Investment Viability Model
Long-term sustainable value creation
The Viability Return Factor
Our model takes a different approach and follows the idea (supported by academic research) that human organisations are Complex Adaptive Systems (CAS). The characteristic of a CAS is that it can adapt to the changes in its environment. The dynamic state of a company's organisational performance system that behaves as a CAS has a certain viability level that is necessary to adapt to change.
Long-term sustainable value creation and growth depends on the ability of a company to deal successfully with changes in its environment. A company that operates as a CAS has the required viability level to navigate the company through all the changes that are coming and will also add value over the long-term for all its stakeholders. You can also do the opposite and predict which company will not survive or will struggle with the sustainability transition if they do not have the required viability level that drives the long-term sustainable performance of the business.
The viability level will predict if a company can deal with the stress of unforeseen changes in the environment - without disruption of normal business activities - to continue along the growth curve. The model determines the viability level that can be used to assess if a company can deal with the stress of a changing environment and can manage this accordingly to continue long term sustainable value creation.
Following the idea that organisations are Complex Adaptive Systems our model uses the paradigm used by natural science as organisations operate under the same principles as other complex adaptive systems that we see in nature and are studied by, for example, physics and biology. This allows the model to measure and quantify the dynamic state of an business performance system - or its viability level - as a physical process with well-accepted and physics-based methodologies. The dynamic states are classified with viability and stress levels and are based on the growth cycle, essential fractal and rhythmic patters of Complex Adaptive Systems. The outcome of classification can be used to better price risk in the net return of investment calculations and provides intelligent information to improve resource allocation decisions and disclosures.
Resource allocation is important to deal with the day of tomorrow. A company has to know its purpose and needs to allocate and re-allocate resources in a way that is consistent with its purpose. Organisations are Complex, Adaptive Systems existing in constantly-changing internal and external environment. Therefore, dynamic resource allocation is required to response to change. We need to understand the governance, financial and market & product potential of an organization, because these are the essential elements of what a company comprises, and this goes further than simply the financial performance indicators like the assets and liabilities on the balance sheet. The condition of the potentials (as a system) will determine the viability of the entity relative to its purpose, the trends (how it adapts), and what change to resource allocation is needed to create long-term sustainable value creation.
Our combined algorithmic and heuristic model helps investors and organisations to understand the viability status of the company, how it is evolving and for example what changes are needed, all of which will dictate how well it is fulfilling its purpose and therefore whether it will be successful and sustainable in the long-term. The analysis of the outcome of the model will also provide a framework to direct changes that need to be made to have the best possibility to achieve long-term sustainable value creation for all the stakeholders of a company.