Author: Tom Koor

Tom Koor

Who is accountable for AI ROI?

Who is accountable for AI ROI?

 What is the purpose of this article?

This article enables a discussion about: AI ROI Accountability and metrics

The audience for this article includes: Investors, Boards of Directors, CEOs, and C-Suite. This article applies to all companies, ranging from pre-revenue through to long established global companies.

This article does not provide tax, legal or financial advice.  Your next steps must be based on your own research and fact-based analysis using current and relevant information.

AI did not write this article.  100% human written.

You can download a PDF of this article from: Who is accountable for AI ROI

What are the critical learnings in this article?

  • Most companies produce poor financial returns.1 It seems like companies are using the same investment management process for AI as they do for other investments.
  • What are the metrics for AI benefits and costs? What are the targets and actual results?
  • Who has accountability for achieving the targets?
  • Does your AI strategy include ROI and accountability?

What are your AI benefits?

AI Benefits could include:

  • Customer impact such as: retention, customer acquisition costs, life-time customer profitability, net promotor score, increase in the number of customers, etc.,
  • Internal impact such as: employee retention, employee satisfaction, process costs, process quality etc.

 What might be AI costs?

AI costs could include:

  • retraining employees,
  • the people (employees and others) to develop, integrate, maintain and constantly enhance AI,
  • the cybersecurity, audit, and compliance reporting,
  • hardware and software costs, cloud computing costs, etc.,

 What is your ROI on your AI investment?

  • What are the metrics for AI benefits? What are the targets and actual results?
  • What are the metrics for AI costs? What are the targets and actual results?
  • Who has accountability for achieving the targets?

How do companies manage their ROI on AI investments?

  • Most companies produce poor financial returns.1 It seems like companies are using the same investment management process for AI as they do for other investments.

 What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Assess your company’s investment management process. Are the processes for metrics, targets, and actual results working? Have accountabilities for targets and results been assigned?
  • Make any required changes to your company’s investment management process.
  • Include AI investments as part of your company’s investment management process.
  • Ensure that any AI strategy includes ROI and accountability.

Footnotes

1 Your company will fail. Koor and Associates

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

Tom Koor

The old VC PE model is obsolete.

The old VC PE model is obsolete.

 What is the purpose of this article?

This article enables a discussion regarding VC and PE models.

The audience for this article includes: VC and PE fund LPs (Limited Partners) and VC and PE fund GPs (General Partners)

This article does not provide tax, legal or financial advice.  Your next steps must be based on your own research and fact-based analysis using current and relevant information. AI did not write this article.  100% human written.

You can download a PDF of this article from: The old VC PE Model is obsolete

What are the critical learnings in this article?

  • The supply of portfolio companies seeking exit is greater than the demand from IPOs, M&A and corporate buyers.
  • The challenges for GPs and portfolio company leaders are to unlearn the past ad recognize that they are now leading startups.

 What is the evidence that the model is obsolete?

  • Exits dropping.
  • Holding periods up
  • Over 32,000 unsold companies with book value of close to $4 trillion U.S.

 What appears to be happening?

  • The supply of portfolio companies seeking exit is greater than the demand from IPOs, M&A and corporate buyers.

 What was the old model?

  • Buy a company with debt, do rollups, increase multiple, exit

 What is the new model?

  • More customers buy products and services from the portfolio company than from the competition.
  • More talented employees stay or come to the portfolio company than the competition.

 What is the challenge for GPs and portfolio company leaders?

  • Unlearn old skills, experience, approaches.
  • Learn new skills, experience, and approaches.
  • Recognize the funds and portfolio companies are now actually startups.
  • Must learn and understand more about customer and employees than the competition.

 Why is this challenge extremely difficult?

  • Old mental models need to be replaced.
  • Old neurological connections in the brain need to be replaced.

What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people
  • Both LPs and GPs are focused on exit. They both need plans to exit and cap tables.
  • LPs doing co-investments into portfolio companies must see portfolio company’s exit plan and cap table.
  • LPs also need evaluation criteria and processes to assess the talent capabilities of GP. The future will be turbulent and unpredictable – what are the competitively differentiated talent that will succeed in the future?

What further reading should you do?

How profitable is Venture Capital? Koor & Associates

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-venture-capital/

How profitable is Private Equity?

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-private-equity/

Tom Koor

Is there anyone you can trust?

Is there anyone you can trust?

  • As noted in the first article below, society does not trust its leaders and institutions.
  • Who do you trust?
  • How do you know that people trust you?

My learnings and unlearnings:

Below are links to my website containing learnings and unlearnings since my last update in June.

This article was 100% written by me – not by AI.  When you send me an email, my response is 100% written by me.

 

Society does not trust its leaders and institutions. V7

  • Criminal behaviour is common in US public companies. The majority of people believe government and business leaders purposefully try to mislead people.
  • Accountants are under pressure to commit unethical behaviour and have done so.
  • Most young Americans have a bleak (my words) view of the future.
  • 70% of people globally are hesitant or unwilling to trust someone who is different from them.
  • 68-70% of people globally, think that government leaders, business leaders, journalists, and reporters purposefully mislead people by saying things they know are false or gross exaggerations.

https://koorandassociates.org/values-morals-and-ethics/societys-trust-in-corporate-leadership-and-political-leadership-is-low/

 How profitable is private equity? V2

  • Close to 50% of PE buyout funds had the same returns (or worse) returns than public market indices.
  • Past PE buyout GP performance is not a predictor of future Direct Alpha performance.
  • There are ways to identity what impacts the future Direct Alpha PE of GPs but I have not found fact-based analysis that these ways will results in positive Direct Alpha.
  • There won’t be fact-based analysis of AI on GP Direct Alpha performance for several years.
  • Scenario planning is important to identify the GP talent which can drive long-term Direct Alpha.

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-private-equity/

How profitable is venture capital? V2

  • The median VC funds had returns about 3% higher than the public market indices. Picking the right VC GPs is critical to better performance than a public market index.
  • Past performance is the best predictor of future performance. Past performance does not 100% guarantee future performance.
  • The VC markets have undergone massive change in the past 20 years.
  • The future environment for VC GPs will be different from the past, turbulent and with regular new challenges.
  • There won’t be fact-based analysis of the impact AI on GP Direct Alpha performance for several years.

