Customer Reviews

Cracking the Value Code: How Successful Businesses are Creating Wealth in the New Economy

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The New Economy is apparently NOT just for the dot.coms of the world! There is hope for every brick and mortar, "old economy" business to rise to the challenges of the New Economy by leveraging all of their assets creatively and powerfully. This book presents an interesting model of how organizations create value for their customers, and goes out of its way to illustrate the rationale behind some of the bloated market caps we've all observed. An excellent, case-story based text, with a compelling view of how businesses can succeed in this brave new world of rapid hyper-change and radical super-competitiveness. A delight for both business practitioners, consultants and investors alike. A MUST READ for every corporate CEO. Also, a super-easy read....I did it in little over one hour! The wide margins and embedded graphics make it easy to jot down notes for future reference.

The core concept the authors are trying to drive home is that while conventional accounting practices list only the tangible assets in the balance sheet, it is important to recognize and leverage on the intangible assets that are largely ignored.Data collected from over 10000 companies, empirical evidence shows the progressive decrease in the ratio of book value to market value of companies. It is also shown that for companies that created most of the wealth in a very short span, this ratio is the lowest; as low as 0.03 in some. This is attributed to the recognition of intangible assets of the new economy companies that are not reported in the balance sheet but recognized by the stock market.

It is then argued that in order to add value and create wealth , companies need to adopt a strategy to optimize the use of all their assets - Physical, Financial, Organizational, Customer and Employee & Customer assets. The book defines each of these assets and a small case study is presented as to how a particular company succeeded in creating value using each of these assets. An analogy is drawn to the understanding of DNA on the basis of four amino acids. These five assets seem to be those with which the authors want to crack the code of creating value and wealth and these assets are the "business genome". The framework that evolves is termed as "Value Dynamics".

I was keenly looking forward for a methodology that would enable a quantitative analysis. Maybe I can find it in the next edition!

The use of Information Technology to measure and report what needs to be measured appears as a summary in the last chapter.

Albert Einstein as quoted in this book had rightly said "Sometimes what counts can't be counted and what can be counted doesn't count".

Creating and implementing vastly improved business models that deliver more value for customers, slash prices, and cause costs to plummet for everyone is a keystone activity for the 21st century. This book deserves praise for making that point. The examples are well selected and make the indicated points well. I would particularly encourage you to consider the Schwab, GE, Dell and Williams Companies examples. They will help you shift your mindset.

Although the authors certainly turned their attention to the task of helping you create that new and improved business model, I think the efforts fell short. First, they don't really share with you how difficult it is to design and implement a new business model inside of an existing company. I regularly interview the 100 CEOs whose stocks have grown the most in the past 3 years, and they usually think that creating new and improved business models is beyond what they and their companies are capable of.

Second, the failure rate on new business models is enormous. Some estimate that less than 1 in a thousand succeeds to any significant measure. Just look at how many on-line business to consumer sites are struggling now.

Third, the book doesn't really address the business processes that the example companies used to reach their new models. In essence, you don't get a useful best practice case history to build from. So the cases are more like anecdotes to convince you that you can succeed.

An improved business model every 3 years would be great, but they don't grow on trees. A better bet would be to develop one improved business model that doesn't require you to change all of the time. That can make you an irresitible growth enterprise. You'll have to look elsewhere to get all of the guidance you need to implement this book's advice to create a new business model.

This is a good start point for everyone who knows that creating and delivering Value for Customers is the only thing that makes value for shareholders. Fair enough.

The other reviewers have made my point - this is a checklist not the answer. Reality varies by case and there are no automatic recipes for success - no book has that.

And the cases they use - well they are successfull today but there is no reason why this will remain the case.

Success for the authors is a high share price, but this is as much an estimate of economic lotto (ie greed and guessing at future share values) as it is an estimate of actual sustainable business viability.

Be wary of their "economic dynamics framework" - those of us who remember "environmental accounting" and the 100s of other odd ways of counting up value, can tell you that ultimately management accounting has survived because it tells you what it costs of make, sell and what margin is left over - not a wooly idea that has subjective elements in its' foundation logic.

For anyone looking for a new direction or inspiration, this is a great starting point.

If you want to make a real difference, go back to first principles, read Michael Porter's Competitive Advantage (1985) from end to end (do not skip the hard stuff after page 100) and you will have a framework of how value is created within firms and industries.

There are no shortcuts, and no recipes - only guideposts for leaders.

