CHAPTER 5

Measuring the Intangible

Pray as though everything depended on God. Work as though everything depended on you.

—Saint Augustine*

Let us move to recognizing, identifying, and measuring the intangible during the creation of Substance and its follow-up Action Process.

Anything you can connect to, all experiments, take place in the tangible domain. The domain of the intangible does not “exist,” in the real sense of the word, because “existence” itself is part of the tangible domain. Seeking to connect to the intangible while in the tangible domain is an experiment akin to antimatter being chased by the scientists in the physical world. Yet, experiments by scientists at NASA and CERN are essential to unravel the mystery of space. It is equally essential in the mundane field to identify the area of influence of the intangible, for the betterment of governance.

The Creation of Substance

A Substance has the inherent characteristics of Quality and Action, which cannot be separated from it. The work is always associated with it, like a piece of cloth and the threads constituting it. Substance combines with Quality and with Activity. When one Substance combines with another Substance, they are yoked together but remain independent. Like a “government by the people, of the people, for the people,” each one is a Substance with the same Quality but differentiated by the activity. The purpose is to create a Substance first.

A Substance is the result of a series of transformations from subtle to gross, from concept to being. The lesser the number of qualities, the subtler it is. Looking at the “government by the people, of the people, and for the people” one can observe Substance with a single quality running through its veins—“governance.” There is symmetry in nature, where governance is universal, all-pervasive, and yet subtlest of all. Effort at its subtlest level is conceptual, an idea that needs to be transformed into a Substance to make it worthwhile for a dynamic action of energy to flow.

Distinctly there are two independent processes that takes place.

Creative Process

In this, government by the people is subtler than the subtle. Its meaning needs to be examined, discussed, debated, and defined through sections, clauses, and sub-clauses. It means a policy is created. That is the Creative Process. It ends with a Plan of Action. That Plan is a Substance. For example, UNCAC as a policy document was the outcome of a Creative Process. This Substance, like many such plans, is critical for Action to follow. For action there must be a Substance. This is the most significant aspect of corporate managers’ understanding of Substance. Companies, for example, declare themselves signatories to the UNGC. The UNGC has 10 principles under four issue areas and is a Substance of Quality. It is no different from machinery or building, except that one is intangible whereas the other is tangible. Merely being a signatory means little unless they have proven action undertaken by way of certification. An IPR is a substance and can be accommodated in the balance sheet, once the IPR is patented. To accommodate a brand value or UNCAC or HACCP, we shall measure such qualitative elements in the intangible way. With the aid of intangible as a constant, when quantitative elements go by the first stage of senses, qualitative elements have to go by the third stage of intuitive knowledge and be made measurable. By expanding the balance sheet with Quality, Substance expands corporate capability.

Action Process

Substance is the end product of the Creative Process when the Action Process begins. The Substance is created in a linear expansion from nothing. Strategy Plan is a Substance of Quality, which also takes shape step by step from nothing.

At each stage of the Creative Process, qualitative change takes place from the subtle to the gross level. This gradual progression connects the critical control points of measurement, culminating in a gross object or mental state. The sequence of progression of the Effort can be learned from nature in the way its Quality is personified for governance.

The Corporate Transformation Cause

Substance is created in six steps, as illustrated in Figure 5.1.

Figure 5.1 The six stages of transformation to substance

There are three layers: (1) nature, (2) sync corporate strategy, and (3) process development.

1. (a) State of quiescence: The six stages of development are evident. They start from the domain of the intangible to create substance in the tangible domain. The first state is the state of quiescence. This is a state of nonexistence. In the beginning, it is a deep mental state before the Big Bang. No quality is attributed to this state, ergo, it is a state of nonexistence.

