Business-valuation

There is a thirst for understanding how to manage the "new" companies that are knowledge based rather than founded on product manufacturing. Here is a book to help with that quest. Sveiby explains that, as an example, the public was willing to pay, in 1995, an average price of $70 for Microsoft when their book value was about $7. In other words, the shareholders saw about $9 of additional value for every $1 of tangible assets on Microsoft's books. There is no entry on Microsoft's balance sheet for that $9, and it represents a major trend in our "post industrial" economy. How do we manage such an illusive asset? Sveiby steps us through (1) understanding the era of knowledge Organizations, (2) managing intangible assets, and (3) measuring intangible assets. There are practical examples of measuring systems, how to organize a company to maintain and transfer knowledge, and keys to developing professional competence. Sveiby defines, for the purpose of this book, knowledge as "a capacity to act." "One's capacity to act is created continuously by a process-of-knowing. In other words, it is contextual. Knowledge cannot be separated from its context. The notion also implies teleological purpose. I believe that the human process-of-knowing is designed by nature to help us survive in an often hostile environment." I learned about the professional's three life cycles - the super star, the statesman, and the normal professional. I learned about the classic problem of organic growth in our knowledge organizations. And I re-learned that "it takes time, experience, and mental effort to turn information into useful knowledge. And since recipients cannot know until afterward whether it was worth spending that time, information that turns out to be worthless is really worth less than nothing." For those trying to understand the new business model, this book is well worth the time and effort. It will help you move your company into the modern age.

Book Review - Joe Pulichino, Doctoral Student, Pepperdine University; President, Athena Learning Group

The New Organization Wealth - Managing and Measuring Knowledge-Based Assets is quite a practical book for managers seeking to get theirs arms around those intangible corporate assets that cannot be easily measured. It's also valuable for those in the fields of knowledge management and corporate education who are wrestling with ways to facilitate the development and productivity of their organization's human competencies.

Although Sveiby's argument that intangible assets can account for the difference between a company's market capitalization and its net book value may not seem so persuasive since the dot.com collapse, his categorization of those assets as "employee competence", "internal structure", and "external structure" is useful as a way of thinking about the character and value of knowledge in an organization. Much more so than the vague catch-all asset of "good-will", knowledge, though also intangible, is an asset that can be created, managed, and measured, and can serve as the focal point for developing a strategic business model. Sveiby demonstrates this through a wide range of case studies.

Especially useful is his "radical notion" that "information is meaningless and of low value". When we consider how much money and human resources are expended on technologies that collect, store, and retrieve information, this will be an uncomfortable notion for many. However, Sveiby, supported by Michael Polanyi's theory of tacit knowledge (The Tacit Dimension, 1967), makes clear that information does play a role in knowledge creation and transfer. As a means of broadcasting articulated knowledge, information provides raw material, the stuff out of which people create knowledge through their interaction with it and with each other. Knowledge thus created is called competency by Sveiby and is defined as the "capacity to act".

Sveiby then introduces the subject of managing intangible assets by making useful distinctions between the roles of professionals and mangers in the "knowledge organization". He discusses how their competencies are best managed and transferred so that the flow of knowledge through the organization (its internal structure) leads to greater efficiency and effectiveness in managing the flow of knowledge in customer and supplier relationships (its external structure). His model leaves business managers with a choice between a knowledge-focused strategy, which "earns increasing returns primarily from intangible assets", and an information-focused strategy, which "earns increasing returns from adapting to information technology".

To account for it all, Sveiby lays out a non-financial system for measuring intangible assets. While providing some thoughtful perspectives on how one might do this, it is not clear that in the end these forms of measurement have the same utility and precision that financial measurements do. It is fair to say, however, that these types of measures, which include surveys, indices, ratios, and rates of changes, do offer indicators that can help to monitor actions that will develop, maintain, and grow these assets.

In the final paragraph of the book, Sveiby admits, "I do not believe that the information in a book such as this can really change anything", and in saying so remains true to his thesis: "The only valuable knowledge is that which equips us for action and that kind of knowledge is learned the hard way - by doing." He invites his readers to experiment with the information in his book and by doing so turn it into knowledge. The practicality of The New Organization Wealth - Managing and Measuring Knowledge-Based Assets is therefore dependent on what the reader does with the information it contains.

