The Risk in the Beauty of Value

I read a lot of blog posts and I comment on many. I also have always quite a few discussions going on in places like LinkedIn. I try (but usually don’t manage) to keep my own posts short, because attention spans aren’t what they used to be in times of information overload. I don’t write as many posts as I would like to, but why do I even want to? I want my posts to contain some novel ideas rather than just reiterating the same old thing. I am already being accused of being single-minded about things like ACM, when that is not really the case. I am single-minded about delivering value in my writing. Hm, what is value? Is it related to money? Could we measure it? How would you define it?

Value is Perception only

I propose that value – just like beauty – is a perception and you can’t measure it. Many will disagree here and state that even if it is perception then one can ask people to report how valuable something is to them and — presto: Value has been measured. Then the 1-5 stars rating of this post defines it’s value? Most probably the immediate feedback is the best way to understand other people’s judgements. It is however not a ‘measurement’ of value as we don’t know why people did or didn’t rate. This leads to a clear requirement for social empowerment in business process execution that allows all involved to immediately provide their value perceptions and judgements. Not later in statistics, but NOW! While it is advisable to sleep over important decisions, you can be sure that the emotional basis for your decision has already been formed in the first few moments. All we do is to work out a rational explanation.

Why is immediacy important?

In one of Charles Schultz’ Peanuts cartoons, Snoopy – Charly Brown’s faithful dog, who often thinks he is a World War One flying ace chasing the triple-decker piloted by the Red Baron – lies on top of the roof of his dog house and contemplates for a day and a night, unable to sleep.

Curse You, Red Baron!

In the last frame Snoopy says: ‘If you think about something at noon and again at midnight you come to different conclusions.’ Nothing could be more true. Heuristics of human behavior show very clearly that we value things very differently depending on our emotional state. When hormones run high (especially testosterone) we are for example much more willing to accept risks. Therefore putting the idea of risk management into the realm of mythology. Risk, just like beauty, just like value, is perception too. We utilize emotional (and thus hormone influenced) decision-making because we NEVER have enough information to decide on risks rationally. We thus value risks very differently at different times and certainly not based on numbers. Well, I admit that some people are emotionally influenced by horsepower or cupsize.

Risk management supposedly makes sure that we look at all uncertain aspects of a business and assess their risks. Good. The real risk is now increased as we use a planning model for execution, a market model for trends, and a model for the risk calculation. All of these use a lot of numbers which we assign ‘valuations’ arbitrarily. We can add some probability of those models, plans and numbers being correct in our calculation, but one has to be aware that this is an incredible house of cards. Risk and value assessement are very much related and dependent. A bond that carries higher risk delivers a higher interest payment. But it is your own momentary judgement that decides. The biggest issue is whether you are willing to believe the rating agencies judgements.

Delivering value is much like creating art.

I posted before that managing is art and not a methodology or practice. What seems valuable to me as an executive is only my own sole perspective and may not be shared by anyone else. But if the people I manage don’t share my concepts of value, how well am I managing? Do we get different values from the same thing? What about the value of my blog? Would you pay to read it? I don’t think so, but I still get a lot of readers. Is value better defined by the number of people agreeing with me? Many put Google-Ads on their blogs and turn their ‘value’ into money this way. I give my opinion away for free. I notice however that my ideas and writings get copied without referencing me. I get neither money nor credit so where is my value? However, these plagiarists do in principle promote my ideas and increase their value perception in the community. Microsoft became the most widely used PC software through piracy and not Bill Gates’ genius! Social networks are solely judged by the number of users and not profitability.

How valuable is something? Really!

We need to ask a lot of questions. How valuable is the predicted value of a traded future — really? How valuable is risk management given that it can’t predict value perceptions? How valuable is any planning tool? How valuable is knowledge? How valuable is skill? How valuable is experience? How valuable is an idea or patent? How valuable is measured VALUE? How valuable is a certain software product? An iPhone App? A smartphone? The Internet? A good friend or a faithful spouse? To all of these questions there is no sensible ‘right’ answer or some number. Each one of you will however have an immediate answer that rings true. Value is a human judgement only.

Value is also a belief system.

