Tuesday, July 03, 2007

About Vantage

Executives activate enterprise by vectoring human, financial, and structural capital resources through operating, investment, and financing decisions. The quantum resultant of these vectors is generally reported through proxy measures such as profitability, capability, capacity, market share, influence, and perspective. The ternary interrelationship of human, financial, and structural capital to their whole can be depicted influentially as shown below, and requires from management ever more advanced concepts and methods in order to achieve and sustain competitive advantage in the global marketplace. The stakes in these decisions are high. For individuals, such decisions generally affect financial freedom, which in turn leads to time and relationship freedom. Organizationally, they determine the fulfillment of stakeholder needs, wants, and expectations. The essence of enterprise lies within the topography of this framework.

Financial capital is the sum of the depreciation, amortization, depletion, rent, interest, and maintenance expenses associated with holding or using commoditized financial assets (both tangible and intangible). Human capital is the sum of wages, benefits, commissions, and other expenses associated with employing people (i.e., those who go home at night). Structural capital is what remains after accounting for the financial and human capital of the firm.

While the competition between financial and human capital has been the subject of classical and neoclassical economic debate, ad nauseam, it is the emerging recognition of structural capital as the ternary equivalent to these traditional capital forms that provides the vantage point for visualizing the topological landscape which stands guard before the vista of strategic success.

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