Structural Capital Management on Rocket DAO platform Part 2

Part 2

 

External and internal structural capital; the platform, which turns external structural capital into internal one.

A company and how do companies with the same set of assets differ were described above. Now we will talk about communications between companies.

The efficiency of interconnected companies follows the similar logic of rules as the set of production assets of one company. But what is the benefit to improve the interaction of companies if the efficiency of one structure of communications between assets, in comparison with others, affects the difference between inflow and outflow of company’s capital?  

We’ll look at two situations about growth and drop in demand for the production released by interacting companies.

 

1. The growth of demand wave.

No matter how effective the organization of the interaction among company’s assets might be, these or those assets of company can often be underloaded during demand increase for the production and company services. At the same time demand growth allows making use of this asset capacities due to the implementation of external orders.

 

For example, you have a recruitment service which works only for 50% of its potential. So that means, it can fulfill external orders for the remaining 50% if there is effective demand for such type of work.  

And then it is beneficial to a resource owner to transfer an asset from the company boundaries, to make it an independent company by means of the completion of commercial functions and to sell the function of excess capacities to both initial company and external customers.

Now imagine that a lot of companies has the set of such underloaded assets, but, owing to a lack of coordination, they don’t know about linking of their excess functionality in separate chains of value creation. In that case, the information clarification on idle capacities, design and realization of their possible interaction can become an additional source of income for an ecosystem, in which this sort of a coordinating activity functions.

And then we will need to sell these underloaded functions separately on the market for cash flow creation from linking of underloaded assets. It means to sell these functions as prime assets, but not as elements of companies (or complex assets). How to do that? It’s possible only through providing the information on the workload of assets and readiness to include them in new chains of value creation. And after that the mechanism of information collection on the workload of assets and also the mechanism of inclusion of these assets in new chains of value creation will be necessary.

 

 

2. Decrease of demand wave.

Now, let’s consider another situation that happens more often. This one is about fall in demand wavefor the existing goods and services.

What do companies usually do with constant fluctuations in demand for the production? They expand and strengthen the departments, which deal with sales and promotion of the production.

They increase budgets for self-promotion and sales. But a sales department itself is not the production function of companies; it doesn’t create the company’s core value.

In cases of falling of demand wave it is simpler to coordinate the interaction of several companies instead of looking for demand for each of them. Moreover, having the information on potential demand and production assets of different owners will allow reconciling them among themselves for meeting the existing demand. Thereby, it won’t allow spending funds for the maintenance of own assets concerned with sales. They can be subordinated to the sale function of the final products of interacting companies.

 

Eventually, even if there is no demand for company’s output goods, having the information on the values made by various underloaded assets it is possible to combine them among themselves for the creation of fundamentally new products and services and by that to create new markets. Wherein, it doesn’t have to be done only in the mode of difficult expensive transformations of production systems. It is enough to combine the underloaded capacities of already existing production systems in the mode of experiments with a small financial burden on a company. Some part of them will work.

 

So, what influences cash flow of owners of any assets?

1.    Productivity, functionality and efficiency of assets.

2.    The structure of interaction of assets within value creation chains.

3.   The ability to operate the interaction of assets in design and implementation of new value creation chains.

 

Actually, all these three parameters influence the structural capital creation:

1.   Within complex assets it is necessary to transform the structure of interrelations of prime assets for their most effective interaction. More effective configuration of assets is the capital structure, which should cost as big as the profit it creates.

2.     The existence of the assessment system of workload of assets and the organization of their interaction for an uninterrupted catching of demand wave is better than its absence. And the question of price here is the difference in quantity of money, which is distributed between companies as a profit. This sum of money is shared between independent attempts to find and serve demand and coordinated actions for all chain in general.

 

The Rocket DAO platform will be focused on the creation of types one and two of the structural capital.

Let’s see how structural capital management will occur on the example of the Rocket DAO platform.

 

Assets on the Rocket DAO platform

Each community participant is registered on the platform and specifies his role and competence.

In fact, participant’s competence indicates the functionality of his assets, whether he performs these functions himself or the company belonging to him. What asset is the source of this competence or function is a matter of separate conversation. There is no need for a participant to show the assets literally. The result of the implementation of this competence and function is required to present. We can allocate 2 mechanisms, which allow determining parameters of a production asset. One of them is a reference to the productivity of assets during the registration on the platform with subsequent data verification. The second one is the result fixation of the asset work in a smart contract after the implementation of the joint projects of the platform participants. Whereas, the compliance of stated parameters of production assets and the actual results will influence an asset owner’s reputation.

So, assets registered by participants with their attributes in the form of competence confirmed by reputation are actually the basis of what we previously called “prime assets”.

 

Complex assets on the platform

Now we will look at how complex assets appear on the platform.

Let’s imagine that you divide any work between some specialists. For example, someone finds a client (a seller), another one will process an inquiry (a client specialist) and someone else manages the implementation of a project (a project manager). So, as it is necessary in project management, the whole team gathers for some time and then disbands. This temporary team consisting of prime assets becomes, basically, a temporary complex asset for operating time. If they can work together and receive an outstanding result, then how to make this team active, i.e. how to turn it into an asset? How to make this result a regular and repeating one?

