical Assets Data Field: Security of supply of raw materials Question: Do you have good control of the supply of raw materials?
Measures: Sof customer orders lost due to mateπals shortages. # of supply sources/key raw mateπals. Location m relation to raw material supplies.
Assess the business control over the supply of raw materials. For example, a company will be more vulnerable if dependent on a single source of important raw materials, or the resources are of high cost and dwindling supply. Location is also a key attribute. Closer proximity may mean more secure, efficient or lower cost availability. Also consider the company's historic rate of turnover of key suppliers.
Data Field: Productive capacity of resources (owned and unowned)
Question: Do you and your suppliers have appropπate levels of productive capacity? Or, in the service industry, do you and your suppliers have appropπate staff and customer facilities
Measures % of customer orders lost due to production capability or facilities.
Assess the productive capacity of the company (using both its own resources and those it does not own). This involves three factors - cost, volume and timeliness. Producing 300,000 cell phones for $1,200 each might reveal strong production capabilities in terms of numbers, but the cost would prevent market success. Slow or efficient processes that delay time-to-market vis a vis the competition also would result in a low score.
Data Field: Finished goods management and distribution
Question: Do you effectively manage and distribute your finished goods?
Measures: Inventory turns, cost of delivery, returned materials cost
Assess the company's ability to optimize inventory. The asset or liability characteristics of inventory management involve both inventory size and change. The key issue for a company is its ability to optimize inventory, relating production/distribution capacity to market demand. Location issues also come into play since they may generate complex distribution processes, depending on the geographic relationship of production and markets.
Section B3 — Provider or Employee Assets Data Field: Management expertise
Question: Does management generate effective processes and culture? Measures: Strategies and operational changes that increases business
Assess a company's management expertise. The element of "expertise" means more than simply the strength of the senior management team. It also reflects management's ability to create value due to factors such as leadership style, industry understanding, a vision of the future, etc. This is reflected m stock markets as pπces πse and fall shaφly if a key leader is gained or lost. If you are the CEO scoring this test, ask yourself how your investors or customers might rank you.
Data Field Workforce effectiveness
Question: Does the company's staff effectively apply the right know-how?
Measures: Years of experience and education. Changes in employee performance grading. Staff and supplier turnover.
Score the company based on the effectiveness of the workforce as a factor of knowledge, skills and competencies to meet coφorate objectives.
Data Field: Appropπate size of workforce
Question- Does the company have an appropπate size of workforce (direct and indirect)? Measures' # of employees. Ratio employees/customers. Ration employees/revenue. % employees working overtime. Frequency of layoffs.
A company requires a workforce that is appropriate m size - not too large or small. Appropriateness of size, for example, requires a balance between "lean" and sufficient elasticity to respond to change.
Data Field: Product offering
Question: Are products clearly effective for their puφoses?
Measures: Product ratings and awards. Frequency of customer complaints/litigation. Level of customer satisfaction. Repeat sales/customer.
The product and service offerings become an asset or liability depending on such factors as suitability, pricing to market, appropriateness for task (e.g., fit for puφose), and customer/market perceptions of all of these factors. Score this category according to the collective strength or weakness of these factors.
Data Field: Customer Service
Question: Does your customer service encourage more business?
Measures: % of customers satisfied on first call. Level of customer satisfaction. Customer service costs/customer. Employee and customer satisfaction with service processes.
Customer service includes the company's culture of service, training, information systems used to support it and the effectiveness of using information to improve customer service processes. The breadth and depth of customer service processes and the information system are important factors in effectiveness.
Data Field: Effectiveness of compensation
Question: Are your staff effectively motivated by their compensation structure?
Measures: Average years with company. Annual percentage turnover.. Satisfied employee/provider indices.
Assess the degree to which compensation structures are an asset or liability for a company. Consider not just compensation levels, but the structure itself. Compensation effectiveness relates to a combination of factors, including salary, bonuses, equity and other forms of ga -sharing that motivate performance and align the goals of individuals and the company. Effectiveness of compensation is reflected in employee loyalty and turnover rates, as well as recruiting and retraining costs Productivity levels by mdividual/teams may be a useful, indirect measure
Date Field- Propensity to leverage m-bound partners
Question: Do you make effective use of m-bound partners?
Measures: Proportion of employees to labor force (suppliers, sub-contractors and outsourcing)
Assess the company's ability to use its partners to create and add value m producing a product or service. In-bound partners include all those companies and individuals who support the production of products or services. In-bound partners, for example, would include a company's major suppliers They also include services, like an accounting firm or management consulting advising on internal processes. Ask to what degree and depth a company makes use of these relationships. In the case of an accountant, for example, ask if that person is simply used for routine bookkeeping or tax work? Or does the company leverage that person's knowledge m more depth to support value creation?
Section B4 — Customer Assets Data Field: Number of customers Question: How many active customers do you have? Measures: # of customers purchasing m the last year.
Assess the size ofthe customer base. Measurements include numbers of customers and proportion of vital few customers to total customer base.
Date Field: Propensity to purchase from the company
Question: How loyal are your existing customers?
Measures: % probability customer will repurchase. Customer retention rates.
Assess the readiness of customers to purchase and repurchase products or services. This is a factor relating to customer loyalty and repeat purchase behavior.
Data Field: Market share
Question- What is the company's market share?
Measures: % market share. Company sales to total sales.
Assess the degree of market share dominance of your company and the benchmark company.
Data Field: Propensity to leverage out-bound partners. Question: Do you make effective us of out-bound partners? Measures Channel value added less channel discount
Assess the effectiveness of a company m leveraging out-bound partner relationships to produce higher sales revenue and improved customer relationships Out-bound partners are all those companies and individuals who support the marketing and sales process m delivering products/services to market They include the channels of distribution, field sales forces of partners or intermediaries, wholesalers, marketing consultants, franchisers, and advertising, public relations and marketing firms Effectiveness of cross-selling strategies to amplify the impact of sales forces is one example of strength this area Strategic marketing of products/services of two companies to increase value with more comprehensive offerings to customers is another Developing formal "feedback" processes to capture knowledge of wholesalers and other intermediaries about the marketplace also reflects a company's propensity to leverage out-bound partners
Data Field Propensity of company to leverage knowledge of customers
Question Do you make use of your knowledge about customers9
Measures Effectiveness of direct marketing Number of customer contacts annually Frequency/extent of market research
Assess effectiveness of a company to secure greater value by knowing more about their customers Companies scoring high on this attribute understand how to create longer-lived customer relationships by better understanding their wants/needs A company's ability to apply customer knowledge m product/service design is one indicator of strength in this area Companies leveraging knowledge of customers effectively also may build information systems with customer profiles, data mine for information to support product design and marketing strategies, and develop capabilities for mass customization
Data Field Brand
Question How effective is brand m creating value for the company7
Measures Level of brand recognition The impact of brand on product pπce
Assess the effectiveness of brand m value terms To what extent does it support the value proposition of the business9
Advanced use ofthe Scoring system
Additional insight can be gamed from advanced use of this tool to more closely inspect changes in the value of assets and to compare with different benchmarks
Direction and rate of change Consider the trend in the increase or decrease of the assets, and the rate of that change Now, adjust the asset scores to reflect the direction of that trend and the rate of that change. Add one point for trends that increase in value and subtract one point for trends that decrease in value Add another point for a significant rate of increase in value and subtract another point for a significant decrease m value.
Weighted Averages. An additional exercise involves a self- weighting of assets on their relative important to the total value of each category. For example, some assets overlap in value with others, or are of less significance to the total. To weight scores, assign weighting of 100 to the most important asset in each of the four categories. Then assign appropriate weightings to the remaining items to represent their significance relative to the top item. You can then calculate a "weighted average" by multiplying the scores by their weighting, then dividing by the number of assets to obtain the average for each ofthe four categories - Financial, Physical, Provider and Customer.
Calibration An additional exercise involves a self-calibration of assets on their relative important to your company or marketspace For example, some companies require large numbers of customers to sell volume to. The number of customers is thus more important than to another company that focuses on a vital few. To calibrate scores, assign calibration of 100 to the most important asset m each of the four categories. Then assign appropriate calibrations to the remaining items to represent their significance relative to the top item. You can then calculate a "calibrated weighted average" by multiplying the scores by their weighting and by their calibration, then dividing by the square of the number of assets to obtain the calibrated average for each of the four categories - Financial, Physical, Provider and Customer
What-if analysis. Imagine the change that you would like to make your company and re-work the exercise using that imaginary company as 'My Company."
Moving targets. Re-work the exercise using one-year-old data and note how your assets, the benchmark's assets and the market boundaries are moving. Now, apply these changes as simple trends to project the relationship one year from now
Asset Effectiveness Form
Section A - Asset Elements
Category / Element My Company The Benchmark Company
Financial Assets
Number of active investors 012345678910 012345678910 Propensity to invest m the company 012345678910 012345678910 Investor communications 012345678910 012345678910
Economic performance of financial 012345678910 012345678910 products Physical Assets Location 012345678910 012345678910
Security of supply of raw materials 012345678910 012345678910 Productive capacity of resources 012345678910 012345678910 Finished goods management and 012345678910 012345678910 distribution Provider Assets Management expertise 012345678910 012345678910 Workforce effectiveness 012345678910 012345678910 Appropriate size of workforce 012345678910 012345678910 Effectiveness of compensation 012345678910 012345678910 Product offering 012345678910 012345678910 Customer service 012345678910 012345678910 Propensity to leverage m-bound partners 012345678910 012345678910
Customer Assets
Number of active customers 012345678910 012345678910 Propensity to purchase from the 012345678910 012345678910 company Market share 012345678910 012345678910 Propensity to leverage out-bound 012345678910 012345678910 partners Propensity to leverage knowledge of 012345678910 012345678910 customers 1. Brand strength 012345678910 012345678910
Section B - Asset Category Averages
My Company The Benchmark
Category / Element Company
Financial Assets Physical Assets Provider Assets Customer Assets APPENDIX C
Variable Definitions and Equation Notes for Exemplary Systems Dynamics Simulation in Figures 7 and 8
Key for Exemplary Data Sources
ND Needs Defining (requires conceptual clarification before seeking data)
NP Needs Proxy (abstract variable that needs real-world equivalent)
CR Company Records (company-specific data, but should be available)
PR Public Records (includes industry averages)
BE Best Estimate (variable that is not captured and/or measurable; proxy unlikely; correlation analysis may be useful)
X Not applicable to this embodiment or involves direct user input
Figure imgf000043_0001
Figure imgf000044_0001
base_KoC_per_trans This is the base amount of Knowledge BE action of Customers gained per transaction. The quality of the firm's Customer Support Technology modifies this factor to determine the actual amount of knowledge gained per transaction. base PE mult The base price to earning ratio of the CR firm. base worn The base word of mouth' multiplier (i.e., BE number of new Customers each current Customer 'recruits' per unit of time). This number is modified by several other factors to determine the actual 'worn mult'. book value The equity of the firm, in millions of CR dollars.
Brand_building_from The rate at which Brand recognition is X _brand_spending built as a result of spending on Brand- building.
Brand_building_from This is the rate at which Brand ND sales recognition is built as a result of selling the product.
Brand_built_per_$ The non-linear degree to which the rate ND, BE of Brand-building per $k spent depends on Knowledge of Customers. Firm's with a low Knowledge of their Customers will gain less brand recognition per $k spent than firm's with a high Knowledge of their Customers.
Brand_decaying Brand recognition fades with time. This ND, BE is the rate of losing Brand recognition. building_KoC The rate at which the firm builds ND Knowledge of its Customers. building_supplier_net The rate at which new suppliers are ND, CR work added to the firm's supplier network. buying_back\selling_ The rate, measured in dollars per year, CR equity at which equity is bought or sold. cap_adjust When 'Traditional Firm' equals '1', this X element equals the Fixed Asset shortfall. cap_util The degree of utilization of the firm's CR production capacity. capitaMnvestment The rate of spending on adding Fixed ND, CR Assets. change_in_AP The rate at which Alliance Partners are CR added (when positive) or lost (when negative). Chg_avg The rate of change in the average rate BE of delivery by the firm and its Supplier Network.
CST _obsolescing The rate at which Customer Support ND, BE Technology obsolesces or otherwise loses its functional value. cust loss frac The fraction of current Customers lost CR, BE per unit of time. This fraction decreases non-linearly as the firm's Knowledge of its Customers increases, debt service The amount of interest accumulated by CR the current Debt per unit of time. delivering_by_internal The rate at which the firm delivers CR, BE units. delivehng_by_networ The rate at which the supplier network CR, BE k delivers units. earnings_from_sales The revenues from selling Knowledge CR, BE of KoC of Customers per unit of time.
Equity The combined value of the firm's CR physical and financial assets minus the amount of Debt held by the firm.
Fixed Asset shortfall The shortfall in amount of Fixed Assets CR necessary to eliminate the sales backlog. fixed costs The cost of maintaining the current CR base of Fixed Assets. gaining_Customers The rate at which the firm gains new CR customers. gross_earnιngs The gross earnings of the firm, CR measured in dollars per year. impact_of_Brand_on The impact of Brand recognition on the BE worn 'worn mult.' impact_of_CST_on_ The impact of the firm's Customer BE KoC_per_transaction Support Technology on the Knowledge of Customers gained per transaction. impact_of_cust_relati The non-linear impact of the firm's BE ons Knowledge of Customers on the number of units demanded per customer per time. impact_of_KoC_on_ This determines the impact that the BE worn firm's Knowledge of Customers has on the 'worn mult.' impact_of_lead_time The non-linear impact that lead time BE on sales has on the number of units demanded per customer. As the lead time increases, Customer tend to order fewer units each per unit of time.
