The Network Multiplier: 4 Steps To Driving More Value & Better Performance

THE NETWORK
MULTIPLIER
4 Steps to Driving More Value & Better Performance
Disclosure
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For internal purposes only.
Not for external publication.
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© Copyright 2014, OpenMatters LLC
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Disclosure • © Copyright 2014, OpenMatters LLC 1

The Network Multiplier
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2 The Network Multiplier • 4 Steps to Driving More Value and Better Performance
Partners
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Partners • © Copyright 2014, OpenMatters LLC 3

Table of Contents
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Executive Module 1: Module 2:

SUMMARY ORIENTATION ASSESSMENT
This workbook is about the power of There are four business models, some Inventory all your intangible assets, paying
networks – social, business and financial older than others, some more valuable specific attention to your dormant customer,
– and how they can help you create more than others. Read this chapter and learn employee, partner and investor networks
value and better performance. which business model is yours. for untapped sources of value.
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Table of Contents
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Module 3: Module 4: Executive

INVESTMENT MEASUREMENT CONCLUSION
Reallocate your capital to networks in order Add network and other intangible key Digital networks and software are eating
to benefit from lower marginal costs, more performance indicators to your financial the world. Use this work book to insure that
growth and higher investor valuations in measures to insure that you are measuring you are leveraging your digital and network
today’s hyper connected world. everything that matters. assets to prosper.
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Table of Contents • © Copyright 2014, OpenMatters LLC 7

Executive
Summary
Executive Summary
“ In the network economy,

success is self-reinforcing;
it obeys the law of increasing
returns”
Kevin Kelley,
Co-Founder, Wired Magazine
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Executive Summary • © Copyright 2014, OpenMatters LLC 11

Executive Summary
In the spring of 2014, the media, from the Twitterverse

to Bloomberg to CNBC and the WSJ, was buzzing about
the $19B acquisition of WhatsApp by Facebook. The
topic of discussion was does the messaging service that
generated approximately $20M in revenues in 2013
really merit a valuation of almost 1000 times revenues?
Bloomberg put it well with its article called: Facebook
Values WhatsApp Like Miracle Drug: Real M&A, making
the point that the companies most valued by the market-
place are usually developing new treatments for cancer
or Diabetes, not sending LOLs and OMGs. The question
on all our minds was, WhatsApp with this valuation?
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Executive Summary
According to our research, WhatsApp is not a once-in-a-decade Personal Notes:
outlier. Cloud-based file sharing service Dropbox made news as _____________________________________
well, receiving venture capital funding at a valuation of $10B, or _____________________________________
40x current revenues. _____________________________________
_____________________________________
Airbnb.com recently raised funding at a valuation of $10B, which would make it worth more that Hyatt Hotels _____________________________________
or Wyndham Worldwide and worth nearly 20x revenues. Taxi-replacement service Uber was recently
_____________________________________
valued at $18B, estimated to be 10x revenues. Most recently Alibaba’s IPO raised funds of approximately
10x revenues. And this is not the entire list of members to the multi-billion dollar startup club who tout _____________________________________
innovative, new business models.
_____________________________________
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Executive Summary
Personal Notes: Indeed, there appears to be an emerging trend in the types of businesses that investors prefer, and today’s
most preferred businesses are receiving the highest valuations of all times! Companies with more traditional
_____________________________________
businesses are left wondering why these upstarts merit such exuberant valuations. Are they more profitable?
_____________________________________
Do they see faster growth? Do they have higher return on assets? Our answer is yes, to all of the above.
_____________________________________ To better understand this phenomenon, we turned to the data and examined 40 years of financial data for
the S&P 500 companies to see how valuations trends have evolved.
_____________________________________
..................................................................................................................................................................................
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_____________________________________ Our research led us to three key learnings:

_____________________________________
1. There are four business models
_____________________________________
_____________________________________ 2. Network Orchestrators outperform other companies

_____________________________________
_____________________________________
3. Most companies are missing this opportunity
_____________________________________
_____________________________________
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Let’s look at each of these
_____________________________________
findings in more detail.
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes: 1. There are four business models:

_____________________________________ ..................................................................................................................................................................................
_____________________________________
To begin, we searched for a simple way to characterize the
_____________________________________
different types of business that were winning and losing value
_____________________________________
in the market. Because the businesses earning outstanding
_____________________________________
valuations today represent a variety of industries (real estate,
_____________________________________
transportation, financial services and manufacturing) we quickly
_____________________________________
moved past the standard industrial classifications and developed
_____________________________________
a new framework based on business model, or “the rationale
_____________________________________
of how an organization creates, delivers, and captures value.”
_____________________________________
We found that there are four foundational ways that companies
_____________________________________
create and deliver value to their customers. Companies may
_____________________________________
operate with a number of these models, but most have a
_____________________________________
dominant preference.
_____________________________________
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Executive Summary
The four business models are: Personal Notes:
.................................................................................................................................................................................. _____________________________________
_____________________________________
Asset Builders:
These companies make, market, distribute, and sell physical things. Examples include Ford, Walmart, _____________________________________
and FedEx.
_____________________________________
Service Providers:
_____________________________________
These companies hire employees who provide services to customers or produce billable hours for which
they charge. Examples include United Healthcare, Accenture, and JP Morgan. _____________________________________
Technology Creators: _____________________________________
These companies develop and sell intellectual property such as software, analytics, pharmaceuticals, and
_____________________________________
biotechnology. Examples include Microsoft, Oracle, and Amgen.
_____________________________________
Network Orchestrators.
_____________________________________
These companies create a network of peers in which participants interact or transact with the many other
members of the network. They may sell products, build relationships, share advice, give reviews, collaborate, _____________________________________
and more. Examples include eBay, Red Hat, and Visa.
_____________________________________
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes:
_____________________________________
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_____________________________________ These four steps will help you and your team:
_____________________________________
..................................
..................................
_____________________________________ Take time to think critically about Understand your own historical biases Begin to pivot your business model
the evolution of business models, about what creates value and how to towards the areas of greatest value
_____________________________________ as a result of ongoing technological share it with your stakeholders. It will and actively reallocate your capital
innovation, and what these changes also enable you to begin to incorpo- using our best practices process
_____________________________________ mean for your company. rate new facts and insights based on guide and case study method.
the latest business research and
_____________________________________ understanding.
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes: We applied this framework to our dataset, the S&P 500 Index
_____________________________________
companies over the past 40 years, in order to see how the four
_____________________________________
business models have performed over time. Two different
_____________________________________
researchers categorized each company into its dominant
_____________________________________
business model, giving consideration to several factors:
_____________________________________
_____________________________________
• The company’s description of itself in annual reports
_____________________________________
• The revenue generated by different business units
_____________________________________
_____________________________________
• Capital allocation patterns such as R&D or COGS expenditure
_____________________________________
• Market perceptions including news articles & analyst reports
_____________________________________
_____________________________________ Although most companies operate in several business models categories, we assigned to each company
the most advanced business model that it uses for a significant portion of its business, or that it is making
_____________________________________
strong efforts to develop. For example, although most of Nike’s business is manufacturing and selling
_____________________________________
shoes, which we classify as Asset Building, Nike has also invested in the Nike+ ecosystem which allows
users to track their activities and share progress and challenges with their friends. For this reason, we
_____________________________________ classified Nike as a Network Orchestrator.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
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Executive Summary
2. Network Orchestrators outperform other companies: Personal Notes:
.................................................................................................................................................................................. _____________________________________
The business model classification yielded some surprising _____________________________________
results. First, our analysis based on the most recent year of _____________________________________
data indicates that Technology Creators and Network Orches- _____________________________________
trators currently receive valuations 2-4x higher, on average, _____________________________________
than the other two business models. Further, trend data over _____________________________________
40 years indicates that this gap is widening over time. We call _____________________________________
this observation ‘the Multiplier Effect’. _____________________________________
_____________________________________
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Executive Summary
Personal Notes: Why are we focused on Multiplier?

_____________________________________ ..................................................................................................................................................................................
_____________________________________
First of all, a company’s Multiplier is calculated from market
_____________________________________
price and revenue – two numbers that are very difficult to
_____________________________________
manipulate. Using Multiplier helps correct for accounting
_____________________________________
manipulations. Second, it is generally accepted that market
_____________________________________
valuations reflect investor expectations for future cash flows,
_____________________________________
and thus we believe it is a good indicator of a company’s tra-
_____________________________________
jectory and ability to generate returns. Indeed, our own research
_____________________________________
on Multiplier found that companies with the highest multipliers
_____________________________________
outperform their peers on revenue growth, profitability, and
_____________________________________
Return on Assets for over a decade. For these reasons, we
_____________________________________
think that all business leaders should consider the Multiplier
_____________________________________
Effect of business models when allocating capital to assets
_____________________________________
and developing strategies for their firms.
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes: Moving beyond Multiplier, we also found that Network

_____________________________________
Orchestrators outperform companies with other business
_____________________________________
models in terms of revenue growth and profit margin.
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes: 3. Most companies are missing this opportunity:

_____________________________________ ..................................................................................................................................................................................
_____________________________________
Despite the many advantages of Network Orchestration over
_____________________________________
the other business models, very few companies capitalize on
_____________________________________
this business model. Our research found that fewer than 5%
_____________________________________
of companies are Network Orchestrators.
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes: This dearth of Network Orchestrators probably drives the fact
_____________________________________
that very few companies are able to achieve the higher mul-
_____________________________________
tipliers. In 2013, only 5% of the S&P 500 had value multipliers
_____________________________________
higher than 6x. There are several reasons why most companies
_____________________________________
are failing to capitalize on the value of networks:
_____________________________________
_____________________________________ Reason 1:
Business models are not well understood since they evolve over time as new technologies enable new
_____________________________________
methods of value creation. The technologies that enable Network Orchestrators, for example, only became
_____________________________________
prevalent a decade ago.
_____________________________________ Reason 2:
Today’s network based business models require new competencies. Most corporate leaders are skilled
_____________________________________
at building, owning and managing physical assets or people. Network Orchestrators, however, leverage
_____________________________________ intangibles such as knowledge (Gerson Lehrman Group) or relationships (Facebook), or other people’s
assets (Uber) as well as new ‘non-management’ and ‘non-ownership’ competencies related to facilitating
_____________________________________ a network of individuals and their individual ‘assets’ and relationships.
_____________________________________
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Executive Summary
These factors put executives and board members in a very Personal Notes:
difficult position and it will clearly take work for established _____________________________________
companies to start cashing in on the value offered by new _____________________________________
business models. _____________________________________
_____________________________________
_____________________________________
Reason 3: _____________________________________
Generally Accepted Accounting Principles (GAAP) categorize some assets as ‘assets’ (plant property and
_____________________________________
equipment), others as expenses (people and intellectual property) and ignores others (customers and
networks) altogether, frequently resulting in the under allocation of capital to intangible assets. _____________________________________
Reason 4: _____________________________________
Standard Industry designations result in siloed thinking, creating gaps where Network Orchestrators can
_____________________________________
enter and disrupt. Consider what Zappos has done to shoe retailing or Uber to the taxi industry.
_____________________________________
Reason 5:
Business models are tightly integrated into all parts of a company, and are therefore daunting to change. _____________________________________
Research by McKinsey & Company shows that few companies change their capital allocation strategies
_____________________________________
year to year to include new business units, and therefore new business models.
_____________________________________
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Executive Summary
Personal Notes: 4. The implications for leaders and their mental models of value:
_____________________________________ ..................................................................................................................................................................................
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Most of us are fully aware that the ground is shifting beneath
_____________________________________
our feet as new business models, enabled by today’s digital
_____________________________________
technologies and new views of value by young leaders, consume
_____________________________________
companies and industries across the board. Identifying the right
_____________________________________
course of action, however, is much more difficult. The research
_____________________________________
presented in this workbook, along the specific tactics, case
_____________________________________
studies and exercise, will hopefully give you the impetus to
_____________________________________
make changes – including the tools and techniques – to create
_____________________________________
your own network based business model opportunities.
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Executive Summary
To get you started on your journey, this work book is organized Personal Notes:
into four actionable sections: _____________________________________
_____________________________________
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_____________________________________
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1: Orientation 2: Assessment 3: Investment 4: Measurement _____________________________________
Understand your business Assess all your intangible In this third step, we will Although your firm probably _____________________________________
model and mental model assets available to and re- focus on how and where to has a good handle on finan-
of your organization, and siding within your company, allocate your capital to cre- cial data, we will focus on _____________________________________
its impact on the Network including both tangible and ate a network centric busi- new key performance indica-
tors based on your networks _____________________________________
Effect. During this first step, intangible assets (intellec- ness model. Central to this
we will guide you through tual property and customer, process is selecting technol- activity along with other in-
tangible asset measures here _____________________________________
an examination of how your employee and supplier ogies essential to connecting
mental and business mod- networks, as well as big and your networks (customers, and how to integrate them
_____________________________________
els are connected as such, small data). We will help you employees, partners) to each with your financial data to see
together, directly impact your take an Inventory of all your other so that they can fulfill how your actions and those
_____________________________________
company’s valuation and relationships – their number, their own needs and yours. of your network are creating
performance. sentiment, capabilities, and value for your organization.
_____________________________________
their levels of engagement
-- as well as the physical and _____________________________________
virtual assets they own to
insure that you can see how _____________________________________
to connect them so that you
can benefit from the Multiplier _____________________________________
discussed in this work book.
_____________________________________
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Executive Summary
Personal Notes: Each module begins by clearly defining the: who, what, when,
_____________________________________
where, and why of each step. The bulk of this workbook is
_____________________________________
devoted to explaining why each step generates value and how
_____________________________________
to successfully implement it. A variety of case studies are also
_____________________________________
included to help you see how other organizations and their
_____________________________________
leaders have navigated each step. The case studies are located
_____________________________________
in the back of each module, so feel free to read ahead and flip
_____________________________________ back and forth if you want some practical examples. Finally,
_____________________________________ there are exercises where you can immediately apply the
_____________________________________ insights to your own firm.
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Executive Summary
Let’s get started! Personal Notes:

_____________________________________
By the way, if you want some extra help along the way, you _____________________________________
will find the following resources at the end of this workbook: _____________________________________
_____________________________________
1. The DigitalGrader.com website that contains all the tools _____________________________________
and videos _____________________________________
_____________________________________
2. FAQ’s that include many of the questions that have been _____________________________________
asked and answered _____________________________________
_____________________________________
3. Links to other resources and other articles to help you _____________________________________
on your way. _____________________________________
.................................................................................................................................................................................. _____________________________________
_____________________________________
In keeping with our style of work today, feel free to move around the book and our website starting
anywhere you like. Remember, this is all about you and helping you achieve your full potential, both as a _____________________________________
leader and member of many networks!
_____________________________________
_____________________________________
_____________________________________
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Executive Summary
Personal Notes: Digital Businesses Are The Most Valuable

_____________________________________
Find out how Digital You Are – Take the Survey Online
_____________________________________
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www.digitalgrader.com
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Executive Summary
Personal Notes:
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Executive Summary: Case Study
Personal Notes:
_____________________________________
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_____________________________________
Hilton Worldwide Holdings just invested $550M in its information technology to meet its customers where
_____________________________________ they most often are: on their mobile devices. Hilton is allowing guests to check in and out, select rooms,
and even unlock doors with their cell phones – a change that is most likely convenient for both guests and
_____________________________________
for hotel staff. As a bonus, Hilton is able to connect valuable data about their guests and their preferences
_____________________________________
in the process.
_____________________________________ Read Full Article:

http://blogs.wsj.com/cio/2014/08/04/hilton-cio-says-it-is-out-from-the-back-room/?mod=wsj_ciohome_cio-
_____________________________________
report
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Executive Summary: Case Study
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
Bringing technology to baseball. Baseball’s league technology group, Major League Baseball Advanced
Media, Is using cameras and radar, plus a slow of data crunching capabilities, to bring new insights to _____________________________________
evaluate the skills of fielders, and possibly offer tips for success.
_____________________________________
Read Full Article: _____________________________________

http://blogs.wsj.com/cio/2014/08/05/now-warming-up-big-data-poised-to-give-baseball-a-boost/?-
mod=wsj_ciohome_cioreport _____________________________________
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Executive Summary
Personal Notes:
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Executive Summary
Personal Notes:
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Module 1:
Orientation
Understand your business and leadership mental
models and their impact on the Multiplier Effect.
Module 1: Orientation
“ If you are not leveraging the

power of today’s networks,
you are missing the power of
today’s multiplier effect.”
Dr. Jerry Wind,
The Lauder Professor
The Wharton School
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Module 1: Orientation • © Copyright 2014, OpenMatters LLC 45

........................................ ........................................ ........................................ ........................................ ........................................
Who: What: When: Where: Why:

........................................ ........................................ ........................................ ........................................ ........................................
The Leadership Learn about your One or two days At an off-site To create a common
Team business models and or workshop understanding and
their performance align the team
for change
.......................................................................................................................................................................................................................................................
If you think back in time, you can see that business models evolve with changing tech-
nologies. Agrarian business models once ruled this land and more than 97% of Americans
worked as farmers—sowing weeds, plowing the land, and selling their produce. With
the advent of the industrial age, a major shift occurred and a new, more dominant busi-
ness model emerged as people began to use machinery to build and produce physical
products. This new model focused on making and selling things from cars to shoes to
cotton gins, and we describe as “Asset Building”.
Following that, large services firms emerged, including financial services, healthcare services and management consulting services, to meet the
needs of customers that were becoming part of the middle class and wanted what they had accumulated serviced – be it their families wealth or health.
We call these businesses Service Providers. After that, the semi-conductor was created (1957) and software was developed—two technologies
that allow people to quickly an easily share their intellectual property, rather than their goods or labor.
We call this business model Technology Creation.
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Personal Notes:
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Today, the newest business model, Network Orchestration, Personal Notes:
has come into the foreground, gaining traction at accelerating _____________________________________
speeds across multiple industries. And it is based on today’s _____________________________________
newest digital technologies, including cloud, social, mobile, _____________________________________
big data and the Internet of everything. _____________________________________
_____________________________________
What makes each of these business models _____________________________________

so unique is their approach to creating value.
_____________________________________
For Asset Builders, the focus is on making one
thing and selling that one thing. This business _____________________________________
model do not scale without the addition of either
physical assets or people. In the third business _____________________________________
model—Technology Creation—scaling is easier
_____________________________________
and less costly, because intellectual capital such
as software and biotechnology can be created _____________________________________
once and sold millions of times (think Salesforce.
com and any great drug). _____________________________________
_____________________________________
And once again, today’s newest business
model – Network Orchestration – scales most _____________________________________
effectively and efficiently because it relies on the
expertise, relationships and knowledge of others _____________________________________
– think Uber, Airbnb and Alibaba. Further, these

_____________________________________
asset-light companies have the lowest margin-
al cost of new products and services because _____________________________________
they rely on network participants (customers) to
_____________________________________
offer up their capabilities (including products and
services) to others. _____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________ ..................................................................................................................................................................................
_____________________________________
_____________________________________ Now before we go much further, let’s talk more specifically about business models.
_____________________________________
.......................................................................................................................................................................................................................................................
Module 1: Orientation - EXERCISE
Which business model are you? Personal Notes:

_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Take the online survey at www.DigitalGrader.com
_____________________________________
_____________________________________
_____________________________________
_____________________________________
DigitalGrader _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: A business model is “the rationale of how an organization

_____________________________________
creates, delivers, and captures value.” Essentially, a business
_____________________________________
model forms the foundation of how a company operates… but
_____________________________________
business models are changing! New technologies have enabled
_____________________________________
new ways for companies to create, deliver, and capture value.
_____________________________________
This module explores business models, how they have changed
_____________________________________
over time, and why some business models perform better than
_____________________________________ others. As noted in our executive summary, we found that all
_____________________________________ companies (regardless of industry) fit into one of four business
_____________________________________ models, depending on the assets that they leverage and the
_____________________________________ value that they create.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
The four business models are: Personal Notes:
.................................................................................................................................................................................. _____________________________________
_____________________________________
1. Asset Builders:
These companies make, market, distribute and sell physical products. The fundamental approach for _____________________________________
these companies is ‘make one, sell one.’ Examples include manufacturers, distributors and retailers.
_____________________________________
2. Service Providers: _____________________________________

These companies hire people who offer services for which they charge. The fundamental approach for
these types of companies is ‘hire one, sell one.’ This model is similar to the Industrial model, but it substi- _____________________________________
tutes an individual’s output (an hour of billable time or work) for a machine’s output (unit of production or
_____________________________________
delivery). Examples include consulting firms and financial institutions.
_____________________________________
3. Technology Creators:
These companies develop and sell intellectual property, such as software and biotechnology. They hire _____________________________________
employees who write code or create other IP-based assets that can then be sold multiple times. The
_____________________________________
fundamental approach for these types of companies is ‘make one, sell many.’ Examples include software
and pharmaceuticals companies. _____________________________________
_____________________________________
4. Network Orchestrators:
These companies use networks of businesses or consumers to make, market and sell their wares with _____________________________________
the company acting as the organizer. The fundamental approach for these types of companies is to
‘make, market and sell many to many.’ Examples include financial trading markets, on-line social networks _____________________________________
and credit card processing companies.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
The last two business models, Technology Creators and Network Personal Notes:
Orchestrators, are relatively new entrants to the world of busi- _____________________________________
nesses. Their core value propositions depend on advancements _____________________________________
in digital technology, which facilitate sharing and replicating _____________________________________
information, processing large amounts of data, and connecting _____________________________________
people and devices. There are five key technologies that have _____________________________________
enabled these new ways of operating: _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Cloud Analytics Social The Mobile _____________________________________
& Big Data Internet _____________________________________
of Things _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Here are just a few examples of the explosive growth of these
_____________________________________
technologies that are core to new, highly scalable, business
_____________________________________
models.
_____________________________________
_____________________________________ Cloud:
• Hundreds of millions of people store personal and financial data in the cloud.
_____________________________________
• 27% use Apple’s iCloud, 17% Dropbox, 15% the Amazon’s Cloud Drive, and 10% Google Play.
_____________________________________
_____________________________________ Analytics & Big Data:

