Creative Finance

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  • But this is a good example of what happens when you let accountants control the boardroom…
  • Value proceeds from the FUTURE … and EMOTIONS?
  • Triple line (after crisis, more shareholder responsibility etc)
  • Kaizen
  • Kenneth Arrow (Nobel prize).
    Giant VS incumbent (Nokia)
    The replacement effect (entrant has to spend more to reach same level)
    The efficiency effect (monopolist has more to lose than incumbent gains. Higher incentive to innovate)
    Sunk cost effect (committed to a certain tech/platform)
  • P353
    439 Allocating innovative capital (startup VS diversified firms internal capital markets)
    Maximum Willingness to Pay.
    Consumer Surplus.
    Value Map.
    364 Porters Generic Strategies (benefit leadership, cost leadership and focus) measure these?
    Creative destruction p431
    434 Strategic Intent (Hamel, Prahalad) *comment lower shareholder return on average
  • Creative Finance

    1. 1. CREATIVE FINANCE © now+om | September 2010 | kelly@nowtom.com
    2. 2. INDEX Creative Finance. 1.0 Intro. 2.0 Value creation. 3.0 Difference between design and marketing. 4.0 The value of design. 5.0 Measuring company innovation. 6.0 Measuring the design process. 7.0 Measuring design risk. 8.0 Accounting for design. 9.0 Summary. 2
    3. 3. 1.0 INTRO
    4. 4. 4 CREATIVEFinance … is not what caused the recent “financial meltdown”, (that was “creative accounting” — and an entirely different story).
    5. 5. 1.0 INTRO The Imagination Economy. Creativity is no longer enough. Creativity can only add value. Nowtom can help corporations create value from the challenges facing them:  What can we dream about?  How far can we dream?  How can we make these dreams a reality? 5
    6. 6. 2.0 VALUE CREATION
    7. 7. 2.0 VALUE CREATION Qualitative. Nowtom  Is a design company, but in the “value creation” business, not only for ourselves (as in any business) but it is our ultimate client delivery.  Focus (and increasingly becoming ever so important) on compelling quantitative financial and economic arguments for design! 7
    8. 8. 2.0 VALUE CREATION Quantitative.  Influence on the purchasing decisions.  Enabling strategy (new markets).  Enabling product and service innovation.  Reputation/awareness/brand value.  Time to market/process improvement.  Customer experiences.  Cost savings/ROI.  Developing communities of customers.  Good design is good for all: triple bottom line accounting for social, environmental, and business impact. 8
    9. 9. 2.0 VALUE CREATION “Evolutionary Economics”. Key Concepts:  Creative finance can guide organisations out of well- practiced routines and product creation patterns.  Can help continuous search to improve dynamic capabilities (“Kaizen”). 9
    10. 10. 3.0 DIFFERENCE BETWEEN MARKETING & DESIGN
    11. 11. 3.0 DIFFERENCE BETWEEN MARKETING & DESIGN Talking VS Listening.  Fundamentally, marketing is about talking to a group, design is about listening to an individual.  Both are important skill sets at different stages of the process. But in the end, would you rather buy from a company that talked or one that listened? 11
    12. 12. 3.0 DIFFERENCE BETWEEN MARKETING & DESIGN Approach.  Using a marketing approach too early on in the process leads us to ask: What will please the greatest number of people just enough to buy our product?  Using a design approach at first tends to lead us through empathy, user centeredness and the creativity to ask: What will delight those who buy our product so much that they tell other people about it? 12
    13. 13. 4.0 VALUE OF DESIGN
    14. 14. 4.0 VALUE OF DESIGN Good Design is More than Just Profit.  Good design and creative finance have significant implications across four areas of a companies internal capital markets:  Profits, assets, investments and shareholder value. 14
    15. 15. Profits Assets Profits from the radically innovative product Shareholdervalue GoodDesign Investments Brand equity Competitive position Customer loyalty Knowledge Network position
    16. 16. 5.0 MEASURING COMPANY INNOVATION
    17. 17. 5.0 MEASURING DESIGN INNOVATION Company Innovation Culture.  How to help convince senior management of the value of design thinking, innovation, empathy, and of being more user-centered across their whole organisation. 17
    18. 18. 5.0 MEASURING DESIGN INNOVATION Company Innovation Culture.  Metrics to measure design impact within a business (not to be confused with design effectiveness or activities performed at each specific step in the development process).  Competitor innovation benchmarking (when/where are competitors investing in innovation). 18
    19. 19. 5.0 MEASURING DESIGN INNOVATION Nowtom Valor ToolBETA Vi + Cm + Bv + Ra + Rip 19 Vitality index Sales from products created in last 3 years / Total sales. Contribution margin (Sales - Direct costs) / Total sales Return on assets Net profit before tax / Total assets Return on intellectual property Total sales / (Market capitalisation - Physical assets) Brand value Expected net annual cashflow from your branded products / Your target annual return on investment percentage
    20. 20. 6.0 MEASURING INNOVATION MANAGEMENT & PROCESSES
    21. 21. 5.0 MEASURING DESIGN PROCESS. Existing Metrics. Innovation Management Dilemma.  Careful balance of structure and co-ordination with looseness and flexibility. Methods.  DIFOTAS (delivery in full on time as specified)  ROII (Return on innovation investment)  TTM (Time to market)  Etc. TBC 21
    22. 22. 7.0 MEASURING DESIGN RISK
    23. 23. 5.0 VALUE OF DESIGN Measuring Design Risk. Key Concepts:  Allocating Innovative capital  Creative destruction (B > C).  Innovation sustainability. 23
    24. 24. 8.0 ACCOUNTING FOR DESIGN
    25. 25. 3.0 VALUE OF DESIGN Accounting-speak.  In accounting terms the impact of design will be similar to the "economic impact”, but the language you use to articulate the impact will be very different. The financial controller, CFO and accountant will be interested in any project that can:  Increase your revenue.  Lower your cost of goods sold.  Deliver a higher contribution margin (and gross margin).  Lower your overheads from capital costs.  Create more earnings before interest in tax (EBIT).  Ensure ongoing positive cash-flow. 25
    26. 26. 9.0 SMARTER CONVERSATIONS = SMARTER ORGANISATIONS
    27. 27. 9.0 SUMMARY Conversation Starter.  Using design thinking in your business is all about organisational culture.  To change culture, you need to change conversations.  Creative finance can be that conversation starter.  Design vision twinned with creative financial strategy are the new competitive battleground. 27
    28. 28. 9.0 SUMMARY So, Give Me Some Examples!  Muji’s new design vision is to achieve “consensus” between consumer and designer.  Price a major factor.  Supported by strong internal cultural alignment.  Only good design AND a creative financial strategy will tie everything together… 28
    29. 29. KIITOS THANK YOU DANKE GRACIAS

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