Figure imgf000047_0001
Figure imgf000048_0001
Exemplary Equation List with Variable Documentation for Figures 7 and
8
STOCKS:
Alliance_Partners(t) = Alliance_Partners(t - dt) + (change_in_AP) * dt
INIT Alliance_Partners = 10
DOCUMENT: The number of Alliance Partners the firm has.
Avg_Deliveries(t) = Avg_Deliveries(t - dt) + (chg_avg) * dt
INIT Avg_Deliveries = 20000
DOCUMENT: The average rate of delivery of goods by the firm and its Supplier
Network.
Backlog(t) = Backlog(t - dt) + (transactions - delivering_by_network - delivering_by_intemal) * dt
INIT Backlog = 10000
DOCUMENT: The number of units which have been ordered but not yet delivered.
Brand(t) = Brand(t - dt) + (Brand_building_from_sales +
Brand_building_from_brand_spending - Brand_decaying) * dt
INIT Brand = 20
DOCUMENT: This is the amount of Brand recognition of the product.
Customers(t) = Customers(t - dt) + (gaining_Customers - losing_Customers) * dt
INIT Customers = 1000
DOCUMENT: The number of Customers who purchase from the firm.
Customer_Support_Technology(t) = Customer_Support_Technology(t - dt) +
(improving_CST - CST_obsolescing) * dt
INIT Customer_Support_Technology = 0
DOCUMENT: The quality of the firm's Customer Support Technology.
Debt(t) = Debt(t - dt) + (acquiring_debt) * dt
INIT Debt = 0
DOCUMENT: The amount of Debt currently held by the firm.
Employees(t) = Employees(t - dt) + (attracting_Employees - losing_Employees) * dt
INIT Employees = 100
DOCUMENT: The number of Employees in the firm.
Fin_Asset_$_Val(t) = Fin_Asset_$_Val(t - dt) + (gross_earnings + acquiring\paying_down_capital - capitaMnvestment - spending) * dt INIT Fin_Asset_$_Val = 1e6 DOCUMENT: The financial assets of the firm, measured in dollars. Fixed_Assets(t) = Fixed_Assets(t - dt) + (adding_Fixed_Assets - losing_Fixed_Assets) * dt
INIT Fixed_Assets = 20000
DOCUMENT: The amount of Fixed Assets owned by the firm.
Knowledge_of_Customers(t) = Knowledge_of_Customers(t - dt) +
(building__KoC - KoC_obsolescing) * dt
INIT Knowledge_of_Customers = 20
DOCUMENT: The level of knowledge the firm has about its customers wants, needs, and desires.
Natural_Resources_Available(t) = Natural_Resources_Available(t - dt) + (- adding_Fixed_Assets) * dt
INIT Natural_Resources_Available = 10000000000
DOCUMENT: The amount of Natural Resources available for producing Fixed
Assets.
Supplier_Network(t) = Supplier_Network(t - dt) + (building_supplier_network - losing_supplier_network) * dt
INIT Supplier_Network = 0
DOCUMENT: The number of Suppliers to which the firm can outsource to supply its product.
Working_Public(t) = Working_Public(t - dt) + (losing_Employees - attracting_Empioyees) * dt
INIT Working_Public = 900
DOCUMENT: The number of potential Employees who are not currently employed by the firm.
USER INPUTS:
Brand_spending = 0
DOCUMENT: The rate of spending on building Brand name.
CST_spending = 0
DOCUMENT: The rate of spending on Customer Support Technology.
Outsource_to_Supplier_Network = 0
DOCUMENT: This element of the model is used to toggle Outsourcing to
Supplier Network on and off. sell_KoC_switch = 0
DOCUMENT: This factor equals '1 ' when the firm sells its accumulated
Knowledge of Customers, '0' otherwise.
Traditional_Firm = 0
DOCUMENT: This element equals '1' if the firm does not engage in outsourcing activities, '0' otherwise. OTHER VARIABLES:
Ability_to_Attract_&_Retain = GRAPH(Fin_Asset_$_Val)
(0.00, 0.05), (500000, 0.15), (1 e+006, 1.00), (1.5e+006, 3.10), (2e+006, 5.75),
(2.5e+006, 6.75), (3e+006, 7.45), (3.5e+006, 7.80), (4e+006, 8.05), (4.5e+006,
8.25), (5e+006, 8.25)
DOCUMENT: The ability of the firm to attract and retain Employees. acquiring\paying_down_capital = acquiring_debt+buying_back\selling_equity DOCUMENT: The rate, in dollars per year, at which capital is acquired or paid down. acquiring_debt = (1000000-Fin_Asset_$_Val)/.25 DOCUMENT: This is the rate of acquiring Debt. a d d i n g _ F i x e d _ A s s e t s = ( 1 -
Outsource_to_Supplier_Network)*losing_Fixed_Assets+cap_adjust DOCUMENT: The rate at which the firm acquires Fixed Assets.
APs_added_per_Supplier_or_Employee_per_time = 0.2
DOCUMENT: The number of new Alliance Partners each current Employee
'recruits' per unit of time.
Attracting_Employees = (2/90) * Ability_to_Attract_&_Retain * Working_Public DOCUMENT: The rate at which the firm gains Employees. base_KoC_per_transaction = 5/20000
DOCUMENT: This is the base amount of Knowledge of Customers gained per transaction. The quality of the firm's Customer Support Technology modifies this factor to determine the actual amount of knowledge gained per transaction. base_PE_mult = 12.5
DOCUMENT: The base price to earning ratio of the firm. base_wom = .2
DOCUMENT: The base 'word of mouth' multiplier (i.e., number of new Customers each current Customer 'recruits' per unit of time). This number is modified by several other factors to determine the actual 'worn mult'. book_value = (Equity/1 E6)
DOCUMENT: The equity of the firm, in millions of dollars.
Brand_building_from_brand_spending = Brand_spending*Brand_built_per_$ DOCUMENT: The rate at which Brand recognition is built as a result of spending on Brand-building.
Brand_building_from_sales = 5*transactions/20000 DOCUMENT: This is the rate at which Brand recognition is built as a result of selling the product.
Brand_built_per_$ = GRAPH(Knowledge_of_Customers)
(0.00, 0.00), (10.0, 0.45), (20.0, 2.00), (30.0, 4.50), (40.0, 7.95), (50.0, 10.9),
(60.0, 13.7), (70.0, 15.5), (80.0, 16.9), (90.0, 17.8), (100, 17.8)
DOCUMENT: The non-linear degree to which the rate of Brand-building per $k spent depends on Knowledge of Customers. Firm's with a low Knowledge of their Customers will gain less brand recognition per $k spent than firm's with a high Knowledge of their Customers.
Brand_decaying = Brand/4
DOCUMENT: Brand recognition fades with time. This is the rate of losing Brand recognition. building_KoC = transactions * KoC_per_transaction
DOCUMENT: The rate at which the firm builds Knowledge of its Customers. building_supplier_network = (Alliance_Partners+Supplier_Network) * suppliers_added_per_Supplier_or_AP_per_time
DOCUMENT: The rate at which new suppliers are added to the firm's supplier network. buying_back\selling_equity = 0
DOCUMENT: The rate, measured in dollars per year, at which equity is bought or sold. cap_adjust = Fixed_Asset_shortfaH*Traditional_Firm
DOCUMENT: When 'Traditional Firm' equals '1', this element equals the Fixed
Asset shortfall. cap_util = GRAPH(lead ime)
(0.00, 0.00), (0.05, 0.095), (0.1 , 0.205), (0.15, 0.325), (0.2, 0.42), (0.25, 0.53),
(0.3, 0.64), (0.35, 0.78), (0.4, 0.86), (0.45, 0.94), (0.5, 1.00), (0.55, 1.03), (0.6,
1.05)
DOCUMENT: The degree of utilization of the firm's production capacity. capitaMnvestment = adding_Fixed_Assets*200 DOCUMENT: The rate of spending on adding Fixed Assets. c h a n g e _ i n _ A P =
(Employees*APs_added_per_Supplier_or_Employee_per_time)
Alliance_Partners/5
DOCUMENT: The rate at which Alliance Partners are added (when positive) or lost (when negative). chg_avg = total_deliveries-Avg_Deliveries
DOCUMENT: The rate of change in the average rate of delivery by the firm and its Supplier Network. CST_obsolescing = Customer_Support_Technology/2
DOCUMENT: The rate at which Customer Support Technology obsolesces or otherwise loses its functional value. cust_loss_frac = GRAPH(Knowledge_of_Customers)
(0.00, 0.4), (10.0, 0.275), (20.0, 0.2), (30.0, 0.15), (40.0, 0.123), (50.0, 0.1 ),
(60.0, 0.0875), (70.0, 0.075), (80.0, 0.0675), (90.0, 0.0625), (100, 0.055)
DOCUMENT: The fraction of current Customers lost per unit of time. This fraction decreases non-linearly as the firm's Knowledge of its Customers increases. debt_service = DebtM
DOCUMENT: The amount of interest accumulated by the current Debt per unit of time. delivering_by_internal = Fixed_Assets*cap_util DOCUMENT: The rate at which the firm delivers units. delivering_by_network = min(Fixed_Asset_shortfall,Supply_from_Network) DOCUMENT: The rate at which the supplier network delivers units. eamings_from_sales_of_KoC = (selling_KoC*margin\unit_of_KoC_sold) DOCUMENT: The revenues from selling Knowledge of Customers per unit of time.
Equity = Phys_&_Fin_$Val-Debt
DOCUMENT: The combined value of the firm's physical and financial assets minus the amount of Debt held by the firm.
Fixed_Asset_shortfall = (2*Backlog-Fixed_Assets)
DOCUMENT: The shortfall in amount of Fixed Assets necessary to eliminate the sales backlog. fixed_costs = Fixed_Assets*20
DOCUMENT: The cost of maintaining the current base of Fixed Assets. gaining_Customers = Customers*wom_mult
DOCUMENT: The rate at which the firm gains new customers. gross_eamings =
(price*delivering_by_interna profit_marginjntemal)+(price*delivering_by_net work*profit_margin_network)+eamings_from_sales_of_KoC DOCUMENT: The gross earnings of the firm, measured in dollars per year. impact_of_Brand_on_wom = GRAPH(Brand)
(0.00, 0.5), (50.0, 0.75), (100, 1.00), (150, 1.20), (200, 1.38), (250, 1.55), (300,
1.65), (350, 1.73), (400, 1.78), (450, 1.83), (500, 1.85)
DOCUMENT: The impact of Brand recognition on the 'worn mult.' i m pa ct_of_CST_o n_KoC_pe r_tra n sa ction =
GRAPH(Customer_Support_Technology)
(0.00, 0.65), (10.0, 0.95), (20.0, 1.23), (30.0, 1.55), (40.0, 1.85), (50.0, 2.10),
(60.0, 2.27), (70.0, 2.48), (80.0, 2.65), (90.0, 2.80), (100, 2.93)
DOCUMENT: The impact of the firm's Customer Support Technology on the
Knowledge of Customers gained per transaction. impact_of_cust_relations = GRAPH(Knowledge_of_Customers) (0.00, 0.4), (10.0, 0.625), (20.0, 1.00), (30.0, 1.38), (40.0, 1.73), (50.0, 2.10), (60.0, 2.43), (70.0, 2.68), (80.0, 2.85), (90.0, 3.00), (100, 3.00) DOCUMENT: The non-linear impact of the firm's Knowledge of Customers on the number of units demanded per customer per time. impact_of_KoC_on_wom = GRAPH(Knowledge_of_Customers)
(0.00, 0.00), (10.0, 0.51), (20.0, 1.00), (30.0, 1.30), (40.0, 1.52), (50.0, 1.70),
(60.0, 1.85), (70.0, 1.93), (80.0, 1.98), (90.0, 1.99), (100, 2.00)
DOCUMENT: This determines the impact that the firm's Knowledge of
Customers has on the 'worn mult.' impact_of_lead_time_on_sales = GRAPH(lead_time)
(0.00, 1.24), (0.1, 1.22), (0.2, 1.19), (0.3, 1.13), (0.4, 1.07), (0.5, 1.00), (0.6,
0.93), (0.7, 0.83), (0.8, 0.71), (0.9, 0.51), (1, 0.00)
DOCUMENT: The non-linear impact that lead time has on the number of units demanded per customer. As the lead time increases, Customer tend to order fewer units each per unit of time. impact_of_supplier_network_on_wom_mult=GRAPH(Supplier_Network/10000) (0.00, 1.00), (1.00, 1.00), (2.00, 1.16), (3.00, 1.31), (4.00, 1.46), (5.00, 1.59), (6.00, 1.71)
DOCUMENT: The impact of the Supplier Network on the 'worn mult'. In other words, the ratio of the 'worn mult' to what the 'worn mult' WOULD BE in the absence of a Supplier Network. impact_on_PE_mult = GRAPH(tot_inv)
(0.00, 1.00), (1.00, 1.34), (2.00, 1.74), (3.00, 2.23), (4.00, 3.00)
DOCUMENT: The impact of 'tot inv' on the PE multiplier. Alternatively, this can be thought of as the ratio of the PE multiplier to what it WOULD BE if the firm took no brand-building, outsourcing, CST-improving, or knowledge-selling actions. improving_CST = (CST_spending) * 0.5
DOCUMENT: The rate at which Customer Support Technology is improved by the firm.
KoC_obsolescing = Knowledge_of_Customers/4
DOCUMENT: The rate at which the firms knowledge of its Customers becomes obsolete or otherwise worthless.