• 2.5 quintillion bytes of new data are created every day.
_____________________________________
• Google processes 1 million gigabytes of data every day.
_____________________________________
• The number of messages on Twitter now exceeds 400 million per day.
_____________________________________ • If all the digitally stored data in the world were printed in books, they would cover the United States in
a layer fifty-two feet thick.
_____________________________________
• 67 percent of 2,500 respondents in 24 industries reported that big-data analytics gave them a
_____________________________________ competitive advantage.
_____________________________________
Social Media:
_____________________________________
• 1.5 billion people are using social media to communicate and collaborate.
_____________________________________ • Thirty billion pieces of content are shared on Facebook each month.
• Eighty percent of online users interact with social media each day.
_____________________________________
• Facebook boasted 1.11 billion active monthly users as of March 2013, a number equal to the
_____________________________________ population of the United States and Europe combined.
_____________________________________
• People spend nearly 20 percent of their online hours on social networks.
• Fewer than 30 percent of CEOs themselves use social media to connect to their constituents.
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
Internet of Everything: _____________________________________
• 26 billion devices are anticipated to be connected by 2020,

_____________________________________
Gartner - http://www.gartner.com/newsroom/id/2636073
• Intel, Cisco, GE, and IBM all have teams working on Internet of Things applications already. _____________________________________
• Smart electricity grids alone could create savings of $200 billion to $500 billion per year by 2025 _____________________________________
according to the McKinsey Global Institute.
_____________________________________
Mobile Devices: _____________________________________
• 5 billion people use mobile phones and smart devices to transact and interact – that means that more
_____________________________________
people have mobile devices than electricity or drinking water.
• People now spend more time on mobile apps than the Internet. _____________________________________
• The number of people accessing Facebook via mobile devices increased from 30 percent to  60 _____________________________________
percent in the 12 months ending in March 2013.
_____________________________________
• Mobile advertising revenue doubled in 2012.
• Mobile phones will overwhelm PCs as the most widespread Internet-access device on the planet this _____________________________________
year. By 2015, over 80 percent of the handsets purchased in mature markets will be smartphones.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Collectively, we call these new digital technologies “CASIM”

_____________________________________
technologies, and they are changing the face of business.
_____________________________________
Throughout this workbook will examine how companies are
_____________________________________
“going digital” and using CASIM technologies to create new
_____________________________________
ways of doing business.
_____________________________________
_____________________________________ Why does CASIM matter to you?

Because companies with digitally-enabled business models outperform their peers. Technology Creators
_____________________________________
and Network Orchestrators grow faster, produce higher profit margins, and generate enterprise value premiums
_____________________________________
with Network Orchestrators receiving the most significant financial advantages. The goal of this workbook
is to help you augment your company with the highly valuable Network Orchestrator business model.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
We focus exclusively on network business models first Personal Notes:
because they are the most valuable, but also because we _____________________________________
believe the following: _____________________________________
_____________________________________
1. Asset Builders are already well understood. Edward Deming and Alfred P. Sloan created standards _____________________________________
of excellence for manufacturing, distribution and retailing business models. Retreading those grounds
_____________________________________
doesn’t make much sense and there are lots of resources in this arena if you need them,
(https://en.wikipedia.org/wiki/Edward_Deming); _____________________________________
2. Services businesses have been around for more than 100 years. Although there is no well known _____________________________________
name in this field, there is no shortage of both domestic and international firms that have mastered this
_____________________________________
business model (https://en.wikipedia.org/wiki/Service_excellence);
_____________________________________
3. Technology firms were created with the advent of the semi conductor in 1957. Since then we have
seen large and very successful software firms be created that according to Marc Andreessen of Internet _____________________________________
fame are now eating the world.

_____________________________________
(http://online.wsj.com/news/articles/SB10001424053111903480904576512250915629460);
_____________________________________
4. Network Orchestrators have significant advantages over the other business models. Their rapid
scaling, by leveraging the network participants, and high profitability, driven by low-asset requirements, _____________________________________
have propelled them to the front of the business model pack.

_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: One of the most notable differences between the business is
_____________________________________
the value they create in the market. Looking across many dif-
_____________________________________
ferent datasets, the average price-to-revenue ratios follow an
_____________________________________
exponential pattern of 1x, 2x, 4x, and 8x for Asset Builders,
_____________________________________
Service Providers, Technology Creators, and Network Orches-
_____________________________________
trators, respectively. We therefor refer to the price-to-revenue
_____________________________________
advantage of Network Orchestrators as the Network Multiplier.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
This research was performed by OpenMatters with input from Deloitte _____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: We also found that business models are a cross-industry phe-
_____________________________________
nomenon. Any business model can be applied to any industry.
_____________________________________
Newer business models are actually breaking down traditional
_____________________________________
industry boundaries and creating new horizontal competitors
_____________________________________
in the process. For example, consider what Zappos has done
_____________________________________
to shoe retailing.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
The introduction of CASIM
_____________________________________ technologies and the corre-
sponding evolution of business
_____________________________________
models are disrupting industries
_____________________________________
new and old with a surge of
network capability – allowing
_____________________________________ new avenues of connectivity
and value creation between
_____________________________________
companies, employees, part-
_____________________________________ ners, and customers.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Lets pause for a moment and do an exercise. Personal Notes:
To start, we want to you to ask yourself the following questions: _____________________________________
_____________________________________
1. How are today’s digital technologies disrupting your company’s economics and your industry overall?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
2. What steps is your company taking to respond to these new threats and sources of value? _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
3. How are you creating your own, digital initiatives like GE, with its Industrial Internet,
(https://www.gesoftware.com/industrial-internet) or McKinsey with its Digital practice, _____________________________________
(http://www.mckinsey.com/client_service/mckinsey_digital)?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Its time again to talk about some hard stuff – we call it mental
_____________________________________
models. First, ask yourself, what determines how your company
_____________________________________
is allocating its capital including what projects it invests in and
_____________________________________
why? Our answer, based on years of working with boards,
_____________________________________
institutional investors and corporate leaders, may surprise you!
_____________________________________
It is your leadership team’s attitudes, behaviors and beliefs
_____________________________________
about the sources of value and risk.
_____________________________________
_____________________________________ If your leaders and board members believe that tangible assets (like plant, property and equipment) are
a good investment, that is where they place their bet. If they think that networks are better (like Facebook’s
_____________________________________ board and founders believe), than that is where they invest. In short, a company’s leadership team
allocates its capital (both financial and human) based its core assumptions about what drives risk and
_____________________________________
rewards. We call this organization’s mental model.
_____________________________________
As background, in The Fifth Discipline8, Peter Senge defines mental models as “deeply ingrained attitudes,
_____________________________________
behaviors and believes, that influence how we understand the world and how we take action.” In the
_____________________________________
business context, a mental model defines what a leader believes drives value, and as a result, what they
focus on, measure, and invest in (http://en.wikipedia.org/wiki/The_Fifth_Discipline).
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
The question is: what is your mental model? Personal Notes:
What are you core, and often, unstated, attitudes, behaviors _____________________________________
and beliefs about what creates value? _____________________________________
_____________________________________
Use the space below to write them down.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
Adapting a company’s business model requires first adapting the mental model of the leadership team. _____________________________________
Let’s look at each of these characteristics individually:
_____________________________________
• Focus
_____________________________________
• Information
• Investment _____________________________________
• Strategy _____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Gather your team and fill out the following form.
_____________________________________
Think of this form as a Myers Briggs profile for your business personality and think – what are your
_____________________________________ preferences, biases, and attitudes. Once complete, you have should have 4 letters that together represent
your focus (inside or out), information preferences (financial or non-financial), investment bias (tangible
_____________________________________
or intangible) and strategy (known or new). Together, they give you a real sense of where you place your
_____________________________________ time and attention.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Regardless of your profile score, remember, mental models Personal Notes:
are elastic – they can change, but change takes effect. _____________________________________
_____________________________________
For example, let’s look at CEO Howard Schultz recently said, “We believe we _____________________________________
how Starbucks has adapted have an opportunity to try to create a value-added
_____________________________________
the mental models of their service outside of the Starbucks ecosystem that
leadership team. In 2009, eventually could compete with PayPal”. _____________________________________
Starbucks brought on Adam http://www.computerworld.com/article/2488717/
Brotman to lead the digital mobile-wireless/evan-schuman--can-starbucks- _____________________________________
ventures group and eventually brought him onto get-people-to-use-its-app-to-pay-for-dry-clean-

_____________________________________
the leadership team as Chief Digital Officer. ing-.html
Brotman notes that Starbucks has always had a _____________________________________
broad view about what was possible with digital Starbucks has shown its commitment to going
technology, saying, “digital for Starbucks was not digital by bringing on the right talent and allocating _____________________________________
just about a website or a point-of-sale system, but capital to digital projects, and is being rewarded
_____________________________________
about an ability to connect with customers and with new and high-potential product lines and
transform their experience and drive the company.” revenue streams. _____________________________________
http://sloanreview.mit.edu/article/how-starbucks-
has-gone-digital/ Now that you have examined your leadership _____________________________________
team’s mental model, let’s take a closer look at _____________________________________

Since joining, Brotman has led initiatives to create how this mental model has manifested into a
the Starbucks Digital Network (which delivers business model for your company. You probably _____________________________________
content to browsers in their shops) and develop the already have some thoughts on which business
_____________________________________
highly popular Starbucks App, which appears to model best describes your firm, but begin by taking
be evolving into a new mobile payment platform. the Digital Grader Assessment located online at _____________________________________
www.digitalgrader.com.
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: To conduct this exercise, use the space that is provided below
_____________________________________
to answer the following questions:
_____________________________________
_____________________________________ 1. Which category best describes your company?
_____________________________________
_____________________________________
_____________________________________
2. Where does most of your capital get allocated?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
3. What are the most important KPIs for your company?
_____________________________________
_____________________________________
_____________________________________ 4. What is the most important risk to your company?

