The Accounting Problem
In 2013, the US Bureau of Economic Analysis released for the first time GDP figures that included intellectual property products. This moment was noted by analysts at McKinsey with, “And while that may seem like an arcane shift relevant only to a small number of economists, the need for the change reflects a broader mismatch between our digital economy and the way we account for it. This problem has serious top-management implications.” In the interim, Apple has become a trillion dollar company selling products that cost about $500 to build. How can Apple be so valuable? Most of us will say, “It’s the brand.” That’s fine, but what makes up the brand? What makes up those intellectual property products? What inventory can account for the gap between traditional valuation and the new digital premium? What is the value of ideas?
The Value of Ideas
Verna Allee, one of the founders of knowledge management, wrote, “The most critical factors of success — the intelligence of employees, the systems and processes in place to get the work done, and the quality of customer and supplier relationships — don’t show up anywhere on the balance sheet.” As an example, as part of a regular study from the consultancy Ocean Tomo, researchers found that the intangible assets of corporate market value, in this case the S&P 500, have steadily risen from 17% in 1975 to over 84% in 2015. Intangibles are assets ranging from our external relationships such as contracts, partnerships, investors, brand recognition, and suppliers, to our people and their attendant knowledge, to the systems and processes we use to enable value creation. At 84%, it seems the intellectual property products are the most important part of US GDP.
In another analysis, McKinsey found that a key measure of the highest performing companies was their R&D spending. From 5,570 of the world’s largest public and private companies, the top economic profit performers spent two to three times more on R&D than their immediate peers and ten times more than the bottom performers. R&D is about exploring ideas.
So what is the thread that runs through all of this information? It is the intelligence of the employees and their communication that creates the intangibles.The intelligence of the employees create the contracts and relationships. The intelligence of the employees build the brand and sign up the suppliers. The intelligence of the employees put in place the processes and systems. How is this done? By the exchange of ideas.
So what are ideas? Webster defines ideas as formulated thoughts or opinions. So ideas in the work context are the thoughts and opinions communicated across an enterprise. It’s not a stretch to say that ideas are the enterprise.The intelligence of the employees is instantiated in their communicated thoughts and opinions. Is there a way to make tangible those valuable ideas?
State of the art natural language processing via open source machine learning tools has opened the door to making our ideas tangible. While most may be familiar with Facebook bots or Siri or Alexa, modern natural language processing has many capabilities. One of the most powerful is the ability to identify patterns. In language and communication analysis, one of the foundational concepts is called Zipf’s Law. And Zipf’s Law is about patterns. It’s Zipf’s Law that encourages Wheel of Fortune contestants to select RSTLNE as their final round letters. Those are among the highest frequency letters used in English. Words also follow Zipf’s Law. So too do phrases. Using Zipf’s Law, researchers have developed a huge amount of open source models that help us find patterns in communication. From skip-thought vectors to Google’s BERT, machine learning based natural language processing is a very cost effective way to find the valuable ideas iterating in your communication data. What was previously unstructured data becomes value accounting, analytics, and even knowledge discovery.
Introducing the Idea Index™
At Take2, we have conducted the research and devised a very unique suite of data curations to help you discover the ideas iterating away, creating value in your enterprise. We picked best of class software tools, all open source, and all well supported, to drive machine learning-based, natural language processing. We curate the outputs, using a linked data architecture, to create a fully integrated view of your digital capital from an idea perspective. When complete, you have a modern machine learning-ready graph of your ideas, along with a suite of knowledge graphs covering topics such as process, talent, customers, product, and even systems. All of these products are also ready for perusal, via conversant natural language, by curious end users. This environment is find, not search. Most of you don’t care about the details of how we use JSON-LD, resource centric data, skip-thought vectors, or BERT but not ERNIE, so here are a few of the capabilities of your Idea Index:
- Just like with Twitter, you can find the most popular (valuable?) or newly trending ideas.
- Business analysts can also explore idea relationships and pathways from initiating ideas to finishing product ideas.
- Your structured data becomes the input to knowledge graphs that illustrate the knowledge capital behind your ideas.
- Market analysis becomes an exercise of exploring how ideas in the marketplace resonate with ideas in your enterprise.
- Product teams can manage ideas, the value creators, not work.
Value Found, Accounting Enabled
What leader would not want an accounting of 84% of the value of their enterprise? When you are ready, we would love to help you find your ideas.