KoC_per_transaction = base_KoC_per_transaction* impact_of_CST_on_KoC_per_transaction
DOCUMENT: The Knowledge of Customers gained per unit transacted.
Iead_time = Backlog/Avg_Deliveries
DOCUMENT: The average time that elapses between the sale of a unit and the time of its delivery. losing_Customers = Customers*cust_loss_frac*1.15 DOCUMENT: The rate at which the firm loses Customers. losing_Employees = (0.2/Ability_to_Attract_&_Retain) * Employees DOCUMENT: The rate at which the firm loses Employees. losing_Fixed_Assets = Fixed_Assets/10
DOCUMENT: The rate at which the firm loses Fixed Assets, for whatever reason. losing_supplier_network = Supplier_Network/2
DOCUMENT: The rate at which Suppliers are lost from the Supplier Network. margin\unit_of_KoC_sold = 10000
DOCUMENT: The profits earned per unit of Knowledge of Customers sold. market_value = (max(PE_mult*net_earnings,.7*Equity))/1 E6 DOCUMENT: The market value of the firm, in millions of dollars. net_earnings = gross_earnings-spending
DOCUMENT: The gross revenues (earnings) of the firm minus the firm's spending.
PE_mult = base_PE_mult*impact_on_PE_mult
DOCUMENT: The actual PE ratio of the firm.
Phys_&_Fin_$Val = Fin_Asset_$_Val + Phys_Asset_$Val
DOCUMENT: The combined value of the firm's physical and financial assets.
Phys_Asset_$Val = Fixed_Assets*200
DOCUMENT: The value of all physical assets owned by the firm. potential_selling_of_KoC = GRAPH(Knowledge_of_Customers)
(0.00, 0.00), (10.0, 0.00), (20.0, 0.00), (30.0, 8.00), (40.0, 23.0), (50.0, 37.0),
(60.0, 52.0), (70.0, 74.0), (80.0, 85.0), (90.0, 91.5), (100, 93.5)
DOCUMENT: The potential rate of selling Knowledge of Customers, whether or not such selling actually occurs. price = 100
DOCUMENT: The price per unit of goods sold by the firm. profit_margin_internal = .4
DOCUMENT: The number of dollars earned by the firm per dollar value of each unit sold. profit_margin_network = .2
DOCUMENT: The number of dollars earned per dollar value of each unit sold. selling_KoC = potential_selling_of_KoC*sell_KoC_switch DOCUMENT: The rate of selling Knowledge of Customers. spending = building_supplier_network + fixed_costs +
(CST_spending+Brand_spending)*1000+debt_service
DOCUMENT: The combined rate of spending on fixed and variable expenses. suppliers_added_per_Supplier_or_AP_per_time = 1.25
DOCUMENT: The number of new Suppliers each current Supplier or Alliance
Partner 'recruits' per unit of time.
Supply_from_Network = Supplier_Network
DOCUMENT: The capacity the Supplier Network has to supply units to the firm's
Customers. tot_inv = SWITCH(Brand_spending,0) + SWITCH(CST_spending,0) + Outsource_to_Supplier_Network + sell_KoC_switch
DOCUMENT: The total number of 'market value'-building activities engaged in by the firm. total_deliveries = delivering_by_internal + delivering_by_network DOCUMENT: The total rate at which units are delivered to Customers by both the firm and the supplier network combined. transactions = Customers*units_demanded_per_cust DOCUMENT: The rate at which units are sold. u n i t s _ d e m a n d e d _ p e r _ c u s t =
20*impact_ofjead_time_on_sales*impact_of_cust_relations DOCUMENT: The number of units demanded per customer per time. wom_mu lt = base_wom* i mpact_of_B ra nd_on_wom*i mpact_of_supplier_network_on_wom_mult* impact_of_KoC_on_wom DOCUMENT: The 'word of mouth multiplier' specifies the number of new Customers each current Customer 'recruits' per unit of time. Variable Definitions and Equation Notes for Other Embodiments of Systems Dynamics Simulation
Key for Exemplary Data Sources
ND Needs Defining (requires conceptual clarification before seeking data) NP Needs Proxy (abstract variable that needs real-world equivalent)
CR Company Records (company-specific data, but should be available)
PR Public Records (includes industry averages) BE Best Estimate (variable that is not captured and/or measurable; proxy unlikely; correlation analysis may be useful) X Not applicable to this embodiment or involves direct user input
Figure imgf000057_0001
Figure imgf000058_0001
Figure imgf000059_0001
Figure imgf000060_0001
Figure imgf000061_0001
Figure imgf000062_0001
Figure imgf000063_0001
Figure imgf000064_0001
Fixed__Asset_utilizati The percent utilization of Fixed Assets CR on owned. fixed costs Costs assessed each time period on CR the firm's Fixed Assets. frac Rwl lost Fraction of Relationship with Investors ND, BE lost each time period. gaining_Contacts When a supplier comes on board, they ND, CR bring with them a certain number of contacts the firm will be able to use. gaining_Customers The amount of new customers gained CR over a given time period. The process is a word of mouth process. The more effective the firm is at developing brand recognition, the supplier networks, customer knowledge, and customer relationships, the more customers it can gain. Loyal Customers are assumed to have a higher word of mouth multiplier than New Customers. gaining_Kol The rate at which the firm gains ND, BE knowledge of its investors. gross_earnιngs The gross earnings of the firm for a CR given time period. imp_of_CR_on_time The impact of Customer Relationship BE Joyal on the time it takes to become loyal. lmp_of_invest_on_ Total impact of investing on the PE BE PE multi multiplier. imp_of_KoC The impact of Knowledge of Customer BE on the ability to improve Customer Support Technology. imp_of_Rwl_on_pric The impact of the Relationship with BE e Investors on the price per share. The better the relationship, the greater the price per share. impact_of_AAR_on The impact of the ability to attract and BE _attracting retain on getting new employees. The greater the ability, the easier it is to attract.
impact_of_AAR_on The impact of the ability to attract and BE retention retain on keeping Experienced Employees. The greater the ability, the easier it is to retain them. impact_of_AP_on_s The impact of the Alliance Partners on BE up the ability to add suppliers. The more Alliance Partners, the easier it is to add suppliers.
Figure imgf000066_0001
Figure imgf000067_0001
Figure imgf000068_0001
Figure imgf000069_0001
Figure imgf000070_0001
Figure imgf000071_0001
Figure imgf000072_0001
Equation List with Variable Documentation for Other Embodiments of Systems Dynamic Simulations
STOCKS:
Ability_to_Attract_&_Retain(t) = Ability_to_Attract_&_Retain(t - dt) + (changing_AAR) * dt
INIT Ability_to_Attract_&_Retain = 0DOCUMENT: The ability of the firm to attract new employees and keep current employees. This is on a scale of 0 (no ability whatsoever) to 100 (couldn't be more able to).
Ability_to_Raise_Capital\Do_Deals(t) = Ability_to_Raise_Capital\Do_Deals(t - dt) + (change_in_ARCDD) * dt
INIT Ability_to_Raise_Capital\Do_Deals = 50
DOCUMENT: The ability of the firm to raise capital and make deals happen.
This is determined from the potential indicated by Organizational Knowledge.
Ability_to_Train(t) = Ability_to_Train(t - dt) + (changing_training_ability) * dt INIT Ability_to_Train = 50DOCUMENT: The ability of a firm to train its employees. It is on a 0 (it can't train) to 100 (couldn't be more able to train) scale.
Alliance_Partners(t) = Alliance_Partners(t - dt) + (change_in_AP - losing_APs) * dt
INIT Alliance_Partners = 100DOCUMENT: Number of strategic partners for R&D, marketing, etc.
Brand(t) = Brand(t - dt) + (brand_building - brand_decaying) * dt
INIT Brand = 20DOCUMENT: Measures brand recognition on a scale of 0-
100%.
Buying_Public(t) = Buying_Public(t - dt) + (losingjoyals + losing_new_custs - gaining_Customers) * dt
INIT Buying_Public = 10000DOCUMENT: The total buying population that is not currently a customer of the firm.
Channels(t) = Channels(t - dt) + (adding_Channels - losing_Channels) * dt
INIT Channels = 15
DOCUMENT: The number of channels a firm has.
Cume_Aux_Sales(t) = Cume_Aux_Sales(t - dt) + (auxiliary_selling) * dt INIT Cume_Aux_Sales = 0DOCUMENT: The accumulated auxiliary sales.
Cume_Transaction_Data(t) = Cume_Transaction_Data(t - dt) + (acquiring_transaction_data) * dt
INIT Cume _Transaction_Data = 0DOCUMENT: This is the sum of information gathered from all transactions.
Customer_Relationship(t) = Customer_Relationship(t - dt) + (building - weakening) * dt INIT Customer_Relationship = 50DOCUMENT: Measures strength of customer relationship on a scale from 0-100%.
Customer_Support_Technology(t) = Customer_Support_Technology(t - dt) +
(improving_CST - CST_obsolescing) * dt
INIT Customer_Support_Technology = 0
Debt(t) = Debt(t - dt) + (borrowing - paying_down) * dt
INIT Debt = ODOCUMENT: Total firm debt.
Experienced_Employees(t) = Experienced_Employees(t - dt) + (becoming_Experienced - losing_Employees) * dt
INIT Experienced_Employees = 100DOCUMENT: The stock of employees who have been with the firm a significant amount of time.
Fin_Asset_$_Val(t) = Fin_Asset_$_Val(t - dt) + (gross_earnings + acquiring\paying_down_capital - capital nvestment - spending) * dt
INIT Fin_Asset_$_Val = 1 e6DOCUMENT: Total financial assets of the firm.
Fixed_Assets(t) = Fixed_Assets(t - dt) + (adding_Fixed_Assets - losing_Fixed_Assets) * dt
INIT Fixed_Assets = 20000DOCUMENT: Measure of functional, on-line capital goods used to make finished units.
Inventory(t) = lnventory(t - dt) + (producing_by_internal + producing_by_network - transactions) * dt
INIT Inventory = ODOCUMENT: Amount of finished goods available for delivery. lnvesting_Public(t) = lnvesting_Public(t - dt) + (losingjnvestors - attractingjnvestors) * dt
INIT lnvesting_Public = 100
DOCUMENT: The number of potential investors not currently investing with the firm. lnvestment_Transaction_Data(t) = lnvestment_Transaction_Data(t - dt) + (change_in_ITD - losingJTD) * dt
INIT lnvestment_Transaction_Data = ODOCUMENT: The amount of relevant transaction data a firm holds.
Investors(t) = lnvestors(t - dt) + (attractingjnvestors - losingjnvestors) * dt INIT Investors = 10DOCUMENT: Number of people who are currently invested in the firm.
Knowledge_of_Customers(t) = Knowledge_of_Customers(t - dt) + (building_KoC - KoC_obsolescing) * dt
INIT Knowledge )f_Customers = 20DOCUMENT: Measures the firm's knowledge of their customer's needs and preferences on a scale from 0% (no knowledge) to 100% (essentially 'omniscient'). Knowledge j--fjnvestors(t) = Knowledge of_lnvestors(t - dt) + (gainingJCol - losingjKol) * dt
INIT Knowledge 3f_lnvestors = { Place initial value here... }DOCUMENT: The Knowledge of Investors a Firm has. This is on a 0 (no knowledge) to 100 (omniscient) scale.
Loyal_customers(t) = Loyal_customers(t - dt) + (becomingjoyal - losingjoyals) * dt
INIT Loyal_customers = { Place initial value here... }DOCUMENT: The number of customers who have been with the firm long enough to be considered loyal customers. Loyal customers are considered a significant asset to the firm.
Natural_Resources_Available(t) = Natural_Resources_Available(t - dt) + (- adding_Fixed_Assets) * dt
INIT Natural_Resources_Available = { Place initial value here... }DOCUMENT: The total amount of resources available that the firm could bring on as fixed assets.
Network_Contacts(t) = NetworkjContacts(t - dt) + (gaining Contacts - losing Contacts) * dt
INIT NetworkjContacts = { Place initial value here... }DOCUMENT: Contacts gained and lost through the Supplier Network.
New_Customers(t) = New_Customers(t - dt) + (gaining Customers - becomingjoyal - losing iew -usts) * dt
INIT New Customers = ODOCUMENT: The number of customers just acquired.
NewjHires(t) = New_Hires(t - dt) + (attracting - becomingjΞxperienced) * dt INIT NewjHires = ODOCUMENT: The stock of new employees. In this simplified model, it is assumed that New Hires do not leave without becoming Experienced Employees first.
Organizational_Knowledge(t) = OrganizationaljKnowledge(t - dt) +
(building OK - losing DK) * dt
INIT Organizationalj nowledge = 0
DOCUMENT: The total amount of knowledge the firm has concerning it processes, customers, and investors.
Outstanding Shares(t) = Outstanding_Shares(t - dt) + (sellingjshares - buyingj ack) * dt
INIT Outstanding Shares = 0
DOCUMENT: Outstanding shares that have been sold to the market.
Processj nowledge(t) = Processj nowledge(t - dt) + (building_PK +
PKjnigrating - PK obsolescing) * dt
INIT Processj nowledge = { Place initial value here... }
DOCUMENT: The amount of Process Knowledge a firm has about its core processes.
ProductionjData(t) = Production_Data(t - dt) + (acquiring_PD) * dt
INIT ProductionjData = 0
DOCUMENT: Data collected regarding a firm's production experience.
Relationship vithjnvestors(t) = Relationship_with_lnvestors(t - dt) +
(buildingjRwl - losingJ wl) * dt
INIT Relationship_with_lnvestors = 50
DOCUMENT: The strength of the firm's relationship with its investors. It is on a 0 (no relationship) to 100 (couldn't be stronger) scale.