_____________________________________
_____________________________________
_____________________________________
5. Where does the top talent tend to go in your company?
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
6. How and where do you interact with customers? _____________________________________
_____________________________________
_____________________________________
_____________________________________
7. What is an important competitive differentiator?
_____________________________________
_____________________________________
_____________________________________
8. Which assets do you prefer and think are least risky? _____________________________________
_____________________________________
_____________________________________
9. What is your business model according to the survey? _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: To put your responses in context, let’s return to our research.
_____________________________________
In fact, what 40 years of data tells us, is that today’s newer
_____________________________________
business models are better performing on a variety of dimensions
_____________________________________
including -- faster growth, higher profit margins, and lower
_____________________________________
marginal cost of expansion. Put this all together, and these newer
_____________________________________
business models generate higher enterprise value for all who
_____________________________________
are involved.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Its time to review your results from the digitalgrader.com
_____________________________________
survey. In particular, use the space below to answer the
_____________________________________
following questions about your business model:
_____________________________________
_____________________________________ 1. Concept: What type of business model did you set out to create?
_____________________________________
_____________________________________
_____________________________________
_____________________________________ 2. Capital: How do you currently allocate your capital?
_____________________________________
_____________________________________
_____________________________________
_____________________________________ 3. Risk: What risks are you primarily concerned about given your assets?
_____________________________________
_____________________________________
_____________________________________
_____________________________________ 4. Talent: Where do today’s top performers go – your industry or startups?
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
5. Metrics: What do you measure – some or all your sources of value? _____________________________________
_____________________________________
_____________________________________
_____________________________________
6. Customers: Do you satisfy all their needs or just a portion? _____________________________________
_____________________________________
_____________________________________
_____________________________________
7. Competition: What are your competitive differentiators? _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Think about your industry at a very broad level and answer
_____________________________________
the questions below in the space provided below.
_____________________________________
_____________________________________ 1. What would a Network Orchestrator look like within your industry or domain?
(Note: Keep in mind that you will need to take a wider perspective than normal)
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
2. What are the names of some of the network orchestrator startups in your industry?
_____________________________________
How successful have these companies been? Are they threatening your core business yet?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
3. Consider the various ways that your company could leverage your own networks or the networks of
_____________________________________ others to augment your existing business model and value proposition and jot those ideas down below.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
On which dimensions is your company most and least digital? Personal Notes:
Now take a look at your price-to-revenue ratio, or Multiplier. _____________________________________
Does it align with the average for your business model? Is it _____________________________________
competitive with your peers? _____________________________________
_____________________________________
Now that you understand the four types of business models _____________________________________
and the different types of mental models that leaders use to _____________________________________
allocate their capital, we are going to spend the rest of this _____________________________________
workbook helping you incorporate Network business models _____________________________________
into your organization so that you can begin to benefit from _____________________________________
their many competitive advantages. This can be achieved by _____________________________________
adding new digital network assets (networks and technology) _____________________________________
internally or by partnering with other companies that have _____________________________________
them (even your customers). Often both routes can be followed _____________________________________
in parallel. Either way, success will depend on an aligned lead- _____________________________________
ership team with a willingness to adapt its mental model to _____________________________________
today’s sources of value. _____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: KEY CHAPTER TAKE-AWAYS:

_____________________________________
_____________________________________
1. There are four business models
_____________________________________ 2. Mental models drive the four business models
3. Different business models have different valuations
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
DigitalGrader _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
http://digitalgrader.com/research/
_____________________________________
.......................................................................................................................................................................................................................................................

Module 1: Orientation - CASE STUDY
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
Amazon.com started by changing the way customers purchased books, but has now created a much
_____________________________________ broader change. Then it began delivering books electronically, and E-books now make up about 30% of
all book sales (of which Amazon has a majority of market share). This shift to electronic format has created
_____________________________________
confusion and bickering about the appropriate pricing for books delivered in bits rather than on paper.
_____________________________________
Publishers, such as Hachette, find themselves in a difficult negotiating position since Amazon has a firm
lock on customers and the market, with over 50% market share for online books.
_____________________________________
Read Full Article:
_____________________________________
http://www.digitalbookworld.com/2013/is-amazon-invincible/
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
This online startup allows people to rent out space in their home through by using Airbnb’s online network
to connect with a broad market of potential travelers. This market segment within the travel industry was _____________________________________
essentially created by Airbnb, and now competes with hotels and other more standard accommodations.
_____________________________________
It now has over 600,000 listings and raised money at estimated 40x revenue. This rapid growth has raised
the hackles of the hotel industry whose lobbyists are now working to restrict this type of hospitality arrangement. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
_____________________________________
_____________________________________
_____________________________________
Consider the threat that Google maps and other navigation applications for smartphones have posed to
_____________________________________ GPS makers, such as Garmin, Magellan, and TomTom. Not only are the apps less expensive than stand-
alone, single-function devices, or oftentimes free, they are better. Networked navigation tools create a web
_____________________________________
of user data points that send back traffic and other information, improving the experience for other users.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
The Nest thermometer brought a new user experience including remote connectivity and some smart,
big data analytics to a less-than-exciting home product and simultaneously gathering data of value to _____________________________________
utilities and customers. When the “iPod” of thermostats hit the market it sold out within weeks. A few years
_____________________________________
later, Google purchased Nest Labs for $3.2 billion, estimated to be 10x revenue. Meanwhile, Honeywell
has launched multiple patent infringement lawsuits in a late-game effort to protect their market position. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
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.......................................................................................................................................................................................................................................................
Personal Notes:
______________________________________________________________________________________________________________________________________________________________________
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______________________________________________________________________________________________________________________________________________________________________
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______________________________________________________________________________________________________________________________________________________________________
.......................................................................................................................................................................................................................................................

Module 2:
Assessment
Inventory all your intangible assets with a clear
focus on your dormant network assets.
Module 2: Assessment
“ To break a mental model

[and business model] is harder
than splitting the atom.”
Albert Einstein,
Theoretical Physicist
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Distributed task force Inventory the Over the course of In meetings with your To build a complete
with connection to all company’s network three to six months company’s leaders and picture of your
business units (BUs) assets – both tangible subject matter experts company’s latent
and intangible network assets
.......................................................................................................................................................................................................................................................
Now that you understand the starting point for your firm, both Personal Notes:
in terms of mental and business models, you are ready to take _____________________________________
the next steps towards creating a more valuable and profitable _____________________________________
Network centric business. _____________________________________
_____________________________________
To do this, you need to begin cultivating network _____________________________________

assets, using CASIM digital technologies. The first
_____________________________________
step is to do a complete inventory of all the network
assets that exist within or around your company with _____________________________________
as much detail and descriptive information as possible.
This will help you and your peers understand what _____________________________________
networks are available to your company, and what
_____________________________________
value you could provide to them.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: In order to accomplish this inventory, you will need to put in
_____________________________________
place a task force team of individuals who are respected and
_____________________________________
well connected within the company that can interface with
_____________________________________
leaders and subject matter experts within the company’s
_____________________________________
business units.
_____________________________________
_____________________________________ This inventory will take the form of an iterative series

of interviews, starting with business unit leaders, and
_____________________________________
continuing with content experts as needed to under-
_____________________________________
stand the different networks that exist within each
business unit and around the company, and the
_____________________________________ characteristics of those networks. Depending on the
size and complexity of the company, this process
_____________________________________
may take one to three months.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Module 2: Assessment - EXERCISE
Let’s prioritize your networks. Personal Notes:

_____________________________________
Think about all your networks – be they customer, employee, partner, supplier or investor. And score them
from 1-10 based on how much value they currently contribute to your organization. Who are your top _____________________________________
networks? Are there any you don’t benefit from at all? Why not?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: It is also important to note how these networks relate to the
_____________________________________
company and what needs they have that correlated with com-
_____________________________________
pany capabilities. For example, could your company provide
_____________________________________
the network with data or services? One of the goals of a net-
_____________________________________
work business model is for the network itself to be enabled
_____________________________________
to generate part of the value, but the Network Orchestrator
_____________________________________
usually must also provide some value, particularly when the
_____________________________________ network is in the early stages of development.
_____________________________________
_____________________________________ More and more customers are switching to online and mobile banking. A Bank of America spokesman
says “tens of thousands” of its customers do their banking on mobile devices each week. Property assets
_____________________________________ are becoming much less important to banks as their customers shift to intangible channels like software.
_____________________________________
So, what is your view of value and how it is created, managed and deployed?
_____________________________________
This is a hard question for many, but for some, very simple, based on what their value of value is.
_____________________________________
Remember, that our research says that each business model has its own multiplier effect with today’s
_____________________________________
intangible assets producing more value with less financial capital. But that is not the whole story.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
As you think the market shift from tangibles to intangibles, here Personal Notes:
is tidbit worth considering when you think about allocating _____________________________________
your capital. Banks are shutting their doors, and opening their _____________________________________
apps. Last year, 2,267 bank and thrift branches shuttered their _____________________________________
windows, according to Charlottesville, Virginia-based SNL Finan- _____________________________________
cial. By 2023, the bank-branch count in the United States is _____________________________________
expected to drop to 93,000 from 80,000. Why the race to close _____________________________________
branches? _____________________________________
_____________________________________
Consider your risk profile for allocating your firm’s capital given the following insights: _____________________________________
Asset Builder: _____________________________________
The risks of physical assets include depreciation, obsolescence, theft, and damage (for example, due to
_____________________________________
natural disasters).
_____________________________________
Service Provider:
_____________________________________
The risks of people assets include attrition and turnover, sourcing difficulties, and HR concerns such as
lawsuits. _____________________________________
Technology Creator: _____________________________________

The risks of intellectual capital assets include obsolescence, high upfront development costs, patent
_____________________________________
infringement and defense, and loss of essential talent.
_____________________________________
Network Orchestrator:
The risks of network assets include loss of customers or reduced participation and reputation risk. _____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Its time to ask the question,

_____________________________________
how does your company allocate its capital?
_____________________________________
To answer this question, gather your team with color stickies and have each member of your management
_____________________________________ team place your stickies on the 4 quadrants of the four different business models signifying where you
allocate your firms’ human and financial capital.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Now that you have seen how companies of all types are
_____________________________________
transitioning their business models to leverage intangible
_____________________________________
assets including their intellectual property and dormant
_____________________________________
networks, please complete the following exercise.
_____________________________________
_____________________________________ 1. What current networks does your company already have or participate in?
_____________________________________
_____________________________________
_____________________________________
2. With which groups are the relationships strongest?
_____________________________________
_____________________________________
_____________________________________
_____________________________________ 3. With which are the relationships weakest?