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-venture-capital/

What is the value of a strategic advisory board? V3

  • CEOs need advisory boards to increase their cognitive abilities and address the challenges of CEO isolation.
  • CEOs who can benefit from a strategic advisory board have the cognitive humility and flexibility to unlearn fundamental knowledge, experience, facts, beliefs, and decision-making processes.
  • CEOs who cannot benefit from a strategic advisory board are unable to change their fundamental thinking.
  • After a successful strategic advisory board meeting, the CEO leaves emotionally and intellectually exhausted. Fundamental learning/unlearning is similar to physical training – improvement is painful and exhausting because muscles are being created.
  • Valuable strategic advisors can challenge the CEO’s fundamental assumptions by asking paradigm shifting questions.

https://koorandassociates.org/corporate-governance/what-is-the-value-of-an-advisory-board-v2/

Your company will fail. V4

  • 40% of CEOs believe their company will not be viable in ten years if it continues on its current path. 80% of companies are not prepared to quickly address disruptions.
  • Few large companies have provided good shareholder returns and had sustained value creation.
  • Most companies do not recover from crisis.
  • Most major changes fail or create limited value.
  • Most large-scale tech programs fail.

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

What is my personal update regarding the past 3 months?

  • Mentoring at The Hatchery, Department of Engineering, University of Toronto.
  • Continued as a member of the Angel Capital Association in the US and the Institute of Corporate Directors in Canada.
  • Continued to share with you, and on my website, some of what I’ve learned and unlearned. I hope that you can also unlearn and learn to succeed in an unpredictable future which is very different from the past.
  • Continued as Board Director at a private company.
  • Continuing my long-term fundraising for the Geoff Carr Fellowship at Lupus Ontario. Over the past 20 years family, friends, neighbours, and colleagues have contributed over 284,000.

 To support the Geoff Carr Fellowship at Lupus Ontario

Link to my Geoff Carr Fellowship fundraising page

Tom Koor

What is the value of a strategic advisory board? V3

What is the value of a strategic advisory board? V3

 What is the purpose of this article?

This article enables a discussion regarding the value of strategic advisory boards for CEOs. The audience for this article is focused on the CEOs of a for-profit businesses.

This article does not provide tax, legal or financial advice.  Your next steps must be based on your own research and fact-based analysis using current and relevant information.

AI did not write this article.  100% human written.

You can download a PDF of this article from: What is the value of a strategic advisory board. V3

What are the critical learnings in this article:

  • CEOs need advisory boards to increase their cognitive abilities and address the challenges of CEO isolation.
  • CEOs who can benefit from a strategic advisory board have the cognitive humility and flexibility to unlearn fundamental knowledge, experience, facts, beliefs, and decision-making processes.
  • CEOs who cannot benefit from a strategic advisory board are unable to change their fundamental thinking.
  • After a successful strategic advisory board meeting, the CEO leaves emotionally and intellectually exhausted. Fundamental learning/unlearning is similar to physical training – improvement is painful and exhausting because muscles are being created.
  • Valuable strategic advisors can challenge the CEO’s fundamental assumptions by asking paradigm shifting questions.

Why do CEOs need advisory boards?

CEOs need advisory boards to increase their cognitive abilities and address the challenges of CEO isolation.

  • The CEO can discuss their issues and concerns a psychologically safe space. Advisory boards may disagree with the CEO, in a safe space.
  • The CEO can increase their cognitive capabilities by drawing upon the current, relevant, knowledge and experience of the advisors.
  • The CEO can improve the quality of their recommendations and decisions resulting from advisors challenging the CEO’s thinking.

 What are the different kinds of advisory boards?

There are many kinds of traditional advisory boards plus the rare strategic advisory board.

Traditional advisory boards have domain experts with current, relevant knowledge e.g.

  • External warning board. Making the CEO aware of changes occurring in the world.
  • Introductory board – doing introductions for the CEO to potential customers, suppliers, employees, and investors.
  • Expert board – a group of experts providing answers to the questions posed by the CEO

A strategic advisory board helps the CEO change how they think, learn, and unlearn.  A strategic advisory board is not a replacement for experts with current relevant knowledge.

There are some cases of a CEO creating an advisory board comprised totally of AI personas or having at least one member of the advisory board being an AI persona.

 How are CEO advisory boards different from consultants?

Consultants provide fact-based analysis while advisory boards provide judgement.

  • Consultants may do fact-based analysis and provide recommendations to the CEO.
  • Consultants may implement solutions.
  • Advisory boards do not do fact-based analysis nor do they implement solutions.

 What is the value of a strategic advisory board?

Strategic advisory boards help the CEO think differently by learning new mental models and unlearning old models.

  • The old mental models were a success in the old world. The world has changed. New models are critical.
  • CEOs cannot learn new models by being told what the new models are. The CEOs need to develop new models, and unlearn old models, with the help of the strategic advisory board.
  • Fundamental learning and unlearning can only happen with neurological changes to the CEOs brain – changes to neurons and the interconnections among neurons.

What are the characteristics of a CEO who can benefit from a strategic advisory board?

CEOs who can benefit from a strategic advisory board have the cognitive humility and flexibility to unlearn fundamental knowledge, experience, facts, beliefs, and decision-making processes.

  • They need cognitive humility – able to admit, in the safe environment of the advisory board, that their knowledge and experience are limited and fallible. They can accept that their deepest beliefs may be wrong.
  • They have cognitive flexibility, able to unlearn what made them successful in the past.
  • They are comfortable saying “I don’t know”. person
  • They don’t view their perception of their self-worth to being the smartest in the room.
  • They don’t try to strongly defend past decisions. They don’t punish themselves for being wrong.

What are the characteristics of a CEO who cannot benefit from a strategic advisory board.

CEOs who cannot benefit from a strategic advisory board are unable to change their fundamental thinking.

  • They view any contradiction to their beliefs as a personal threat rather than a learning opportunity.
  • They confuse company performance with personal self-worth.
  • They cannot alter plans when presented with new facts – they do not accept new facts, as facts.
  • They have severe cognitive rigidity.

 What does success and failure of the strategic advisory board look like after 12 months?

Success may look like:

  • At least one major flawed initiative was stopped due to new insights.
  • Significant changes made to the strategic plan before the strategy is presented to the fiduciary board.
  • At least one major implementation ran more smoothly.
  • The CEO left advisory board meetings emotionally and intellectually exhausted. Fundamental learning/unlearning is like physical training – improvement is painful and exhausting because muscles are being created.

Failure may look like:

  • The CEO made minor changes to major initiatives and decisions.
  • The advisory board was focused on deep details of minor issues
  • The CEO left each advisory board meeting “feeling good”. The meeting was pleasant with no difficult action or outcomes for you. This meant that little learning/unlearning occurred. Just as if the CEO left a private training session, not tired in the slightest, heart rate never changed, etc.,

 Who should be on the CEO’s strategic advisory board?

Your advisory board has an extremely diverse background. Potential members could include those who;

  • Have excellent listening skills.
  • Can challenge the CEO’s fundamental assumptions by asking paradigm shifting questions.
  • Can be patient during the CEO’s neurological restructuring process. The advisor understands the biological implications of cognitive unlearning
  • Can leave their egos behind – and not try to prove how smart the advisor is.