RequestsjBacklog(t) = Requestsj3acklog(t - dt) + (buildingj acklog - delivering - losingjjnfilled j-equests) * dt
INIT RequestsjBacklog = ODOCUMENT: The current level of unfilled orders.
SupplierjNetwork(t) = Supplier_Network(t - dt) + (buildingjsupplier_network - losing supplierjπetwork) * dt
INIT Supplierj etwork = ODOCUMENT: The number of suppliers for the firm.
Technology(t) = Technology(t - dt) + (improving_Tech - degrading_Tech) * dt INIT Technology = ODOCUMENT: The level of Technology within the firm.
Working_Public(t) = Working_Public(t - dt) + (losingjΞmployees - attracting) * dt
INIT Working_Public = { Place initial value here... }DOCUMENT: The working population not employed by the firm.
USER INPUTS: buyj ack OS = { Place right hand side of equation here... } DOCUMENT: How much (if any) shares the firm chooses to buy back in a given time period.
CST_spending = lndicated CST_Spending*CST_Spending_switch DOCUMENT: Spending on Customer Support Technology for a given time period. customerjnvesting = brand spending+channeljspending+CST spending DOCUMENT: Total amount of investment in the customer sector. debt_equity_ratio = { Place right hand side of equation here... } DOCUMENT: This is the debt equity ratio the firm can choose.
FAj'nvesting -.ost = adding_Fixed_Assets*pricejper_FA
DOCUMENT: The amount of investment on Fixed Assets in a given time period. investingjn_empioyees = { Place right hand side of equation here... } DOCUMENT: The amount of money invested in employees for a given time period. selljjnits = { Place right hand side of equation here... }
DOCUMENT: This is a switch signifying a firm's decision to sell units of
Knowledge of Customers. selling jprice = 100
DOCUMENT: The price the firm charges for each transaction. sellingjshares = capitaljιeeded*(- debt_equity_ratio)/effectivej rice_per_share
DOCUMENT: The amount of shares sold by the firm in a given time period. supplierjnvestment = { Place right hand side of equation here... } DOCUMENT: The amount of investment in the supplier network for a given time period (in dollars). tech_spending = { Place right hand side of equation here... }
DOCUMENT: The amount of investment in technology requested in a given time period.
OTHER VARIABLES:
Figure imgf000077_0001
= internaljproductivity
DOCUMENT: The total amount the firm could produce if necessary. acquiring\paying_down_capital =
Figure imgf000077_0002
DOCUMENT: The net acquiring and paying down of capital. acquiring\payingJransactions = borrowing/10 + buying J->ack/10 + paying down/10 + selling _shares/10
DOCUMENT: The number of transactions calculated from acquiring and paying down capital. This is used to determine how much transaction data is gathered over a given time period. acquiring_PD = producing_byj'nterna PDjper_unitjproduced DOCUMENT: The rate at which Production Data is acquired each time period. acquiring Jransactionjdata = transactions*TD_gained_perJransaction DOCUMENT: The amount of transaction data acquired in a given time period. adding_Channels = channel 3pending*cj er $*impact Df_ARCDD Dn_ch*impact_of_SN 3n_ch
DOCUMENT: The number of channels added in a given time period. adding_Fixed_Assets = order_Fixed_Assets DOCUMENT: The rate at which the firm adds fixed assets. amountjoj eliver = MIN(Requestsj3acklog, Inventory)
DOCUMENT: The amount to deliver is determined through analyzing the
Requests Backlog and the Inventory level. attracting = investing Jnj3mployees*base 3mpj er $*impact Df_AAR_on attracting DOCUMENT: The amount of new employees the firm attracts over a given time period. attractingjnvestors = lnvestors*base attract_womJrac*impact_of_RljDn attracting DOCUMENT: The number of Investors a firm attracts over a given time period. This is done through word of mouth in the marketplace. auxiliary jselling = base auxj3elling*impact Df_CRjDnjauxj->elling Average_Cost Df_Producing = { Place right hand side of equation here... } DOCUMENT: This is the average cost of producing. avg_Fin_A_$ 7al = { Place right hand side of equation here... } DOCUMENT: The average financial assets. avgjOK = 50
DOCUMENT: Average Organizational Knowledge. base_APs_added jperjΞxpjΞmpj erJime = { Place right hand side of equation here... }
DOCUMENT: The number of Alliance Partners an experienced employee can add to the firm over a given time period. This is more than what a new hire can add. base_APs_added_per_New_Hirej erJime = { Place right hand side of equation here... }
DOCUMENT: The number of Alliance Partners an experienced employee can add to the firm over a given time period. base 3ttract_womjτac = GRAPH(net_earnings)
(0.00, 0.005), (10.0, 0.035), (20.0, 0.07), (30.0, 0.11 ), (40.0, 0.15), (50.0, 0.2), (60.0, 0.245), (70.0, 0.315), (80.0, 0.4), (90.0, 0.53), (100, 0.7) DOCUMENT: The base word of mouth fraction is determined solely by the net earnings of the firm. base auxjselling = { Place right hand side of equation here... } DOCUMENT: The normal amount of auxiliary selling. base_CRJ->uilding = { Place right hand side of equation here... } DOCUMENT: The base amount of Customer Relationship units built per employee per transaction. base emand = 20
DOCUMENT: The base level of units desired per customer. basejempj er S = { Place right hand side of equation here... } DOCUMENT: The base number of employees the firm can attract per dollar spent. basej'nterest_rate = .1 basej<nowj erj3mp = { Place right hand side of equation here... } basejossjrac = GRAPH(net_eamings)
(0.00, 0.6), (10.0, 0.525), (20.0, 0.46), (30.0, 0.39), (40.0, 0.33), (50.0, 0.285), (60.0, 0.225), (70.0, 0.165), (80.0, 0.115), (90.0, 0.07), (100, 0.05) DOCUMENT: The base loss fraction is determined solely by the net earnings of the firm. basejoyaljossjrac = { Place right hand side of equation here... } DOCUMENT: The normal percentage of loyal customers the firm would lose each time period if there was no impact of Customer Relationship. basejicjoss rac = { Place right hand side of equation here... } DOCUMENT: The percentage of New Customers the firm would lose each time period if there were no impact of Customer Relationship.
Base_PE_multiplier = { Place right hand side of equation here... } DOCUMENT: How much organization is worth beyond current net earnings. basejproductivity =
GRAPH((1.5*ExperiencedjΞmployees+New_Hires)/Fixed_Assets)
(0.00, 0.00), (1.00, 8.50), (2.00, 16.0), (3.00, 25.5), (4.00, 35.5), (5.00, 46.0),
(6.00, 56.0), (7.00, 67.0), (8.00, 77.5), (9.00, 86.5), (10.0, 97.5)
DOCUMENT: The base level of productivity in the firm. It is determined from a ratio of total employees (Experienced Employees and New Hires) to fixed assets. basej-etention ime = { Place right hand side of equation here... } DOCUMENT: The average time an Experienced Employee remains with the firm. base echjper_$_spent = { Place right hand side of equation here... } DOCUMENT: The amount of technology gained per dollar invested. baseJimeJo_adj_AAR = 2
DOCUMENT: Base time it takes to adjust the firm's ability to attract and retain to its potential. base imejojaxp = { Place right hand side of equation here... } DOCUMENT: The average time it takes for a New Hire to become an Experienced Employee. base ime ojoyal = { Place right hand side of equation here... } DOCUMENT: The average time it takes for a New Customer to become a Loyal Customer. becoming jΞxperienced = (New_Hires/baseJimeJo 3xp)*impact -)f_AT DOCUMENT: The number of New Hires who become Experienced Employees in a given time period. becomingjoyal = (NewjCustomers/baseJimeJoJoyal) * imp_of_CR_onJimeJoya imp_of_KoC_onJimeJoyal
DOCUMENT: The number of New Customers who become loyal in a given time period. book /alue = (Equity/1 E6) borrowing = capitaljπeeded*debtj3quity_ratio brand_building = marginal_ease_of_buildingj3rand *
(Brand j uilding rom sales + brand j uilding romj3rand_spending)
DOCUMENT: This is the cumulative rate of building of Brand recognition. brand j uildingJτom_Brand_spending = brand_spending*brand -.uiltjper_$k DOCUMENT: The amount of brand recognition generated by investing money in developing this recognition.
Brand jDuilding_from sales = transactions*Brandj uiltjperJransaction DOCUMENT: Selling units generates Brand recognition. This converter shows the rate of brand recognition acquired as a result of selling. brandj uiltjper $k = GRAPH(Knowledge_of_Customers) (0.00, 0.105), (10.0, 0.645), (20.0, 0.945), (30.0, 1.13), (40.0, 1.26), (50.0, 1.35), (60.0, 1.44), (70.0, 1.48), (80.0, 1.53), (90.0, 1.54), (100, 1.58) DOCUMENT: The amount of brand recognition built per dollar spent. Knowledge of the customer influences this amount.
Brandj uiltj er ransaction = { Place right hand side of equation here... } DOCUMENT: The brand built for a given transaction. brandjdecaying = Brand/4
DOCUMENT: The rate at which Brand Recognition is decaying. brandjspending = 0
DOCUMENT: The amount of money spent on brand building in a given time period. building = ease_ofJmproving_CR*((1.5*ExperiencedjΞmployees/transactions*CRj er_
Employee_perJransaction)+(New_Hires/transactions*CRjDerjΞmployee pe
^transaction))
DOCUMENT: Customer Relationship strength is built through interacting with the customer (through employee transactions). The amount this strength is built up is impacted by the number of Channels, the Supplier Network, the amount of transactions, the strength of Brand, and the Customer Support
Technology. buildingj acklog = demand
DOCUMENT: The amount of units ordered each time period. buildingj oC = acquiring Jransaction ata*ease_ofj uilding_KoC*impactj3f_CST_onj oC_ building*impact Df_Relationshipj uilding Dnj oc
DOCUMENT: Building knowledge of the firm's customers results from acquiring transaction data. The better the relationship and the stronger the support technology, the more effective the firm will be at generating this knowledge. building OK =
((Experienced jΞmployees+New_Hires)*base_knowjper 9mp*impact Df_AT DnJσιowjper_emp) + buildingj oC + buildingj°K + gaining ol building_PK = acquiring_PD*PKjperjjnit -)f_PD_acquired building_Rwl = { Place right hand side of equation here... } DOCUMENT: The firm builds its relationship with investors by gaining knowledge of those investors. building supplierjietwork = supplierjnvestment*suppliers added_per_$ * impact Df_PK Dnj uild 3N*impact Df 3N_on 3N*impact 3f_AP Dn 3up DOCUMENT: The number of new suppliers attracted over a given time period. buying_back = payingjdown*marketjpricejper_share
DOCUMENT: The amount of shares bought back by the firm in a given time period. c_per_$ = { Place right hand side of equation here... } DOCUMENT: The number channels added per dollar spent. capitaljnvestment = customerj'nvesting+tech 3pending+FAj'nvesting_cost+investingj'nj3mploy ees+supplierjnvestment DOCUMENT: Expenditures from investing in customers, providers, and physical assets in a given time period. capitaljieeded = { Place right hand side of equation here... } DOCUMENT: The firm can analyze its performance and determine what capital (if any) is needed. changej'n_AP =
(Experienced jΞmployees*base_APsjaddedjperjΞxpjΞmp_perJime+New_
Hires*base_APs_addedjper_New_HirejperJime) *impactj--f 3N_on_AP
DOCUMENT: The number of Alliance Partners added to the firm each time period. changejn_ARCDD = (potential_ARCDD- AbilityJo_Raise_Capital\DojDeals)/timeJo adjust_ARCDD DOCUMENT: The change in a firm's ability to raise capital and do deals. This is determined through a potential (based on Organizational Knowledge) and the amount of time it takes to realize this potential. changej'njΞmployees = attractingjΞmployees-losingjΞmployees DOCUMENT: The net change in the number of employees for a given time period. changeJnJTD = acquiring\payingJransactions*ITDjperJrans*impact Df_Rl 3n_chgj'n_ITD DOCUMENT: As a firm acquires and pays down capital, it gathers transaction data. changing_AAR = (potential_AAR-AbilityJo_Attract_&_Retain) / (baseJimeJo adj_AAR*impact DfjNC_onJimeJo adjust_AAR) changing Jraining ability = (potential_AT-AbilityJo_Train) / timeJo_adj_AT DOCUMENT: The net change in the firm's ability to train. channel spending = 0
DOCUMENT: The amount of investment in developing channels.
Contacts jper Supplier added = { Place right hand side of equation here... } DOCUMENT: The number of contacts each supplier brings with them.
Contactsjper SupplierJost = { Place right hand side of equation here... } DOCUMENT: The number of contacts taken by a supplier when it ceases being a supplier to the firm.
CostjDf_Producing = GRAPH(Processj nowledge)
(0.00, 97.0), (10.0, 97.0), (20.0, 97.0), (30.0, 96.5), (40.0, 94.0), (50.0, 89.0), (60.0, 79.5), (70.0, 56.0), (80.0, 34.5), (90.0, 22.0), (100, 18.0) DOCUMENT: As Process Knowledge goes up the firm is able to produce one unit at a cheaper cost. cost_per_FA = { Place right hand side of equation here... }
CR_per Ξmployee_per_transaction = base_CRjDuilding*impact_ofj3rand_on_CR*impactjDf_CST_onj uild*impac t_ofjC_on_CR*impact Df_SN Dn_CRj3uilding*impact Df_TD DOCUMENT: The amount of customer relationship units gained per employee per transaction.
CST_obsolescing = Customer 3upport_Technology/2
DOCUMENT: The amount of Customer Support Technology obsolescing each time period.