To answer this question, it is necessary to consider, how in general arrangements between owners of assets (or competence) for its coordinated use, will be fixed. The technology of smart contracts will be used on the platform in order to record these relations and confirm the fact of the implementation of arrangements. However, unlike the usual legal documents used for securing transactions, smart contracts will perform also an information function on the platform.

Assume, that within a project our “seller”, “client specialist” and “project manager” have developed such an operating procedure, which makes their team much more effective. So, they also have enshrined this procedure (within the business process or the formalized algorithm) in a smart contract.

To a large extent, a smart contract will contain a “flow chart” of a complex asset. That means it will contain the description of all forms of interaction of prime assets within the complex one (all procedure of the interaction between specialists, the way they transfer tasks and products according to specifications, the coordination of plans, the record of work results and so on) will be registered there.

 

 

Further, if assets with the identical functionality (other project managers, sellers and so forth) realize the same order of interaction, which is fixed in the smart contract, their efficiency will be higher than the industry average, even with some loss of efficiency on a prototype. And then a new team will be able to get the same result, as the previous one, without costs of creation and of sharpening the unique interaction technique.

 

Now, let’s talk about what is necessary for this system to work at full power on a large scale:

1.    The asset base, capable to perform this or that production functions.

2.   The base of smart contracts, recording the relations of prime assets within a complex one. In fact, these smart contracts are the base of quasi-firms gathering and functioning during the action of smart contracts. If the owner of these complex assets becomes one person, then due to his wish these complex assets are placed into the asset base.

3.   The base of smart contracts, recording different combinations of relations among assets for the realization of this or that function. In other words, smart contracts which ensure the work of complex assets. Smart contracts differ in realizable functions, goods and also costs of the realization of these functions.

4.    “Flow chart” of complex assets fixed in smart contracts, i.e. algorithms and forms of the interaction of prime assets within complex ones. Here specifically structures of complex assets are fixed.

5.    The verification procedures of new smart contracts, which are placed in the base. The key parameter, which is verified in smart contract, is the performance of asset work. This procedure can be automatic on the basis of objective data analysis generated by smart contracts upon the results of the project realization.

 

 

And how will this system work?

Imagine, that you are a function user, i.e. you’re an entrepreneur who wants to use assets fixed on the platform. Assume, that you want to find performers of marketing promotion function of your project.

You’re entering the base of assets and introduce input requirements for a function (a product, deadlines, cost, etc.). After that a list of “complex assets” and “companies” capable to perform this function at the moment is displayed on the platform. Everyone has his reputation, proved by the real projects on the platform. Occupancy of these assets and readiness to implement projects are presented in this list as well. You also get a set of realized smart contracts, within which this asset or a group of assets have realized a request similar to yours.

If there are no “assets” or companies willing to implement functions, you can get a “bare” smart contract without any enshrined assets in it. However, the system will show you a list of “assets” capable to perform these or those functions within specified parameters of efficiency. Also, the system will display you approximate economic calculations of the cost of the final products or services, of a general marginal utility of production chain, of asset replacement cost, of marginal utility of each element, etc. There can be a situation when assets, necessary for the implementation of the smart contract, will have to give consent to work and will delay the answer. For this purpose, the system will give time for a reaction, so that the inquiries left without answer will influence asset owner’s reputation. Besides, the platform will collect statistics on asset owners’ behavior and will specify the probability of quick response from the owner of assets to a customer. It is necessary for preliminary calculations of economic parameters of launching projects.

Of course, one may wonder, whether the competition between owners of assets remains if they are evaluated by the system on a limited set of parameters?

Firstly, it is these parameters will be the base for judging competitiveness of assets.

Secondly, every asset and its owner will have their reputation, calculated by how stakeholders evaluate asset work.

Thirdly, most of the information, on the basement of which there will be calculations of asset efficiency (for example, the cost of asset work, additional services, etc.), will be specified by the owners of assets themselves. Since an asset owner can influence the market and form his own market policy, it will allow keeping an opportunity for a competition.

 

The one who applies for the information on production assets can fully count on the system mechanism of team formation and can use it for reference and guidance purposes. And then the assessments of the real value of production functions can be formed through negotiations with the owners of assets. If you are able to make the cost of assets lower than the system offers, it will mean that your negotiation skills have their own value and you can turn them into your own separate asset ;).

 

After you conclude any smart contract within all its possible configurations, you can start to follow it. Obviously, new data on the actual work of assets will appear in the system during project realization. For example, there will be changed such subjects as the terms of order performance and “delivery” terms of finished work, the amount of interaction between participants during coordination of tasks, the actual cost of the work of assets, which is invoiced, an assessment of an asset work quality by his consumer, the actual productivity of complex assets, new algorithms of the performance of asset functions, users’ feedbacks and various integral indicators of asset work evaluation. Thereby, not only the objective information on asset characteristics will be updated, but also the information on its dynamics will be gathered.  

 

What is the benefit of reuse of the smart contract for those who launch projects?

They benefit from a drastic cost reduction on the search of contractors, reaching out of work with them, concluding deals, reputation verification, risk insurance and risk management. All this will lead to the reduction of transaction cost.

Translated by Alena Palchenko

by Andrew Miroshnichenko

 

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