1. (b) Corporate: Dhirubhai Ambani, founder of Reliance Industries, India, was a great visionary. His vision statement is succinct, consists of four issue areas, and relates to the strategic planning stages of process development. The first part of the statement is, “Our dreams have to be bigger.” Anyone’s vision starts at this phase, in the domain of the intangible. It is the same for corporate. It is a phase of nonexistence, time to dream big. We see Unilever brands Sunlight detergent or Lux toilet soap in use for nearly a hundred years. The “what’s good for General Motors is good for America” syndrome is like a puppy that chases its tail. The power to leave where you are stuck now or choose how you want to move forward in 100 years, even if that means dropping a couple of brands, is possible to contemplate in this state of quiescence. You may apply the same to any major brand, be it Microsoft, Apple, or Tesla. It is repetitive no doubt but protective, under the canopy of corporate. In the future, IPRs may be owned by only individuals, and corporate may need to revisit its strategies. Marc Benioff says that “capitalism, as we know it, is dead.” A pole-shift theory of capitalism, with spontaneous optimism, would do the trick in this phase of quiescence.

1. (c) Rating: Process Development Stage 1—State of Quiescence—Ranking 0. The power of 0, where a tangible element is not seen.

2. (a) Space: This is the second phase of the six transformation points. The subtlest of the elements created is space. It has only one quality element—sound.

There’s an interesting scientific discovery on this score, a message from beyond the stars. NASA’s Voyager 1 spacecraft sent its first transmission after leaving the earth’s solar system. This is the incredible sound recording beamed back to Earth from Voyager 1 as it crossed a new frontier, becoming the first spacecraft ever to leave the solar system. The rising tones NASA observed are made by the vibration of dense plasma or ionized gas and were captured by the probe’s plasma wave instrument. Speaking in a news conference, Don Gurnett, principal investigator for the Voyager plasma wave investigation, said: When you hear this recording, please recognize that this is a historic event. It’s the first time that we’ve ever made a recording of sounds in interstellar space.1

It is a proof of concept, scientifically established that the first element sound is from space. Science proved it for the first time but it was mentioned centuries before in India that of the pancha bhuta, the five elements, space had only one, sound.

2. (b) Corporate: The strategy that “Our dreams have to be bigger” rings a bell to the visionary. It is the sound that takes the visionary from the domain of the intangible to the reality of the tangible domain, from a dream state to a waking state. Mahatma Gandhi was sitting alone on the parapet wall of the Sabarmati River when he had a brain wave. He decided to start a salt satyagraha the next day, a long march toward the seashores of Dandi, a village in Gujarat. At the seashore, on April 6, 1930, with a lump of salt in his hand, he declared, “With this, I am shaking the foundations of the British empire,” and he did. In the same manner, dreaming big can shake the foundations of the corporate world. This is the phase of thought and ideas.

Corporate is governed by the most active senses. While reflecting in Stage 1, in the intangible domain, a break from reason is called for. Carlos Castaneda, author of The Teachings of Don Juan: A Yaqui Way of Knowledge, says fear is the first natural enemy a man must overcome on his path to knowledge. Freedom of enterprise is stunted by a fear of everything, fear of the known and more the fear of the unknown. What is significant is that the Strategy Idea may begin in Stage 2, which is at the lowest stage of senses at work, with a single element in-store but is yet to be developed further. Several fault lines in capitalism need a good shake from the past, to cause a revolution now that will set a course of action for the future.

2. (c) Rating: Process Development Stage 2—It rings a bell—a sound—an idea—Conceptual stage: Ranking 1, reflecting a single element.

3. (a) Air, which is less pervasive, in addition to sound, has the quality of touch that can be heard and felt.

3. (b) Corporate: Strategy Planning has begun setting its ambitions higher, by communicating the Strategy Idea. There are three stages by which Strategy Planning takes place. This stage is the first one. A conceptual idea needs to be communicated. This not only leads to a brainstorming session but primarily serves the function of communicating the idea to a select few to test its validity. It’s a crucial aspect of business transformation—convincing others of your ideas. Those who are chasing NPAs or promoting a cheat software tend to skip this aspect, and it is the lead cause for subsequent disaster. Despite the process of communication, if you are yet chasing NPAs or heavy penalties, you need to change up your close confidants. They may have failed you, but it is also time to question yourself, as to whether your ideas are worth their salt. Don’t get stuck to some brands because it had once been too good to you. Setting your ambitions higher is at a matured stage after strenuous intellectual effort.