CST_per_$ = { Place right hand side of equation here... } DOCUMENT: The units of Customer Support gained per dollar spent.
CSTj er OK = { Place right hand side of equation here... } DOCUMENT: The units of Customer Support Technology gained per Organizational Knowledge gained. debt service = DebtM degrading Tech = Technology/18 {months}
DOCUMENT: Technology becomes obsolete. delivering = amountJo_deliver
DOCUMENT: The amount of units delivered each time period. demand = unitsj emandedjper_cust*(New_Customers+1.5*Loyal_customers) DOCUMENT: The total units desired per time period. It is a function of the number of customers and the average demand per customer. Loyal customers are assumed to want more in this calculation. earningsJτom_sales -if_KoC = sellablejjnitsj oC*pricejperjjnit Df_KoCj5old*sell_units DOCUMENT: The firm earns money from selling its Knowledge of Customers. ease DfjDuildingj oC = GRAPH(KnowledgejDf Customers) (0.00, 0.00), (10.0, 0.98), (20.0, 1.30), (30.0, 1.40), (40.0, 1.44), (50.0, 1.43), (60.0, 1.40), (70.0, 1.36), (80.0, 1.21 ), (90.0, 0.87), (100, 0.00) DOCUMENT: The more knowledge the firm has of the customer, the easier it will be to build more knowledge-except near the 100% threshold, where it will become increasingly difficult to add more knowledge, since the firm already has most relevant knowledge. ease_of_improvingj3R = GRAPH(Customerj elationship) (0.00, 0.04), (10.0, 0.44), (20.0, 1.01 ), (30.0, 1.31 ), (40.0, 1.47), (50.0, 1.51 ), (60.0, 1.46), (70.0, 1.37), (80.0, 1.23), (90.0, 1.01 ), (100, 0.00) DOCUMENT: The greater the customer relationship the firm has with customers, the easier it will be to build increase the relationship-except near the 100% threshold, where it will become increasingly difficult to build a stronger relationship, since the firm already would have such a good relationship. ease ofjocating --hannel = GRAPH(Channels) (0.00, 0.02), (10.0, 0.045), (20.0, 0.145), (30.0, 0.315), (40.0, 0.615), (50.0, 0.915), (60.0, 1.00), (70.0, 1.00), (80.0, 1.00), (90.0, 1.00), (100, 1.00) DOCUMENT: The number of channels determines how easy it is for a customer to locate a channel, which impacts the amount of units desired per customer. effective_pricejDer_share = market DricejDerj3hare*impjDf_Rwl_onj rice DOCUMENT: The price per share the firm can actually charge.
Equity = Phys_&_Fin_$Val - Debt
Fixed_Asset_utilization = GRAPH(leadJime)
(0.00, 36.5), (10.0, 81.5), (20.0, 36.5), (30.0, 36.5), (40.0, 82.5), (50.0, 83.5),
(60.0, 73.0), (70.0, 17.0), (80.0, 16.5), (90.0, 56.5), (100, 63.5) fixed_costs = Fixed_Assets*costj er_FA
DOCUMENT: Costs assessed each time period on the firm's Fixed Assets. fracj wlJost = .1
DOCUMENT: Fraction of Relationship with Investors lost each time period. gaining Contacts = building 3upplierjιetwork*Contactsjper 3upplier added DOCUMENT: When a supplier comes on board, they bring with them a certain number of contacts the firm will be able to use. gaining Customers =
((Loyal_customers*Loyal_wom*impact Df_CR_on_wom*impact_of SN Dn_g
C*impact_ofj rand Dn_wom*impactjDf_KoCjon_wom)+(New_Customers*N ew_wom*impact Df_CR Dn_wom*impact_of 3Nj3njgC*impact Df_brand D n_wom*impact_ofj oC 3n_wom))
DOCUMENT: The amount of new customers gained over a given time period. The process is a word of mouth process. The more effective the firm is at developing brand recognition, the supplier networks, customer knowledge, and customer relationships, the more customers it can gain.
Loyal Customers are assumed to have a higher word of mouth multiplier than
New Customers. gainingj ol = changeJn_ITD*Kol_gainedj er_TD gained*marginal 3ase 3fJmpj ol gross_eamings = selling_price*transactions + eamingsJrom sales Dfj oC DOCUMENT: The gross earnings of the firm for a given time period. imp_of_CR_onJimeJoyal = GRAPH(Customer_Relationship) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of Customer Relationship on the time it takes to become loyal.
Figure imgf000085_0001
impact_of_cj'nv*impactjDf 3j'nv*impactjDf_FAj'nv*impact DfJs DOCUMENT: Total impact of investing on the PE multiplier. imp DfjKoC = GRAPH(Knowledge DfjCustomers)
(0.00, 0.27), (10.0, 0.43), (20.0, 0.52), (30.0, 0.67), (40.0, 0.83), (50.0, 1.00), (60.0, 1.21 ), (70.0, 1.36), (80.0, 1.48), (90.0, 1.55), (100, 1.61 ) DOCUMENT: The impact of Knowledge of Customer on the ability to improve Customer Support Technology. imp_of_Rwlj3nj rice = GRAPH(Relationship_with_lnvestors) (0.00, 0.35), (10.0, 0.42), (20.0, 0.54), (30.0, 0.66), (40.0, 0.83), (50.0, 1.00), (60.0, 1.21 ), (70.0, 1.39), (80.0, 1.51 ), (90.0, 1.58), (100, 1.60) DOCUMENT: The impact of the Relationship with Investors on the price per share. The better the relationship, the greater the price per share. impact of_AAR_on_attracting = GRAPH(AbilityJo_Attract_&_Retain) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the ability to attract and retain on getting new employees. The greater the ability, the easier it is to attract. impact_of_AAR_on_retention = GRAPH(AbilityJo_Attract_&_Retain) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the ability to attract and retain on keeping Experienced Employees. The greater the ability, the easier it is to retain them. impact_of_APj3n 3up = GRAPH(Alliancej°artners)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the Alliance Partners on the ability to add suppliers. The more Alliance Partners, the easier it is to add suppliers. impact_of_ARCDD_on_ch = GRAPH(AbilityJo_Raise_Capital\Do_Deals) (0.00, 0.37), (10.0, 0.45), (20.0, 0.55), (30.0, 0.67), (40.0, 0.83), (50.0, 1.00), (60.0, 1.17), (70.0, 1.32), (80.0, 1.42), (90.0, 1.51 ), (100, 1.57) DOCUMENT: The impact of the ability to raise capital and do deals on adding channels. impact Df_ARCDD DnJntj-ate =
GRAPH(AbilityJo_Raise_Capital\Do_Deals)
(0.00, 1.77), (10.0, 1.71 ), (20.0, 1.60), (30.0, 1.46), (40.0, 1.25), (50.0, 1.00),
(60.0, 0.82), (70.0, 0.6), (80.0, 0.46), (90.0, 0.33), (100, 0.2)
DOCUMENT: The impact of the firm's ability to raise capital and do deals on the interest rate it will be charged on debt. The greater the firm's ability to
RCDD, the lower the interest rate they will be subjected to. impact of_ARCDD_onJech = GRAPH(AbilityJo_Raise_Capital\Do_Deals) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the ability to raise capital and do deals on the ability of the firm to improve technology. impact_of_AT = GRAPH(AbilityJo "Train)
(0.00, 0.3), (10.0, 0.38), (20.0, 0.48), (30.0, 0.62), (40.0, 0.82), (50.0, 1.00), (60.0, 1.20), (70.0, 1.38), (80.0, 1.46), (90.0, 1.54), (100, 1.59) DOCUMENT: The impact of a firm's Ability to Train on helping a New Hire become an Experienced Employee. The greater the firm's ability, the faster a New Hire can become an Experienced Employee. impactj3f_AT_onj;nowj er_emp = GRAPH(AbilityJo_Train)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00),
(60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) impact_ofj3rand_on_CR = GRAPH(Brand)
(0.00, 0.5), (10.0, 0.75), (20.0, 1.00), (30.0, 1.20), (40.0, 1.38), (50.0, 1.55),
(60.0, 1.65), (70.0, 1.73), (80.0, 1.78), (90.0, 1.83), (100, 1.85)
DOCUMENT: The impact of Brand recognition on Customer Relationship units built. The greater the recognition, the easier it is to build the relationship. impact_of_brand Dn_wom = GRAPH(Brand)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of Brand recognition on the word of mouth multipliers for gaining customers. impact 3f_cjnv = GRAPH(customerjnvesting)
(0.00, 0.39), (10.0, 0.47), (20.0, 0.59), (30.0, 0.74), (40.0, 0.87), (50.0, 1.00), (60.0, 1.10), (70.0, 1.23), (80.0, 1.34), (90.0, 1.45), (100, 1.54) DOCUMENT: The impact of customer investing on the PE multiplier. impact of C -on CR = GRAPH(Channels)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of Channels on building Customer Relationship. impactjDfjCRjDn auxjseliing = GRAPH(Customer_Relationship) (0.00, 0.12), (10.0, 0.14), (20.0, 0.18), (30.0, 0.34), (40.0, 0.5), (50.0, 1.03), (60.0, 1.45), (70.0, 1.70), (80.0, 1.81 ), (90.0, 1.82), (100, 1.84) DOCUMENT: The impact of Customer Relationship on the rate of auxiliary selling. The stronger the relationship, the greater the rate. impact_ofj3R_on_loyal_lossJrac = GRAPH(CustotnerjRelationship) (0.00, 1.99), (10.0, 1.68), (20.0, 1.51 ), (30.0, 1.30), (40.0, 1.16), (50.0, 1.00), (60.0, 0.78), (70.0, 0.56), (80.0, 0.45), (90.0, 0.4), (100, 0.39) DOCUMENT: The impact of Customer Relationship on the percentage of loyal customers who leave each time period. impactjDfjCR onjicJossJrac = GRAPH(Customer_Relationship) (0.00, 1.99), (10.0, 1.68), (20.0, 1.51 ), (30.0, 1.30), (40.0, 1.16), (50.0, 1.00), (60.0, 0.78), (70.0, 0.56), (80.0, 0.45), (90.0, 0.4), (100, 0.39) DOCUMENT: The impact of Customer Relationship on the percentage of New Customers lost in a given time period. impact_of_CR Dn_wom = GRAPH(Customer_Relationship) (0.00, 0.00), (10.0, 0.51 ), (20.0, 1.00), (30.0, 1.30), (40.0, 1.52), (50.0, 1.70), (60.0, 1.85), (70.0, 1.93), (80.0, 1.98), (90.0, 1.99), (100, 2.00) DOCUMENT: The impact of Customer Relationship on the word of mouth multipliers for gaining customers. impactjDfjCSTjDn Duild = GRAPH(Customer_Support_Technology) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the Customer Support Technology on Customer Relationship units built. The more technology the firm has, the easier it is to build the relationship. impact Df_CST Dnj oC_building =
GRAPH(Customer 3upport_Technology)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00),
(60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46)
DOCUMENT: The impact of Customer Support Technology on building customer knowledge. impact Df_CST Dn_retainingj oC =
GRAPH(Customer_Support_Technology)
(0.00, 0.31 ), (10.0, 0.36), (20.0, 0.45), (30.0, 0.57), (40.0, 0.77), (50.0, 1.00),
(60.0, 1.19), (70.0, 1.30), (80.0, 1.39), (90.0, 1.47), (100, 1.51 )
DOCUMENT: The impact of Customer Support Technology on the ability to retain Knowledge of Customers. The better the technology, the easier it is to retain. impact Df_custj"elationship = GRAPH(Customer_Relationship) (0.00, 0.4), (10.0, 0.625), (20.0, 1.00), (30.0, 1.38), (40.0, 1.73), (50.0, 2.10), (60.0, 2.43), (70.0, 2.68), (80.0, 2.85), (90.0, 3.00), (100, 3.00) DOCUMENT: The impact of the strength of customer relationship on the number of units desired per customer. impact_of_ej'nv = GRAPH(investingJn 3mployees)
(0.00, 0.39), (10.0, 0.47), (20.0, 0.59), (30.0, 0.74), (40.0, 0.87), (50.0, 1.00), (60.0, 1.10), (70.0, 1.23), (80.0, 1.34), (90.0, 1.45), (100, 1.54) DOCUMENT: The impact of employee investing on the PE multiplier. impact_of_FAj'nv = GRAPH(FAj'nvestingj--ost)
(0.00, 0.39), (10.0, 0.47), (20.0, 0.59), (30.0, 0.74), (40.0, 0.87), (50.0, 1.00), (60.0, 1.10), (70.0, 1.23), (80.0, 1.34), (90.0, 1.45), (100, 1.54) DOCUMENT: The impact of FA investment on the PE multiplier. impact_of_ITDjDnjRwl = GRAPH(lnvestment_TransactionjData) (0.00, 0.44), (10.0, 0.54), (20.0, 0.58), (30.0, 0.68), (40.0, 0.84), (50.0, 1.00), (60.0, 1.19), (70.0, 1.30), (80.0, 1.42), (90.0, 1.42), (100, 1.43) impact DfjKoC_on_wom = GRAPH(Knowledge_of_Customers)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00),
