Asset or Service Provider - What are YOU as an employee?

Our Employees are our biggest asset is a common refrain from most senior business leaders. As someone who has spent a lot of time with annual reports and financial statements, I have often wondered at the lack of insight on employee profile, development in them. 

This made me look up the history of financial accounting and statutory reporting and came across the book by J R Edwards

It was interesting to read about the stages of accounting development, my quick summary below from the book:

• Pre-Capitalist period (4000 BC - 1000 AD) - for record keeping of extensive trade to track goods & exchanges
• Commercial Capitalism (1000 AD - 1760 AD) - investment of money in stock-in-trade and proceeds used to buy more stocks. Double entry bookkeeping was the key innovation
• Industrial Capitalism (1760 - 1830) - innovation in machine use, factory system, abundance of labour and new energy sources. Accounting used as a mean of control - performance and resource allocation decisions.
• Financial Capitalism (1830 - till date) - Financing of public utilities, shift of London Stock Exchange from govt to company securities. Accounting challenges of capex vs opex, fixed asset valuation, periodic profit calculation and appropriate form of reporting for absentee owners. With this also came considerable legal regulations, companies acts and accounting and audit obligations on directors. 

I understand the accounting reason of employees not figuring in balance sheets or other statutory statements since employees are not assets owned by the organisation. 

As J R Edwards points out the emphasis of financial accounting has moved from record keeping to financial reporting and is still based on past and not ideal for investment decisions. Although organisations these days address this with their detailed annual reports with emphasis on market potential, key strategies, risks and plans; the employee skills aspect is still missing and is big gap in the knowledge led digital economy. 

Human Capital - Key to company Future 

Some of the question with regard to the above which I think about are:

1. How can any valuation of an organisation be complete without considering how its talent is growing and how satisfied the employees are?
2. How can we evaluate an organisation's future vision without knowing if its employees are ready to embrace it?
3. How can we believe an organisation's claim to building the future of an industry without knowing if it has the right talent, skills and training for this future?
4. How can we evaluate an organisations culture and the readiness for change when competing with disruptive startups?
5. How can we know if the employees are the drivers of the future (as in they buy-in to this future) or if it driven by select few in the exec board?
6. How can we know if an organisation has adequate succession planning and second level leadership to execute on the future vision?

Plus many more with regards to the role of its employees. One of the fundamental questions is Are your employees merely performing certain tasks (like your service providers) or they really assets which are helping you build the future?

I think one of the ways to assess this is for forward thinking boards to report on their human capital (something like the sustainability reporting or CSR reporting), without compromising on employee privacy and concerns of losing talent to competitions. 

A non-financial reporting which address the talent pool will make it much more easier for investors to evaluate their investments decisions with having a much better picture of what the future looks like for the companies they're interested in. I am sure this will require a lot of work for the companies involved but this exercise will be useful for their long term future and employee engagement in this age of digital disruption.

This was originally posted in my SAP Blog

What we can learn from the word story of 'Digital?

In my previous post, we looked why it was important for Telco's to go digital. While writing that post, I had intended to write a follow-up about the definition of a Digital Telco. In this post, we look at the definition of 'digital'.

I am currently reading Raymond William's masterpiece 'Culture and Society'. In the opening chapter, Raymond explores the evolving meanings of the words during the period 1780-1950. Some of these words include:

• Industry (from human attribute of perseverance to manufacturing, means of production to institution )
• Class (division in a school to social order),
• Culture (tending of natural growth or process of human training to general state of mind,general state of intellectual development in a society , general body of arts finally whole way of life, material, intellectual & spiritual) ,
• Art (human attribute/skill to represent the creative or imaginative art)

This got me thinking about the word 'digital' which seemed to everywhere these days with regards to its potential to disrupt industries. A quick googling led me to the very interesting word stories page from Oxford English Dictionary (OED) written by Richard Holden about digital.

It is surprising to see evolution of the usage (as mentioned in the OED word story)

• In the sense ‘designating a whole number less than ten’ (fifteenth century)
• ‘of or pertaining to a finger, or to the fingers or digits’ (1897 OED entry)
• Digital devices as opposed to analogue (1930-40)
• Digital media (1970s onward - information having a digital equivalent in CDs etc) - subsequent fall in this usage since the default was digital
• Digital as an embracing of computer technology or internet - replacement of real world equivalents with digital e.g. digital art, digital marketing etc.

In addition to the above, we have also seen, since the 1960s with the growth of business software, numerous paper based business processes getting digitised with technology (or going 'digital').

Today, we are also seeing entire industries becoming digital with new business models as seen in the growth of the on-demand economy with startups who're disrupting entire industries and creating new ones. With the internet of things, we are also seeing the usage of digital pertaining to connecting things via the internet to one another (or to put it another way 'digital' economy is bringing the world closer).

I am sure there are similar equally interesting stories from usage of technology, IT, software and the plethora of other words we're used to - keen to hear your views on the same.

This has also been posted on SCN

Digital Telco - Why Does it Matter?

The word 'Digital Telco' makes one think of a sort of nirvana for all the key stakeholders of a Telecommunications company. The definition I take is of an enterprise which understands and has the trust of its consumers, its employees, suppliers/partners and assets (more on this in my next post).

Going by that definition and as things stand today, to become a Digital Telco will require massive transformations for Telcos. For anyone who has been involved in a meaningful transformation, it is obvious that this is not something which will be easy to achieve. Hence, the first question is why bother and why is this important?

Consider the following:

1. Public companies traded in the US now have a one-in-three chance of not successfully surviving the next five years, as per a recent BCG perspective article
2. Consolidation in mobile is creating three operators across key markets reflecting quad play (Convergence of fixed, mobile, broadband & television) and tighter regulatory oversights.
3. Margin consideration from becoming a pure utility is scary for a Telco. 

• According to a net margin data collated by NYU Stern, a typical general utility has a margin of 8.7% while a Telecom services company has a margin of 11.5%. 
• Global telecom services revenue in 2015 according to Statista is €1140 Billion. Difference in net profit from a change from a services to a utility business could mean €32 Billion of lost margins for Telco's globally. 

With the above in mind, Digital Transformation and building a vision of a Digital Telco is no longer a choice but a necessity.

To survive and to thrive in the current environment driven by consumerisation, empowered consumers, disruptive technologies and a buzzing startup ecosystem; Telcos have to embrace Digital technologies and build a version of themselves which is much more agile, customer focused and closely connected both internally & externally. 

Are there other drivers which are making Digital Transformation an imperative? Let me know your thoughts. 

In my next post, I would like to offer some thoughts on what I imagine a Digital Telco to be.