Long-Term business survival is the final aim of any new venture. This is why Business people and Business Theorists were among the first to apply Darwin Theory outside its original framework to try to understand Economic superiority. We will show in this short presentation why this approach is not enough as it misses a key fact: Money, originally, doesn't come from the Outside Environment.

1. CRITERIA
FOR
BUSINESS
LONGEVITY:
Does
a
pure
Darwinian
approach
work?
©
North
Delta
College
2015
Mathema'cs
applied
to
Business
Theory
1

2. INTRODUCTION
Long-­‐Term
business
survival
is
the
final
aim
of
any
new
venture.
This
is
why
Business
people
and
Business
Theorists
were
among
the
first
to
apply
Darwin
Theory
outside
its
original
framework
to
try
to
understand
Economic
superiority.
We
will
show
in
this
short
presentaTon
why
this
approach
is
not
enough
as
it
misses
a
key
fact:
Money,
originally,
doesn't
come
from
the
Outside
Environment.
Mathema'cs
applied
to
Business
Theory
2

3. SUMMARY
IntroducTon
PART
1:
A
Business
Formula:
E=
MC2
A)
the
formula
B)
understanding
where
it
comes
from
C)
the
3
dimensions
for
Business
Survival
PART
2
:
System
theory
A)
the
inner
part
B)
the
outside
environment
C)
the
Darwinian
statement
PART
3
:
The
Financial
Flows
A)
model
for
a
Business
Ecosystem
B)
what
Darwin
misses
C)
funding:
neither
inside
nor
outside
D)
the
financial
tap
E)
what
opens
the
tap
PART
4
:
The
Final
statement
Mathema'cs
applied
to
Business
Theory
3

4. PART
1:
A
BUSINESS
FORMULA:
E
=
MC2
Our
key
criteria
for
understanding
proper
business
performance
for
the
long
term
as
well
as
shorter
business
cycles
is
the
following
formula:
E
=
MC2
Where
E
stands
for
Excellence
M
stands
for
MoTvaTon
of
Employee
C
stands
for
Customer
SaTsfacTon
C
stands
for
Consolidated
Profit
The
3
barometer
indicators
to
weather
the
economic
storm
and
lead
your
ship
to
the
right
port.
Mathema'cs
applied
to
Business
Theory
4
THE
FORMULA

5. Comments
on
the
Formula
These
are
the
3
final
KPI
while
leading
a
business.
The
minimal
leadership
kit.
Business
management
in
one
single
stance.
Nothing
can
prove
such
a
formula
however
it
has
been
empirically
tested
managing
real
businesses
and
is
therefore
far
more
than
a
model.
It
will
be
our
starTng
point,
our
iniTal
strategic
insight
onto
what
triggers
superior
economic
performance
and
understand
business
survival
on
short
economic
cycles
as
well
as
longer
ones.
This
will
lead
us
naturally
to
criteria
for
business
longevity.
Mathema'cs
applied
to
Business
Theory
5
PART
1:
A
BUSINESS
FORMULA:
E
=
MC2

6. There
are
therefore
3
components
on
the
right
hand
side
of
the
equaTon.
The
3
dimensions
we
want
to
explore.
1.
MoTvaTon
of
employees
indicates
a
crystallisaTon
of
the
inner
workings
of
the
company
2.
Customer
SaTsfacTon
indicates
the
most
important
KPI
In
the
External
environment
3.
Consolidated
Profit
is
the
most
powerful
financial
indicator
Mathema'cs
applied
to
Business
Theory
6
Understanding
where
the
formula
comes
from
PART
1:
A
BUSINESS
FORMULA:
E
=
MC2
E
=
MC2
Inner
Workings
External
Environment
Financial
Flow

7. These
are
therefore
the
3
dimensions
we
will
consider
for
studying
Business
Survival
and
Business
Longevity.
1.
The
inner
working
of
the
Business
OrganisaTon
seen
as
an
holisTc
EnTty
2.
The
outside
Environment
3.
The
Financial
requirements
In
the
remainder
of
this
presentaTon
we
will
describe
these
3
dimensions
using
more
structural
maths
and
in
parTcular
concepts
from
System
Theory
and
this
will
naturally
lead
us
to
the
Business
Longevity
Criteria
we
are
looking
for.
Mathema'cs
applied
to
Business
Theory
7
The
3
dimensions
for
Business
Survival
PART
1:
A
BUSINESS
FORMULA:
E
=
MC2