Market value is about shared beliefs. If only I believe something is valuable it is a lot less so than if others believe it too. Which is why we continuously try to convince others that our beliefs are the right ones. Moral values are the most obvious proof of my point. Value is therefore not about measurement or proof or market price. Many accept things at ‘face value’ and don’t bother to dig deeper to see if that actually fits their own needs. Owning a brand product that gets recognized by others as such is valuable because we get judged accordingly. Value becomes a measure of happiness! If we share values we feel we belong and it makes us happier. Value is related to how it makes us FEEL in relationship to others. If others are willing to take the same risk, I am less risk averse for no good reason.

Enter the world of financial markets with complex derivatives that NO ONE UNDERSTANDS! Before a market crash many stocks are perceived incredibly valuable as they rise for no other reason that many believe they are. Once someone who owns a lot of them decides that he is going to cash in on that belief, exactly that stock becomes an incredible risk to anyone who still believes in it. Within days it gets dumped by all those who can do it in time. Once it is low enough those who cashed in on the sale go back to buying it as now it is even better value! It has now a lot more potential to increase again. It doesn’t seem that value is only what people are willing to pay. It has to do with potentials and expectations.

Perfect process execution does not reduce risk!

Allow me to apply these thoughts to the world of business and BPM. When businesses need to consider an investment, its potential return or ROI is used to promote a belief in achievable future value. Investments in BPM for example claim to deliver ROI through more revenue and better service, but mostly by doing more with less (people). The numbers are purely made up before and tuned afterwards, because how anyone can have the chuzpe (Jiddish for boldness) to claim that firing people while doing more revenue will improve service is beyond me. Risk is supposedly reduced as process execution is guaranteed. What gibberish nonsense. Obviously it has nothing to do with numbers, but with beliefs. If a charismatic leader makes people believe that what they do is the grandest thing then it delivers (emotional) value. It makes people happy to belong and they will do the most incredible things. Take for example Kenneth Lay as CEO of Enron, which was voted six years in a row America’s most innovative company by Fortune Magazine. A lot of perceived value based on made-up numbers. Hindsight makes us see former value calculations quite differently. At some stage the same will happen with stock markets and BPM. Caveat Emptor!

It is the reason why I don’t care for delivering fake ROI calculations for using ACM. Software or processes don’t deliver ROI. People do. ACM is about creating potential and opportunities for skilled people to simplify their job (efficiency), handle a larger workload with less errors (revenue) and transparently collaborate until customer value perception is satisfied (effectiveness). All of it is in the judgement of the people involved and can neither be predicted nor measured. But all know when it works!

(Just read this posts about ‘Loosing value in the process‘, which is not about BPM but value of printed versus digital media. It reiterates many of the things I said here from a value perspective. Filloux also rather wants more expensive perfection (=effectiveness) than standardized mediocrity.)

I am the founder and Chief Technology Officer of ISIS Papyrus Software, a medium size software company specializing in communications and process management. I wrote several books and hold a number of patents. My quest is to bring common sense to IT, mostly by focusing in human quality issues rather than cost saving, outsourcing and automation. I am also Chief Architect at VIPorbit software which provides mobile relationship management.

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Posted in Executives, People Management
10 comments on “The Risk in the Beauty of Value
  1. Adam Deane says:

    Oxford Dictionary defines value as: the regard that something is held to deserve; the importance, worth, or usefulness of something.
    (From the Latin “valere” – To be strong, be well)

    On the other hand… I think you were actually referring to “Value for Money”

    Cambridge Definition:
    ‘Value for money’ (VFM) is a term used to assess whether or not an organisation has obtained the maximum benefit from the goods and services it both acquires and provides, within the resources available to it. Some elements may be subjective, difficult to measure, intangible and misunderstood. Judgement is therefore required when considering whether VFM has been satisfactorily achieved or not. It not only measures the cost of goods and services, but also takes account of the mix of quality, cost, resource use, fitness for purpose, timeliness, and convenience to judge whether or not, together, they constitute good value.

    Achieving VFM is also often described in terms of the ‘three Es’ – economy, efficiency and effectiveness. The definition of the three Es approved by the Value for Money Committee is as follows:

    Economy – careful use of resources to save expense, time or effort.

    Efficiency – delivering the same level of service for less cost, time or effort.

    Effectiveness – delivering a better service or getting a better return for the same amount of expense, time or effort.

