From Producing Things To Producing Value

by Jay Deragon on 01/23/2013

Intangibles Matter Every business is systemic in nature. Business represents a “system” of inputs, processes and outputs.

On the output side of a business are the results of peoples efforts to work in processes with the aim of creating value for the customer.  On the input side of a system are the suppliers whom provide tangible and intangible assets for the business to use in creating and distributing to the marketplace for consumption.

Systems thinking is the process of understanding how things influence one another within a whole. In organizations, systems consist of people, structures, strategies and processes that work together to make an organization “healthy” or “unhealthy”. Systems thinking is also an approach to problem solving, by viewing “problems” as parts of an overall system, rather than reacting to specific part, outcomes or events and potentially contributing to further development of unintended consequences.

Systems thinking is not one thing but a set of habits or practices within a framework that is based on the belief that the component parts of a system can best be understood in the context of relationships with each other and with other systems, rather than in isolation. Systems thinking focuses on cyclical rather than linear cause and effect.

From Producing Things To Producing Value

business has changedWhat mattered most in the Industrial Era was producing a lot of things. These were tangible things that the marketplace willingly and aggressively consumed. Producing, distributing and selling things was the method for creating tangible results… and money which went to buying more things.

The Information Age was the period in human history characterized by the shift from production of things to an economy based on the manipulation of information, i.e., an information society. The onset of the Information Age is associated with Digital Revolution, just as the Industrial Revolution marked the onset of the Industrial Age.

The information age increased the production and distribution of knowledge. The more knowledge consumed the more awareness and understanding of “things” spread to the masses. This phenomena increased consumer expectations for value and transparency of information needed to determine value. The markets demand for value increased and business leaders had to learn to “produce more value” rather than things.

The economics of business has shifted from an empahsis on tangible things to the recognition of intangible value. Subsequently the nature of business has shifted from “using machines to using minds” to create more human value by adopting human values. This represents a shift in thinking. Business results are now the result of effectively using intangible capital to produce tangible results.

The systemic nature of business has also changed from measuring and emphazing results to measuring and emphasizing use of intangible capital. This is the beginning of a new era, The Social Era

{ 1 comment }

SystemsThinking Writings January 23, 2013 at 10:49 pm

We shouldn’t forget that each phase is built on the previous one and the previous one is still necessary. We can only have a focus on intangibles because the tangibles are still being met. We should not lose sight of the fact that if we stop being able to meet tangible needs, the higher levels of the economy will be in trouble.

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