8. IntroducTon
In
some
sense,
businesses
can
be
seen
as
Systems,
where
the
business
organisaTon
is
seen
as
the
system,
that
is
the
inside
part.
This
system
lives
in
an
environment
("the
outside
part")
where
it
has
to
struggle
for
its
survival.
This
is
in
fact
nothing
more
than
a
glorified
Darwin
Theory.
Mathema'cs
applied
to
Business
Theory
8
PART
2:
SYSTEM
THEORY
THE ENVIRONMENT
SYSTEM
=
THE
BUSINESS

9. The
Inner
part
The
inner
part
is
the
business
organisaTon
itself.
In
a
former
presentaTon,
we
have
depicted
it
as
the
set
of
all
the
processes
that
makes
the
business
run.
This
model
remains
valid
in
our
Systems
approach
to
business
survival
and
longevity.
Mathema'cs
applied
to
Business
Theory
9
PART
2:
SYSTEM
THEORY
THE BUSINESS
ORGANISATION

10. The
outside
environment
The
outer
part
is
made
up
of
the
Environment
in
which
the
Business
(or
the
system)
has
to
survive.
The
environment
generates
opportuniTes,
like
customers;
threats,
like
compeTtors
and
constraints,
like
regulaTons,
taxes
etc...
Mathema'cs
applied
to
Business
Theory
10
PART
2:
SYSTEM
THEORY
THE ENVIRONMENT
2. Threats
1. Opportunities 3. Constraints

11. The
Darwinian
statement
This
system
model
is
basically
the
Darwinian
approach.
Darwin
Theory
tells
us
the
different
systems
compete
among
themselves
to
survive
in
the
same
environment.
The
systems
that
survive
are
those
who
can
adapt
themselves
the
best
to
the
given
environment
and
its
changes.
In
one
statement:
survival
of
the
fieest.
That
is:
business
longevity
comes
from
adaptability
and
responsiveness
to
the
environment.
We
will
precisely
see
that
this
approach
misses
something
major:
The
existence
of
Money
or
Cash
in
the
Universe
Mathema'cs
applied
to
Business
Theory
11
PART
2:
SYSTEM
THEORY

12. Model
for
a
Business
Ecosystem
What
does
Business
Management
Theory
tell
us?
The
main
objecTve
of
any
business
organisaTon
is
increased
returns
to
the
shareholders
of
the
company.
i.e.
The
existence
of
the
financial
flow.
The
key
result
we
want
to
achieve
in
our
model
of
the
business
ecosystem
is
the
fact
that
Money
iniTally
is
neither
inside
the
organisaTon,
nor
in
the
environment
and
requires
another
dimension
missed
by
System
Theory
or
Darwin.
Mathema'cs
applied
to
Business
Theory
12
PART
3:
THE
FINANCIAL
FLOWS

13. Our
model
This
is
how
our
model
looks
like:
We
sTll
have
the
system
and
its
environment,
but
in
addiTon,
to
the
boeom
of
the
system
(i.e.
The
business
organisaTon)
we
integrate
a
transverse
flow
going
backwards.
This
flow
is
the
life
injecTng
flow
inside
the
organisaTon.
It
is
a
form
of
Energy,
and
in
Economic
terms
it
is
called
The
Funding
flow.
Mathema'cs
applied
to
Business
Theory
13
PART
3:
THE
FINANCIAL
FLOWS

14. Our
model
It
is
very
important
to
understand
the
structure
of
the
financial
flow
inside
the
organisaTon.
Fundamentally,
there
are
2
financial
flows
inside
any
living
business
organisaTon:
A)
the
entering
flow,
coming
from
Sales
&
Revenues
B)
the
out-­‐ward
flow
,
to
pay
the
expenses
related
to
the
business
The
non-­‐trivial
statement
is
that
this
second
outward
flow
comes
iniTally
from
a
separate
in-­‐going
flow
that
we
could
call
funding
which
has
a
different
source
from
the
other
ingoing
flow,
namely
sales.
Mathema'cs
applied
to
Business
Theory
14
PART
3:
THE
FINANCIAL
FLOWS