3. (c) Rating: Process Development Stage 3—Communication stage: Ranking 2, reflecting two elements.

4. (a) Fire has three quality elements, in addition to sound and touch, it possesses a form that can be heard, felt, and seen.

4. (b) Corporate: Strategy Planning steps up by forming a team for the execution of strategy ideas after clearance from the select members of the strategy group. Ambitions are not merely quantitative goals but qualitative ones and a necessary means to move forward. Team members translate the strategy idea into a Strategic Plan.

The Tamil classic text the Thirukkural by the poet Thiruvalluvar consists of 1,330 couplets in three parts—virtue, wealth, and love. Verse #517 states, “After having considered, ‘this man can accomplish this, from these means,’ let (the king) leave with him the discharge of that duty.” Corporate speaks often of the delegation of authority but fails at practicing it well. Forming a team is an opportunity for the delegation of authority to trickle down to the foot soldier. The several fault lines we see within corporate all stem from the lack of governance. Hence, this clause has the goal of achieving self-governance, the issue area that is a dominant aspect of management. A foot soldier is free to determine his or her performance through self-governance. There are two aspects to its successful implementation: (i) intellectual capability and (ii) reverse mentoring. Reverse mentoring establishes the foot soldier as an important aspect of management, as all above listen and work toward self-governance. The role of a supervisor is thus reversed, and inverts who listens and who is listened to, in the hierarchy of corporate management. Risk culture, therefore, spreads to the lowest-ranking person as well as to each above. The LIBOR fiasco mentioned earlier arose since risk appetite is top-down disastrous management that doesn’t spread risk culture. Team formation for the relative Strategy Idea is crucial to set the tone for the next 100 years, as to the qualitative elements of management. The fault lines one finds of the past are all qualitative and therefore selection of team members would be critical for the Strategy Idea to be converted to set goals and targets at this formation stage.

4. (c) Rating: Process Development Stage 4—Formation stage: Ranking 3, reflecting three elements.

5. (a) Water has four quality elements—sound, touch, form, and taste. It can be heard, touched, seen, and tasted. The unique element present in water is taste and consequently discrimination.

5. (b) Corporate: The stage is set for formulating policies and setting targets, to construct values and deconstruct the valueless that have been the stumbling block of corporate growth in the past. The purpose is to come out with a Strategy Plan, a comprehensive statement of projections that reflect the Strategic Idea formulated in Stage 1. An idea well-conceived in Stage 1, from the domain of the intangible, is carried through Formulation Stage 5, in the tangible domain, toward a thoroughly developed substance in varying degrees of perfection. The prime factor in Keynes’s Animal Spirits is the spontaneous urge to action rather than inaction. In reality, managers get stuck at this stage, because they are mired in chasing quantitative benefits multiplied by quantitative probabilities. At the end of it, there is none to bell the cat. It is spontaneous optimism that animal spirits propound. Managers are reluctant to commit themselves for a variety of factors, moral, hedonistic, or economic. Ethical motive supported by many a principled policy that would form part of management quality needs to be written as a set of rules for each policy. A Strategy Plan is a substance of Quality and Action. Hence, how these rules and by whom they would be conducted are being made ready at this stage. It is a single individual who comes out with a great idea, be it a Steve Jobs or Thomas Watson Jr. or Bill Gates. Invariably, they are successful because of the previous stage, forming the right team. This stage hinders progress for many a company because of the managerial hesitation to commit. This phase comes out with a Strategy Plan, projecting say 7 years into the future, setting ambitions higher, determined by the quality of the plan.

5. (b) Rating: Process Development Stage 5—Formulation Stage: Ranking 4, reflecting four elements.

6. (a) The earth has five qualities: sound, touch, form, taste, and smell, that is, it can be heard, touched, seen, tasted, and smelled. The matter is in the completed form. The transformation cause is wholesome, and the effect is a Substance.