Who should not be on the CEO’s strategic advisory board?

Do not have people on the CEO’s strategic advisory board who want to give advice rather than help the CEO learn and unlearn. Don’t have people such as:

  • Retired executives who have out-of-date functional and industry knowledge.
  • Having a dominating, narcissistic personality.
  • Avoiding conflict. Fundamental learning and unlearning requires intense uncomfortable debates.
  • Friends and allies who lack the courage to not support the CEOs points of view.
  • Professional services providers who may have biases to sell you major projects or be concerned about the financial implications if they upset you.

How can the CEO deal with the conflicting advice they’ll get from their strategic advisory board?

The onus is on the CEO to make decisions and not just ask for 100% consensus from the advisors. Some of the ways for the CEO to deal with conflicting advice are:

  • Being able to describe conflicting options in their own words.
  • Seeking out the best components alternatives.
  • Resisting the biological pressure to reject conflicting data.
  • Describing how they will make a decision and how/why the board and C-Suite will support the decision.
  • Taking notes.
  • Sleeping on the discussion and making critical decisions the next day.

What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Have the functional and industry expert been able to successfully address the CEO’s issues?
  • If the CEO still has issues, does the CEO still need to address those issues?
  • Determine which type(s) of advisory board are needed.
  • If considering a strategic advisory board, assess the phycological and cognitive capabilities of the CEO.

 What further reading should you do?

  • Norman Doidge, “The brain that changes itself”, Random Penguin Books, 2007
  • Jacqueline Brassey, Aaron de Smet, Michiel Kruyt, “How to learn and unlearn in a volatile world”, Harper Collins, 2022
  • Is the human expert panel concept obsolete? Koor & Associates

https://koorandassociates.org/creating-business-value/is-the-human-expert-panel-concept-obsolete/

  • What is learning? Koor & Associates

https://koorandassociates.org/creating-business-value/why-have-your-minimized-your-talent/

Tom Koor

Your company will fail. V4

Your company will fail. V4

 What is the purpose of this article?

This article enables a discussion about your company’s long-term survival and competitively differentiated returns to investors.

The audience for this article includes: boards of directors, CEOs, the C-Suite, individual investors, and institutional investors,

This article does not provide tax, legal or financial advice.   You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: Your company will fail. V4

What are the critical learnings in this article?

  • 40% of CEOs believe their company will not be viable in ten years if it continues on its current path. 80% of companies are not prepared to quickly address disruptions.
  • Few large companies have provided good shareholder returns and had sustained value creation.
  • Most companies do not recover from crisis.
  • Most major changes fail or create limited value.
  • Most large-scale tech programs fail.

Will companies survive and prosper if they continue in their current path?

40% of CEOs believe their company will not be viable in ten years if it continues on its current path. 80% of companies are not prepared to quickly address disruptions.

  • In 2024, four in ten CEOs believed their company will no longer be viable in ten years if it continues on its current path. The majority of CEOs believed they will not be in their current role in five years time. 1
  • 94% of those running companies with more than $5 billion in revenue said that internal obstacles, not external ones, keep their companies from growing profitably. 2
  • Eighty percent of companies are reactive; they are unprepared to quickly address disruptions that may occur, and their operations aren’t structured for long-term resilience. 3
  • Globally, only 20% of companies are well prepared for disruption, and 29% well prepared for crises. 4

 How many large companies have provided good shareholder returns and had sustained value creation?

Few large companies have provided good shareholder returns and had sustained value creation.

  • The median return for public company stocks has been -0.74%yr. The 90% percentile has been 22.10%/year. (29,078 publicly listed common stocks in the CRSP data base from December 1925 to December 2023.) 5
  • Study of the largest 5,000 US companies stock prices rom Jan 2011, to Dec 2020 showed that after 10 years, 42% ended in the black, 36% lost money, and 22% had disappeared. 6
  • In 2023, 0.4% of large companies had SVC (Sustained Value Creation) for 10 years. 10% had done it for 8 years. Half the companies had 6% or less annual shareholder return over 10 years. 7

 How many companies recover from a crisis?

Most companies do not recover from crisis. 2

  • 80% of the swings in market value for companies occur as a result of decisions and actions taken during three types of PREDICTBALE crises. 2
  • About 5% to 7% of companies are in free fall or about to tip into it at any one time; of those, only 10-15% will recover. 2
  • More than 70% of companies fail to outperform their industry peer group average in both the short (one year) and long term (five years), after a previous performance downturn period. 8

How many major changes succeed and create value?

Most major changes fail or create limited value.

  • Only 12% of major changes produce lasting results. 9
  • During the past two decades, only 26% of corporate transformations have successfully created value in both the short and long terms. 8

How many large scale technology programs succeed?

Most large-scale tech programs fail.

  • More than two-thirds of large-scale tech programs are not expected to be delivered on time, within budget, or within their defined scope.10

How many public market funds succeed?

Most actively managed public market funds underperform their benchmarks.

  • Over a 20-year period ending in 2025, over 95% of US funds underperformed their benchmarks.11

How many buyout PE (private equity) funds succeed?

  • Close to 50% of PE funds had the same (or worse) returns as public market indices. 12

 How many VC (venture capital) funds succeed?

  • The median VC funds had returns about 3% higher than the public market indices. 25% of VC funds had annual returns at least 4% lower than public market indices. 13

What are your next steps?

  • Define the words/concepts/data you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Benchmark your company relative to peers and over economy: financial performance, customer perception (e.g. Net Promotor Score, market share growth, etc.), total shareholder return.
  • Do three sets of anonymous surveys, addressing some or all of the above questions: The Board of Directors, the C-Suite, employees, and shareholders.
  • Discuss the results of benchmarking and anonymous surveys.
  • What results do you believe are facts and represent the truth? Do you believe you have a problem(s) you must address?