Ever wonder why the market value of a company is so much higher than the "book value" of a company? Sveiby tells us it is the intangible assets of a company that make up the difference. In The New Organizational Wealth Sveiby focuses particularly on knowledge organizations for whom the intangible assets are particularly crucial. He describes the three categories of intangible assets (employee competence, internal structure and external structure) and, with examples from the real world, recommends strategies to maximize these assets through recruiting, management, organizational structure and thoughtful customer selection. The final section of the book provides concrete nonfinancial measurements we can each use to monitor these important intangible assets. The New Organizational Wealth is a terrific book and a superb reference for the measurement of intangible assets!

For anyone serious about studying humans in the urban environment, this is essential reading. The authors detail the sagas (and they often are) of individuals who owned strategically located bits of real estate and refused to sell their property to land developers eager to consume them in major projects. Sometimes you root for the holdout, sometimes you feel sorry for the misguided rebel. The writing can become a bit petulant when the authors fail to see the holdout's point of view (for at least one author progress is always on the side of the Donald Trumps of the world), but ultimately enough information is given to allow the reader to decide who was the wisest player in a particular scenario. This book also provides a look at 'New York buildings that aren't there anymore.'

I gave this book a less than stellar rating because it is simply hard to read. Following all the acronyms and financial terms was hard enough, but the book was written too much like a text book for brokers and financial gurus. That being said, the information in this book is of the 5 star quality and is well worth the effort of digging for if one is considering any kind of investing in the stock market, especially the high tech sectors.

The sarcastic wit and biting humor found in the pages are a real bonus, the authors make their points and then add interesting quotes, articles or they simply point out the patently obvious (making the point that the information wasn't all that obvious to millions that lost billions of dollars in bad investments).

Bubba Greaterfool is their name for the poor sucker that bought into the hype, didn't know what he was doing, probably never heard of the great tulip market, thought that the sky was the limit and then got stuck holding the empty bag as the hot air was expelled from the over inflated stocks that made up the tech stocks of 96-00. My main complaint with this book is that it isn't written in a way that would appeal to or be read by the general public, Bubba especially. And he is the guy that really needs this information.

I would highly recommend reading this to anyone that handles their own stock investments or plans too, the information is too valuable to ignore and the insight can be used to gauge other markets besides just tech stocks (remember the silver fiasco in the early eighties?) As for casual readers I would recommending passing on this offering as it is just too much work to read, but keep it in mind if you ever consider buying that stock that just can't possibly do anything but go up...

Clark and Neill have done it again. With a combination of clarity and foresight spiced with humor, Net Value is a guide book for looking at tomorrows investing today. For an insightful and revealing look at the value of Internet-related stocks, this book is excellent.

This book is timely, up-to-date and makes some predictions which are proving to be amazingly accurate. Its tounge-in-cheek prose makes for a great read - I have a much better understanding of the dotcom land after reading this - highy recommended

This compact (252 page) book provides a practical approach to structured forecasting and valuation which is based on the Eval 2003 software provided on CD-ROM. This software, though containing a few bugs, provides a systematic methodology for predicting income statements and balance sheets, based on data provided on more than 3000 companies in a consistent format.

Given that this book assumes quite a bit of knowledge about financial statement analysis, I do not consider it a substitute for a basic textbook. However, after having built dozens of valuation spreadsheets over the years, I appreciate the work that went into developing Eval. The book documents the approach well, and when in doubt the Eval spreadsheet can be consulted.

The authors of this text are experts in their field, and in particular have made lasting contributions to Accounting Analysis ("accruals") that are described in this book.

One caveat -- during the process of working with Eval I found a number of bugs in the software (a field was not imported correctly, a minus sign appeared to have left out of another field, etc.) that should have been caught prior to publication. Readers should pay particular attention to the "plug" assumptions, since these may be require adjustments in many cases.

However, if Eval is treated as a point of departure for a financial analysis, rather than a final result, readers will gain considerable value from this book and will be able to stay clear of potential pitfalls.