6. (b) Corporate: This stage is the culmination of five stages of intense analysis of past, present, and future, from a single company connected to a global GDP. It is the stage of committing deeper the strategy idea onto a paper. Strategy Plan is a Substance of Quality and Action. Creative Process ends in a Substance of Quality. A Substance can be UNCAC, HACCP, an IPR, Code of Conduct, CoBP, balance sheet, profitability statement, and so on. It is all-pervasive.

6. c. Rating: Process Development Stage 6—Substance Stage: Ranking 5, reflecting five elements (Table 5.1).

Table 5.1 Ratings for creative process

At each stage, one element is added to the completion of the previous step. So, there are no decimal ratings. The successive advancement to the next stage is not a work-in-progress but a moving forward to the next stage on completion of the previous one. From Stage 2 onward the movement has clear cut-off points, which are tangible. Corporate gets stuck, as mentioned earlier, in the Stage 5, Formulation Stage, and somehow reaches the last stage of the Creative Process, that is, the emergence of Strategy Plan. Somehow, at the Formulation Stage in the tangible domain means one is not moving toward a thoroughly developed substance in varying degrees of perfection. Quality of the emerging substance is determined by the Formulation Stage 5. The Creative Process follows an identical growth process in all Substances, be it man-made or natural. A baby may take 9 months, a diamond a few years, an IPR a few weeks, a policy a few hours, but the process is chronologically successive, yet separate. There is no quantum jump. As Warren Buffett put it: “No matter how great the talent or efforts, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.” A Strategy Plan is as detailed as a flight manual, for an Action Process to follow, in order accidents are avoided, to run smoothly. Many an entrepreneur fails when he tries a quantum jump.

Intellectual Value Capital

Creative Process is the Intellectual Value Capital of a company consisting of several independent Substances of Quality and Action Plans. Intellectual Value Capital is measured by a simple addition of each such Substance created, divided by the number of Substances. The resultant figure indicates the completed stage of development and achievement. If any single Substance is below par, the rating would be of the lowest grade. Otherwise, Substance such as UNCAC, COSO Framework adopted, each would get a value of 5, each a substance of Quality and Action Plan. If the Code of Conduct (CoC) is prepared as an Ethical Strategy Plan but valued below par, say 2, Intellectual Value Capital of say two factors UNCAC and CoC will equal 5+2 divided by 2 resulting in the value of Intellectual Value Capital of a company to be 3. Any number of such Substances can be added to arrive at Intellectual Value Capital but in spite of having a Quality document like UNCAC if others do not match in quality, Intellectual Value Capital value comes down. This is evident when UNCAC is 5 but CoC is only 2. All such qualitative policy documents are yoked together but valued independently. It is imperative all policy documents are well structured and by itself each is valued at the optimum of 5, like the UNCAC. We convert raw materials into finished products so as to sell them off—that is the purpose. The same is the case for creating a policy document, such as the UNCAC, or whistleblower policy, to ensure they are strictly followed. These policies have been created from the unknown and brought to a known level as an Object so that Action Process is easy.

Action Process

It is unique to the quality of the respective Creative Process documentation. For example, the results of violation of human rights, labor rights, environmental rights or anti-corruption drive, corporate governance, risk management, profitability statements, CoC, whistleblower policy would look to the respective Quality document to comply with standards or targets. So would an IPR, product innovation for its Quality and Action of the Substance. Each is unique, pin to pin, plane to plane. Action Process starts at a gross level. This follows the same Six Stages of Transformation to Substance. The Creative Process starts at the level of non-existence whereas the Action Process begins at the level of insentience. If, after all the trouble taken to create a CoC document, it has been “read, laughed and filed code,” then it is said to be in a state of insentience. It is common in very many countries who were signatories to the UNCAC to start with, and after several years ratify UNCAC but do not create an anti-corruption body or bodies under Article 6, the preventive anti-corruption clause. The implication of not having a head for such a body is quite alarming in the context of the anti-corruption drive, in particular, Article 46, Mutual Legal Assistance, states, “The provisions of this article shall not affect the obligations under any other treaty, bilateral or multilateral, that governs or will govern, in whole or in part, mutual legal assistance.” The head of the UNCAC in a country can overrule any other bilateral or multilateral treaty signed and sealed by that country. The head of the UNCAC is so empowered but nevertheless finds himself powerless to operate.

