A Critical and Missing Need of Investment and Venture Capital

I am not a futurist...and will never lay claim to that profession...it is far too risky and dependent on "unknowns"...still it is fun to make predictions and watch what really comes to fruition...

It is easier and safer to "guess" from the safety of obscurity...

But my predictions have been quite accurate...much to the amazement of those who I have shared them with...

Many of the real Futurists are predicting that the 21st Century will be dominated by private equity, venture capitalists and the privatization of many currently publicly traded corporations.  I have to agree...

Public trading of stock and equity was the funding option for the 20th century.  Earned and deserved governmental regulation has eroded at the viability of this option.  These laws have all focused on reducing the risk associated with the investment in public stock...this risk created by less than forthright corporations or individuals within those organizations...the public deserves the right to make informed decisions...when the information is accurate...GREAT!  When it is misinformation based in the lack of full disclosure or outright deception...someone other than the stockholder should pay...and those who profited by this unethical tactic...punished...

Business 101 teaches that a critical input in the organizational growth equation in cash flow! 

If the viability of public offerings becomes difficult...organizations will find other options...

What has become apparent to me is the "quiet" privatization of corporations...

Step back for a moment and look at how many buy-backs are occurring...and how many corporations have gone from public to private!

Search out who is the largest corporations...they are no longer sitting on the NYSE!

This trend has been moving for sometime...and has drawn little attention!   

The number of players in this arena is growing and the participants (knowingly and unknowingly) are guised as private equity and venture capital firms.

Although it is anticipated that the shape and face of the business world will transform, what it will look like in the next few decades is yet to be described.

Rather than argue that prediction...let's simply accept this and see where it takes us...

It creates a unique set of challenges for any individual organization seeking growth...

The 20th century organization made decisions based Return on Investment (ROI).

Simply stated...Opportunity and Effort...

There was an assumption that "anything is possible"  but the question "Is it worth it?'

The 21st century organization will shift their focus to the reduction of risk.

The "risk" of what is claimed to be possible...coming to fruition...

This becomes the focus because of the very nature of the investors...

In the 20th century the risk was distributed across hundreds...or even thousands of investors...and it for all practical purposes...became a non-issue...in fact..."disclaimers" were added related to the "risk" involved with investing...simply to further offset it...

The 21st century will be run by consortium and groups.  These investors will be astutely attuned to risk...

Other 21st century investors will address "risk" through a "mutual fund portfolio" strategy.  This will be an attempt to disperse "risk" across a multiplicity of investments and offset individual "risks."  The mutual fund strategy will also look like cash and bond offerings to its investors...making it possible for the smaller players to still be involved in this arena...
In either instance...the missing element is related to real control!

This provides an opportunity for real Process Improvement (PI) practitioners.

Successful PI efforts reduce the risk of failure...

The 20th century methodologies addressed "risk" as a "side benefit."

21st century methodologies (such as that found in "The New Brass Ring") recognize the specific need to quantify "risk" and focus a portion on their efforts on it!

The old axiom..."a person can  not manage what they can not measure" is critical to 21st century investor success...

"Risk" must be quantified and controlled in order for privatized funding to be successful.

The critical and missing element of success for investment capital firm will be REAL control of "risk."

Speifically the "Missing and Critical" element is a separate entity that oversees the performance risk that every investment assumes!

Even better...is an organization that not only oversees the risk...but does something about it!



This can be easily accomplished by engaging an external PI firm to oversee initiative and operational risk/performance!

It should be a contractual obligation for funding...

Reducing "risk" is well worth the cost...

It should be in the contractual relationship between the PI provider and the Investment Firm...

This need is what my organization (The Cii see http://www.thecii.com/) is focused on providing.

The simply question to ask any PI organization (to assess if they focused on the right things) is...

How have you quantified "risk?"

If you are not comfortable with their answer...go elsewhere!