Footnotes

1 PWC, “PWC’s 28th annual global CEO Survey”, PWC, 2025 01 20

https://www.pwc.com/gx/en/ceo-survey/2025/28th-ceo-survey.pdf

2 Chris Zook, “Barriers and Pathways to Sustainable Growth”, Bain, 2016 07 19

https://www.bain.com/insights/founders-mentality-barriers-and-pathways-to-sustainable-growth/

3 Ben Aylor, Jeremy Kay, Neeru Pandey, and Rainer Schuster, “If disruption is the new normal, operational resilience is the new necessity”, Boston Consulting Group, 2022 11 01

https://web-assets.bcg.com/16/4a/c7519aef4b9599e0decc5ad14f61/bcg-if-disruption-is-the-new-normal-operational-resilience-is-the-dec-2022.pdf

4 McKinsey, “Resilient firms and economies – How companies, governments, and multilateral development banks can help unlock growth in emerging markets”, World Economic Forum, 2025 12 08

https://www.weforum.org/publications/resilient-firms-and-economies-how-companies-governments-and-mdbs-can-help-unlock-growth-in-emerging-markets/

5 Hendrik Bessembinder, “Which U.S. stocks generated the highest long-term returns?”, W.P. Carey School of Business, Arizona State University, 2024 11 01, Page 14

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4897069

6 John Rekenthaler, “How many stocks beat the indexes?”, Morningstar, 2021 04 26

https://www.morningstar.com/markets/how-many-stocks-beat-indexes

7 Guy Brusselmans, Zuzanna Szmuc, Jenny Lundqvist, “Sustained value creation – the test of the best”, Bain, 2025 01 21

 https://www.bain.com/insights/sustained-value-creation-the-test-of-the-best-infographic/

8 Martin Reeves, Christian Grub, Kristy Ellmer, Adam Job, Gabe Bouslov, and Paul Ctchlove, “Five truths (and one lie) about corporate transformation”, Boston Consulting Group, 2024 04 12

9 Michael Mankinsand Patrick Litre, “Transformations that work”, Harvard Business Review, 2024 06 01

https://hbr.org/2024/05/transformations-that-work

10 Michael Grebe, Vanessa Lyon, Michael Harnisch, Abhik Chatterjee, Steven Alexander Kok and Jon Brock, “Most large-scale tech programs fail – Here’s how to succeed”, Boston Consulting Group, 2024 11 13

https://www.bcg.com/publications/2024/most-large-scale-tech-programs-fail-how-to-succeed#:~:text=BCG’s%20latest%20research%20shows%20that,year%20for%20a%20single%20program.

11 Anu R. Ganti, Davide Di Gioia, Nick Didio, Liam Flaherty, “SPIVA U.S. Year-end 2025”, S&P Global, 2026 03 03, Page 12

https://www.spglobal.com/spdji/en/spiva/article/spiva-us/

12 Tom Koor, “How profitable is private equity?”, Koor and Associates. 2026 07 176

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-private-equity/

13 Tom Koor, “How profitable is venture capital?”, Koor and Associates, 2026 08 03

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-venture-capital/

What further reading should you do?

“Is your company planning to fail?”, Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Tom Koor

How profitable is venture capital? V2

How profitable is venture capital? V2

 What is the purpose of this article?

This article enables a discussion regarding the profitability of VC (Venture Capital) funds. The focus is on traditional VC funds with a fixed liquidation date.  The article scope excludes: evergreen and perpetual funds.

The audience for this article includes: LPs (Limited Partners), GP (VC fund General Partners), and VC fund portfolio companies.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: How profitable is Venture Capital V2

What are the critical learnings in this article?

  • The median VC funds had returns about 3% higher than the public market indices. Picking the right VC GPs is critical to better performance than a public market index.
  • Past performance is the best predictor of future performance. Past performance does not 100% guarantee future performance.
  • The VC markets have undergone massive change in the past 20 years.
  • The future environment for VC GPs will be different from the past, turbulent and with regular new challenges.
  • There won’t be fact-based analysis of the impact AI on GP Direct Alpha performance for several years.

How do you read this article?

This article uses Direct Alpha as the measure of GP performance. See Appendix A for a definition of Direct Alpha.

How profitable have VC GPs been for their LPs? 1

The median VC funds had returns about 3% higher than the public market indices.

  • 25% of VC funds annual returns10% (or more) higher than public market indices.
  • 25% of VC funds had annual returns at least 4% lower than public market indices.

Picking the right VC GPs is critical to better performance than a public market index.

 How can you predict future performance of VC GPs?

Past performance is the best predictor of future performance.  Past performance does not 100% guarantee future performance.

  • Interim results of current fund have generated Direct Alpha. “Persistence is also apparent using the interim performance of the previous fund…at the time of fundraising. This persistence translates into economically significant benefits of using interim performance data available to LP Investors.” 2
  • When VC GPs introduce new funds, the performance is broadly in line with their established funds. 2
  • Funds that are in the bottom quartile tend to stay there. 3
  • Fund size below $250 million US. 4
  • The GP has been a successful prior founder. “The outperformance of successful founder-VCs is consistent with them adding more value post-investment” 5

How have the VC markets changed?

The VC markets have undergone massive change in the past 20 years.

  • Massive growth in total assets under administration from $521 billion US in 2006 to $5.7 trillion in 2025
  • Time to liquidity has extended e.g. average time to IPO is up to 14 years,
  • GPs have difficulty in achieving exits e.g. Late 2024 had $3.6 trillion of unrealized value.
  • The secondary market was small in early 2000s but is now a major source of exits.
  • Net asset loans (i.e. borrowing against the unrealized value) by GPs were small in early 2000s but are now a major way for GPs to provide distributions to LPs.
  • GPs have started to use line of credit to reduce or change the time of credit calls. This impacts IRR and Direct Alpha calculations and may also change the decile ranking of a fund.

What are the future uncertainties VC GPs face?

The future environment for VC GPs will be different from the past, turbulent and with regular new challenges.

  • Will there be a pickup in demand for exits of VC portfolio companies?
  • How long will investors continue to put cash into continuation funds?
  • Do VC funds as a whole have too much capital invested in portfolio companies?
  • How will geopolitical, demographic, and technology changes impact the creation of valuable portfolio companies?
  • Are there any limits to the number and size of valuable portfolio companies which can be launched?

What will be the impact of AI on GP performance?

There won’t be fact-based analysis regarding the impact of AI on GP Direct Alpha performance for several years.

What are your next steps? – as an LP

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Do fact-based analysis on current and relevant information. The internet is swamped with opinions, obsolete data, and misinformation.
  • Create a range of future scenarios.
  • Define the talent characteristics of GPs that will be successful in the unpredictable turbulent future.
  • Assess potential VC GPs based upon the above 4 steps,

Footnotes

1 2026 02 17 Vanguard,”An optimistic but measured outlook for private equity”, Vanguard Workplace Solutions

https://workplace.vanguard.com/insights-and-research/perspective/an-optimistic-but-measured-outlook-for-private-equity.html

2 2023 08 01 Robert S. Harris, Tim Jenkinsoin, Steven N. Kaplan, and Ruediger Stucke, “Has persistence persisted in private equity? Evidence from buyout and venture capital funds”,Journal of Corporate Finance, August 2023 Volume 81, Page 15

https://www.sciencedirect.com/science/article/pii/S092911992300010X

3 2020 11 01 Robert S. Harris, Tim Jenkinsoin, Steven N. Kaplan, Ruediger Stucke, “Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds”, Working Paper 2020-167, The University of Chicago, Page 13]

https://bfi.uchicago.edu/wp-content/uploads/2020/11/BFI_WP_2020167.pdf

4 2026 05 29 Sonali Basek, Nirali Patel, Aaron Schwartz, and Dan Suzuki, “Chasing outliers:  Venture Capital in the AI Era”, iCapital

https://icapital.com/insights/investment-market-strategy/chasing-outliers-venture-capital-in-the-ai-era/

5 2022 04 01 Paul A. Gompers and Vladimir Mukharlyamov, “Transferable Skills? Founders as Venture Capitalists”, National Bureau of Economic Research Working Paper 29907

https://www.nber.org/system/files/working_papers/w29907/w29907.pdf

 What further reading should you do?