I read this book with great enthusiasm because I concur with the authors premise. Namely, to be successful in the future, companies must effectively, measure, report, and manage their intangible assets. However, while attempting to offer sage advice, the authors support their theory with a colorful series of pseudo-case studies that are, at best, dated information and, at worst, incomplete. For example, the authors position Priceline.com, Lucent Technologies, ... as examples of "thought and practice leaders" in the new economy. One only needs to look at their collective stockprices over the past year to see that these companies have not avoided powerful downward market realities. Even the oft cited darling of Wall Street, FDX Corporation, is included as a "technology leader" with their package tracking system serving as their "single greatest competitive advantage." This simply ignores the reality that United Parcel Service (UPS) their biggest competitor delivers and electonically tracks more parcels around the world in one day than FDX does in one week. What gives? In the end, the authors offer some "structure" for how to optimize your intangible assets...the kicker is that when you ask the question "How do I do it for my company?" you are left with a most unsatisfying "it depends." In effect, the folks at Andersen leave you with their business cards and suggest that you call them so they can figure it out for you.

I had great expectations and found this book superficial. One gets the feeling this is more a vocabulary book rather than an in-depth study on this complex subject. Cases are one-page long each and take you too rapidly to a conclusion without detailed arguments and facts. The "Value Dynamics" framework proposed by the authors does give you an approach for the orderly incorporation of often-ignored drivers of value such as culture and structure, but again the book is more focused on the "what" rather than the "how".

Summary:
Arthur Andersen's Value Dynamics framework, published in the book Cracking the Value Code: How Successful Businesses Are Creating Wealth in the New Economy, differentiates the firm from other consultants who continue to use methods that focus only on tangible assets. The "Value Dynamics Framework" provides a context for viewing the ways that organizations create value by combining and recombining different types of assets. This book is about what creates value for businesses and the customers they serve. The core of this book is about the expansion of the meaning of traditional sources of wealth --- land (physical assets), labor (employee and supplier assets), and capital (financial assets) --- and the addition of customer and organizational assets. The main theme that the authors are trying to get across is that while conventional accounting practices only encompass tangible assets in the balance sheet, it is important to recognize and leverage on the intangible assets that are largely ignored. The authors' reports are based on the results of consulting experience and studies from their position as partners with Arthur Andersen. The authors provide with some really interesting examples and case studies. For example how to quantify ability to assimilate new companies and new technologies (which Microsoft tends to do so well)? Or how to quantify customer and employee loyalty? One of the interesting concepts of this book is using the customer as an asset. This book uses the example of Charles Schwab and its amazing ability to attract and retain customers. It also delves into the critical element of replenishment cost. The authors draw analogy of the five assets of an organization to that of the DNA on the basis of four amino acids. The five assets namely Physical, Financial, Organizational, Labor and Customer are the main key areas where the author wants to generate value. This book highlights the need to acknowledge intangible assets such as leadership and creates a framework according to, which these intangibles can be assessed. While stimulating and thought provoking, this book unfortunately has some week points. While examples emphasize successful management of one or more assets and do a good job in showing how this might lead to the market success, it doesn't show that other companies failed by neglecting and trying to do the same thing. Another weak point stems from the intangible use of one of the themes - that the five assets discussed represent a kind of DNA code for business. It is never clarified how the processes used by DNA to reproduce itself or to evolve over the time are analogous in any way to the processes by which firms turns combinations of assets into profits. I think the analogy on the surface is ostentatious. In conclusion, the authors write in an enjoyable consultant style manner with many real world examples as its strength, spread over a wide array of topics like a sheet of frozen ice but lacks depth.

This book is not for someone who wants to understand what it takes to understand and implement an eCommerce business plan or channel. The book is filled with bland examples, limited detail, and few conclusions. If you are looking to actually crack the value code and make the tough decisions necessary to compete in the digital economy. This one is not it. Save your money and save your time.

Sorry to be so harsh, but the book doesn't live up to the repuation of a big company like AA !

Well done. I recommend this book to anyone interested in the dynamics of enterprise value today. The book is seriously under valued (priced) for the IP it offers the reader. What a bargin?

It flows well and offers insight into the thinking of valuation beyond a formula approach, plug-it-in software programs and hobbiest appraisers. AA&Co. hits a home run with the publication of this work.

Finally, someone has taken the time to write a business book that makes sense to the people who make the wheels of business turn: Everybody. This book explains how tech stocks can rally with negative earnings while solid fundamentals can't hold up some blue chips. It's all about HOW you value a company! Intellectual and other intangible assets don't have a place on the balance sheet, yet they're worth a tremendous amount to a company's value. How is this so? How is this measured? The answers are in this book and it's a fascinating read.