(60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) impact DfJeadJime_on_units_desiredjDer_customer = GRAPH(leadJime) (0.00, 72.0), (10.0, 69.0), (20.0, 62.0), (30.0, 61.0), (40.0, 61.0), (50.0, 61.0), (60.0, 61.0), (70.0, 54.5), (80.0, 53.0), (90.0, 42.0), (100, 0.00) DOCUMENT: The impact of lead time on the number of units desired per customer. impact_ofjMC DnJimeJo adjust_AAR = GRAPH(NetworkjContacts) (0.00, 5.97), (10.0, 5.49), (20.0, 4.98), (30.0, 4.35), (40.0, 3.87), (50.0, 3.45), (60.0, 3.06), (70.0, 2.61 ), (80.0, 2.10), (90.0, 1.71 ), (100, 1.26) impact_of_OKj--nJech = GRAPH(Organizational_Knowledge) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the organizational knowledge on the ability of the firm to improve technology. impact Df_PD_onjproductivity = GRAPH(ProductionjData) (0.00, 0.00), (10.0, 0.00), (20.0, 0.00), (30.0, 0.00), (40.0, 0.00), (50.0, 0.00), (60.0, 0.00), (70.0, 0.00), (80.0, 0.00), (90.0, 0.00), (100, 0.00) DOCUMENT: The impact of Production Data on internal productivity. impact Df_PK_on_build 3N = GRAPH(Process_Knowledge) (0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of Process Knowledge on a firm's ability to build its supplier network. The more knowledge, the easier it is to build this network. impact Df_Relationshipj uilding_on_Koc = GRAPH(Customer_Relationship) (0.00, 0.41), (10.0, 0.45), (20.0, 0.53), (30.0, 0.65), (40.0, 0.82), (50.0, 1.00), (60.0, 1.15), (70.0, 1.28), (80.0, 1.39), (90.0, 1.46), (100, 1.50) DOCUMENT: The impact of Customer Relationship on building customer knowledge. impact_of_RI_on attracting = GRAPH(Relationship_with_lnvestors) (0.00, 0.37), (10.0, 0.47), (20.0, 0.58), (30.0, 0.67), (40.0, 0.83), (50.0, 1.00), (60.0, 1.20), (70.0, 1.34), (80.0, 1.44), (90.0, 1.53), (100, 1.58) DOCUMENT: The impact of Relationship with Investors on the ability to attract new investors. The greater the relationship, the easier it is to attract new investors. impact_of_RljDn_chgj'n_ITD = GRAPH(Relationship_with_lnvestors) (0.00, 0.33), (10.0, 0.38), (20.0, 0.45), (30.0, 0.58), (40.0, 0.75), (50.0, 1.00), (60.0, 1.23), (70.0, 1.38), (80.0, 1.48), (90.0, 1.56), (100, 1.60) DOCUMENT: The impact of Relationship with Investors on the ability to gather transaction data. The greater the relationship, the easier it is to get data. impactjDf_RI_onJosing = GRAPH(Relationship_with_lnvestors)
(0.00, 1.57), (10.0, 1.54), (20.0, 1.47), (30.0, 1.34), (40.0, 1.16), (50.0, 1.00),
(60.0, 0.79), (70.0, 0.6), (80.0, 0.47), (90.0, 0.37), (100, 0.3)
DOCUMENT: The impact of Relationship with Investors on the ability to keep investors. The greater the relationship, the easier it is to retain new investors. impact_of_SN_on_AP = GRAPH(SupplierjNletwork)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00),
(60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) impact_of_SN_on_ch = GRAPH(SupplierjNletwork)
(0.00, 0.26), (10.0, 0.35), (20.0, 0.46), (30.0, 0.57), (40.0, 0.74), (50.0, 1.00),
(60.0, 1.30), (70.0, 1.47), (80.0, 1.54), (90.0, 1.58), (100, 1.60)
DOCUMENT: The impact of the supplier network on the number of channels added. impact_of 3N_on 3R_building = GRAPH(SupplierJMetwork)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00),
(60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46)
DOCUMENT: The impact of the Supplier Network on Customer Relationship units built. The more suppliers the firm has, the easier it is to build the relationship. impact_of_SN_on_gC = GRAPH(SupplierjMetwork)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of the Supplier Network on the word of mouth multipliers for gaining customers. impact_of_SN_on_SN = GRAPH(Supplierj etwork)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00),
(60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46)
DOCUMENT: The impact of the Supplier Network on the firm's ability to attract more suppliers. The more suppliers a firm has, the easier it is assumed to be to attract more suppliers. impactjDf supJnv = GRAPH(supplierJnvestment)
(0.00, 0.39), (10.0, 0.47), (20.0, 0.59), (30.0, 0.74), (40.0, 0.87), (50.0, 1.00),
(60.0, 1.10), (70.0, 1.23), (80.0, 1.34), (90.0, 1.45), (100, 1.54)
DOCUMENT: The impact of supplier investing on the PE multiplier. impact_of_TD = GRAPH(Cume "TransactionjData)
(0.00, 0.34), (10.0, 0.42), (20.0, 0.54), (30.0, 0.68), (40.0, 0.83), (50.0, 1.00), (60.0, 1.13), (70.0, 1.25), (80.0, 1.37), (90.0, 1.43), (100, 1.46) DOCUMENT: The impact of Transaction Data on Customer Relationship units built. The more data the firm has, the easier it is to build the relationship. impact_of_Technology_onjproductivity = GRAPH(Technology) (0.00, 0.00), (10.0, 0.00), (20.0, 0.00), (30.0, 0.00), (40.0, 0.00), (50.0, 0.00), (60.0, 0.00), (70.0, 0.00), (80.0, 0.00), (90.0, 0.00), (100, 0.00) DOCUMENT: The impact of Technology on internal productivity. impact DfJs = GRAPH(techjspending)
(0.00, 0.39), (10.0, 0.47), (20.0, 0.59), (30.0, 0.74), (40.0, 0.87), (50.0, 1.00), (60.0, 1.10), (70.0, 1.23), (80.0, 1.34), (90.0, 1.45), (100, 1.54) DOCUMENT: The impact of tech spending on the PE multiplier. improvingjCST = ((CST_spending*CST_per_$) + (building_OK*CST_per_OK)) * marginal 3ase_of mproving_CST*imp -)f_KoC improving_Tech = tech 3pending*baseJechjper $ 3pent*impact Df_ARCDD_onJech*impact_ ofjOK αnJech
DOCUMENT: The amount the firm's technology is improved in a given time period. interestj-ate = basej'nterest_rate*impact Df_ARCDD Dnj'ntj-ate DOCUMENT: The interest rate the firm is charged on its debt. i nte rn a I jp rod uctivity = basej roductivity*impact Df_PDjDnj3roductivity*impactjDf_TechnologyjDn_ productivity
DOCUMENT: Actual internal productivity is determined by base productivity and the impacts of Production Data and Technology.
ITDjperJrans = { Place right hand side of equation here... }
DOCUMENT: The amount of transaction data gathered for each transaction.
KoCjDbsolescing =
Knowledge Df_Customers/(obsJime Df_KoC*impact_of_CST_on_retaining_
KoC)
DOCUMENT: An amount of Knowledge of Customers will become obsolete each time period.
Kol_gainedjper_TD_gained = { Place right hand side of equation here... }
DOCUMENT: Knowledge of Investors gained per Transaction Data gained.
Kol jDbsolesenceJime = { Place right hand side of equation here... } DOCUMENT: Time Knowledge of Investors remains relevant before obsolescing. lead ime = Inventory/totaljsupply DOCUMENT: The amount of time between taking an order and fulfilling that order. losing_APs = Alliance_Partners/timejan_AP
DOCUMENT: Each time period a certain number of Alliance Partners can be lost. losing Channels = Channels/5
DOCUMENT: The number of channels lost in a given time period. losing Oontacts = losing _supplierjιetwork*Contactsj->er_SupplierJost DOCUMENT: When a supplier leaves it takes some contacts with it. losingjΞmployees =
Experienced jΞmployees/(basej-etentionJime*impact_of_AAR Dnj-etention
) losing jrixed_Assets = Fixed_Assets/10
DOCUMENT: The rate at which the firm loses Fixed Assets, for whatever reason. losingjnvestors = lnvestors*baseJoss_frac*impactjDf_Rl DnJosing DOCUMENT: The number of Investors lost over a given time period. losing JTD = lnvestment_TransactionjData/4
DOCUMENT: The amount of relevant ITD that loses relevance for a given time period. losing_Kol = Knowledge DfJnvestors/KoljDbsolesenceJime losingjoyals =
Loyal_customers*basej,oyalj,ossJrac*impact Df_CR_onj,oyal_lossJrac*im pact Df_KoC Dn_loyaljOss_frac
DOCUMENT: The number of loyal customers lost in a given time period. losingjoyals =
Loyal_customers*baseJoyalJossjrac*impactjDf_CR_onJoyalJossJrac*im pactjDfj oCjDnJoyalJossJrac
DOCUMENT: The number of loyal customers lost in a given time period. losingjιew_custs =
New 3ustomers*base_ncJossJrac*impactjDf 3Rj3nJoyalJossJrac
DOCUMENT: The number of New Customers who leave in a given time period. The stronger the customer relationship, the fewer should leave. losingjiew -usts =
Newj3ustomers*basejιcJossJrac*impactjDf_CR DnJoyalJossJrac DOCUMENT: The number of New Customers who leave in a given time period. The stronger the customer relationship, the fewer should leave. losing OK = { Place right hand side of equation here... } DOCUMENT: Each time period a certain amount of Organizational Knowledge will become obsolete. losing_Rwl = Relationship_with_lnvestors*frac_RwlJost
DOCUMENT: The natural loss of relationship that occurs from atrophy per time period. losing supplierjnetwork = SupplierjNetwork/suppliersj-esidenceJime DOCUMENT: The number of suppliers the firm loses in a given time period. losingj-infilledj-equests = Requestsj3acklog/4
DOCUMENT: The number of orders lost each time period as customers take their requests away for whatever reason.
Low_Costj°osition = { Place right hand side of equation here... }
Loyal_wom = { Place right hand side of equation here... }
DOCUMENT: Loyal Customers will have a greater word of mouth multiplier than New Customers. marginalj3ase Dfj uildingj3rand = GRAPH(Brand)
(0.00, 1.00), (10.0, 1.00), (20.0, 1.00), (30.0, 1.00), (40.0, 1.00), (50.0, 1.00),
(60.0, 0.99), (70.0, 0.94), (80.0, 0.81 ), (90.0, 0.58), (100, 0.00) marginal_easejDfj'mpj ol = GRAPH(Knowledgej--)fJnvestors) (0.00, 0.04), (10.0, 0.44), (20.0, 1.01 ), (30.0, 1.31 ), (40.0, 1.47), (50.0, 1.51 ), (60.0, 1.46), (70.0, 1.37), (80.0, 1.23), (90.0, 1.01 ), (100, 0.00) DOCUMENT: The greater the Knowledge of Investors the firm has, the easier it will be to improve this knowledge-except near the 100% threshold, where it will become increasingly difficult to add more technology, since the firm would already be near the maximum. marginalj3ase Dfj'mprovingjCST = GRAPH(Customer 3upport_Technology)
(0.00, 0.04), (10.0, 0.44), (20.0, 1.01 ), (30.0, 1.31 ), (40.0, 1.47), (50.0, 1.51 ), (60.0, 1.46), (70.0, 1.37), (80.0, 1.23), (90.0, 1.01 ), (100, 0.00) DOCUMENT: The greater the Customer Support Technology the firm has, the easier it will be to improve this technology-except near the 100% threshold, where it will become increasingly difficult to add more technology, since the firm would already be near the maximum. marginal j3asejDfj'mproving_CST_2 =
GRAPH(Customer_Support "Technology)
(0.00, 0.04), (10.0, 0.44), (20.0, 1.01 ), (30.0, 1.31 ), (40.0, 1.47), (50.0, 1.51 ),
(60.0, 1.46), (70.0, 1.37), (80.0, 1.23), (90.0, 1.01 ), (100, 0.00)
DOCUMENT: The greater the Customer Support Technology the firm has, the easier it will be to improve this technology-except near the 100% threshold, where it will become increasingly difficult to add more technology, since the firm would already be near the maximum. marketjpricej er share = market /alue/Outstanding Shares DOCUMENT: What the market believes a share is worth. It is calculated by taking the market value and dividing it by Outstanding Shares. market /alue = net_earnings*PEjnultiplier DOCUMENT: Firm market value. materials_costs = producing_byJntema Cost_of_Producing DOCUMENT: The total cost of materials for production generated over a given time period. net_earnings = gross_earnings-spending
DOCUMENT: The net earnings of the firm for a given time period. network_costs = { Place right hand side of equation here... } DOCUMENT: Costs associated with building inventory from the supplier network.
New_wom = { Place right hand side of equation here... }
DOCUMENT: New Customers have a lower word of mouth multiplier than
Loyal Customers. obsJime_of_KoC = 4
DOCUMENT: The amount of time it takes for current customer knowledge to become obsolete. obsolesenceJimejDf DK = { Place right hand side of equation here... } DOCUMENT: The amount of time new Organizational Knowledge remains relevant to the firm. orderj^ixed_Assets = 0
DOCUMENT: The number of fixed assets ordered by the firm in a given time period. orderjromjietwork = { Place right hand side of equation here.. }
DOCUMENT: The units ordered from the supplier network in a given time period. pay downjD = { Place right hand side of equation here... } DOCUMENT: The firm can choose to pay down debt. paying jown = pay_down_D
PD_per_unitjproduced = 0
DOCUMENT: The amount of Production Data generated for each unit produced.
PEjnultiplier = Base_PEjnultiplier*lmp_ofj'nvestjDnj°Ejnulti DOCUMENT: Actual worth beyond net earnings.
Phys_&_Fin_$Val = Fin_Asset_$_Val + Phys_Asset_$Val
Phys_Asset $_Val = 200 * Fixed_Assets
DOCUMENT: The value of all physical assets owned by the firm.
