Strategic Thought Transformation - The IIPM Think Tank

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groups Will the management stop
looking at maximizing shareholders’
wealth then
Not at all! In corporations that have
achieved this situation (and even otherwise
in corporations that have still
not paid back shareholders), management
should use the m-PIPE Matrix to
assess the worth of possible projects
where disposable clusters of wealth
could be invested. The m-PIPE Matrix
assists the management in understanding
whether it is more profitable to retain
the wealth and invest the same in
projects or to pay the disposable wealth
back to the shareholder groups.
The reader is cautioned that financial
concepts like WACC, DWACC &
AIR being discussed out here are being
analyzed in extremely simple terms, for
the sake of non-complexity. The reader
is again advised to refer to the Planman
WPS & m-PIPE Construct Manuals
for comprehensive descriptions of
DWACC and related concepts.
1. Wealth Digress Body
This portion of the WPS is made up of
three parts uniting three periods in the
life of the business unit; past, present
and future. In summary, the first part
displays the present value of wealth
targeted in the past and that should
have been achieved as on the current
period. The second part displays the
present value of actual wealth situation
in the current period after analyzing
the performances of the current period
and the present values of expected
wealth flows of the future. The third
part displays the targeted future value
of wealth that should be achieved
in the next period after considering
environmental changes and augmenting
the current wealth flows with AIR
(Augment Interest Rate). These three
parts (and data in the m-PIPE Matrix)
together are used to mathematically
calculate the strategies that should be
undertaken for the particular business
unit.
Cannot corporations easily increase
wealth status under these constructs
by rampantly taking loans, getting equity
capital, selling asset equipment, or
increasing the amount of credit sales
Further, cannot wealth status of corporations
also be wrongly decreased due
to increased capital asset purchases,
equity buybacks or even by making
dividend payments
Critics have been silenced by the
wonderful discounting and augmenting
technique utilized in this model through
the Wealth Time Frontier Tally, which
is the true representation of how much
wealth is in the organization. WPS
takes care to discount in such methods
by calculating the present value of taking
loans or selling capital equipment
or getting in equity money into the
organization. Present value of credit
sales where money would be received
in the future, PV of future interest and
principal being repaid on loans, PV of
future dividends being promised by
management to shareholders on equity
Most importantly,
management
should be innately
motivated to pay
relevant dividends
back to the
shareholders
investments, PV of future revenues
being lost due to asset sale, PV of
revenues gained due to asset purchases
etc are examples of how the
WPS and m-PIPE constructs ensure
that the wealth figures are precisely
displayed. As previously mentioned,
118 adjustments and critical environmental
analysis is the reason
these constructs are so successful
in the corporate world. Thus,
short term methods to increase or
decrease WTF Tally are not possible
as WPS ensures true present value
display of WTF Tally, whether in
past, present or future.
If dividend payments reduce
wealth of the business unit, then
wouldn’t managers stop making
dividend payments completely
Well, the argument is applicable
not just for these WPS and m-PIPE
constructs but also for the complete
management philosophy where
management should be innately
motivated to pay relevant dividends
back to the shareholders. This particular
issue of management psyche
with respect to dividend payments
is not a problem due to or within
the gamut of these models.
In the WPS architecture, due to
the fact that the Wealth Digress
Body is positioned below the Magnitude
Narrative Body (and more
so due to the fact that the Wealth
Digress Body provides reason and
control over the movement of the
organization), it is sometimes referred
to as base legs of the Wealth
Payback Sculpt. Not surprisingly,
the Wealth Digress Body nomenclature
also refers to such a usage.
The three parts of the Wealth Digress
Body are described in detail
below:
Part A (PAWS: Past Augmented
Wealth Status): This
part consolidates the past and gives
the previous period’s Operational
Cluster Wealth Flow (OCWF) status
for the business unit. This is different
from the Net Cluster Wealth
Flow as NCWF includes all wealth
An IIPM Intelligence Unit Publication STRATEGIC INNOVATORS 49