Strategic Thought Transformation - The IIPM Think Tank

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A. Sandeep
Professor of Strategic
Management at IIPM,
New Delhi; and
all-India Dean, IIPM
Meta SBU WTF & WTF Tally
in Magnitude Narrative
Body
Accumulating the WTF understanding,
every MetaSBU can be appropriately
assigned a Wealth Time Frontier that
shows the number of periods that are
still remaining for the MetaSBU to be
a positive wealth MetaSBU. The WTF
Tally in the case of the MetaSBU would
show the aggregate of remaining positive
or negative market-determined
wealth value in the business unit if the
business were to be closed down. Why
is such a scenario of ‘closing down’
drawn out Because the calculations
of WTF Tally in this scenario ensure
that the wealth of a business is not simply
the cash & assets available to the
business, but the conservative market
determined value. The WTF Tally thus
consolidates the value of the business’s
internal capabilities and competencies
that the market has provided. Hence a
supply chain channel of a business is
not given simply the value of the warehouses
and stores, but rather the value
that the outside world attaches. How
can soft assets like skills of employees
be valued The market determines the
value that they would pay to purchase
any kind of an internal wealth of the
business. Not to disagree, this kind of
a system becomes a valuation heavy
exercise; but for the sake of correctness
of understanding & calculation,
this kind of an evaluation exercise
has to be undertaken. The WTF Tally
later on becomes one of the key factors
that defines what are the internal and
external competitive strategies being
undertaken by the business.
But to calculate the WTF or WTF
Tally for any MetaSBU requires an understanding
of what would the Wealth
Time Frontier actually mean in the case
of a MetaSBU.
WTF in the case of a MetaSBU
plays around with a scenario that if
the MetaSBU’s operations were stopped
in a particular period, would the
MetaSBU still be in wealth positive
This means that for every consequent
period of the MetaSBU’s operations,
an assumptive scenario is visualized
wherein the MetaSBU is assumed to
be closed down in each particular period.
Given this scenario, various Cluster
Wealth Inflows and Cluster Wealth
Outflows are found out through typical
backward calculations for each period.
For example, if a MetaSBU closes down
in a particular period, all the loans
that have been taken would have to
be returned immediately; the MetaS-
BU would have to collect all accounts
receivables; assets would have to be
divested off; equity investors would
have to be paid back; there would be
no wealth additions or negations due
to expected future operational sales
and expenses; and so on so forth. Once
these adjustments are made, the aggregate
Cluster Wealth Flow position
of the MetaSBU can be immediately
calculated appropriately as on that
particular period; in other words, the
WTF Tally. Such calculation of the WTF
Tally needs to be made for various periods
of operations of the MetaSBU to
correctly assign the Wealth Time Frontier.
Obviously, present value figures
have to be calculated using the Augment
Interest Rate (defined later on)
to correctly bring out the current value
of the identified and adjusted past and
future cluster wealth flows. Thus, WTF
in the case of a MetaSBU signifies that
if the MetaSBU were to be closed down
in a particular period, would it have
made an overall wealth loss, or would
it have made an overall wealth profit.
Therefore, if a MetaSBU is assigned
a Wealth Time Frontier of WTF (-7),
it means that it would take another
seven periods for the MetaSBU to be
considered ‘safe’; in other words, if the
MetaSBU were to close down before
seven periods from the current period,
the MetaSBU would end up incurring
an overall wealth loss.
On the other hand, a MetaSBU with
a WTF of (+5) would mean that the
MetaSBU reached the ‘safe’ position
five periods ago. However, this in no
way signifies that the MetaSBU would
An IIPM Intelligence Unit Publication STRATEGIC INNOVATORS 47