PKjnigrating = changej'njΞmployees*PK_perjΞmployee_orjNew_Hire DOCUMENT: Employees bring (and take away) Production Knowledge as they move into and out of the firm.
PKjDbsJime = { Place right hand side of equation here... } DOCUMENT: The length of time Process Knowledge remains relevant.
PK_obsolescing = Processj nowledge/PKjDbsJime
DOCUMENT: A certain amount of Process Knowledge becomes obsolete each time period.
PKjperjΞmployee orjNIewjHire = { Place right hand side of equation here...
}
DOCUMENT: The amount of Process Knowledge each employee has.
PKjper_unitjof_PD_acquired = { Place right hand side of equation here... } DOCUMENT: The amount of Process Knowledge gained for each unit of Production Data acquired. potential_AAR = (potential_AARJrom_Fin_A $+potentialJrom_OK)/2 DOCUMENT: Potential Ability to Attract and Retain. It is determined by a firm's assets (financial and knowledge). potential_AAR_from_Fin_A_$ = GRAPH(Fin_Asset_$_Val/avg_Fin_A_$_Val) (0.00, 0.00), (0.5, 32.0), (1.00, 50.0), (1.50, 59.5), (2.00, 66.0), (2.50, 71.0), (3.00, 76.0), (3.50, 80.5), (4.00, 84.5), (4.50, 87.0), (5.00, 89.5) DOCUMENT: The potential ability of a firm to attract and retain based upon its level of Financial Assets. The more assets a firm has relative to the average, the greater is this potential. potential_ARCDD = GRAPH(Organizational_Knowledge) (0.00, 0.00), (10.0, 32.0), (20.0, 50.0), (30.0, 59.5), (40.0, 66.0), (50.0, 71.0), (60.0, 76.0), (70.0, 80.5), (80.0, 84.5), (90.0, 87.0), (100, 89.5) DOCUMENT: The potential ability of the firm to raise capital and do deals, which is determined by the firm's Organizational Knowledge. potential_AT = GRAPH(OrganizationaljKnowledge)
(0.00, 0.00), (10.0, 10.0), (20.0, 20.0), (30.0, 30.0), (40.0, 40.0), (50.0, 50.0), (60.0, 60.0), (70.0, 70.0), (80.0, 80.0), (90.0, 90.0), (100, 100) DOCUMENT: The potential ability of a firm to train based upon its level of Organizational Knowledge. The more knowledge a firm has, the greater is the potential for the firm to train. potentialjromjDK = GRAPH(Organizational_Knowledge/avg_OK) (0.00, 0.00), (10.0, 32.0), (20.0, 50.0), (30.0, 59.5), (40.0, 66.0), (50.0, 71.0), (60.0, 76.0), (70.0, 80.5), (80.0, 84.5), (90.0, 87.0), (100, 89.5) DOCUMENT: The potential ability of a firm to attract and retain based upon its level of Organizational Knowledge. The more knowledge a firm has relative to the average, the greater is this potential. pricejper_FA = GRAPH(Technology)
(0.00, 100), (10.0, 89.5), (20.0, 82.5), (30.0, 73.0), (40.0, 65.0), (50.0, 54.0), (60.0, 45.0), (70.0, 34.0), (80.0, 21.5), (90.0, 9.00), (100, 0.00) DOCUMENT: The higher the level of technology, the less it costs to add a unit of Fixed Assets. price_per_unit_ofj oCj3old = { Place right hand side of equation here... } DOCUMENT: The price the firm can charge for each unit of Knowledge of Customer sold. producing j yjnternal = Ability o_Produce*Fixed_Asset_utilization DOCUMENT: The amount of inventory generated by the firm in a given time period. producing j yjietwork = IF orderjτomjιetwork<=Supplyjavailablejτomj\letwork THEN orderjromjietwork ELSE Supply available_fromj etwork DOCUMENT: The number of units added to the inventory by suppliers in a given time period.
Rwlj uiltj er_unit_gainJnj ol = { Place right hand side of equation here... } sellable_unitsj oC = KnowledgejofjCustomersDOCUMENT: The amount of sellable Knowledge of Customer units a firm can sell. spending = fixed -osts
+ variable_costssupplierj3roductivity = { Place right hand side of equation here... }
DOCUMENT: The amount of units each supplier can produce in a given time period. suppliers added_per $ = { Place right hand side of equation here... } DOCUMENT: The number of suppliers gained for each dollar invested in the supplier network. suppliersjOsidenceJime = 2
DOCUMENT: The length of time a new supplier remains a supplier to the firm.
SupplyjavailableJromjNletwork = Supplier_Network*supplierjproductivity DOCUMENT: The total units the supplier network is capable of delivering in a given time period.
TD_gained_perJransaction = { Place right hand side of equation here... } DOCUMENT: The amount of Transaction Data gained for a given transaction. time an_AP = { Place right hand side of equation here... }
DOCUMENT: The amount of time a new Alliance Partner will remain with the firm. timeJo_adj_AT = { Place right hand side of equation here... } DOCUMENT: The time it takes a firm to adjust its actual ability to train to the potential derived from its Organizational Knowledge. timeJo adjust_ARCDD = { Place right hand side of equation here... }
Figure imgf000096_0001
= borrowing+sellingjshares-buyingj ack- payingjdown totaljsupply = Ability o_Produce + Supply_availableJτom_Network transactions = delivehng+auxiliary_selling
DOCUMENT: The total number of transactions in a given time period. units_demandedjper_cust = base demand*ease 3fJocating_channe impactjDf_custj-elationship*impact Df_leadJimejDn_units_desiredj er_customer
DOCUMENT: The actual number of units desired per customer. units jperj oC = { Place right hand side of equation here... } DOCUMENT: The amount of sellable units for each unit of Knowledge of Customer. In some firms it may be a 1 :1 ratio, in others not. variablej--osts = brandjspending + CISjspending + debtjservice
DOCUMENT: Expenditures attributable to producing and servicing debt. weakening = Custoιmer_Relationship/5
DOCUMENT: Customer Relationship doesn't stay built up forever. If nothing is done to try to continue adding to the stock of Customer Relationship, it will weaken.
Section 7 — Conclusion
In furtherance of the art, the inventors have devised methods, software, and systems which combine asset allocation information, for example, tangible and intangible assets, and market information to derive an estimate of business market value. The exemplary embodiment classifies tangible assets into physical and financial asset categories and intangible assets into customer and employee asset categoπes. It also derives four asset-weighting factors from the market information and applies them to the physical, financial, customer, and employee assets Other facets of the invention use the four-asset framework to project and visualize market response to real or hypothetical business decisions affecting asset allocations over time. Thus, ultimately the invention provides an effective tool for strategic business management.
The embodiments descnbed above are intended only to illustrate and teach one or more ways of practicing or implementing the present mvention, not to restrict its breadth or scope. The actual scope of the invention, which embraces all ways of practicing or implementing the invention, is defined only by the following claims and their equivalents.

Claims

Claims
1 A computer system that estimates how operational decisions m a business are likely to affect its market value, the system comprising: means for representmg two or more assets of the business; means for modeling the market value of the business based on the assets; means for representing an effect of one or more operational decisions on one or more of the assets; means for determining a change m the market value based on the effect of one or more operational decisions on one or more of the assets; and means for displaying the asset composition of projected market value.
2. A computer system that estimates how one or more operational decisions of a business are likely to affect its market value, the system comprising: means for capturing quantified information for the business, with the information including balance sheet information and income statement information; means for organizing at least a portion ofthe balance sheet information and the income statement information into one or more categories of tangible assets and one or more categories of intangible assets; means for determining a contribution of one or more assets in each of the categories to a market value of the business; means for modeling an effect of one or more business decisions on the market value; means for adjusting the modeled effect based on an effect of similar decisions on one or more related businesses; and means for outputting the contribution of the one or more assets in at least one of the categories.
3. A computer system comprising: means for determining a value of one or more tangible assets m a business; means for determining a value of one or more intangible assets m the business; means for combining the value of one or more ofthe tangible assets and the value of one or more ofthe intangible assets; and means for providing a visual indication of the combination of values.
4. A data processing method for managing a business comprising: organizing tangible and intangible assets into two or more categories of assets; determining a contπbution of one or more assets in each of the categories to a market value of the business; and determining an effect of one or more business decisions on the market value.
5 A computer readable medium having computer executable instructions thereon for causing a computer to perform the method of claim 4.
6. A data processing system for managing a business comprising: means for organizing tangible and intangible assets into multiple categories of assets; means for determining a market value contribution of each of the categories; means for modeling the effect of one or more operational decisions on the market value contribution of at least one ofthe categoπes; and means for displaying the effect.
7 A data classification scheme for organizing or classifying data relating to tangible and intangible assets, the classification scheme comprising: a tangible asset category; an employee asset category; and a customer asset category.
8. The data classification scheme of claim 7 wherein the tangible asset category includes physical asset data or financial asset data and wherein the data classification scheme includes an organizational asset category.
9. A method of using a data processing system for managing a company comprising: organizing tangible and intangible assets into two or more categories of assets; processing data regarding assets in other companies to assess relative asset allocations to the two or more categoπes of assets; recalibrating an asset value model of the company based on data about one or more other companies; determining a market value contribution of each of the categories; modeling the effect of one or more operational decisions on the market value; enhancing the model based on the effect of such decisions on the other companies; making operating decisions based on the modeled effect; translating or mapping operational decisions' effect on the market value ofthe categoπes of assets; and providing a visualization of that data.
10 A business information system for a business, comprising means for retrieving information concerning one or more tangible assets, means for retrieving information concerning one or more intangible assets; and means for deπving a business valuation estimate based on the information concerning one or more tangible assets and the information concerning one or more intangible assets.
1 1 The business information system of claim 10 further comprising means for retrieving market information concerning the business, wherein the means for deπving a business valuation estimate deπves the business valuation estimate based on the market information, the information concerning the one or more tangible assets, and the information concerning the one or more intangible assets.
12 The business information system of claim 1 1 wherein the means for deriving a business valuation estimate includes: means for deriving one or more asset weighting factors from the market information; means for weighting the information concerning the one or more tangible assets according to one or more of the asset weighting factors; and means for weighting the information concerning the one or more intangible assets according to one or more of the asset weighting factors, with the business valuation estimate based on the sum of the weighted tangible asset information and the weighted intangible asset information.
13. The business information system of claim 12: wherein the information concerning tangible assets includes physical asset information and financial asset information and the information concerning intangible asset information includes customer asset information and employee asset information; wherein the means for deriving one or more asset weighting factors from the market information deπves at least four asset weighting factors; wherein the means for weighting the information concerning the one or more tangible assets weights the physical asset information and the financial asset information according to two respective asset weighting factors; and wherein the means for weighting the information concerning the one or more intangible assets weights the customer asset information and the employee asset information according to two respective asset weighting factors, with the business valuation estimate based on the sum of the weighted physical asset information, the weighted financial asset information, the weighted customer asset information, and the weighted employee asset information
14 A business information system for a business, comprising: means for receiving information concerning one or more tangible business items; means for receiving information concerning one or more intangible business items; and means for deπving a business valuation estimate based on the information concerning the one or more tangible business items and the information concerning the one or more intangible business items.
15 The business information system of claim 14 wherein the information concerning one or more intangible assets includes information concerning employee or customer relationships.
16. The business information system of claim 15 wherein at least some of the received information is received from sources external to the system.
17 A business analysis method comprising: capturing data concerning operation of a business, dividing the data mto physical-asset data, financial-asset data, employee-asset data, and customer-asset data; and modeling market data as a function of the physical-asset data, the financial-asset data, the employee-asset data, and the customer-asset data to provide a visual indication of asset allocation.
18. A business analysis method comprising. capturing data concerning operation of a first business and one or more comparable businesses; dividing the data mto physical-asset data, financial-asset data, employee-asset data, and customer-asset data for each business to define asset allocations for each business; generating a visual display of the asset allocations for the businesses; analyzing the effect of asset allocations for the businesses on overall market value of the businesses; and making a business decision which affects the asset allocation between the physical-assel data, the financial-asset data, the employee-asset data, and the customer-asset data based on the analysis
19 A business analysis method comprising: receiving or generating one or more business items; and weighting each of the one or more business items based on market data about one or more businesses.
20. The method of claim 19 further comprising: estimating an effect of one or more operational decisions on a market value of the business based on the weighting one or more ofthe business items.
21 The method of claim 19' wherein weighting each of the one or more business items includes modeling a market value of a business as a weighted sum of the one or more business items and computing a weight for each of the one or more business items based on the market value; and wherein the method further comprises changing one or more of the business items and deriving another market value of the business based on the weight for each of the one or more business items after changing the one or more business items.
22. The method of claim 19, wherein the one or more business items includes a physical business item, a financial business item, an employee business item, and a customer business
23. A business analysis method comprising: capturing two or more business items; modeling a given market value of a business as a weighted sum or linear combination of the two or more business items, including calculating one or more weights based on market data for one or more businesses, with each weight corresponding to one of the business items; and estimating a new market value of the business from the weights and the business items after changing the one or more business items.
24. The method of claim 23 : wherein the weighted sum of the two or more business items is a linear combination of the two or more business items; and wherein modeling the given market value ofthe business includes a regression analysis
25 A business analysis method comprising' capturing a business asset allocation schedule including one or more business items; and determining a weight for each of the one or more business items based on market data for one or more businesses.
26. A method of estimating a value of a business, comprising: capturing a business asset allocation schedule including one or more business items; and estimating the value of the business from the one or more business items and market data for one or more businesses.
27 The method of claim 26 wherein market data comprises data related to the exchange of equity or debt instruments for the one or more businesses.
