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MANAGEMENT METRICS
PRODUCTIVE DURABILITY
An initiative pioneered by Unni Krishnan (LongWealth GmbH)
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Open PDF:
Productive-Durability-Living-Machine-Brochure-24336.pdf
Peter Burgess COMMENTARY
Message from Unni Krishnan :
to christopher, me, Philippa
Wed, Mar 8, 11:25 PM
Hi Chris, glad to see a like minded initiative.
Attaching our latest brochure on Productive Durability and Living Compounding effects which represent true value.
Hope it makes sense and happy to speak if I can help in any way.
Love & Courage
LongWealth GmbH
Nominated to Austria's Top Management Consultants Award 2016 & 2018 ... 'The Constantinus Award' Instituted by the Federal Govt. of Austria
In response to Unni Krishnan reaching out to Chris, Philippa and myself I have made some effort to understand what Unni is doing with the idea of 'Productive Durability'. The following is a first step in helping me to understand the underlying concepts that Unni is using.
Peter Burgess
Living + Machine = Productive-Durability
From a business into an institution
Living Compounding outlasts market returns
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What is 'Productive Durability'?
- The world of business is biased towards success metrics which overvalue near- term growth while it undervalues durability.
- The question of whether the company will retain its vibrant qualities a decade from now, dominates its ability to re/generate compounding returns on
- 70% of its future cash flows. This defines wealth creation in sharp contrast to monetary extraction.
- Productive Durability is a holistic discipline built on a breakthrough thesis, tools and techniques. It enables leaders to make the crucial distinction
- between performance driven through a linear money machine logic versus intrinsic living compounding returns.
- For founders and guardians of family run enterprises, it protects the institutional logic of wealth creation from being dissipated over time.
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Peter Burgess COMMENTARY
I am delighted to see an initiative that links issues beyond the economic activity to the sustainable performance of economic activity. The words (labels) attached to specific things are different in TVM coompared to this initiative ... but the framing is quite similar.
For TVM the ultimate rusult or impact is the totality of social, environmental and economic impacts ... some good some bad.
In the Productivity Durability framing it is Living + Machine that creates the ultimate result ... and the key question is to what extent are these the same things as are being described in TVM. I think they are !!!!!!!!!!
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The LivingMachine
Living + Machine = Productive Durability
Thesis ... Being in a State of Self-Propagating Compounding Economic Returns Accumulating Perpetual Value
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LIVING
Invisible, Intangible, Infinite, Irreplicable
- Mindset
- Purpose
- Brand
- Culture
- Innovation
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This yoke represents leadership which unifies the polarities
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MACHINE
Visible, Tangible, Finite, replicable
- Hard Assets
- Cap Ex
- ROCE
- IRR
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PRODUCTIVE DURABILITY
- “Life force” that comes from the leaders Creating Scarce Capital
- 70% of Future Cashflows over +10 years
- Conventional management KPIs and tools
- Measuring Financial Capital
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Vitality of the living
- Mindset
- Purpose
- Trust
- Culture
- Creativity
- R&D and IP
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Peter Burgess COMMENTARY
This seems to be very similar to the core of Social Capital and Society in TVM. It seems to be about 'people' which is, of course, central to the TVM framining of progress and performance.
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Bridging Living and Compounding
- Leadership Choices,
- Decisions Habits
- which nourish the Living defying instant gratification of incremental market returns
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Peter Burgess COMMENTARY
Based on this, I think TVM has a different approach to metrics and their use for 'management' and 'decision making' than this LongWealth initiative. I like the idea that different parts of the 'system' have different behaviors, but effective management is going to have to embrace the behaviors that actually exist and then optimize to get the best results.
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Self Perpetuating Value
- >70% of earned cash flows reservoir
- >40% ROCE
- 50% Capital Reinvestment Rate
- Longevity markers
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Peter Burgess COMMENTARY
The idea of 'self perpetuating value' sounds like true sustainability but the listed metrics do not seem to support this. Cash flow is a purely economic measure just as is the 'Return on Capital Employed (ROCE)' that is listed.
TVM attempts to be clear about the important difference between past performance, the current state and the impacts of current activities, and future activities and changes in state.
In the case of TVM, all the impacts and states are relative to (1) Social Capital and Society; (2) State and Changes for Environmental or Natural Capital; and (3) State and results (profits) from Economic Capital and Activities.
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Institutional Integrity
- Institutional memory
- Conscience keeper
- Purpose to Performance
- Invisible to Infinite
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Peter Burgess COMMENTARY
TVM does not relate very well to these headline words ... though it is likely that TVM at a 'lower level' will embrace the concepts in a meaningful way
TVM as a system of metrics attempts to 'unclutter' the actual metric or measurement about something ... and at the same time make sure that the metric is 'in the right place' in the total system.
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THE INSTITUTIONAL LOGIC INTEGRATES THE LIVING QUALITIES
WITH THEIR COMPOUNDING VALUE CREATION EFFECTS
BEYOND CONVENTIONAL FINANCE; CAPM MODELS*
Straying away from Living Compounding
is losing trillions of dollars of longevity.
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LivingCompounders Outclass MoneyMachines
- In 1964, S&P 500 companies would stay on the list for an average of 33 years.
- In 2016, it was 24 years and this is forecast to shrink to just 12 years by 2027.
This longevity loss represents perhaps the single largest self-destruction of human potential akin to nature extraction.
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Institution building applications
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Institutional Integrity & Memory
Hardwiring the connect between the Living elements and their ability to create Compounding Returns
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Litmus testing Longevity
Ten vital signs of Living, Compounding S-curve, Long-term Alpha, Beta (Compounding Upside/ Downside)
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Leadership Self- reflection
The Great Wall/Box , Hinge Assumptions, Constructive confrontation
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Releasing the Intrinsic/hidden human potential
through the Living elements
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Preserving Unity of Purpose & Oneness
across groups/SBUs/functions unified observeship, safe spaces, purpose to performance
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Pioneering Productive Durability
- Productive Durability was developed piece by piece over an eighteen-year journey of direct experiences with enlightened leaders by opening our hearts to their deepest dilemmas.
- The theory, model and tools were co-created with some of India’s most respected conglomerates while it was simultaneously being corroborated by iconic global firms, especially post 2008 crisis. Its breakthrough qualities have been recognized by MIT, Berkeley, Wharton and enlightened leaders across the world.
Our work demonstrates that human flourishing yields consistent compounding returns far in excess of market economics
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| The text being discussed is available at
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