It is time for us to consider treating Ecosystem assets as an appreciating capital asset class – because they grow stronger through use – and our accounting must shift from measuring cost/return to measuring what is being built and how fast it appreciates.
Ecosystem assets are the only capital class that becomes more valuable every time it is used. Investing in them is not a cost – it is the foundation of compounding advantage. In some ways applying this logic offers a real breakthrough, it reframes the entire investment conversation in ecosystems – and you can turn compounding from a metaphor into a management system.
Current accounting fails ecosystems. Traditional accounting assumes assets wear out, value declines with use and treats relationships as expense, knowledge is seen as overheads, coordination is a cost and trust is intangible and is left untracked.
*** Depreciation logic was built for assets to die.
Most organisations that attempt ecosystem strategy eventually face the same frustration: the investment case never quite holds together. Early returns are modest. The assets being built — knowledge pools, trust networks, partner capabilities, shared intelligence — do not appear on the balance sheet. The CFO asks what the ROI is. The answer requires a level of abstraction that the finance function cannot operationalise. The capital allocation conversation stalls. Investment is reduced. The ecosystem underperforms. The original skepticism is confirmed.
Restricting Leaders on the realization of Ecosystems
One could even go further here “depreciation logic doesn’t just mis-value ecosystem assets – it actually forces leaders into making poor decisions that can structurally weaken their future”
The most important ecosystem assets are systematically under-valued by standard accounting logic — because they appreciate through use, and accounting assumes assets depreciate through use. This is not a technicality. It is the structural cause of chronic ecosystem under-investment.
I would argue you cannot build a compounding ecosystem with a depreciation worldview.
Why? Because in ecosystems:
- knowledge pools deepen with use and exploration (think of AI here)
- trust capital strengthens with repeated interactions and establishing common positions
- relationship networks expand and bring new value and diversity of understanding
- capability combinations multiply and build a greater robustness
- AI and digital intelligence compound and bring new perspective and understanding
- Adaptive capacity simply accelerates
These are compounding assets whose value increases through combination, coordination, shared intelligence, partner capability, repeated use, network reinforcement and AI-driven learning loops.
The new investment logic is replacing the old question “what does this cost and what does it return” with the new, ecosystem-aligned question “What does it build, and at what rate does what is being built appreciate?”
This feeds the logic of compounding value systems:
- value grows non-linearly
- returns accelerate over time
- the asset base strengths with use
- the system becomes more intelligent
- the ecosystems becomes more adaptable
This is a category-defining shift as it reframes ecosystem investment from
- Expense into new capital formation
- project into new capability
- output into new intelligence
- deliverables into new compounding engines of value and opportunity.
Thinking in appreciating assets enables boards and more importantly CFOs a way to see, value and justify ecosystem investment using a logic that matches how ecosystems actually create value.
Is this the missing accounting logic that is holding ecosystems back?
The not-so obvious insight here is by classifying ecosystems assets as appreciating you unlock
+ New valuation models
+New investment theses
+New governance structures
+New growth strategies and
+New balance-sheet categories
More importantly you finally rid yourself of that absurdity of treating trust, intelligence and partner capability as “soft” or “intangible.
We need to “chase” the hardest assets to build and the strongest drivers of compounding growth
The three governance shifts that need to be considered
Implementing the appreciating asset framework within existing governance structures requires three specific shifts in how investment decisions are structured and reported:
- Replace depreciation reporting with appreciation tracking: for the six ecosystem asset classes identified, replace the depreciation/amortisation line with an appreciation trajectory report. This is a management reporting change, not an accounting change. It requires defining the appreciation measures for each asset class and including them in the strategic performance dashboard alongside financial metrics.
- Establish a compound return horizon: ecosystem investment decisions should be evaluated against a compound return horizon — typically three to five years — rather than a single-period ROI. This requires the strategy and finance functions to agree on a compound return model: what is the architecture’s compound rate today, what is the target rate, and which investments raise the rate most efficiently? This is analogous to the discount rate conversation in conventional capital allocation — it requires the same rigour but operates on a different logic.
- Protect architecture investment from operational pressure: the most common cause of ecosystem underperformance is not poor design; it is the systematic defunding of Horizon 3 architecture investment under Horizon 1 operational pressure. The appreciating asset framework provides the governance argument for protecting this investment: it is not overhead, it is appreciation. Cutting it does not save cost; it reduces the compound rate of the architecture’s most valuable assets establishing the long term value of Ecosystems.
Finally
| This is not a call to change accounting standards |
| The argument here is not that GAAP or IFRS should be revised — though the treatment of ecosystem assets as a recognised asset class is a legitimate long-term policy question. The argument is that management accounting, investment governance, and capital allocation decisions can and should operate with a more accurate model of ecosystem asset behaviour — one that tracks appreciation rather than depreciation, recognises pool depth and network gravity as economically meaningful metrics, and evaluates compound architecture investment on a compound return logic rather than a single-period ROI basis. |
The organisations that govern ecosystem investment well are not those with more sophisticated accounting. They are those that ask a different question: not ‘what does this cost and what does it return?’ but ‘what does this build, and at what rate does what it builds appreciate?’
** Extracts from a paper “Appreciating Assets: A New Investment Framework for Intelligent Ecosystems” by Paul Hobcraft