    Cheers,
    Adam

    Like

    • Adam, thanks for reading and commenting. I ‘value’ your time and effort to do so. Is that now VFM or EEE?

      Yes, VFM is about judgement, meaning perceived value! The way VFM as EEE are described they mean exactly the same thing: BPM = cost/time/effort. Effectiveness is however about achieving a goal and not about cost. Effectiveness of service is about ‘servicee’ value perception and not executing process steps the cheapest possible way. If you don’t achive a goal, even if you do it economically, then it is still not efficient, because it was ALL wasted.

      Like

  2. The post was just restructured and extended to make my point about the relationship of risk and value clearer and to explain better why ROI is part of a belief system.

    Like

  3. Max,
    if you were an island, i’d be in total agreement with you. As it is, you are tied into a system of obvious and hidden values, acceptable and non-acceptable behaviour patterns. You may position yourself on the edge of that system and try to distance yourself from the average, but at the end of the day you’ll still need to conform to a certain extent.

    I think we all know that ROI is more make-believe than fact just as BPM is – if anything – process operations suited to few processes and certainly not management … but that’s the way it is. Gradual shifts are probably the best we can hope for….see here for a quick illustration of what I mean: http://taraneon.de/blog/2011/06/17/process-quality-catch-22/

    Thomas

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  4. Thomas, thanks for reading and commenting as thoughtfully as you usually do. Obviously we all need to fit in to some extent. But I think that I am still not getting my point across. I am not talking about dumping current social, business and financial structures. They might kill themselves though if we don’t get some changes. Then we are in reall deep $#!T.

    The Catch-22 of: “We can’t spend time and effort on trying to avoid process errors as all our resources are tied up with correcting the mistakes we made in the past.” as you posted is our everyday life. IT spends 80 percent of budget on maintaining outdated stuff and has no time to do new stuff. Change never comes easy, but accepting things that aren’t sensible and WORSE not even human, means we CREATE that Catch-22 again each day.

    If we stop that silly rigid guessing, planning, risking and repair cycle by executing business more in real-time then we are stepping out of that Catch-22 situation. We simply need to accept that we can’t plan it and we are much better off by using IT to support people and their intuition rather than replace them. That is actually the GRADUAL SHIFT that you are talking about. Choose some objectives and goals and follow them on a day to day basis and allow for guiding the ship towards the goal while considering conditions in real-time.

    The concept of Adaptive Processes is nothing else than creating an environment that allows many gradual shifts each day and empowers people to perform them. Thanks, again.

    Like

  5. Adam Deane says:

    Hi Max,

    Two additional comments regarding: “Making the point” and “Fake ROI”

    “I try to keep my own posts short, because attention spans aren’t what they used to be in times of information overload.”
    Your post has 1,463 words in it!… it’s a short book :-)
    I’d advise making the point at the start of the post, then following it with your explanation.
    It’s hard to follow long explanations of logic if you don’t know that the writer is aiming at
    This one, for example is:

    * What is value
    * Defining Value and tying it in with immediacy
    * Why is immediacy important
    * Example of immediacy and tying it with Risk
    * Risk, like value is perception
    * Risk and value assessment
    * Value as a belief system
    * Applying these to BPM
    * Investments in BPM are nonsense. No real ROI or reduced risk
    * Software doesn’t deliver ROI. People do

    It’s easier to follow the logic if you know that the writer is aiming at.

    “It is the reason why I don’t care for delivering fake ROI calculations for using ACM”
    and then you go on to explain the ROI calculations for using ACM.

    No one cares about “creating potential and opportunities for skilled people to simplify their job”. Maybe in an utopian world. But in the real world managers want workers to work harder and deliver results. Creating potential is not in their priority list (you might argue that it should be). Even employees don’t care about “creating potential”. They either want more money or less work (or both), prestige, power, acknowledgement of their work. (again you may argue that they should aim for creating potential)

    “handle a larger workload with less errors”. Most of the errors are incorrect decisions. Nothing that can be solved by BPM, ACM, CRM or any other system. Experience and brains are required here

    “transparently” . Lets face it.. no one wants transparency. This is a fake ROI.
    Transparency showcases the employee’s error of judgement. No manager wants transparency either. (Which manager wants to showcase his team’s failures).

    I think the word you are looking for is visibility. The manager wants to see the problems in the system and problems with the team, and fix them before HIS manager finds out.

