How does a Chief Executive Officer (CEO) make a strategic business decision?

How does an executive form an opinion on the balance between a return on an allocation of resources and the potential risk involved?

How do bankers or investors decide to invest their capital and how do they weigh up the balance between the hoped for Return On Investment (ROI) and the possible loss of their capital?

How do they ‘see’ a business? On what basis is their ‘perception’ of the business formed? How do they get a map of a business?

Medieval Measurement
Amazingly, most of today’s investment and business decisions are still based on an invention that has not yet been updated for over 500 years!

In Venice in 1494, a Franciscan monk and collaborator of Leonardo Da Vinci, Fra Luca Pacioli, invented double-entry bookkeeping and published the world’s first textbook on accounting principles and practice. Ever since, this has been the basis of investment decisions. Double-entry bookkeeping shows a map of how money and goods flow through a business.

This allowed investors and business people to ‘see’ a business, evaluate risk and return and then form an opinion on whether or not to make an investment.

In those days and even on through the industrial revolution, a business consisted of things. Things are tangibles like property, buildings, inventories, cash in the bank and so on. So the double-entry bookkeeping system seemed like a useful way of organising one’s view of the ebb and flow of these tangibles and one simply accepted this way of looking at things and then went on to make one’s investment decision.

That was then, this is now. Since the knowledge and information revolutions, it’s hard to imagine how young business people could be misled more than to be given the impression that this is what today’s businesses are still made up of – tangibles. Yet we find that in business colleges and MBA programs around the world the medieval measurement, the ‘double-entry’ view of a business, is still being taught as though it were enough.

In the 2000s we already have computers that can do more than 100 billion computations a second and we are still using pre-Newtonian physics to make our business decisions. In the next few years, this will have to change.

Knowledge-Based Companies
In knowledge-based companies like Apple and Google what does the traditional accounting system capture? Hardly anything.

The old accounting system is blind to knowledge-based assets and is often limited to just considering labour and material costs. In today’s fastest-growing, market-responsive businesses the cost components of many products are intellectual capital like R&D and customer-service.

As clever companies increasingly recognise their intellectual assets, they will increasingly direct their attention to developing those assets. When it comes to productivity, two heads are always better than one and that means networking – intranets, extranets and the Internet. It means the messaging on Facebook and Twitter and the other emerging cognocracies.

Intellectual Capital (IC)
These ‘far-seeing enterprises’ will be exploiting, managing and measuring the primary ingredient of their economic performance, their intellectual capital or IC as it is now being called. The intangible IC assets of information, knowledge and skill will be formalised, captured and leveraged to produce higher-valued assets, higher performance and a more profitable enterprise.

Also, hi-tech manufacturing companies of today and tomorrow will derive most of their value-added from knowledge and skill. This will have to be accountable. Those businesses that are not accounting for their IC assets will be under-valued and left behind. Those that do will more than double their assets and move ahead.

ICD and Investing in People
In business, people are now becoming more important than money. IC is becoming the most valuable asset of many corporations. IC accounting is how a modern business gets a more accurate view of its people assets when knowledge is its chief resource.

Suppose you are an investor. You can form a more useful and realistic perception of companies like Google by accounting for their ‘soft’ IC assets than you can by merely accounting for their ‘hard’ assets like their office buildings, cash and equipment.

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FACT: The value of the tangible (money) assets on today’s balance sheet is exceeded many times by the value of the IC (people) assets of the enterprise.

FACT: The intellectual capital of the enterprise is the raw material from which all financial results are derived.

FACT: The intellectual capital owned by the enterprise can be measured, managed and developed along with the financial capital and tangible assets currently recorded on the balance sheet of the enterprise.

One of the biggest issues in business today is engagement. Employees are engaged by their employers. Customers are engaged by their salespeople. Engagement is all about attention and we will focus more on attention in later lessons.

On the job, some employees pay more attention than others. In selling some salespeople pay more attention than others. Why is that?

Attention is all about cognitive engagement. Here’s a simple audit for you to rate your own cognitive engagement in just 20 questions. It was designed by Dr Eric Bienstock who is Vice-Principal of SOT in New York. Eric holds a Master’s degree in Mathematics from the Courant Institute of Mathematical Sciences, and a Ph.D. from New York University where he studied Mathematics, Education and Learning Theory. He based this checklist on the SOT’s Learn-To-Think Coursebook and Instructors Manual (Michael Hewitt-Gleeson & Edward de Bono, Capra/New 1982).

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How do you rate your own cognitive engagement?

INSTRUCTIONS: Answer each of the following 20 questions, scoring
either 3, 2, 1, or 0 points for each answer depending on your
objective estimate of how often you actually do what is stated.
Use your best guess of the following criteria for scoring:

3 – 90% OF THE TIME (nearly always)
2 – 70% OF THE TIME (mostly)
1 – 40% OF THE TIME (often)
0 – 10% OF THE TIME (hardly ever)

SCORE

______ My judgments of ideas are based on the value of the idea rather
than on my emotions at the time.

_______ I judge ideas not just as “good” or “bad” but also as “interesting”
if they can lead on to better ideas.

_______ I consider all factors in a situation before choosing, deciding or planning.

_______ I consider all factors first, before picking out the ones that matter most.

_______ When I create a rule I see to it that it is clearly understood
and possible to obey.

_______ I try to see the purpose of rules I have to obey, even if I don’t like the rules.

_______ I look at consequences of my decisions or actions not only as they affect me
but also as they affect other people.