The targets are set in six scales during the Action Process and akin to the Creative Process. It reflects establishing the performance scales in the same manner for both the Creative Process and the Action Process. The ratings of 0 to 5 in the Action Process sync with the Creative Process ratings accordingly. Only one among the many belong to the quantitative element of management—profitability statement and balance sheet—the rest are qualitative. For example, project management or HACCP or UNCAC implementation, Strategy Plan will have a detailed Action Plan with targets set in the Action Process. There is no half-hearted attempt that would be acceptable. Hence, when the ratings in six scales relate to the ratings of the Creative Process, say rated 3, it means it is at the Formation Stage. That is to say, the team is not formed yet, to take corrective action to lift the task accomplishments to an optimum level of performance. Deeply looking at these phenomena of corrective action leads naturally to the Creative Process. This will be taken up in later chapters Table 5.2.

Table 5.2 Ratings for action process

Properties of the Creative Process and the Action Process

1. The Creative Process is a product of the intangible and Six Stages of Transformation to Substance represented by Quality that must be present to measure the status of a Substance.
2. There are two aspects to Action in Substance: (1) Effort and (2) Performance.
3. In the case of Action Process of Substance, Effort is apparent whereas in the case of Substance of Quality, the Effort leads from conceptual thought.
4. In the case of the Creative Process, the end product is Substance whereas the end product for Action Process is task accomplishment, which can end up creating another Substance when goes for corrective action that needs a rehash of the process. Another Substance is warranted when fault lines during the Action Process are rectified.
5. In the Action Process, when targets are set, Performance and Effort are in various scales of achievement; the process characteristics reflect the manner by which target goals are met, lethargic to active participation of individuals and team members.

Action Value Capital

Action Value Capital is the culmination of tasks accomplished in an infinite succession of finite purposes by controlling each goal. We have the capability to control huge corporate data. Action Process is the triggering device of the mind. Action is the purpose of the creation of Substance. It follows the same principle of the Creative Process. The stages of development are the same. If the Action Process of two Process Blocks is completed, the ranking by Table 5.2 would be the basis. Each quantitative item, like sales, consumption, advertising expenses, would be an independent process block. We shall take up process blocks in detail later. Since Action starts on a gross object, it is quantitative with targets set for tasks accomplished. The six stages are calculated in equal distribution. Some may perform to obtain 3, another 3, and another 5. The average for three different process blocks, say, inventory reduction, sales targets, consumption targets, in this case is 11/3 = 3, taking only the integer. This would be the same for every Substance acted upon. Action Value Capital is therefore 3. Note combining two different types of process blocks, because we are measuring the Effort put in and the Performance of individuals, related to the stage they have completed.

Intangible Value Capital

Intangible Value Capital is the average sum of Intellectual Value Capital and Action Value Capital, of the Creative Process and the Action Process, respectively. Assuming Intellectual Value Capital is 4, the average sum of several process blocks, and Action Value Capital is the aforementioned 3, then the Intangible Value capital is arrived at as follows:

Intangible Value Capital = [Intellectual Value Capital + Action Value Capital]/2;

That is = [4 + 3]/2; = 3

Profitability Statement and Balance Sheet would form part of the Action Value Capital. Value is derived by targets set and performance measured.

The enterprise valuation is 3. Optimum level is 5 by each individual Substance. Index of Inactivity would be [5–3] = 2. The gap needs to be filled by each process area and by each person to reach the optimum level of performance. Further calculation will be explained later with a case study.

Note

1. Associated Press. 2013. “A Message from beyond the Stars: NASA’s Voyager 1 Spacecraft Sends First Transmission after Leaving Earth’s Solar System.” https://www.dailymail.co.uk/sciencetech/article-2420739/First-sound-recording-solar-beamed-Earth-NASA-Voyager-1-spacecraft.html#ixzz57BBIs2Sl.

*https://www.catholic.com/magazine/online-edition/st-ignatius-said-what