28 The method of claim 26 wherein estimating the value of the business based on the one or more business items and on market data for one or more businesses comprises: weighting each of the one or more business items based on the market data for one or more businesses; and estimating the value ofthe business based on each of the two or more weighted business items.
29 The method of claim 28 wherein weighting each of the one or more business items includes deπving one or more corresponding regression coefficients based on the market data and scaling each of the one or more business items based on its corresponding regression coefficient.
30. A business analysis method comprising' capturing data concerning a business; distributing a first portion of the data to a physical-asset module, a second portion of the data to a financial-asset module, a third portion ofthe data to an employee-asset module, a fourth portion of the data to a customer-asset module; providing market data to the physical-asset module, the financial-asset module, the employee-asset module, and the customer-asset module; and calculating a respective market contribution coefficient in each module, with each coefficient estimating a proportionate effect of each portion of data on the market data
31 A method of estimating a \ alue of a business, comprising' capturing a business asset allocation schedule including two or more asset-\alue indicators from two or more corresponding asset categories, weighting each of the two or more asset- value indicators based on market data for one or more businesses; and estimating the value of the business based on each of the two or more weighted asset- value indicators
32 The method of claim 31 wherein the business asset allocation schedule includes a category of tangible assets and a category of intangible assets.
33 The method of claim 31 wherein weighting each of the two or more asset-\alue indicators based on market data for one or more businesses includes weighting the asset- value indicators based on market data for the business, for a group of businesses in a common industry, for a group of business m a common economic sector, or for a group of businesses having one or more common traits.
34 The method of claim 31 , wherein the business asset allocation schedule includes at least four asset categoπes and at least four corresponding asset-value indicators, weighting each ofthe two or more asset-value indicators includes weighting each of the four asset-value indicators; and estimating the value of the business includes adding the four weighted asset-value indicators
35 The method of claim 31, wherein the business asset allocation schedule includes a physical-asset category and a corresponding physical-asset-value indicator, a financial-asset category and a corresponding financial-asset-value indicator, a customer-asset category and a corresponding customer-asset-value indicator, and an employee-asset category and a corresponding employee-asset category.
36 The method of claim 31 wherein weightine each of the two or more asset- value indicators includes deπving two or more corresponding regression coefficients based on the market data and scaling each ofthe two or more asset- value indicators based on its corresponding regression coefficient
37 The method of claim 31 wherein receiving or generating a business asset allocation schedule comprises receiving information through a wired or wireless communications network from one or more public or propπetary databases and wherein weighting each ofthe two or more asset-value indicators includes receiving information through a wired or wireless communications network from one or more public or propπetary databases including market data for the one or more businesses
38 A method of estimating a value of a business, comprising: capturing a business asset allocation schedule including a physical-asset- value indicator, a financial-asset-value indicator, a customer-asset-value indicator, and an employee-asset-value indicator, weighting the physical-asset-value indicator, the financial-asset-value indicator, the customer-asset-value indicator, and the employee-asset-value indicator based on market data for one or more businesses; and estimating the value of the business based on the weighted physical-asset-value indicators, the weighted financial-asset-value indicator, the weighted customer- asset- value indicator, and the weighted employee-asset-value indicator
39 The method of claim 38 wherein weighting each asset-value indicator based on market data for one or more businesses includes weighting each asset-value indicator based on market data for the business or for two or more businesses having one or more common traits.
40 The method of claim 38 wherein weighting each of the two or more asset-value indicators includes deriving two or more corresponding regression coefficients based on the market data and scaling each ofthe two or more asset-value indicators based on its corresponding regression coefficient.
41. The method of claim 40 wherein receiving or generating a business asset allocation schedule compπses receiving information through a wired or wireless communications network from one or more public or proprietary databases and wherein weighting each ofthe two or more asset-value indicators includes receiving information through a wired or wireless communications network from one or more public or propπetary databases including market data for the one or more businesses.
42 A method of estimating a value of a business, comprising, receiving business information about the business, deriving or extracting from the business information a business asset allocation schedule including a physical business item, a financial-business item, a customer business item, and an employee business item; receiving market information for one or more businesses having at least one trait in common with the business through a wired or wireless communications network from one or more public or proprietary databases; weighting the physical business item, the financial business item, the customer business item, and the employee business item based on the market information, wherein weighting includes deriving a corresponding regression coefficient based on the market information for each business item and scaling each business item based on its corresponding regression coefficient; and estimating the value of the business based on the weighted physical business item, the weighted financial business item, the weighted customer business item, and the weighted employee business item.
43 A method of analyzing hypothetical operating decisions for a business, comprising: modeling a market value indicator of the business as a mathematical function of two or more business items, modeling or representing a business operating decision as a change in one or more ofthe business items; and evaluating the mathematical function based on the change in the one or more of the business items to determine a relative change in the market value indicator or to determine a projected market value indicator.
44. The method of claim 43 wherein modeling a market value indicator of the business compπses performing a regression analysis of the market value indicator and the two or more business items.
45 A method of estimating a market value of a business, the method comprising: receiving infomiation concerning tangible assets and intangible assets; calculating one or more asset weighting factors based on information concerning past or current market value of the business, weighting the information concerning the tangible assets and intangible assets based on the one or more asset weighting factors; and combining the weighted information concerning the tangible and intangible assets.
46 A method of estimating a market value of a business, the method comprising: receiving information concerning tangible assets and information concerning intangible assets, weighting the information concerning the tangible assets and the information concerning intangible assets based on one or more market-based weighting factors; summing the weighted information concerning the tangible assets and the information concerning the intangible assets to provide an indication of market value for the business
47. A method of estimating a market value of a business, the method comprising: receiving asset allocation information identifying two or more asset allocation amounts; weighting one or more of the asset allocation amounts based on one or more market- based weighting factors; and summing the asset allocation amounts after weighting one or more ofthe asset allocation amounts to provide an indication of the market value.
48. A method of analyzing hypothetical asset allocation strategies, the method comprising: capturing data concerning two or more asset allocation categories; weighting the data using one or more market-based asset weighting factors; displaying an indicator of market response on a display.
49 A method comprising: identifying two or more business components that affect value of a business aggregating the identified assets into two or more categories; retrieving or determining a market value of the business; weighting the assets based on the market value of the business; and modeling the market value as a sum ofthe weighted assets m the two or more categoπes.
50. A computer readable medium having instructions stored thereon for causing a computer to implement one or more methods descπbed in claims 17 through 49.
51. A method of modeling asset investment allocations m an operating business concern, the method comprising. defining tangible and intangible assets as having a value; modeling the effect of business operational decisions on the value of the assets; and providing a visual indication of such effect on the value of the assets.
52 A method of analyzing hypothetical asset allocations of a business, comprising, classifying assets of the business into two or more categories; determining a market-value regression model including an asset-value indicator for each of the two or more asset categories and a regression coefficient for each asset- value indicator, with each regression coefficient based on market data for one or more businesses; changing one or more of the asset- value indicators; and outputtmg a market value based on the market value regression model after changing one or more of the asset-value indicators.
53 A data processing system for managing a business comprising: organizing tangible and intangible assets mto multiple categoπes of assets; determining a market value contribution of each of the categories; and displaying the effect.
54 A system comprising: means for representing or determining values of assets in a business; means for combining the values of the assets based on a market value for the business; and means for providing a visual indication of the combination of values
55 A method of managing a target business based on business information about a one or more other businesses, the method comprising: generating or receiving business information for the target business; generating or receiving business information for the one or more other businesses. classifying the business information for the target business into two or more asset categoπes, classifying the business information for the one or more businesses into the two or more asset categories; modeling a market value associated with the target business as a function of the assets in the two or more asset categories; modeling a market value associated with the one or more other businesses as a function of the assets m the two or more asset categories: and comparing one or more portions of the function for the market value associated with the target business to one or more portions of the function for the market value associated with the one or more other businesses.
56. A method comprising deriving meaningful information about a company by analyzing standard market data associated with the company or standard market data associated with one or more other companies.
57 A method comprising deπving data indicative or representative of the relative contribution of one or more assets of a business to a market value of the business, based on business information about one or more other companies.
58 A financial measurement and reporting system comprising: means for collecting business items for a business, means for classifying the business items into at least physical, financial, employee and customer categories; means for determining a relative contπbution of one or more of the business items in each of the physical, financial, employee, and customer categories to a market value of the business; means for reporting the business items classified into the physical, financial, employee and customer categories and the relative contπbution of the one or more of the business items in each of the physical, financial, employee, and customer categories.
59. A financial measurement and reporting system comprising: means for identifying one or more business items for a business; means for determining a relative contπbution of each of the one or more business items to a market value of the business; and means for reporting the relative contπbution of the one or more of the business items to the market value of the business.
60 The system of claim 59 wherein the means for reporting comprises a paper document or an electromc display.
A computer-implemented method comprising: receiving or generating two or more business items; modeling a given market value of a business as a weighted sum or linear combination) of the two or more business items, including calculating one or more weights based on market data for one or more businesses, with each weight corresponding to one of the business items; and estimating a new market value of the business from the weights and the business items after changing the one or more business items.
The method of claim 61 : wherein the weighted sum of the two or more business items is a linear combination of the two or more business items; and wherein modeling the given market value of the business includes a regression analysis.
A method of estimating a value of a business, comprising, receiving or generating two or more business items for the business; weighting each of the two or more business items based on two or more corresponding market-based weights; and determining a sum of the two or more weighted business items.
A method of depicting a market value of a business, comprising' receiving data regarding the market value of the business, receiving data regarding the business, the data including a first portion concerning one or more physical assets of the business, a second portion concerning one or more financial assets of the business, a third portion concerning one or more employee assets of the business, and a fourth portion concerning one or more customer assets of the business; determining first, second, third, and fourth relative contributions to the market value based respectively on at least the first, second, third, and fourth portions of the data; and displaying a graphic aid having a total area and including first, second, third, and fourth respective regions, with each respective region having a respective area based on a ratio of a respective one of the total relative contributions to the market value.
65 A method of depicting a market value of a business, comprising recen ing data regarding the market value of the business, receiving data regarding the business, the data including a first portion concerning one or more physical assets of the business, a second portion concerning one or more financial assets of the business, a third portion concerning one or more employee assets ofthe business, a fourth portion concerning one or more customer assets of the business, and a fifth portion concerning one or more organizational assets for the business, determining first, second, third, fourth, and fifth relative contributions to the market value based respectively on at least the first, second, third, fourth, and fifth portions of the data, and displaying a graphic aid having a total area and including first, second, third, fourth, and fifth respectπ e regions, with each respective region having a respective area based on a ratio of a respective one of the total relative contributions to the market value
66 The method of claim 66, wherein the graphic aid has a rectangular periphery
67 The method of claim 66, wherein the graphic aid has a rectangular periphery, wherein each of the first, second, third, and fourth regions are five-sided polygons, and wherein the fifth region is a four-sided polygon
68 The method of claim 66, wherein the graphic aid has a rectangular periphery, and wherein each ofthe first, second, third, fourth, and fifth regions includes at least four sides
69 A method of depicting a market value, comprising decomposing the market value into at least five components, and rendering an image having a first bounded area representative of the market value, with the first bounded area comprising at least five identifiable regions, with each of the five regions having an area based on the proportionate contπbution of a respective one of the five components to the market value
69 A method of depicting a market value, comprising decomposing the market \ alue into at least three components, and rendering an image having a first bounded area representative of the market value, with the first bounded area comprising at least three identifiable regions, with each of the three regions having an area based on the proportionate contribution of a respective one of the three components to the market value
70 A graphic aid for depicting a market value, comprising. a first region representative of an actual or estimated proportionate contribution of employee assets to the market value; and a second region representative of an actual or estimated pro rata contribution of customer assets to the market value
71 The graphic aid of claim 70, wherein one of the first and second regions represents a negative contribution to the market value.
72 A graphic aid for depicting a market value, comprising a first region representative of an actual or estimated contπbution of physical or financial assets to the market value, a second region representative of an actual or estimated proportionate contribution of employee assets to the market value; and a third region representative of an actual or estimated pro rata contribution of customer assets to the market vlaue.
73 The graphic aid of claim 70, wherein one of the first and second regions represents a negative contribution to the market value.
74 The graphic aid of claim 70 further comprising: means for indicating that at least one of the customer assets, the employee assets has made no appreciable contribution to the market value
75 A computerized business consulting system, comprising means for receiving or processing market data, means for receiving business data and one or more consulting requests from a first business; means for receiving business data and one or more consulting requests from a second business, means for organizing the business data from the first or the second business into two or more asset categoπes; and means for determining an answer to the one or more of the first consulting requests or second consulting request, with the answer based on the market data and the organization of the business data mto the two or more asset categories.
76. The system of claim 75, wherein the means for receiving business data and one or more consulting requests from the second business can receive concurrent with the means for receiving business data from the first business
77 The system of claim 74 wherein one or more of the consulting requests from the first business includes a request for a projection of a market response to a operational decision.
78 The system of claim 77, wherein the means for organizing the business data organizes the data mto three or more categories and wherein the means for determining an answer includes. means for modeling the market data as a function of at least a portion of the business data m each of the three or more categories; and means for determining or estimating effects of the operational decision on at least the portion the business data in each of the categoπes; and means for evaluating the function based on the determined or estimated effects to determine an estimate or projection of new market data.
79. The system of claim 78 wherein the market data is a market value of the first business, and the system further comprises means for communicating the estimate or projection of new market data to the first business
PCT/US1999/029467 1998-12-11 1999-12-11 System for modeling, measuring, managing, and depicting the effects of business decisions on market value WO2000034911A2 (en)

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