_______ I look at a wide range of possible consequences before deciding
which consequences to bother about.

_______ On the way to a final objective I establish a chain of smaller objectives
each one following on from the previous one.

_______ The objectives I set are near enough, real enough and possible
enough for me to really try to reach them.

_______ In planning, I know exactly what I want to achieve.

_______ I keep my plans as simple and direct as possible.

_______ I know exactly why I have chosen something as a priority.

_______ I try to get as many different ideas as possible first,
before starting to pick out the priorities.

_______ I will go on looking for alternatives until I find one I really like.

_______ While most people look for alternatives when they are not satisfied;
I look for them deliberately even when I am satisfied.

_______ I am able to tell myself the real reason behind a decision I make.

_______ Before making a decision, I consider the factors, look at the consequences,
get clear about the objectives, assess the priorities, and search for possible alternatives.

_______ I am able to see the other person’s point-of-view whether I agree with it or not.

_______ I am able to spell out the differences and similarities between different viewpoints.

_______ TOTAL SCORE.

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INTERPRETATION

Don’t panic, this is NOT a scientific test. It’s an audit or checklist to help you take stock of your thinking, your own attention skils, your own cognitive engagement. That’s all!

Every day the output of your brain is decisions. You make hundreds of conscious decisions a day, sometimes more. The quality of these decisions has a direct impact on the quality of your personal life, your family, your business and your friends. If you can raise the quality of your decisions you can raise the quality of your life.

A trained thinker can direct his or her thinking and use it in a deliberate manner to produce an effect. To a trained and skilled thinker, thinking is a tool that can be used at will and the use of this tool is practical. This ability to use ‘thinking as a skill’ is the sort of thinking ability that is required to get things DONE.

• If your total score in this test was between 51 and 60 points, you may already possess superior brainpower.

• If you scored between 31 and 50 points, you may have better than average brainpower.

• If you scored between 0 and 30, you may possess no additional brainpower other than the natural thinking ability that most people have.

___________ Record your score and post any comments you have:

Family, Friends and Colleagues
If you wish to pass it on to others you can print it out or forward this email to anyone whom you think will benefit from it, too.

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DFQ #042:

What was your score? _________

In thinking about your brainpower audit what interesting comments can you make?

On Wednesday, the School of Thinking will celebrate it’s 31st anniversary …

At that time, Edward de Bono and I had formed a business partnership to sell consulting services in the USA and so we were meeting with senior managements of Fortune 500 corporations in New York like Citicorp and so on. We registered the consultancy as a New York Corporation–Edward de Bono & Associates Inc–and we were the only two shareholders. We agreed that Edward would be the major shareholder and I was Managing Director.

Working in the US out of New York, I soon began to see the potential of a national project for ‘teaching thinking’ and developed a scalable method for teaching ‘teachers of thinking’ based on the Scheyville train-the-trainer method I had learned in the Australian Army during the Vietnam war.

So, on November 17th, 1979 I met with Edward de Bono, at JFK in New York and put forward my idea of training “teachers of thinking” in a properly instituted school of thinking.

He agreed with the idea and offered to contribute his CoRT Thinking syllabus. We co-founded The Edward de Bono School of Thinking in New York City and launched the “Learn-To-Think Project” whose stated goal was to create “500,000 thinking instructors by 1985”.

Because Edward de Bono was still employed as a Professor of Investigative Medicine at Cambridge University in the UK he could only contribute part time. We agreed that he would be appointed Chairman and I would run SOT on a daily basis as Managing Director. Edward and I co-authored and published Learn-To-Think: Coursebook and Instructor’s Manual (Capra/New, Santa Barbara 1982) which set out both the CoRT Thinking lessons and how to train them using the Scheyville train-the-trainer method.

In January 1980 I recruited SOT’s first intake (01/80) of 50 trainees and within 100 days I trained and graduated our first class of ‘thinking instructors’–also the first in the world! Dr Eric Bienstock was a member of that first intake graduating top of the class and subsequently he became the first Chief Instructor SOT.

Today, Eric is Vice Principal SOT and lives in New Jersey with his wife Jane. Their daughter, Elizabeth, was an SOT baby and is now a rising advertising thought-leader. Eric became internationally recognised for his idea of 3-Minute Thinking.

Since 1979, SOT lessons have reached over 70 million people in 45 countries and is the longest running program in the world for the teaching of ‘teachers of thinking’.

Happy birthday to the school and all who have trained in her since 1979!!

More SOT history …

Dr Michael Hewitt-Gleeson,

Principal SOT • 1979-2010