Your company will fail. Koor and Associates

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

How profitable is Private Equity? Koor and Associates

https://koorandassociates.org/selling-a-company-or-raising-capital/how-profitable-is-private-equity/

Appendix A – What is Direct Alpha?

Direct Alpha is the annualized return of a fund over a public market index (e.g. S&P 500).

  • Direct Alpha is calculated using the specific cash flows of an LP in and out of a fund. These dates and dollars amounts are used to determine hypothetical purchases and sales of a public market index
  • Direct Alpha also includes the Net Asset Value of the fund, which is the value of unsold assets.

Direct Alpha measures the annual percentage return above or below the benchmark the LP would achieve.  A Direct Alpha of 0% means the investor received the same return as if they had bought and sold the public market index. A direct Alpha of 5% means the investor received an annual return 5% higher than the public market index.

Why not use the IRR reported by funds?

  • The IRR reported by funds does not represent the annual % cash returns the LP would achieve over the lifetime of the fund.
  • The IRR can also be manipulated by funds to generate high values.
Tom Koor

How profitable is private equity? V2

How profitable is private equity? V2

 What is the purpose of this article?

This article enables a discussion regarding the profitability of PE (Private Equity) buyout funds.  The focus is on traditional PE funds with a fixed liquidation date.

The audience for this article includes: LPs (Limited Partners) and GPs (General Partners of PE buyout funds).

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

You can download a PDF of this article from: How profitable is Private Equity V2

What are the critical learnings in this article?

  • Close to 50% of PE buyout funds had the same returns (or worse) returns than public market indices.
  • Past PE buyout GP performance is not a predictor of future Direct Alpha performance.
  • There are ways to identity what impacts the future Direct Alpha PE of GPs but I have not found fact-based analysis that these ways will results in positive Direct Alpha.
  • There won’t be fact-based analysis of AI on GP Direct Alpha performance for several years.
  • Scenario planning is important to identify the GP talent which can drive long-term Direct Alpha.

How do you read this article?

This article uses Direct Alpha as the measure of GP performance. See Appendix A for a definition of Direct Alpha.

How profitable have PE buyout GPs been for their LPs? 1

Close to 50% of PE buyout funds had the same returns (or worse) returns than public market indices.

  • 25% of PE buyout funds had annual returns 8% (or more) higher than public market indices.
  • 25% of PE buyout funds had annual returns at least 5% lower than public market indices.

Picking the right PE buyout GPs is critical to better performance than a public market index.

Does past PE buyout GP performance help you predict future performance? 2

Past PE buyout GP performance is not a predictor of future Direct Alpha performance.

  • “Interim performance offers no evidence of persistence”
  • “Investors gain little by knowing which quartile the GPs current fund is in when they are deciding whether to invest in the next buyout fund”.
  • But what if you took the second previous fund, which is largely realized, to predict performance? “We find no evidence of persistence using this approach”.

How can you predict future performance of PE buyout GPs?

There are ways to identity what impacts the future Direct Alpha PE of GPs but I have not found fact-based analysis that these ways will results in positive Direct Alpha.

  • Has the GP been growing revenue and EBITDA in portfolio companies? There are reports which indicate that simply cutting costs is of limited value.
  • Does the GP’s team do the investment due diligence or is it done only by external consultants, advisors, and lawyers? There are reports which indicate that internal due diligence, length of the due diligence process and due diligence process improve GP performance.
  • The use of value creating operating partners has big impact on EBITDA. One study found that deals with operating partners generated average EBITDA growth of 23.2% Deals without operating partners generated average EBDITA growth of 11.9%. 3
  • There are a number of talent characteristics which impact GP performance. These include: The operational and financial background of the deal partners, the ongoing replacement of poor performing deal team members, the fund having a dedicated human capital partner to managing talent acquisition and exiting at portfolio companies. The portfolio company CEO execution skills CCC (high empathy and listening skills are not correlated with EBITDA growth).4

Have the private equity and public markets changed?

There have been massive changes in the private equity and public markets in this century. 6

  • Over the past 10 years private equity has spent $900 billion taking public companies private.
  • From 2000 to 2024 the number of US public companies declined from about 7,000 to 4,500. The number of PE backed companies grew from about 2,000 to 11,600.
  • 61% of the stock value creation occurs prior to the IPO, leaving less value creation potential for the average investor. 85% of US unicorns that went public were unprofitable in 2023.
  • 44% of the Russell 2000 companies are unprofitable.
  • The conventional thinking that smaller companies outperform larger companies is not supported by facts. The Russell 2000 has been underperforming the S&P 500 and Nasdaq composite by increasing amounts over the past 20 years. E.g. over 20 years: -5.6% per year, over 10 years: -9.2% per year, over 5 years: -10.7% per year.

What are the current challenges PE fund managers face in providing cash returns to LPs?

  • The traditional PE equity value creation model appears broken. For 40 years the approach has been financial leverage and increasing the price to EBITDA multiple. 6 This approach now often appears to fail.
  • The total PE assets appear to be greater than the capacity and demand from IPOs and operating companies.
  • There is a backlog of portfolio companies waiting for exits The assets under management have tripled since 2014 while the value of exits has remained flat, resulting in a build up of unsold assets. 7 Late 2024, global buyout funds were holding about $3.6 trillion of unrealized value in about 29,000 unsold companies. 8
  • To provide capital returns, GPs: are borrowing money to give to LPs or selling some assets to the GP ‘s continuation fund. 9 (the cash from LPs investing in the continuation fund can be given to LPs in the original fund.) Most existing investors in a PE fund decline the option to roll over their investment in a continuation fund run by the same GP. 10 .
  • There different points of view regarding portfolio companies sold to a continuation fund. Some believe these portfolio companies have major profit growth potential and they should be retained.  Others believe these portfolio companies have few or no buyers and thus are being sold to avoid a write-down.
  • LPs are getting return on capital by selling their interest in a fund to a third party. This is a secondary investment.  Online marketplaces are emerging to enable LPs to sell their PE fund investments.