_____________________________________
_____________________________________
_____________________________________
4. How well are you capitalizing on the skills, value and assets owned by members of your networks –
_____________________________________
including your employees, competitors, suppliers, customers, and other stakeholders?
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
5. What are sentiment, number, and levels of engagement and shared economics of these relationships? _____________________________________
_____________________________________
_____________________________________
_____________________________________
6. How are you using technologies to engage with each network?
_____________________________________
_____________________________________
_____________________________________
7. What value could you offer to these networks? _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................


_____________________________________
_____________________________________
1. Every company has dormant networks
_____________________________________ 2. Most companies have under-allocated capital to
_____________________________________ their networks
3. Every company has the opportunity to activate their
_____________________________________
networks for value

_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
DigitalGrader _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
http://digitalgrader.com/step-2/
_____________________________________
.......................................................................................................................................................................................................................................................

Module 2: Assessment - CASE STUDY
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
These smartphone, car-hailing services allow individuals to use personal cars to make money by giving
_____________________________________ rides to others. Although Uber and Lyft do not directly compete with auto manufacturers, they are clearly
change the overall auto industry and the ways that consumers need and interact with cars. Rather than
_____________________________________
retrenching and trying to protect its turf, Ford Motor Company has indicated its openness to the disrup-
_____________________________________
tion in their industry. Chairman Bill Ford Junior recently said in an interview with the Wall Street Journal,
“Whether it’s Uber or Lyft, or another (auto company), we are open to working with them. Rather than
_____________________________________ turning our back on them, or ignoring them, we are both saying we would like to get to know them and,
where it makes sense, work together.”
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
Nike has a great job levering their close relationship with their customer base to tap into new sports
related markets. In 2006 Nike broke ground by creating the Nike+Ipod Sports kit, which allowed runners _____________________________________
to track their runs and also share them with other runners. Quite a bold move for an athletic wear manu-
_____________________________________
facturer with little tech experience! In 2012, Nike developed another – the FuelBand that logs activity
throughout the day and allows you to share your achievements and create friendly competition with friends _____________________________________
and family. Clearly hitting a sweet spot with customers, the FuelBand sold out twice in pre-order and
Nike’s sports equipment division saw an 18% rise in profits in the fiscal year it was released. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
_____________________________________
_____________________________________
_____________________________________
This Stamford, Connecticut-based owner of such iconic hotel brands as St. Regis and Sheraton, is planning
_____________________________________ to sell $2 billion to $3 billion of hotel properties in the next few years. Starwood doesn’t want to own prop-
erties anymore; it just wants to manage them, leaving the problems associated with periodic economic
_____________________________________
slumps to others. That’s something it knows quite a bit about, having recently salvaged a credit rating that
_____________________________________
was cut to junk in the 2009 downturn.
_____________________________________ How will Starwood make money? It will earn fees for managing the properties it is selling to hotel owners
in places like Dubai, which boasts fourteen Starwood hotels. The company aims to increase its revenue
_____________________________________
from management to 80 percent of its annual total, up from 60 percent. This stands in stark contrast to
_____________________________________ 2008, when management fees accounted for just 25 percent of revenue.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
This retailer has been able put its intangible data assets to good use. Like many companies, target collects
a great deal of information on its shoppers. Each Target shopper has a unique identification number which _____________________________________
enables target to keep track of his or her personal purchases. A few years ago, Target’s statisticians combed
_____________________________________
through their data and identified some purchase patterns that were highly correlated with pregnancy. With
this information, Target is able to send highly target advertisements and coupons to women likely to be _____________________________________
pregnant, and begin capturing new customers at a time when significant change means that their “shop-
ping patterns and brand loyalties are up for grabs.” _____________________________________
_____________________________________
Read Full Article:
http://www.nytimes.com/2012/02/19/magazine/shopping-habits.html?pagewanted=1&_r=3&hp& _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
_____________________________________
_____________________________________
_____________________________________
GE has noticed the rapid innovation taking place in home automation today, and wants to be a player. To
_____________________________________ that end, GE has opened up thousands of patents to the “crowd” and has partnered with Quirky, a startup
which crowd-sources invention ideas and helps makes those inventions a reality. Together, GE and Quirky
_____________________________________
will source and create appliance and other home devices that can be controlled remotely through the free
_____________________________________
Wink app.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
AT&T has begun using their employees to generate value in a novel way: by crowdsourcing innovative
ideas. Participants in TIP submit and discuss ideas, and “vote” on the best ideas with virtual currency. _____________________________________
Approximately once a quarter the top ideas as selected to pitch to leadership, which can then lead to real
_____________________________________
dollar investment, production, and commercialization. Thus far, the program has seen participation from
over 130,000 employees, over $38 million has been invested, and numerous patents have been submitted. _____________________________________
Begun in 2009, the TIP program is still going strong.
_____________________________________
Read Full Article:
_____________________________________
http://www.forbes.com/sites/larrymyler/2013/12/05/atts-innovation-pipeline-engages-130000-employees/
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
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Personal Notes:
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Module 3:
Investment
Invest in network assets in your organization.
Module 3: Investment
“ The usefulness, or utility, of

a network equals the square
of the number of users.”
Robert Metcalf,
Electrical Engineer
.......................................................................................................................................................................................................................................................
Module 3: Investment • © Copyright 2014, OpenMatters LLC 111

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Leadership team with Allocate at least 10% Over the course Throughout your To drive better
recommendation from of your capital to your of 6-18 months organization performance and
task force team network assets higher value from
the assets of others
.......................................................................................................................................................................................................................................................
Once your task force completes the relationship inventory for Personal Notes:
your firm, you will have a complete picture of your current _____________________________________
portfolio of tangible and, even more important, intangible and _____________________________________
network assets. During the inventory process, this team should _____________________________________
also begin assessing which networks have the potential to grow _____________________________________
into a new network-based business unit for the business. _____________________________________
_____________________________________
The task force team and the leadership team should work together to identify promising opportunities for _____________________________________
the development of a network business model asset.
_____________________________________
_____________________________________
This asset will have two components:
1. The network _____________________________________
2. The value that your company can provide _____________________________________
_____________________________________
When it comes to the network, a high-potential network will have several of these characteristics:
_____________________________________
• Large number of potential members
_____________________________________
• The members are underserved/have an unmet need
• Many members already have a relationship with your company _____________________________________
• Your company uniquely understands the group _____________________________________
• The members could provide value to each other _____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: The second component is the value you that your network-
_____________________________________
based business can provide for the target network – why they
_____________________________________
will want to engage with your company (and each other) on
_____________________________________
the platform you are creating. This is where your other
_____________________________________
intangible assets come into play.
_____________________________________
_____________________________________ For example your assets might include…
_____________________________________
• Subject matter experts among your employees who could provide knowledge needed by the network
• Data on a particular topic of interest to the network
_____________________________________
• Relationships with members of the community that the network would like access too
_____________________________________
_____________________________________
When considering the potential networks you could serve, and the opportunities where you
_____________________________________
could create value, the best options will be those that:
• Have a relatively quick path to generating value
_____________________________________
• Have the potential to transform the company (over time)
_____________________________________
• Create new pools of value without cannibalizing existing ones
_____________________________________
• Tap into the value of a broad ecosystem including customers, partners, etc.
_____________________________________ • Require low capital investment to begin
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
We recommend that the leadership team set aside a week’s Personal Notes:
worth of time to devote to this important exercise. During the _____________________________________
first two or three days of the week, the task force should pres- _____________________________________
ent the asset inventory business unit by business unit, with a _____________________________________
focus on the network assets and potential sources of value for _____________________________________
each. The last half of the week should be devoted to prioritizing _____________________________________
the opportunities and picking or one or two to focus on. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Here are the four steps for augmenting your organization’s
_____________________________________
existing business model with network value.
_____________________________________
_____________________________________ 1. Choose a network.

We’ve discussed the characteristics of a good network opportunity above, so pick one or two here that
_____________________________________
you think would constitute an early win for your organization if you allocated real capital to its growth
_____________________________________
and development.
_____________________________________ 2. Add a technological solution to connect that network.

Essentially, create the platform on which your company and network participants will communicate or
_____________________________________
share information. There are many low-cost preexisting options that you could use to “test the waters”
_____________________________________ with your network, such as Facebook, Twitter, or Yammer. Selecting a fast and cheap solution to begin
with is recommended because the early stages of asset development are very iterative. When you
_____________________________________ begin to have early successes with your network and better understand its wants and needs, you can
upgrade the platform in tailored ways.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
3. Recruit early members by seeding content and value. _____________________________________

The most difficult time for network assets is when they are growing to reach critical mass. In the early
_____________________________________
stages, you will need to provide the content or benefit for the network in order to encourage participants
to join. This could take many forms, but here are a few examples: _____________________________________
A. Have employees create content
_____________________________________
B. Bring in experts or specialists of interest to the network
C. Partner with organizations that could gain from your network _____________________________________
D. Share data or information that the company has access to _____________________________________
4. Expand the network by sharing the rewards. _____________________________________
Once participants begin joining the network, likely in order to access the benefits that you have provided,
_____________________________________
you should incentivize them to participate in the value creation. You could, for example, create ways
that the user can derive recognition and esteem from his/her participation. Here are some ways people _____________________________________
derive esteem from existing networks:
_____________________________________
A. Twitter and Instagram: number of followers
B. Yelp: membership in the Elite Squad (for popular reviewers) _____________________________________
C. Etsy: Favorite shops and trending product emails

_____________________________________
D. Uber: Positive reviews
_____________________________________
Sharing revenue is another common way to incentivize participation. Many networks offer participants
_____________________________________
the opportunity to earn money for the value they provide. Airbnb and Uber allow people to share and
monetize assets they own. Taskrabbit and Care.com allow people to offer their services to a broad _____________________________________
market. Etsy and ArtFire enable artists and artisans to market and sell their work.
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: As we have seen, reallocating your capital to a different (and

