Business Strategy for Capital Intensive Enterprise
In his seminal 1776 volume The Wealth of Nations, Adam Smith (1723-1790) describes a pin making factory. Charged with the complete task of manufacturing pins, one worker could “scarce, perhaps, with his utmost industry, make one pin in a day, and certainly could not make twenty.” A ten-person factory on the other hand makes 48,000 pins—an average of 4,800 pins per person per day. In Adam Smith’s world, the wealth of nations rests on the division of labour.
The huge productivity increase attributable to the division of labour does not come about just by selecting workers suited to specialist over generalist tasks, or just by the saving of time transitioning between tasks. Specialist work means specialist tools. A specialist charged with doing one such task every day will soon find ways to make his life easier by inventing specialist tools to help him. Generalists have much weakened incentives.
The specialist tools are the sine qua non of productive enterprise. They are the real capital of the capitalist system. More advanced societies have more of them, they represent an ever-higher proportion of the cost of production, and they are employed via a larger number of steps in the production chain. But in the decision-making process associated with them we have a patchy record of success.
Capital Strategy Pty Ltd is the corporate vehicle for professional work undertaken by me, Ian Runge. My interests are mainly concerned with these specialist tools…. what I call Real Capital. I undertake only limited consulting work, but am available for workshops; “strategy” sessions; occasional secondment to in-house teams; tailored-to-suit high-level training; challenging and/or confronting conference speeches and presentations; and non-executive directorships for capital intensive enterprise.
Topics to challenge the conventional wisdom of capital investment choice: (links below refer to brief articles and other references elsewhere on this site).
Ÿ How to Value Capital and make Capital Investment Decisions under Uncertainty.
Ÿ Why Procrastination is Rational (sometimes, at least). The Matching Law
Ÿ Distorted Market Signals and Inappropriate Economic Models—Why Investment Returns Fall Short of Expectations
Ÿ DCFs and NPVs—Helpful or Mis-leading? A Fresh Look at Capital Investment Decision-Making
Ÿ Rational and Not-so-rational Investments in Information from a Corporate Perspective
Ÿ “At-risk” Capital Investment Analysis—differentiating the probability of loss from the amount of (possible) loss. Comparing choices with different risk/return characteristics.
Ÿ Why a Strategy of “Making Management Accountable” leads to lost profits.
Ÿ How the Economic Structure of Capital Intensive Business Enterprises limits the Scope for Change
Ÿ Institutions—the Economic Cinderella. The benefits and pitfalls of strong corporate cultures on business decision-making. Circuit breakers and paradigm shifters.
Ÿ Knowledge-based Industry—21st Century Real Capital
Ÿ Promoting Entrepreneurship or Enhancing Core Competencies?—the limitations and pitfalls for genuine growth strategies.
Ÿ Capital Investment Criteria for the next decade and beyond
Contact: Dr. Ian Runge, Director
Capital Strategy Pty Ltd.
G.P.O. Box 569
Brisbane, Qld. 4001
Ph: (07) 3210-2788