 What will be the impact of AI on GP performance?

There won’t be fact-based analysis of AI on GP Direct Alpha performance for several years.

Is scenario planning important to predicting the future Direct Alpha of GPs?

Scenario planning is important to identify the GP talent which can drive long-term Direct Alpha.

  • The future cannot be forecast.
  • Public markets may change.
  • Interest rates and the economy may change.
  • The business models GP need to create positive Direct Alpha may change.

 What are your next steps – as an LP?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people. Different data sources will have different definitions. Very subtle differences in definitions can have a major impact on your returns.
  • You should create future scenarios.
  • Then you create detailed evaluation criteria regarding GPs. As discussed above, assessing the talent of the GP firms is critical. They need to be able to learn and unlearn more quickly and better than the competition.

 Footnotes

1 “A optimistic but measured outlook for private equity”, Vanguard

https://corporate.vanguard.com/content/corporatesite/us/en/corp/articles/optimistic-but-measured-outlook-private-equity.html

2 “Has persistence persisted in private equity? Evidence from buyout and venture capital funds” Journal of corporate finance, Page 15.

https://www.sciencedirect.com/science/article/pii/S092911992300010X

3 “The Impact of Operating Partners on Private Equity-backed companies in France: an exclusive study”, Page 6

https://www.franceinvest.eu/wp-content/uploads/2023/10/The-impact-of-Operating-Partners-on-PE-1.pdf

4 “Which CEO Characteristics and Abilities Matter?” – National Bureau of Economic Research

https://www.nber.org/digest/feb09/which-ceo-characteristics-and-abilities-matter

 5 “Private Equity Can Add Diversification to Your Public Index Holdings”, page 5-6, iCapital, 2025 July 16

https://icapital.com/category/insights/private-equity/

6 “Bridging Private Equity’s Value Creation Gap”, page 2, McKinsey, 2024 April 12

https://www.mckinsey.com/industries/private-capital/our-insights/bridging-private-equitys-value-creation-gap

7 2025 Global Private Equity Report – Bain, Page 4,6

https://www.bain.com/insights/topics/global-private-equity-report/

8 ibid., Page 17

9 What is a continuation fund? A GP creates a new fund, managed by the GP. Some assets are sold to the new fund.  LPs have the option to receive cash or roll over their investments into the new fund.

10 Kobi Kastiel, Yaron Nili “The rise of private equity continuation funds”, Chicago Booth Stigler Center January 2024 page 1

https://www.chicagobooth.edu/research/stigler/research/-/media/5d46328c68e0466b9787f42d98275f3b.ashx

 What further reading should you do?

Your company will fail. Koor and Associates

https://koorandassociates.org/avoiding-business-failure/your-company-will-fail-v1/

What are the core components of talent? Koor and Associates

https://koorandassociates.org/creating-business-value/core-components-of-talent/

LP (Limited Partner) assessment of a fund. Koor and Associates

https://koorandassociates.org/selling-a-company-or-raising-capital/lp-limited-partner-assessment-of-a-fund/

 Appendix A – What is Direct Alpha?

Direct Alpha is the annualized return of a fund over a public market index (e.g. S&P 500).

  • Direct Alpha is calculated using the specific cash flows of an LP in and out of a fund. These dates and dollars amounts are used to determine hypothetical purchases and sales of a public market index
  • Direct Alpha also includes the Net Asset Value of the fund, which is the value of unsold assets.

Direct Alpha measures the annual percentage return above or below the benchmark the LP would achieve.  A Direct Alpha of 0% means the investor received the same return as of they had bought and sold the public market index. A direct Alpha of 5% means the investor received an annual return 5% higher than the public market index.

Why not use the IRR reported by funds?

  • The IRR reported by funds does not represent the annual % cash returns the LP would achieve over the lifetime of the fund.
  • The IRR can also be manipulated by funds to generate high values.
Tom Koor

Society does not trust its leaders and institutions. V7

Society does not trust its leaders and institutions. V7

 What is the purpose of this article?

To enable boards of directors, C-Suite, and shareholders to begin a discussion regarding: the value of society’s trust in them, and whether action must be taken to increase trust.

This article applies to all companies, ranging from pre-revenue through to long established global companies.

This article does not provide tax, legal or financial advice.

You must do your own research and fact-based analysis using current and relevant information.

AI did not write this article.  100% human written.

You can download a PDF of this article from: Society does not trust its leaders and institutions V7

What are the critical learnings in this article?

  • Criminal behaviour is common in US public companies. The majority of people believe government and business leaders purposefully try to mislead people.
  • Accountants are under pressure to commit unethical behaviour and have done so.
  • Most young Americans have a bleak (my words) view of the future.
  • 70% of people globally are hesitant or unwilling to trust someone who is different from them.
  • 68-70% of people globally, think that government leaders, business leaders, journalists, and reporters purposefully mislead people by saying things they know are false or gross exaggerations.

I wonder how society can survive when the population doesn’t trust leaders and institutions and believes leaders are only looking after themselves.

How common is criminal behaviour in US Public Companies?

Criminal behaviour is common in US public companies. 10% of public companies commit securities fraud every year.1

My observations

  • This was data leading up to 2022. Have things changes since the 2024 US Presidential election?
  • What is the overall percentage of US public companies committing criminal acts each year? Securities Fraud is only one example.
  • Where were the boards of directors?

Are accountants under pressure to commit unethical behaviour?2

  • Accountants are under pressure to commit unethical behaviour and have done so. 55% of accountants have witnessed unethical behaviour in their career.  24% have been pressured to behave unethically in a three-year period.
  • 40% of accountants said the top area for ethical challenges was leadership and culture.

My observations

What are the values, morals, and ethics of accounting firm leaders?

How do young Americans (18-29 yrs old) view the future?3

Most young Americans have a bleak (my words) view of the future. 59% say the country is on the wrong track.

  • Only 15% trust the federal government and 39% trust the military.
  • Only 33% say they trust that the 2026 elections will be conducted fairly.
  • Only 29% say they will be better off than their parents.
  • Approval ratings for President Trump, the Democrats and the Republicans are similarly low: 25%-26%
  • The majority believe both political parties care more about elites than people like them.
  • What’s the most important qualities of a congressional candidate that would make young American vote for the candidate: 37% said a candidate who shares their values.

Do people think the next generation will be better off?

32% of people globally4 and in Canada5 think the next generation will be better off.

Do people trust some who is different from them?

70% of people globally are hesitant or unwilling to trust someone who is different from them.6 73% in Canada.7

Do people help leaders who are different from them?

34% of people globally would put less effort to help a team leader with different political beliefs succeed.8  31% in Canada. 9

Who do people trust?