_____________________________________
probably foreign) business model will require some adjustment
_____________________________________
in your leadership team’s and board member’s mental model.
_____________________________________
Many companies have difficulty shifting their mental model
_____________________________________
away from the biases of last year’s budget, or their previous
_____________________________________
attitudes, behaviors and beliefs about the sources of value –
_____________________________________
especially if they have built their entire career and organization
_____________________________________ around those assumptions.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
However, given our research, it’s time for action and the chart Personal Notes:
below is your map to success. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: When you use these steps correctly, they will help you allocate
_____________________________________
your capital to today’s sources of value. In addition, this frame-
_____________________________________
work for growth reflects what great investors already know
_____________________________________
about how to create value and minimize risks – that is to
_____________________________________
leverage the assets, relationships, and knowledge of others
_____________________________________
to drive value and performance.
_____________________________________
_____________________________________ As you move forward, this network amplification

process can become a quarterly ritual that actually
_____________________________________
inspires leaders to really innovate and invest in
_____________________________________
technologies that create employee and customer
excitement and value, and free themselves from the
_____________________________________ historical bias that sets budget and capital allocation
in most companies. Most importantly, your investors
_____________________________________
will love you for investing in what truly matters –
_____________________________________
today’s sources of value – and the enabling
technologies that enhance them.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
So how should you set up your team up for this capital Personal Notes:
reallocation process and future processes like this? _____________________________________
Our recommendations: _____________________________________
_____________________________________
• Staff your team with passionate individuals who are excited by the project – and make sure they are _____________________________________
connect to the external market you are tapping into.
_____________________________________
• Insulate the project team from the rest of the business. Don’t siphon off their time, resources, and _____________________________________
attention but expecting the same output and results you would of a developed business unit.
_____________________________________
• Give the project team freedom to operate, and even change the plan, without the bureaucratic
_____________________________________
oversight. This will increase their level of ownership and ability to hone in on value.
_____________________________________
• Expect iteration. Rapid response to new learning’s should be a part of the creation of digital assets
and will be important in projects that connect with an external network. _____________________________________
_____________________________________
• Limit the capital invested up front. The goal of digital business models is to become a part of, or create,
an external network with high growth potential. If you have found an opportunity that is resonating, _____________________________________
the market will amplify your investment with participation from the network.
_____________________________________
• “Give” in order to “get”. In the early stages of network development, your team may need to spend a lot
_____________________________________
of time developing the value – for example, creating the content. Over time, expect the network to start
giving back more. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: To accomplish the previous tasks, you will need to answer the
_____________________________________
following questions (this is not an exercise, although feel free
_____________________________________
to create notes in the margin where we have left space for you)
_____________________________________
_____________________________________ • Who will comprise the team?

_____________________________________
_____________________________________
• Are there capabilities that must be sourced externally?
_____________________________________
• How will the team report upward? At what cadence?
_____________________________________
_____________________________________ • How much authorities will the team have to be self-directed?

_____________________________________
_____________________________________
• How can the team provide value quickly?
_____________________________________
• What results do you expect and in what timeframe?
_____________________________________
_____________________________________ • What resources will the team need immediately and how
_____________________________________ will those be supplied?
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
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_____________________________________
_____________________________________
1. Companies are capital allocators
_____________________________________ 2. The most valuable company companies allocate their
_____________________________________ capital to networks
3. Every company should allocate at least 10% of their
_____________________________________
capital to networks
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
DigitalGrader _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Module 3: Investment - CASE STUDY
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
Walmart is trying to co-opt disrupters by enlisting people outside the organization to help it innovate. The
_____________________________________ retailer recently ran a crowdsourcing contest, offering distinctive new products a chance to “Get on the
Shelf at Walmart.” The competition drew more than 4,000 inventors, entrepreneurs, and small businesses
_____________________________________
from across the United States, and more than 1 million votes were cast. The winners were:
_____________________________________
HumanKind Water,
_____________________________________ A bottled water company that gives 100 percent of its net profits to help provide clean drinking water for
underdeveloped communities worldwide, took first prize.
_____________________________________
_____________________________________ PlateTopper,
A kitchen product that transforms dinner plates into airtight food-storage containers, came in second.
_____________________________________
SnapIt Eyeglass Repair Kit,

_____________________________________
A screw kit to tighten loose glasses in thirty seconds, was third.
_____________________________________
All three products will be available on Walmart.com, and HumanKind Water will also be on shelves in
_____________________________________ some Walmart stores.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Module 3: Investment - CASE STUDY
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
Google is a company well known for capability with digital technology and ability to innovate…
so let’s look at how they manage their most innovative projects – the ones they call “moonshots”. In 2010, _____________________________________
Google developed a semi-secret lab known as Google [X] to work on the development of a self-driving
_____________________________________
car. Since then, additional projects have been added such as Google Glass, a wearable computer with
an optical head-mounted display, and Project Loon, which aims to bring the Internet to all with a network _____________________________________
of high-altitude balloons. Google demonstrates several best practices for managing innovative projects
within a large company. _____________________________________
_____________________________________
Separation
Google [X] labs are located in a physically separate space, about a half-mile from Google’s main campus, _____________________________________
and have a different reporting structure.
_____________________________________
Low Investment
_____________________________________
Google invests judiciously in its “moonshots”. Spokeswoman, Jill Hazelbaker, notes, “The sums involved
are very small by comparison to the investments we make in our core businesses.” _____________________________________
The Right Talent _____________________________________
Google [X] projects benefit from passionate leaders with relevant experience. For example, when
_____________________________________
embarking on the self-driving car project, the team brought on Sebastian Thrun who previously sent
an autonomous car through a 7-mile obstacle course in the Mojave Desert. _____________________________________
_____________________________________
The External Network
Google leverages external experts as well to support its projects. Google has partnered with at least 16 _____________________________________
other companies so far, ranging from Silicon Valley startups to established chip manufacturers.
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
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Personal Notes:
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.......................................................................................................................................................................................................................................................

Module 4:
Measurement
Monitor your performance – integrating financial
data with new network centered data
Module 4: Measurement
“ If you change the way you

look at things, the things you
look at change.”
Wayne Dyer,
Author & Motivational Speaker
.......................................................................................................................................................................................................................................................
Module 4: Measurement • © Copyright 2014, OpenMatters LLC 133

........................................ ........................................ ........................................ ........................................ ........................................

........................................ ........................................ ........................................ ........................................ ........................................
Leadership and Measure what Ongoing During the course To help keep your
finance team matters – all your of daily activities company and board
sources of value and on course with
today’s realities
.......................................................................................................................................................................................................................................................
There is an old saying, ‘you can only manage what you measure’. Personal Notes:
In our research, we are going one step further. We are saying _____________________________________
that leaders’ mental models about what is valuable determines _____________________________________
where they allocate their capital. _____________________________________
_____________________________________
Today’s measurement systems —GAAP—categorize tangible, physical assets as assets. Intangible assets, _____________________________________
however, are not measured as clearly. People are categorized as expenses, R&D is sometimes capitalized,
_____________________________________
but sometimes not, and customer networks are not valued at all. These guidelines lead executives and
boards to over-allocate to what they know is valued by today’s measurement system (even if it is outdated) _____________________________________
and under allocate to intangible assets – such as today’s networks of customers or intellectual property.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Investors have taken notice of the shift from tangible to intangible
_____________________________________
goods, and are allocating their dollars at increasing speed to
_____________________________________
intangible based organizations. Indeed these intangible assets
_____________________________________
now make up a majority of the market value of the S&P 500
_____________________________________
companies!
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Given this fact, let’s start what this means to your board and Personal Notes:
leaders by considering that businesses are nothing more than _____________________________________
asset allocators to assets – be they tangible or intangible. In _____________________________________
fact, corporate leaders are like investors who create portfolios _____________________________________
of stocks and bonds, only business leaders instead build a _____________________________________
portfolio of tangible and or intangible assets that enable them _____________________________________
to create and share value. For most people, this is a new point _____________________________________
of view on business, but consider that great business leaders _____________________________________
are in fact great asset allocators. According to research by _____________________________________
McKinsey, businesses leaders invest more capital each year _____________________________________
than investors do. _____________________________________
_____________________________________
Read Full Article: _____________________________________

http://www.mckinsey.com/insights/strat-
egy/how_to_put_your_money_where_ _____________________________________
your_strategy_is
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Further, those organizations that are active reallocators, those
_____________________________________
that regularly rebalance their portfolios of assets to align with
_____________________________________
the market, are usually the best performers.
_____________________________________
_____________________________________
The importance of rebalancing assets is sensible considering
_____________________________________
the pace of change. Although most companies have historically
_____________________________________
served our tangible needs, the bottom of the asset pyramid is
_____________________________________ now being commoditized, while the intangible needs at the
_____________________________________ top are emerging as the most growing and valuable parts of
_____________________________________ the economy.
_____________________________________
_____________________________________ According to the International Integrated Recording Committee, fully 81 percent of business assets today
consist of intangibles. The 81 percent goes largely unmeasured in favor of a fine-grain focus on the other
_____________________________________ 19 percent. That’s the equivalent of seeing just ten of the cards in a fifty-two-card deck. What poker player
would get into a game where he or she could only see one card in a hand of five-card-stud? Should leaders
_____________________________________
and their boards of directors be worried? Absolutely. The financial implications are frightening.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Most leaders and managers, of course, are aware that this sea Personal Notes:
change has been happening. But they don’t have the tools to _____________________________________
measure and make the most of the new reality. Employees _____________________________________
and suppliers enter the books only as an expense; intellectual _____________________________________
property may appear as goodwill, but only in the context of an _____________________________________
acquisition; and customers appear only in the income column _____________________________________
when they open their wallets. _____________________________________
_____________________________________
These misperceptions distort judgments, breeding false assumptions, bad investment (which is to say _____________________________________
strategic) decisions, and leave leaders, boards, and the organizations they run open to profound risks.
And where there is mis-measuring, mismanaging inevitably follows. Leaders who play by outmoded rules _____________________________________
and rely on retroactive, rather than prospective, data are putting their companies and careers in peril.
_____________________________________
We are only beginning to understand the growing _____________________________________

influence of networks in our business and personal
_____________________________________
life, and even more importantly, how to measure and
track this influence. New assets and new sources of _____________________________________
value creation mean new Key Performance Indicators
(KPIs) for leadership teams. Few businesses, however, _____________________________________
have dramatically updated their tracking and reporting
_____________________________________
systems to keep up with the dramatic changes in
relationships, interactions, and sources of value. _____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: For a moment, think of the sheer number of past, present and
_____________________________________
prospective customers that your organization has and is about
_____________________________________
to interact with and ask yourself – do you have a database of
_____________________________________
them? Do you know how they relate to each other? Do you
_____________________________________
track their cadence and frequency of interaction with you and
_____________________________________
each other? How well do you understand their lifetime value?
_____________________________________
Keep going and ask the same questions about your past, present
_____________________________________ and prospective employees, your suppliers and partners, and
_____________________________________ finally, your investors and lenders. If you can, that is great news
_____________________________________ – and you are among the very few organizations that can.
_____________________________________
_____________________________________ If not, you’re in need of some new metrics and KPIs!