    Visibility is a real value. It is a real ROI. Nothing fake about it.

    Cheers,
    Adam

    Like

    • Thanks, Adam, I said I try. Yes, I could make my posts a lot shorter or not write them at all. I don’t write many. I could try to write them dry and quite logical and structured. So why do you write your posts as spoofs or satires? They aren’t always easy to follow and can be interpreted qutie differently but it is always entertaining. Even when I don’t agree with you. My tries at entertainment are little snubs and stubs, no more. I would like to copy you, but then that wouldn’t be me.

      While you tell me to be more clearcut in my writing and I promise I will try harder in the future, you should likewise be more clearcut in your criticisms (which I appreciate enough to respond to!) You are simply using other terms than me and then propose quite conflicting approaches. BTW, I have not provided any ROI calculations. I said that ACM is about creating the opportunities (by providing all the information for better decisions) for people to use their skill and experience. We do actually agree on this.

      Your ‘real-world’ perspective about what people (managers and workers) want doesn’t sound right to me. It seems to me that you are very much desillusioned and cycical about people. But maybe I read that wrongly. Yes, maybe I am too idealistic in everything. Life, people, software and the illusion that my writing might make a difference. The pen isn’t really mightier than the sword, but it is irrelevant either.

      I do however believe and several scientific studies have shown it, that people are mostly intrinsicly motivated and not by money. Most people don’t mind to work a lot if it is fun and they do get the intrinsic motivation of acknowledgement. You even admit that as well. To get acknowledgment people need to be given the opportunity (potential) to do a good job. Excuse me, but NO ONE gets awarded for following a hardcoded process perfectly. So the one thing a BPM performer doesn’t get is acknowlegdement and thus intrinsic motivation. Experience and brains aren’t needed for most BPM applications except some creativity in how to bypass the limitations of the hard-coded process.

      I know for a fact that most executives love transparency. And yes, you might want to use the term visibility, but visibility means to see something from the outside, but I feel that to look through something is a lot more powerful to understand. Yes, mid-level corporate politics don’t care for transparency and some unions outright hate it and forbid it in terms of employee work performance. But I propose that the system must provide the opportunity for it and then the business uses it as it wishes. Just because the data is available mustn’t mean that it is being used.

      Finally, I have never said that what I proposein my posts is rationally logical. I hope it isn’t. So it is hard to follow it logically. I am using a lot of intuition and gut feel and even more experience. In difference to others I don’t think that correlation is causation so I am reporting my observances and my conclusions, that I do feel very strongly about.

      I am sorry that you wish to disagree with me, because the more I try to find the points where you are actually saying different things than me, the more I see it we really say the same thing. I see hope for you yet. Cheer up, Adam. We are both trying to do the same thing from two different perspectives. We’ll meet in the middle eventually.

      Like

  6. Adam Deane says:

    Hi Max,

    Just for the record… I love the way you write.
    If you would change it – it just wouldn’t be a Max Pucher article.
    My comment on adding the point to the top of the post as well, was only in response to your worries (expressed in your first paragraph) about attention spans.

    I don’t have a problem with ACM… when it’s the right solution for the right problem.
    BPM fits strict processes. ACM fits adaptive processes.

    I would love to work with more adaptive processes, but the way people work is not dictated (nor influenced) by software vendors.
    Would I want government employees (for example) to be more creative, more innovative, more motivated – absolutely.
    Do I think its going to happen any time soon? Mmmm. I think I’ll stick to my disillusioned and cynical feelings regarding government employees and their ability to change.

    Keep up the great writing.

    Cheers,
    Adam

    Like

    • I know that we respect each other! I just can’t resist a challenge …

      BTW, my kind of ACM does also strictly-defined processes, but they are an option not a must. I have to tell you that even government employees are willing to do a good thing if they are given the opportunity and it is easy enough. Why not try it? I certainly do.

      Thanks again, Max

      Like

  7. Hi Max,

    I think this movie by Dan Pinke says a lot about value and motivation and very much envision what you say. Studies say that motivation to do something is not powered by value at all. Better fuel for action is to empower people to improve something…anything!

    Cheers,

    Erwin

    Like

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Max J. Pucher
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by Max J. Pucher. All rights reserved.
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