77% of people globally trust scientists, 53% CEOs and 47% government leaders.10 In Canada, 78% trust scientists, 44% trust government leaders and 37% trust CEOs.11  I wonder why Canadian trust in CEOs is lower than the global average.

 Do people believe that hostile activism is a viable means to drive change?

  • Globally 53% of people ages 18-34 believe that hostile activism is a viable means to drive change.12 In Canada 67% of people ages 18-34 believe that.13 I wonder why more young people in Canada believe in hostile activism than the global average.

How do people view the wealthy?

  • 65% of people globally believe the wealthy’s selfishness causes many of our problems.14 61% in Canada believe that 15
  • 67% of people globally believe that the wealthy don’t pay their fair share of taxes.16 73% in Canada believe that.17

Do people think that leaders lie to them?

68-70% of people globally, think that government leaders, business leaders, journalists, and reporters purposefully mislead people by saying things they know are false or gross exaggerations.18  In Canada, 62% to 67% of people believe that.19

What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Conduct an anonymous survey of your board of directors, CEO, and C-Suite to learn their perception of how important it is that employees, customers and society trust.
  • Discuss the results of the anonymous survey and decide whether or not to continue.
  • Survey your board of directors, CEO, C-Suite, employees and other members of your company’s ecosystem, op learn the degree of trust in the board of directors, CEO, and C-Suite.
  • Discuss the results, in terms of: what are the symptoms, what are the problems, what are the underlying root causes.

Footnotes

1 “How pervasive is corporate fraud”, Alexander Dyck (University of Toronto), Adair Morse (University of California-Berley), Luigu Zingales (University of Chicago)

https://link.springer.com/article/10.1007/s11142-022-09738-5

2 “The new era of ethical challenges for accountants”, Association of Chartered Certified Accountants, Oct 14 2024

https://www.accaglobal.com/gb/en/professional-insights/global-profession/ethical-challenges.html

3 National Poll by Harvard Youth Poll 2026 Spring

https://iop.harvard.edu/youth-poll/52nd-edition-spring-2026

4 Page 10 2026 Edelman Trust Barometer Global Report

https://www.edelman.com/sites/g/files/aatuss191/files/2026-01/2026%20Edelman%20Trust%20Barometer%20Global%20Report_Final.pdf

5 Page 6 2026 Edelman Trust Barometer Canada Report

https://www.edelman.com/ca/trust/2026/trust-barometer

6 Page 17 2026 Edelman Trust Barometer Global Report

7 Page 12 2026 Edelman Trust Barometer Canada Report

8 Page 16 2026 Edelman Trust Barometer Global Report

9 Page 17 2026 Edelman Trust Barometer Canada Report

10 Page 10 2026 Edelman Trust Barometer Global Report

11 Page 49 2026 Edelman Trust Barometer Canada Report

12 Page 07 2026 Edelman Trust Barometer Global Report

13 Page 12 2026 Edelman Trust Barometer Canada Report

14 Page 13 2026 Edelman Trust Barometer Global Report

15 Page 11 2026 Edelman Trust Barometer Canada Report

16 Page 11 2026 Edelman Trust Barometer Global Report

17 Page 17 2026 Edelman Trust Barometer Canada Report

18 Page 10 2026 Edelman Trust Barometer Global Report

19 Page 15 2026 Edelman Trust Barometer Canada Report

Tom Koor

Does your company have current knowledge and facts?

Does your company have current knowledge and facts?

 What is the purpose of this article?

  • This article enables a discussion about the value and creation of knowledge, facts, and data.
  • The audience for this article includes: investors, board oof directors, and C-Suite
  • This article applies to all companies, ranging from pre-revenue through to long established global companies.
  • This article does not provide tax, legal or financial advice.
  • You must do your own research and fact-based analysis using current and relevant information.
  • AI did not write this article. 100% human written.

You can download a PDF of this article from:Does you company have current knowledge and facts

How is this article structured?

  • Decisions and actions are based on knowledge. Knowledge is derived from facts. Facts are derived from data.

What are the critical learnings in this article?

  • Your company’s survival and success depends on having better knowledge than your competitors and better ability to learn.
  • Knowledge explains why things happened. Your decisions and actions are based on knowledge.
  • Facts describe behaviour at a point in time and are validated. Facts are what people believe to be the truth.
  • In today’s turbulent, fast changing, and unpredictable world knowledge, facts and data often become obsolete quickly.

What is knowledge?

Knowledge explains why things happened. Your decisions and actions are based on knowledge. For example:

  • The facts could be that sales dropped last quarter. Knowledge is knowing why customers decided to buy from your competition rather than from your company.

What are the two types of knowledge?

  • Explicit knowledge is what resides in documents and electronic files.
  • Tacit knowledge is extremely difficult to document e.g. how to calm an angry customer, how to reorganize talent to cope with an unexpected crisis. Tacit knowledge resides in peoples’ brains.

 Why is current knowledge critical to your company’s survival and success?

Your company’s survival and success depend on having better and more current knowledge than your competitors in key areas.

  • Some of the key areas include: Why customers make buying decisions. Why your solution more is more profitable than the competition. Why star employees decide to join your company or leave your company.
  • You must have current knowledge. Why? For example, knowing how customers made buying decisions 10 years ago is not helpful in today’s world.
  • Why customers make buying decisions may change within days. E.g. fashion
  • The average half life of professional skills and technical knowledge is below 5 years.1

What are facts?

Facts describe behaviour at a point in time and are validated. Facts are what people believe to be the truth.

  • Facts are truthful at a specific point in time in a specific situation.
  • Facts describe behaviour at a point in time e.g. 80% of revenue comes from 20% of customers.
  • Facts by themselves are not the rationale for making decisions about actions to take.

Everyone needs to have a common understanding and agreement on what the facts are.

 How does your company create knowledge from facts?

  • Analytical techniques and software, including AI, help identify potential knowledge from facts.
  • The creation of knowledge in the brains of your board directors, C-Suite, and employees requires physical changes in their brains.

Do facts need to be validated?

Facts without validation are not facts. Assumptions, opinions, hopes, etc. are not facts. Some types of validation may include:

  • Separating correlation from causation e.g. smoking and lung cancer are correlated. But it’s false to conclude that lung cancer causes smoking.
  • Getting different data e.g. the statement that the new software is great success because there were 100,000 downloads in a month is not fact when the different data shows that 99% of people uninstalled after a week, and that after a month only 10 people were cash paying subscribers.

Facts need to be constantly validated in today fast changing, unpredictable world.

How does your company create facts from data?

  • You must have a common definition of facts and data. Create a glossary for defining facts and data.
  • Create data from variety of sources.
  • Analytical techniques and software, including AI, help identify potential knowledge from facts.
  • The final step is people in your company agreeing on what are the facts.