_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Understanding the sheer size of your network, where many Personal Notes:
companies stop, is only part of the journey. With social media _____________________________________
ever at our fingertips, one very happy or very upset contact, _____________________________________
whether employee, customer, supplier, or investor, can have a _____________________________________
surprisingly large impact. _____________________________________
_____________________________________
Consider the PR firestorm that Comcast recently endured after unhappy customers recorded and shared _____________________________________
comically bad support phone calls. For this reason, you also need to chart the number of their connections
_____________________________________
(as noted in the points above), but also the number of their interactions (or lack thereof), the quality of
their interactions (e.g. what was your last sale, your last communication, their last interaction, etc.) and the _____________________________________
sentiment of their interactions (e.g. positive, negative, neutral). The weakest link in relationships could
cause the chain to break, creating risks for your enterprise and its potential growth potential. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: So how and where do you get started generating this information?
_____________________________________
Simply, use the measurement framework below to see what
_____________________________________
you need to measure and report to insure your organization’s
_____________________________________
future success. However, to help you get started, here are some
_____________________________________
simple steps that you can take to begin developing your own
_____________________________________
network KPI’s.
_____________________________________
_____________________________________ 1. Map Your Network

That is first chart your customer network including your first, second and third degree of separation against
_____________________________________ past, present and prospective customers. Next, do the same for employees, partners and investors.
_____________________________________
2. Chart Their Interactions
_____________________________________ That is once you see all your networks links (only do first, second and third degree of separations) –
determine the amount of times that you have interacted with them and them with you. Hopefully, like for
_____________________________________
the point above, you are using some of today’s technologies – like CRM, ERM or ERP – so that you can
_____________________________________
gather the right information you need from this assignment from your heads of Marketing, HR and Supply
Chain and Finance. If not – time to contact your local technology for a solution to learn what you need to
_____________________________________ get started.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
3. Plot Their Overlaps _____________________________________

Understanding the true power of your network is also determining what customers could also be potential
investors because they love your product. The same is true for suppliers, partners and employees. But be _____________________________________
careful. In today’s social, mobile and cloud world – you need to make the connections before your stake- _____________________________________
holders do where you have not treated them well. Once they see the connections, they might just gather
together, connect and create strategic risks for your stock price, employment picture and sales pipeline. _____________________________________
_____________________________________
4. Regularly Rebalance Your Capital Allocation
The final step for managing profit and value in your business is to create KPI’s that you and your board use _____________________________________
to run your organization and each of your business models that are contained in your overall organization.
For example, here are some KPI’s that you can use for starters by business model; _____________________________________
_____________________________________
• Asset builders: Inventory turnover, cost of goods sold, manufacturing capability
• Service providers: Hours billed, average employee utilization _____________________________________
• Technology Creators: Patents and other IP generated, number of licenses sold _____________________________________
• Network Orchestrators: Network participants, activity of each participant, number of transactions _____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Each business must also be considered with regards to its
_____________________________________
growth and value potential, keeping in mind the value and
_____________________________________
performance differential between the different business models.
_____________________________________
So start calculating the size of your networks as soon as possible
_____________________________________
to understand what you need to do to harness their collective
_____________________________________
power and wisdom or risk that they will tap into their own and
_____________________________________
unseat your company and its future growth potential.
_____________________________________
_____________________________________ Remember, as noted at the beginning of this chapter, you can only manage what you measure so measure
all the sources of value – especially those created by your networks as well as the size and interactions of
_____________________________________ your networks just like you manage and measure all the SKU’s of your products and services or equipment
in your building. For example, in the industrial age, strategy was based on the size of a company’s plant.
_____________________________________
The key industries in this era were manufacturing, transportation, and energy. Perhaps the key example
_____________________________________ is the railroad empire built by Cornelius Vanderbilt in the late nineteenth century, which included the New
York and Harlem railroad and the New York Central and Hudson River railroad.
_____________________________________
_____________________________________
In the services age, it was based on how many people the company employed and how to maximize their
billable hours. Industries that flourished during this time included insurance, financial services, information
_____________________________________ technology, and telecommunications.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Today, when it comes to strategy in the world of the digital Personal Notes:
corporation, leaders and managers must see themselves as _____________________________________
investors and understand all sources of value. Recent research _____________________________________
by the McKinsey Global Institute proves that investing in social _____________________________________
technologies creates considerable value today. In retail banking, _____________________________________
particularly when applied to sales and marketing, smart invest- _____________________________________
ing yields a revenue increase between 4 and 7 percent. In the _____________________________________
professional-services field, the research shows, similar invest- _____________________________________
ments in operations, distribution, and business support functions _____________________________________
generate a boost in revenues between 8 and 11 percent. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes: Its time to create new KPI’s for each of the four business models
_____________________________________
for your organization. Specifically, our intent here is to help you
_____________________________________
measure what matters so that you can track the performance
_____________________________________
of all of your assets. To do that, the list provided below is the
_____________________________________
just the tip of the iceberg.
_____________________________________
_____________________________________ Feel free to expand in any of the four quadrants to insure that you have created a balance scorecard of
new measures (and old) for your organization. In seeing the whole, you will begin to the see the parts more
_____________________________________
clearly. Best of luck with this exercise, we have saved the best for last, helping you keep track of what has
_____________________________________
previously been overlooked, mis-measured or over emphasized. We know the insights that this exercise
will bring will be helpful on your way to realizing your full multiplier effect.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
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_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Module 4: Measurement - EXERCISE
Personal Notes: One last time, gather your team and use the space below to
_____________________________________
list your new KPI’s by business model. Pay particular attention
_____________________________________
to the new KPI’s you are creating – insuring that you list them
_____________________________________
all, given that they are new for most organizations and have
_____________________________________
probably not been measured or managed (let alone reported
_____________________________________
to your board or shareholders) before.
_____________________________________
If you need further help, go to digitalgrader.com and use our new KPI tool to help you measure what matters.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
Measure all your sources of value _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
http://inventorytool.digitalgrader.com/
_____________________________________
.......................................................................................................................................................................................................................................................


_____________________________________
_____________________________________
1. Existing measurement systems (GAAP) misallocate
_____________________________________
intangible assets
_____________________________________ 2. Mis-measurement leads to under allocation of capital
_____________________________________ to intangibles
3. Measure what matters – all the sources of value
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Personal Notes:
DigitalGrader _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Module 4: Measurement - CASE STUDY
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
We’ve already discussed Nike’s innovative move into digital network products with their Nike+ product
_____________________________________ line. Nike has also adapted quickly to new trends in product marketing. By 2012, Nike’s print and TV
advertising had dropped 40%, while the overall marketing budget climbed steadily upwards. Where has
_____________________________________
the remainder of the marketing budget gone? Nontraditional digital media such as social networks, online
_____________________________________
communities, and online campaigns. Nike noted that its core customer has moved away TV viewership
and towards online presence and community. Nike has responded quickly to align it’s marketing to that
_____________________________________ trend, while many companies have had trouble shifting away from the budget allocations of decades past.
As Nike CEO Mark Parker said, “connecting today is a dialog”.
_____________________________________
_____________________________________ Read Full Article:

http://fortune.com/2012/02/13/nikes-new-marketing-mojo/
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Module 4: Measurement - CASE STUDY
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
In 2011, Cisco re-evaluated all of its business units and decided to re-focus the entire business around
five network-centric key priorities – core routing, switching and services; collaboration; architectures; and _____________________________________
video. As a part of this restructuring, Cisco shut down the Flip video camera division, which it had acquired
_____________________________________
only two years previously. Unfortunately, this acquisition was quickly followed by a market shift to all-in-one
smartphones, rather than single purpose devices. Cisco was able to note the trend, and to adapt. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Personal Notes:
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Personal Notes:
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.......................................................................................................................................................................................................................................................

Executive
Conclusion
Executive Conclusion
“ Move fast and break things.

Unless you are breaking stuff
you’re not moving fast
enough.”
Mark Zuckerberg,
Co-Founder of Facebook
.......................................................................................................................................................................................................................................................
Executive Conclusion • © Copyright 2014, OpenMatters LLC 159

Congratulations!
Personal Notes:
_____________________________________
_____________________________________
_____________________________________
By investing this time in yourself and your company, you have
_____________________________________
made great strides towards creating more value by leveraging
_____________________________________
the dormant power and value of your customer, employee,
_____________________________________
partner, and supplier and investor networks. Hopefully, by this
_____________________________________
point, you and your leadership team have aligned on plan for
_____________________________________
the future that has the potential to shift your business to take
_____________________________________
advantage of the value of digital networks, and have even
_____________________________________
begun implementation of this plan. The road ahead is long–
_____________________________________
indeed, adaptation will be required for the life of your compa-
_____________________________________
ny–but the process is worthwhile. But we are not done. To help
_____________________________________ you on your way, we have included below a list of FAQ’s that
_____________________________________ are commonly asked as part of any organization’s desire to add
_____________________________________ network value to their existing asset, services or technology
_____________________________________ businesses. We hope that they are helpful for you as well on
_____________________________________ your journey.
_____________________________________
_____________________________________ Best of luck!

.......................................................................................................................................................................................................................................................
Key workbook takeaways… Personal Notes:
.................................................................................................................................................................................. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Executive Conclusion: Q&A
Personal Notes: Question:

Research shows that tangible assets now constitute 20% or less of total corporate value in the S&P 500,
_____________________________________
compared to more than 80% in 1975. What does this finding mean for companies and their CFOs?
_____________________________________ ..................................................................................................................................................................................
_____________________________________
Answer:
_____________________________________ Our research indicates that investors are paying more for companies with business models that embrace
today’s technologies and emphasize intangible assets—social, business and financial networks, big data
_____________________________________
and intellectual property (e.g., bio-tech, clean tech and fin tech)—and that co-create products and services
_____________________________________
with their customers. Meanwhile, organizations with more traditional business models that focus on tangi-
ble assets as well as older manufacturing and distribution technologies are viewed as less valuable.
_____________________________________
Our research identified four types of assets that companies invest their capital in: physical, human,
_____________________________________
intellectual and customer networks. These assets, in combination with enabling technologies, produce
_____________________________________ distinctly different business models. We also found that three of the asset types―human, intellectual and
customer networks―are mis-categorized or ignored by GAAP―that is human, intellectual and customer
_____________________________________ networks. This suggests that CFOs may under-invest in these types of assets and/or under-manage and
under-report them to investors and their boards. Our research also indicates that investors are valuing the
_____________________________________
Technology Companies (regardless of industry) and Network Orchestrators of social, business or com-
_____________________________________ mercial relationships between two and four times more than manufacturers, distributors, retailers or service
providers, regardless of industry. Underlying this valuation gap is the fact that asset and service-centric
_____________________________________ businesses typically scale by investing in more assets and/or more people (both of which don’t scale well).
The implication of our findings is that CFOs who do not embrace digital technologies, intangible assets
_____________________________________
and emerging networks could be creating strategic, operational and financial risks for their company, their
_____________________________________ board and their shareholders.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Question: Personal Notes:

If a shift to digitally enabled business models is necessary, shouldn’t that fall to the CEO or the entire
_____________________________________
leadership team, not the CFO?
.................................................................................................................................................................................. _____________________________________
_____________________________________
Answer:
Not necessarily. There are reasons why this is very much a CFO issue and opportunity. First, CFOs are _____________________________________
the stewards of corporate value. Second, they have the finance background and understanding of market
_____________________________________
valuation of business models that are needed to comprehend the long-term financial implications of
different business models. Third, they have that broad perspective needed to bring this picture together _____________________________________
for the executive team and board, to explain how shifting business models to digitally centric can
increase enterprise value, and then catalyze the required change. _____________________________________
_____________________________________
Finally, this critical issue provides CFOs with a significant opportunity to be leaders and strategists by re-
balancing their company’s investment portfolio and reallocating some capital to assets and projects that may _____________________________________
develop into more valuable business models. Our research with OpenMatters suggests that companies
that allocate capital to creating scalable and extensible intellectual property (IP) and business, consumer _____________________________________
and commercial/financial networks, regardless of industry, can create additional value for their organizations.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................


