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Value-added business

Cracking the Value Code could contain valuable insight for your business.

Whether you own or manage a big business or a one-person shop, there are many tangible ways to add value to your enterprise.

“But, in the New Economy, it is intangible assets such as relationships, knowledge, people, brands, and systems that are taking center stage,” according to Richard E.S. Boulton, Barry D. Libert, and Steve M. Samek in their book “Cracking the Value Code,” (HarperBusiness, $27, hardback).

The three authors are American and British partners in Arthur Andersen, the massive accounting and professional services firm. They examine how successful businesses are creating wealth. Their work is based on a three-year study of some 10,000 companies, plus their own experiences in value creation.

“Cracking the Value Code” is an eye-opening and thought-stimulating approach to making companies of all sizes more profitable in the near and long term. In the authors’ view: “Leadership, one of the key factors in determining the future prospects of a company, is invisible on its balance sheet. So are many of the assets that are essential to the creation of value in the New Economy. In fact, for an organization to succeed today and in the years ahead, it is going to have to create value in totally different ways, using assets that are not even captured by our current accounting methods.”

This book takes a three-part approach to value creation. Part One focuses on how companies create value today. Part Two looks at how a number of leading businesses are “leveraging specific types of assets to create exceptional value.” And Part Three sums up the challenges facing businesses today and actions that can be taken “to design, build, and manage a business model for success in the New Economy.”

The authors emphasize that it is “the complex interaction of a company’s mix of assets–its economic DNA if you will–that creates or destroys value.”

In the heart of their book, they raise a number of key questions, such as: Who is creating value with physical assets? Who is creating value with employee assets and supplier assets? And, who is creating value with customer assets and organizational assets?

And as they answer each question, they provide concrete examples of how more value can be created by using such tools as organizational structure, corporate culture, brands, receivables, inventory, land, buildings, debt, and suppliers. They also describe four “disconnects” that continue to handicap many managers: (1) an incomplete view of the enterprise; (2) an incomplete view of strategy; (3) an incomplete understanding of the market; and (4) an incomplete view of value.

“Today,” the writers note, “government policy, business strategy, risk management, process improvement, and reporting are still primarily shaped by the industrial economy and the centuries-old measurement system that preceded it. But business leaders, regulators, politicians, and academics alike are struggling to find a new language and a new set of principles … to understand the underpinnings of success in this new age, and to reinvent the legacy of measurement.”

This book could help clarify their thinking.

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