More on values-architecture
February 9th, 2010
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The discussion on values-architecture and values in business continues happily unabated. Still seems worthwhile, and also seems useful to re-post some of it here to make it more generally available.
@Tom You asked for suggestions.
Keep it simple. Keep it brief. That is what business people want.
Yup. But they don’t like the results of simplistic, which is what we’ve got at the moment. 
Condensing the simple out of the complex is darned hard work, which is perhaps why most people prefer simplistic. Even though it doesn’t work.
@Cliff – “Price equals value at equilibrium, so a price should reflect a value.”
No, it doesn’t. You’re using a circular definition in which ‘value’ is described solely in terms of price. Which you’re welcome to do if you wish; but you need to be aware that there are very serious consequences, one of which is that it forces you to measure every possible value in monetary terms (hence the political philosophy called ‘monetarism’, popularised by Reagan and Thatcher amongst others). Since some values – religious faith, for example – make no sense at all in monetary terms, we either have to invent spurious metrics which can seem to make monetary sense, or ignore the value altogether – neither of which choices are viable in the medium- to longer-term.
“If a person buys stock and becomes a shareholder, then yes, they have paid a price. However, if they sell the stock, they realize a value.”
No, that’s the same circular definition: “value = realised/realisable difference in price”. In effect, ‘value’ here is ‘potential to obtain resources exchangeable within the transaction-economy’. To quote a famous example, “money can’t buy me love” – it can buy a _simulation_ of it (ie. a transaction) but not love itself (ie. a value – the feeling of loving and being loved). Likewise money can buy me the simulation of attention (it’s called ‘advertising’) but it does actually guarantee the real committed attention of the attention-economy (the underlying value). The fact that the underlying need is not satisfied in each case leads to addictive behaviours that may seem very profitable on the surface (’sex-industry’, anyone?) but cause serious problems elsewhere, via complex-system feedback loops as per ‘United Breaks Guitars’.
A value is based in a _feeling_. The only link between price-based ‘value’ and value in the broader sense is that the actual or potential availability of funds creates the feeling of certainty that transactionable resources will be available as and when required. That feeling of certainty (or desire for it) is only _one_ amongst many values in play in an organisation’s enterprise: if we stick to the delusion that ‘value = difference in price’, we are forced to attempt to model a complex multi-dimensional context in only one dimension. That would be a guaranteed path to failure in any other form of business-analysis: so why on earth would you think it would work any better in this one?
Again, please, think broader: to understand value in business, we need to model it _as_ value, not via a crude kludge that tries to force it into a price.
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@Cliff – “A side comment, just to show that I have feeling for the social issues that Tom has raised:”
I perhaps need to reiterate that my point here about the social-issues is in terms of their _business impact_, not about the issues themselves. I’m trying to keep all of this discussion strictly to the theme of the thread: “What is value in business?”
To illustrate this, let’s do a business-oriented value-analysis starting from your next comment: “I am a big believer in transaction taxes/fees that encourage investors to hold investments for awhile”.
>>
I am a big believer in transaction taxes/fees that encourage investors to hold investments for awhile – even for market insiders or “specialists” who currently can perform stock trades without any fees of any kind. There is currently no “impedance” in the system and I am very worried about the direction that speculation is headed and how unstable it might make the entire world economy. Capital markets are needed but they are currently set up as a scam by the trading community to skim money from the entire capital market environment
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Note first that transaction-taxes are a _method_ to tackle a _symptom_. If we go straight to impose taxes without exploring the underlying issues, we’re likely to fall into the classic IT-industry trap of pre-packaged ’solutions’ looking for a suitable problem – the cart-before-horse’ syndrome. (For US folks especially, there are also some serious concomitant questions about where that money will go once it passes into government hands. )
)If we do a conventional business-architecture from the traders’ point of view, our business-model would use a conventional organisation-centric view of the enterprise, and hence would cover only those stakeholders directly engaged in the transactions: the trader, the client, and various ‘middle-men’ roles. It would cover only the monetary aspects of the value-propositions and the like. It would also be built in accordance with current law, and hence would assume zero-tax transactions. Zero-tax is clearly preferable for all the direct players in the transaction: it’s more profitable for the trader, and (probably) cheaper for the client. _Within_ that closed circle, everyone’s happy – probably.
But the point is that the _real_ enterprise in that context _does_ extend beyond that closed circle. Whilst everyone’s ‘making money’ within the circle, there are huge externalised costs (in many different senses of ‘cost’) in the broader ecosystem: local ‘efficiency’ ends up destroying whole-of-system effectiveness. But these costs are invisible _within_ the circle, because we’re only modelling the direct-transactions.
The core social value in play here is ‘fairness’, which in practice is expressed in a variety of different forms, some of which are very well described in Cliff’s post above. But note that this is nominally _external_ to the closed-circle – yet _their existing business-model depends on zero-taxes_. If transaction-taxes are introduced, that business-model becomes non-viable. Which for them is a very serious business-architecture problem – yet it’s one which, at present, they have no way to see.
So if I’m a business-architect working for one of the traders, how do I ’surface’ that critical dependency? The answer is to do what I’ve been describing in all of these posts:
- extend the architecture-model to the whole enterprise, not just the client/prospect border
- model the cross-dependencies between transaction-economy, attention-economy and reputation/trust economy
- include values _as_ values (not solely in monetary form) within my business-architecture models
This is not trivial: an unexpressed, unreleased value will keep on building until it eventually explodes, destroying not merely the business-model but at lot else whilst it’s at it. A colleague, for example, was once at a creditors’ meeting which very nearly became a lynch-mob: traders, you have been warned!
Since the previous post on ‘Values-architecture 101‘, the discussion on LinkedIn on values-architecture and values in business continues happily unabated. Still seems worthwhile, and also seems useful to re-post some of it here to make it more generally available.
I know I tend to write long, so perhaps unsurprisingly one person commented:
@Tom You asked for suggestions.
Keep it simple. Keep it brief. That is what business people want.
Yes, true. But business-folks also don’t like the results of simplistic, which is mostly what we get at the moment. 
Condensing the simple out of the complex is darned hard work, which is perhaps why most people prefer simplistic. Even though it doesn’t work.
The path from complex to simple necessarily goes through something called ‘work-in-progress’ – which invariably and inevitably is going to be somewhat messy, tangled, confusing and the rest. And long-winded, too. Hence, my apologies, ‘cos this is indeed a work-in-progress…
Anyway, for those who don’t mind things that only halfway towards simple, more after the ‘Read more…’ link.