15. What
Darwin
misses
The
source
of
this
funding
flow
is
not
in
the
environment.
No
maeer
how
responsive
you
are
to
the
outside
realm,
the
iniTal
cash
or
energy
injecTon
will
be
provided
for
another
reason.
Therefore
,
contrarily
to
Darwin,
we
state
that
in
the
business
jungle,
it
is
not
just
about
the
survival
of
the
fieest.
Mathema'cs
applied
to
Business
Theory
15
PART
3:
THE
FINANCIAL
FLOWS

16. Funding:
neither
inside
nor
outside
This
funding
flow
is
therefore
de-­‐coupled
from
the
flow
coming
from
the
customers
in
the
environment.
Furthermore
it
doesn't
come
either
from
the
internal
energy
or
internal
cash
of
the
system.
It
is
therefore
neither
inside,
nor
outside.
This
is
precisely
what
tradiTonal
System
Theory
misses.
Mathema'cs
applied
to
Business
Theory
16
PART
3:
THE
FINANCIAL
FLOWS

17. The
financial
tap
Where
does
this
funding
flow
originate
from?
Let
us
zoom
in
our
picture.
Mathema'cs
applied
to
Business
Theory
17
PART
3:
THE
FINANCIAL
FLOWS
We
see
that
at
the
entrance
inside
the
organisaTon,
the
funding
flow
has
a
door
or
a
tap,
which
has
3
posiTons:
-­‐
closed:
funding
not
allowed
-­‐
open:
funding
allowed
-­‐
volume:
if
allowed,
how
many
units
of
Energy
goes
in
We
can
also
see
that
this
is
slightly
more
complicated
than
the
concept
of
gate
in
computer
science
which
has
only
2
posiTons
(on/off)

18. What
opens
the
tap
Now
the
real
quesTon:
what
opens
the
tap
and
controls
the
volume?
Anglo-­‐Saxon
business
management
theory
says
that
this
tap
opens
when
shareholders
sense
they
will
make
superior
return
when
invesTng
in
the
organisaTon.
We
challenge
this
very
simple
and
straight-­‐forward
asserTon
which
is
oken
the
first
strategic
principle
students
learn
in
a
MBA
Course.
Mathema'cs
applied
to
Business
Theory
18
PART
3:
THE
FINANCIAL
FLOWS

19. Mathema'cs
applied
to
Business
Theory
19
PART
3:
THE
FINANCIAL
FLOWS
What
opens
the
tap
Superior
returns
as
an
economic
principle
yes.
But
what
about
reputaTon,
brand
image
and
belief
system
of
the
funder.
Will
an
Islamic
bank
invest
in
an
non-­‐sharia
compliant
venture
even
if
it
begets
superior
profit?
Will
a
reputed
bank
invest
in
a
Hard-­‐rock
band
even
if
they
churn
millions
of
profit?
Therefore
the
purpose
and
mission
of
the
venture
maeers
too.
What
is
important
with
money
is
what
you
do
out
of
it,
not
just
the
fact
money
has
no
smell,
no
colour.
Once
the
tap
is
open,
the
business
is
alive,
and
we
can
move
on
back
to
system
theory
and
Darwin
and
see
the
future
of
the
organisaTon
as
a
survival
game
between
the
business
as
an
holisTc
enTty
and
its
external
environment,
unTl
the
next
round
of
funding.

20. The
Final
statement
It
is
therefore
the
objecTve
missions
of
the
organisaTon
and
the
roadmap
to
achieve
them
which
ulTmately
opens
the
funding
tap
and
not
just
an
economic
principle
such
as
superior
returns
for
shareholders.
Business
longevity
is
therefore
funcTon
of
the
organisaTon's
purposes
rather
than
peripheral
aeributes
such
as
adaptability
to
changing
environment.
Obviously,
responsiveness
to
the
environment,
can
make
the
difference
between
being
dead
or
alive
in
the
short
run.
But,
in
the
Long
Term,
sole
the
core
mission
of
the
organisaTon
maeers.
Mathema'cs
applied
to
Business
Theory
20
PART
4:
THE
FINAL
STATEMENT