Why are current facts critical to your company’s success?

Facts are constantly changing in todays turbulent and unpredictable world.

  • There is the risk that your company continues to believe out of date or unvalidated facts as the truth.
  • Your decisions and actions are then based on out-of-date or unproven knowledge.

What is data?

  • Data is a huge pool of unprocessed – unvalidated and without business meaning.
  • Examples include: 1,000s of customer invoices and payments, sensor readings in a factory, raw survey responses, social media posts, logs of customer phone calls and emails, etc.

Why is current data critical to your company’s success?

New and changed data often appear in todays turbulent and unpredictable world.

  • Current and relevant facts must be based on current and relevant data.
  • Current relevant knowledge must be based on current and relevant facts.
  • Your company decisions must be based on current and relevant knowledge.

What are the challenges in your people learning to create new knowledge?

It is mentally difficult and psychologically stressful to make the biological changes in your brain required for learning and creating new knowledge and new facts.

  • You will very naturally, and often unknowingly, utilize a broad range of cognitive and psychological bias to resist unlearning, and to resist new knowledge which is different from the past.
  • You will unconsciously favour decision making and planning processes from the past and which are no longer useful today.
  • Your information technology systems continue to support the old way of doing thing.

What are your next steps?

  • Define the words/concepts you are using, in a glossary. I have seen major confusion when the same words mean different things to different people.
  • Identify the key areas where your company must have competitively differentiated knowledge.
  • Identify the links between your company’s performance and your company’s knowledge.
  • Assess your company’s knowledge and facts.
  • Assess your company’s planning and decision-making links to knowledge.
  • Identify your company’s process for creating fact from data.
  • Assess your company’s leadership capabilities to quickly learn and unlearn. Start with the Board of Directors, CEO and C-Suite.

Footnotes:

1 Boston Consulting Group “Reskilling for a rapidly changing world.https://www.bcg.com/publications/2023/reskilling-workforce-for-future

 

What further reading should you do?

  • What is learning? Koor and Associates

https://koorandassociates.org/creating-business-value/why-have-your-minimized-your-talent/

  • Are you solving the right problem? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/are-you-solving-the-right-problem/

  • Is you company planning to fail? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

Tom Koor

Are you solving the right problem?

Are you solving the right problem?

 What is the purpose of this article?

  • This article enables a discussion about whether you’re solving the right problem with the greatest impact on your business.
  • The audience for this article includes: investors, the board of directors, CEOs, and C-Suite.
  • This article applies to all companies, ranging from pre-revenue through to long established global companies.
  • This article does not provide tax, legal or financial advice.
  • You must do your own research and fact-based analysis using current and relevant information.
  • AI did not write this article. 100% human written.

You can download a PDF of this article from: Are you solving the right problem

What are the critical learnings in this article?

  • A problem is a symptom (something observable) which has a negative impact on your company.
  • You need a solution which addresses the cause of the symptoms.
  • A cause explains why the symptom is occurring e.g. a fire in the building is causing smoke to pour out the windows.
  • A root cause is a cause, which if addressed by a solution, means the problem will never occur again.
  • The fundamental root cause is always people.

What is the structure of this article?

Symptoms > Problems > Causes > Root Cause > Fundamental Root Cause

What is a problem?

  • A problem is a symptom (something observable) which has a negative impact on your company.
  • A symptom occurs when what is observed in not what is expected. The observation may be by a human, sensor, or AI making an observation based on complex analysis of data. Some examples of a symptom are: smoke coming out of building windows. The observation may be measurable e.g. last quarter sales 20% below target.
  • A decision is made whether or not the symptom is a problem. It is not a problem for me if the morning temperature is 2 degrees lower than I expected. It may be a problem for your company if last quarter’s sales were 20% below target.

How do you decide if a symptom is a problem you may need to correct?

  • You have criteria to define if a symptom is a problem.
  • These criteria may include the impact on your company, employees, your shareholders, and society.
  • The impact may be in the next month, or 10 years from now.

Your company will have lots of problems. You won’t solve all of them, because many will have little impact.

Do you need a solution to the problem?

  • You need a solution which addresses the cause of the symptoms.
  • You do not need a solution to the problem.

What is the cause of a problem?

  • A cause explains why the symptom is occurring e.g. a fire in the building is causing smoke to pour out the windows.
  • A cause can only be determined after investigation i.e. is the smoke due to an electrical fire, a broken natural gas line burning, a smoke bomb, a blocked fire place, etc.

There can be a hierarchy of causes and solutions.

  • There can be a hierarchy of causes e.g. the fire was from a broken natural gas pipeline, the break occurred due to failures in installing the pipeline, etc.

What is a root cause?

  • A root cause is a cause, which if addressed by a solution, means the problem will never occur again. E.g. checking the natural gas pipeline for other defects to make sure there won’t be future natural gas fires. Turning of the natural gas pipeline may correct the immediate symptom but does not prevent future natural gas fires.

What is always the fundamental root cause?

  • The fundamental root cause is always people. E.g. who were the people who approved the process for selecting design engineers and installations firms for a poorly designed and poorly installed natural gas pipeline.

Are your focused on the right symptoms?

Have you identified symptoms which could cause major problems for your company in the next 3-5-10+ years?

  • It’s easy to focus on short-term symptoms showing that your company is currently in trouble.
  • It’s hard to identify symptoms and address causes to prevent your company from getting into trouble in the future.

What will be your challenges?

  • Measuring the symptoms and determining their impact.
  • It is easy to focus on symptoms and causes rather than root cause. It is difficult to overcome the cognitive and psychological barriers.
  • Understanding the cause-and-effect relationship between symptoms, causes and root causes.
  • In today’s inter-related systems world, there may be a large number of inter-related symptoms and root causes. One symptom may have multiple partial root causes, and a single root cause may impact multiple symptoms.
  • The fundamental root cause of people talent is often impossible to address, especially when changes are needed to the board of directors, CEO, or C-Suite.

 What are your next steps?

  • Define the words/concepts you’re using, in a glossary. I’ve seen major confusion when the same words mean different things to different people.
  • Create your own framework for analyzing symptoms and documenting problems, causes, and root causes.
  • Identify symptoms indicating current problems
  • Define symptoms which would identify future problems
  • Always include the fundamental root cause of people.
  • Define the decision-making criteria, especially the criteria for launching project(s) to address a symptom.

What further reading should you do?

Is your company planning to fail? Koor and Associates

https://koorandassociates.org/avoiding-business-failure/is-your-company-planning-to-fail/

What is learning? Koor and Associates

https://koorandassociates.org/creating-business-value/why-have-your-minimized-your-talent/