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Structural Capital Management on Rocket DAO platform  - By Miroshnichenko A.

Part 1

Introduction – about economic necessity to manage structural capital

 

How to keep modern business alive if the situation in the market is absolutely unpredictable and changes every second? And what if you’re not able to define at least approximately, what factors should be considered, when doing a situation development analysis?

 

In the Golden age of capitalism it was enough to set up some manufacture, mass-produce the same kind of goods once in a while adopting innovations into it. Nowadays it’s necessary to constantly reconstruct, to endlessly readjust not so much a company production system, as the system of interrelationships between a company and its suppliers and customers. More time, money and efforts are spent on the search of adequate suppliers and clients as well as on the coordination of activity with them. Then not a production, but its sale becomes a problem.

 

Within all these conditions not individual companies, but the systems of companies compete with each other. Constant cost reduction on production, design and release of new goods and services for new markets and also transaction cost reduction (above all, on restructure of the interaction between firms in one value creation chain) are regarded of paramount importance.   

 

It’s clear that there are different ways to compete in this situation. For example, it is possible to “chase rainbows”, that is to offer fantastic plans for realisation, which will show its profit only in some decades. But it’s obvious to us that services, which allow accelerating and simplifying the interaction of companies in constantly reconstructed chains of value creation, will come to the fore.

 

We create the Rocket DAO platform as such an instrument, or rather the entire infrastructure providing the whole system of cost-cutting measures to coordinate companies among themselves.

 

 

Interaction between companies on the platform Rocket DAO

Rocket DAO platform is made as a decentralised accelerator of start-up-projects entering an ICO.

In its basic functionality the platform unites all the participants serving as investors, startuppers and experts.

The main process of the platform is the attraction of investments by blockchain-startups. This process is implemented in staged system for ensuring more transparent process.

 

Behind every expert, investor or startupper there are assets – an idea, competence, money, companies, the systems of interacting production assets, etc. In fact, these assets are involved into the process of launching startups. Therefore not only people with their competence, but also their assets will be concentrated on the platform, which will allow all parties to benefit.

On the assumption that the term of release and the life cycle of a product or service are reducing in the modern world, any business can be presented as the process of design and output of a new production on an unknown market. I.e. the business focused on innovations consists of a startups series. Thus, the business will be a constant transformation of business models of companies from a limited set of assets. And if it’s clear, why a systemic, repeating, stage-by-stage start of projects of an ICO improves quality and efficiency of these projects, then the management mechanism of structural set of assets, or company structural capital remains out of sight. It is precisely this structural capital of platform participants in particular and of the whole platform in general, that makes functioning of these businesses much more effective comparing to individual companies off the platform. So, let’s understand how and by what means does it occur?

 

An asset as a unit of structural capital. “Prime asset”. What is structural capital?

So, what is an asset?

It’s something capable of making money.

 

We assume that an asset is capable to carry out:

1) a production function;

2) a product.

 

This production function means the ability to manufacture some product. For example, the production function of a machine is to cut off excess metal from a detail, so its product is either a detail or a workpiece. Competence may be an asset also. If you are able to conduct market research, then this is your production function, and the segmented market picture is your product.

Often assets are divided into tangible and intangible, implying that tangible assets are exhausted at constant use, while intangible increase in cost to the contrary. But for us it’s not important. The only thing that matters for us is that an asset performs a function and creates a product, generating income.

We will further consider an indivisible production function as the simplest asset, though it will always be a conventional. This is because something, that has utility and functionality of an asset, can be subdivided into smaller units. The same way a business process is divided into functions (actions), which in its turn can be divided into smaller operations. Market research consists of a number of relatively independent actions or functions, like identifying a target audience, market capacity assessment etc.

So, any participant of the business platform owns some assets capable to perform a utility function and to make a product. Competence of a person or absolute concrete material assets, like machines and masters, may be this asset as well. At the same time, these assets will be still presented on the platform through an expert and his competence. That means it is he who will specify what production functions he can perform and no matter by means of his hands or hands of his contractors. In this sense each person is a capitalist because he owns an asset, which he wants to work.

To fully understand what we call an asset, we should add some more parameters allowing us to figure out, what cash flow is generated with the help of an asset. Namely, parameters of “output”, i.e. in what amounts, for what time and of what functionality (utility) an asset can make a product. A machine can make a definite quantity of details per month. The function can also appear to be the “output”. A machine can carry out some types of the operations providing functionality (utility parameters) to a workpiece for some time.

Resources or raw materials are required for an asset to produce some goods, or to perform a production function. Besides, there is also a need in other resources (for example, electricity and so forth). In total, expenses for functioning and productivity define the structure of asset cost.  

 

Let’s repeat, a function provided by competence works by the same logic. It can be estimated on hours, for example, how many hours a person can perform this or that work, or how many hours are required to receive this or that product. Also, what inputs including specific functions in his activity, which can be given to outsource, he needs for this purpose.

 

So, we have owners of assets and they, in fact, have assets. The owner wants his asset to work for a maximum price all the time. But what this price depends on besides the sale price of a function and input cost?

 

Complex asset

If to take a closer look at the examples we mentioned about a machine and a person with competence in marketing, we can notice, that it’s not that simple with an asset structure. The point is the work result of an asset and its cash flow can change, depending on the way a machine or a person proceeds. On the one hand, the same incoming request can be executed in many ways, with different expenses, by means of another technology, etc. And in this sense the owner of resource should take care of cost reduction of his work while preserving “output” of an asset (either of a product or a production function) and then pocket the difference in the form of a margin.

 

On the other hand, constant load of a resource, uninterrupted supply of raw material of the set parameters and its “output” depend on how this asset interacts with other assets.

In order to constantly work and sell his time, a marketing specialist has to receive the exact tasks without additional specifying from the customer. In their turn, marketing specialist’s contractors will have to quickly and without too much talking receive and perform such tasks as to carry out analytics, to gather information and so forth.

This interrelation and interaction of assets in any production form “a complex asset” itself. It is a complex one, as it consists of “prime assets”. Usually a complex asset is a company, which has some quantity of the assets, merged in value creation chains.

The principle moment in a complex asset is the relations between “prime” assets. How do assets interact among themselves for production of goods or services? Usually these relations are described as the process, where raw materials move in a certain order through the assets (for example, machines) receiving added value at each stage of transformation from each asset. These relations are quite sustainable and are fixed in documents coordinating an order of their interaction. The same set of assets can give a different result depending on the structure of communications between assets. Then besides a simple set of assets, its structure also influences cash flow. That is called structural capital.

As a rule, property on assets limits an opportunity to influence the assets structure and therefore the efficiency of their interaction. It means that they are limited to the borders of a company and to the power over assets and their interaction.

And then the company itself can be spread out to set of assets and to structure of their interaction, or system of links between assets.

If the same set of assets in different systems of communications gives a different production result, it means that the secret of this difference is concluded in linkages. And then the major factor influencing the cash flow of these assets is the system of communications between assets. And if it influences cash flow then it influences the cost of linkages.

If assets can often be assimilated to material assets (for example, machines), then the structure of their communication is not a material thing, but a purely intellectual one. This communication structure is the obvious example of non-tangible asset, or structural capital.

Once you learn how to manage this connection structure, or the structural capital, you will open a secret of marginal utility of assets.

 Translated by Alena Palchenko

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