Sunday, October 16, 2005

Cracking The Value code - How Successful Businesses Are Creating Wealth in
the New Economy
By Richard E S Boulton, Barry D Libert and Steve M Samek
Publisher: Harper Business

THERE are aspects of economy that befuddle many of us non-economists. But every book on management or economics have facts and figures that will benefit anyone of us who have the patience to pause and learn.

THIS book begins with the line `based on a three-year, 10,000-company
study...' At journey's end when the last page of the Epilogue is finally
turned over, there's a sense of great relief. It was no fun chewing
This is one `code' book that's hard to crack. It helps if the reader has
the mental stamina to plough through what seems like a vast field of
management jargon. The book's saving grace is found in the numerous true-
case studies of companies which have actually identified and applied the
necessary values. The benefits are seen in their healthy balance sheets.
To achieve an elementary understanding of this book, a five-minute
visual study of the Contents page is compulsory. In particular, scrutinise
the sub-headings under Parts 1, 2 & 3. Part 1 deals with `See What
Matters'; Part 2 covers `Invest in What Matters' and Part 3 touches on
`Manage What Matters'.
The book's objective is clear but its delivery is long and winding.
There is a generous display of bar charts, horizontal and vertical but
their merits and usefulness are held in serious doubt.
However, a one-word write-off of this book would be grossly unfair to
its authors. Half-through the book, there emerged a distinct but not an
altogether unpleasant flavour that calls for closer attention.
In the first section `See What Matters', it is said: `Today's business
world has been transformed by globalisation, breakthrough technologies,
and new levels of competition in which old rules of business are
constantly breached. These are the hallmarks of the New Economy, and they
leave companies with no choice but to develop new business models attuned
to the new reality. Old ways of managing and measuring assets no longer
Managers are asked how can they create greater value for their
companies. The answer is to identify the firm's most important sources of
value and scrutinising intangible assets that fall largely outside the
formal measurement system.
Intangible assets come in the form of employees and customers. Strange
as it may seem, about 85 per cent of 250 executives interviewed revealed
that although they recognised the significance of investment in workers
and clients, less than 35 per cent of them said they acted accordingly.
The middle section `Invest in What Matters' focuses on employees because
people are deemed as human capital. It is said that the `value of employee
assets lies in their skills, knowledge, experience, and attitudes and is
enhanced by an organisation's ability to hire, train, motivate and retain
the best people'.
USAA, a property and casualty insurance group, stands out as a shining
example of a firm that creates value with employees. USAA in its 77-year
history has the enviable record of attaining the best customer service in
its industry. USAA insists that its 22,400 employees are `passionate about
serving people' and new workers have to attend at least 10 weeks of
training sessions.
Some of the aspects discussed at length throughout the book are abstract
to the unknowing mind. Fortunately, there is a glossary.
Richard Boulton, Barry Libert and Steve Samek, the co-authors of this
book are senior partners of Arthur Andersen. Arthur Andersen is an
organisation that focuses on assurance, tax, consulting and corporate
finance. The company employs 77,000 people in 84 countries and has a long
tradition of excellence since 1913.
Putting it all together in the final section of `Manage What Matters',
the three joint authors of Cracking the Value Code suggest that when all
else fails, break all the rules.
They cite the example of Encyclopedia Britannica which, in October 1999,
arrived at the decision to give away the contents of its 32-volume
reference set which was selling at US$1,300 (RM4,940). Its strategy was to
get advertising revenue of US$35 million a year. During the first week
when was launched, the Internet hits on the site totalled
10 million per day.
Whether the reader agrees with what is discussed in the book is not so
important. The importance lies in the fact that most of the principles
mentioned have been applied to varying degrees of success by
organisations, big and small.
The topics covered and the case studies highlighted are thought-
provoking. They may be unpalatable as garden snails to those outside this
field of specialised interest but the formulas for success are well argued
and deserve at least some hours of rational thought and contemplation.

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