Can you offer an example that illustrates how CFOs can create value in this way?
_____________________________________
..................................................................................................................................................................................
_____________________________________
Answer:
_____________________________________
Consider the information companies have about their customers, including number of interactions, level
_____________________________________ of sentiment and potential for product and service co-creation. This treasure trove of customer data is
an enormous and often-untapped asset, and to our point, it’s not measured nor reported on the balance
_____________________________________
sheet ―unless the company is involved in an acquisition – and only then categorized as goodwill. If you
_____________________________________
think about this asset and other intangibles in this way, and then inventor them, CFOs get a better handle
on their organization’s latent sources of value, which we’ve noted are often viewed by investors as the
_____________________________________ most valuable assets. From there, they can create a plan for reallocating capital to their most valuable
assets, whether they’re measured or not by GAAP, and power them with today’s technologies, such as
_____________________________________
the cloud and mobile.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

How can CFOs help their organization take advantage of digital opportunities & reshape their business model?
_____________________________________
..................................................................................................................................................................................
_____________________________________
Answer:
_____________________________________
Even if CFOs are convinced by the research’s findings, it’s not realistic for them to say to their board or
other members of the executive team, “We should pivot our existing business model and become a _____________________________________
technology or network organization overnight.” An important part of our message is that you don’t have
_____________________________________
to, or even want to, reinvent your core business overnight. CFOs can formulate a strategy for helping the
organization incrementally transition from an Asset Centric Organization or Service Provider to becoming _____________________________________
a Technology Business or Network Orchestrator. To be successful, this transition has to be looked at as a
long-term process, a shift that occurs over the course of years, beginning with smaller initiatives outside _____________________________________
the core. As these initiatives show potential, they are scaled to become more impactful over time. John
_____________________________________
Hagel and John Seely Brown of the Deloitte Center for the Edge have developed a framework for making
major institutional change via “edge opportunities.” Applying that framework means identifying and lever- _____________________________________
aging an organization’s existing intangible assets such as IP and relationships.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................


What are the first steps that a CFO of organization with a traditional business model might deploy?
_____________________________________
..................................................................................................................................................................................
_____________________________________
Answer:
_____________________________________
The initiative has to start at the top with strong and innovative leadership. There’s nothing more important
_____________________________________ than getting the CEO, board and management team aligned with the idea that digital technologies are
critical to driving value.
_____________________________________
_____________________________________
From there, CFOs can employ a four-step process, starting by assembling the leadership team to create
a vision for new business model opportunity for the organization. The CFO has to provide the sponsorship
_____________________________________ to drive that vision throughout the organization. The CFO will also need team members who understand
today’s valuable technologies and how they can drive value in new ways for the organization.
_____________________________________
_____________________________________ Second, take a complete inventory of the company’s assets, tangible and intangible, and identify which
assets have the potential to generate revenues that resonate with customers and investors. That inventory
_____________________________________ includes the people, processes and technologies essential to support the monetization of those assets.
_____________________________________
Third, formulate a detailed plan (include converting traditional advertising and transaction revenue models
_____________________________________ to subscription and membership) to develop previously underutilized assets into a new business model
that helps transform the company over time. As part of this step, CFOs will need to align the finance func-
_____________________________________ tions’ actions and communications with the new strategies they will be championing.
_____________________________________
Fourth, introduce new and real-time metrics so that management, the board and shareholders have a
_____________________________________ full view of the organization’s health and growth prospects. Measuring all sources of value—and not just
financial results—is essential to nurturing fledgling business models. The finance function will have to
_____________________________________
implement real-time sensing of customer and employee engagement, sentiment and related measures to
_____________________________________
track the data and benefits created by these networks and add them to the data already being captured
and reported.
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

What other challenges can CFOs expect as they try to pivot their organization’s business model?
_____________________________________
..................................................................................................................................................................................
_____________________________________
Answer:
_____________________________________
A company’s current business model is shaped by the attitudes, behaviors and beliefs of the leadership
team, which we call their “mental model.” CFOs should expect to invest significant time and attention to _____________________________________
helping other leaders examine and shift their mental models so that they are willing to get behind the shift
_____________________________________
and adjust their capital allocations accordingly. Getting everyone on board and creating a new budget
could take up to 18 months. The organization will also need to train and recruit new talent with the necessary _____________________________________
digital knowhow to implement today’s new, more scalable and extensible business models which have
lower marginal costs of expansion. _____________________________________
_____________________________________
For the first few years the network-based businesses will be nurturing “seeds,” and they can’t be expected
to produce immediately dramatic bottom-line results for the company. That means leaders and boards _____________________________________
will need to be patient and supportive, while providing the necessary funding and strategic direction so
the seed business has a clear path to profitability. _____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................

Executive Conclusion: Endnotes
Personal Notes: Endnotes:
_____________________________________ 1. Ocean Tomo, 2010.
_____________________________________
2. “Why Software Is Eating the World,” WSJ online, August 20, 2011.
_____________________________________
Related Resources:
_____________________________________
• CFOs: Embrace Digital or Put Your Company’s Future at Risk
_____________________________________
• Scaling Edges - A Pragmatic Pathway to Broad Internal Change
_____________________________________
• Tomorrow’s CFO: Moving ‘Up and to the Right’ as Strategist and Innovator
_____________________________________
• Adding Innovation to the CFO’s Agenda
_____________________________________
• Realigning Your Organization’s Portfolio for Growth
_____________________________________
• Shifting Out of First Gear in Social Business: How to Drive Adoption
_____________________________________
• How CFOs Can Make Social Software Work for Their Companies
_____________________________________
_____________________________________ This document is private property of OpenMatters LLC.

It contains confidential information intended for specific individuals and purpose, and is protected by law.
_____________________________________ If you are not the intended recipient of this document, you should delete this booklet immediately and any
disclosure, copying, or distribution or the taking of any action based on it, by you is strictly prohibited.
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
_____________________________________
.......................................................................................................................................................................................................................................................
Executive Conclusion: Contributors
Barry Libert Jerry Wind Megan Beck Fenley

www.linkedin.com/in/barrylibert www.linkedin.com/in/jerrywind www.linkedin.com/in/meganbeck
Vivian Polikar Scott Gieske

br.linkedin.com/pub/vivian-polikar/10/648/a85 www.linkedin.com/in/scottgieske
.......................................................................................................................................................................................................................................................

Thank You!
.......................................................................................................................................................................................................................................................

We Help Leaders and Boards
Build Great Digital Companies.
Boston, MA
Phone: 888-436-5403
www.openmatters.com

The Network Multiplier: 4 Steps To Driving More Value & Better Performance

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THE NETWORK

This document is private property of OpenMatters LLC.

© Copyright 2014, OpenMatters LLC

Disclosure • © Copyright 2014, OpenMatters LLC 1

Partners • © Copyright 2014, OpenMatters LLC 3

Text goes here…

••••••••••••• ••••••••••••• •••••••••••••

Executive Module 1: Module 2:

Text goes here…

••• ••••••••••••• ••••••••••••• •••••••••••••

Module 3: Module 4: Executive

Table of Contents • © Copyright 2014, OpenMatters LLC 7

“ In the network economy,

Executive Summary • © Copyright 2014, OpenMatters LLC 11

In the spring of 2014, the media, from the Twitterverse

According to our research, WhatsApp is not a once-in-a-decade Personal Notes:

outlier. Cloud-based file sharing service Dropbox made news as _____________________________________

well, receiving venture capital funding at a valuation of $10B, or _____________________________________

40x current revenues. _____________________________________

Executive Summary • © Copyright 2014, OpenMatters LLC 13

_____________________________________ Our research led us to three key learnings:

_____________________________________ 2. Network Orchestrators outperform other companies

Executive Summary • © Copyright 2014, OpenMatters LLC 15

Personal Notes: 1. There are four business models:

The four business models are: Personal Notes:

Technology Creators: _____________________________________

Executive Summary • © Copyright 2014, OpenMatters LLC 17

Executive Summary • © Copyright 2014, OpenMatters LLC 19

Executive Summary • © Copyright 2014, OpenMatters LLC 21

2. Network Orchestrators outperform other companies: Personal Notes:

The business model classification yielded some surprising _____________________________________

data indicates that Technology Creators and Network Orches- _____________________________________

trators currently receive valuations 2-4x higher, on average, _____________________________________

this observation ‘the Multiplier Effect’. _____________________________________

Executive Summary • © Copyright 2014, OpenMatters LLC 23

Personal Notes: Why are we focused on Multiplier?

Executive Summary • © Copyright 2014, OpenMatters LLC 25

Personal Notes: Moving beyond Multiplier, we also found that Network

Executive Summary • © Copyright 2014, OpenMatters LLC 27

Personal Notes: 3. Most companies are missing this opportunity:

Executive Summary • © Copyright 2014, OpenMatters LLC 29

companies to start cashing in on the value offered by new _____________________________________

business models. _____________________________________

Executive Summary • © Copyright 2014, OpenMatters LLC 31

into four actionable sections: _____________________________________

1: Orientation 2: Assessment 3: Investment 4: Measurement _____________________________________

Executive Summary • © Copyright 2014, OpenMatters LLC 33

Let’s get started! Personal Notes:

1. The DigitalGrader.com website that contains all the tools _____________________________________

and videos _____________________________________

asked and answered _____________________________________

3. Links to other resources and other articles to help you _____________________________________

on your way. _____________________________________

Executive Summary • © Copyright 2014, OpenMatters LLC 35

Personal Notes: Digital Businesses Are The Most Valuable

Executive Summary • © Copyright 2014, OpenMatters LLC 37

_____________________________________ Read Full Article:

Read Full Article: _____________________________________

Executive Summary • © Copyright 2014, OpenMatters LLC 39

Executive Summary • © Copyright 2014, OpenMatters LLC 41

“ If you are not leveraging the

Module 1: Orientation • © Copyright 2014, OpenMatters LLC 45

........................................ ........................................ ........................................ ........................................ ........................................