intellectual assets

The Value Creation Machine

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On Tuesday (November 4, 2010), political chatter was all the rage as Republicans gained control over the House, sending a clear message to President Obama that the political landscape had shifted.  The Democrats now occupy the US Presidency and Senate while the Republicans dominate the House of Republications. 

Most experts wonder if Congress will ever get anything done.  As a result of not passing a budget bill in 1995, the federal government was shutdown.  With President Bill Clinton and Speaker Newt Gingrich at the helm, the shutdown was fueled by political fighting.  Sadly, many people look to the government for all of the answers when their own ingenuity would work. 

Yes, the government has an important role to play. I don’t believe that market forces are always the answer to societal problems…the market is not driven by morals or ethics.  In fact, find a cheap labor force across the globe and some businesses will abandon their own creed of “America First.” 

Individuals need to take control of their lives by developing strategies to produce results.  If we are to equip people for the future as scholars, we need to make sure they understand that the future will belong to the aggressor, not the passive in the new economy. During this discussion, we will explore how companies develop value for their customers and how it contributes toward wealth building.

 In uncertain times, it’s virtually impossible to navigate the market without fully engaging customers.  Any operations that fail that economic maxim of the 21st century will fail. Management guru Brian Tracy argues that the duty of businesses is to create and keep customers: “The two most important words to keep in mind in developing a successful customer base are positioning and differentiation.”

Of course, it was possible several decades ago to create products and services without knowing the customer and later convince them to buy.  Many companies during the Industrial Revolution built their success due to scarcity of commodity, limited competition, and uneducated buyers. This is not the case today.

Today’s operations must be value conscious as it relates to the market. Alvin Toffler and Heidi Toffler, authors of Revolutionary Wealth,  research how tomorrow’s wealth will be created, and who will get it and the wealth method. Customer value is defined as the ‘difference between what a customer gets from a product, and what he or she has to give in order to get it.’  They argue, “Today’s wealth revolution will unlock countless opportunities and new life trajectories, not only for creative business entrepreneurs but for social, cultural and educational entrepreneurs as well.”

Daniel Spulber, author of Economics and Management of Competitive Strategy, further suggests that value creation is strategic:  “Managers must pay close attention to value creation because it is the source of the company’s potential profits. The company generates value by providing products to customers, which it produces both by purchasing inputs from suppliers and supplying some of its own.” 

Spulber further outlines a value-driven strategy in three ways:  (a) to attract customers away from competitors, the company must provide sufficient customer value as compared to rival companies, (b) to attract key suppliers away from competitors, the company must offer sufficient supplier value, and (c) to attract investment capital in competition with other market investment opportunities, the company must increase the value of the firm for its investors.

Therefore, effectively managing the attribute of value creation will provide businesses with a competitive advantage.

Briefly explain how value creation has shifted from the Industrial Revolution to the Knowledge Economy and what attributes will be associated with wealth creation in the distant future?

© 2010 by Daryl D. Green

Fueling Intellectual Assets

/ nuleadership / 26 Comments

When I wrote my first book, My Cup Runneth Over: Setting Goals for Single Parents and Working Couples, it took me two months to write and less than a year to get published (it normally takes 18 months to three years to get published).  People were amazed at my publishing accomplishments.

My world was transformed, from being a little unknown engineer in Tennessee to being a respected expert and quoted by USA Today and Ebony Magazine.  It provided a great avenue for influencing others across the country and the world.  Additionally, it provided me with a more diverse portfolio of passive income and revenue.  In the greater scheme of thinking, I found out that my new platform was centered, not on the physical book—but on the creation of intellectual assets. 

As organizations contend with global competition, many businesses will need to rethink their strategies for sustainability in the knowledge and innovation economy.  Across the nation, companies are depending more on freelance workers.

According to the Bureau of Labor Statistics, the number of workers placed by temporary staffing agencies rose by 404,000 since September 2010. Furthermore, many gifted, laid-off workers are forced to become independent contractors and freelancers.  According to the Freelancer Union, 18% of its members were forced to give up health insurance in 2009 while 39% cut back coverage.  This trend is reshaping America’s workforce.

Yet, value creation will be the key to opening endless opportunities for today’s businesses.  We complain about the rate of manufacturing jobs going abroad and how this reality impacts the quality of living. Perhaps the future will be ruled not by the tangible but the intangible.  In fact, the knowledge economy will wreak havoc on traditional thinking. 

 

Thomas Davenport and Kevin Desouza, intellectual strategists, argue the importance of organizations understanding their intellectual assets: “In the industrial economy, a key component of mass production and productivity—and hence economic growth—was the reuse of physical assets: molds, templates, castings and so forth.  Although so much of the economy is now based on intellectual assets, we have yet to achieve a similar level of reuse and productivity improvement for that class of asset.”  In this discussion, we will look at how intellectual assets will fuel the future.

Henrik Vejlgaard, author of Anatomy of a Trend, argues that emerging trends are influenced by gifted people, including entrepreneurs, designers, and artists.  Vejlgaard notes that these people “create new products or invent new styles or begin doing something in a completely new way.”  In the old days, creative people were the butt of jokes pertaining to finding sustainable employment.  

Yet, the future will belong to just these people, as many organizations across the world will need this asset to enhance their survivability.  Fueling the knowledge economy will be knowledge creation (intellectual asset creation) and knowledge management (intellectual asset management).

An important ingredient for the knowledge economy is the creation, use, storage, and positioning of an organization’s intellectual assets.  Intellectual assets are valuable elements created by human ingenuity: written documents, software, musical compositions, and other intellectual spin-offs.  Intellectual assets can be divided into two categories, product assets and process assets.  Product assets are the specific outputs of knowledge work such as software programs or legal briefs.  

In contrast, process assets are codified knowledge about how to perform a task such as manufacturing steps for a new product.  Some countries have already realized the critical value of intellectual assets.  In May 2004, the Ministerial Council in France studied how intellectual assets impacted value creation, growth, and economic performance.  The study noted, “The continuous shift toward a knowledge-based and innovation-driven economy has brought to the forefront the issue of how knowledge is created, disseminated, retained and used to obtain economic returns.”

Intellectual assets will place individuals at the center stage of wealth creation across the globe.  Today, traditional publishers struggle to stay in business as the world has been overrun by knowledge creation.  Many experts will argue that the Big 6 (Random House, Inc., Penguin Putnam, HarperCollins, Holtzbrinck, Time Warner, and Simon & Schuster) dominate the publishing world.  Yet, the world is changing.  

According to a Para Publishing study, traditional publishers are in trouble.  In 2004, more than 1.8 million books were in print.  A new book is published every 30 seconds.  With challenges from the global economies, digital publishing models, and industry standard changes, major publishers are bombarded with changes that impact their bottom-line.  In 2002, major publishers decreased output by 5% yet titles published rose by 6%. 

What is driving the publishing industry now?  It is independent publishers and literary entrepreneurs emerging in this digital age.  In fact, 70% of the titles are now coming from small or self-publishers. In the digital age, individuals can transform one idea into multiple formats including paper back, hardcover, MP3 files, DvD, and other downloadable files.  Therefore, knowledge creators are building an empire of intellectual assets.  Websites like Createspace.com and Lulu.com give individuals the power to create wealth while building influence effortlessly.

What modifications will need to be made in the publishing model to incorporate intellectual assets created by entrepreneurs? How can organizations take advantage of these gifted creators in their organizations and still fully control their knowledge management processes?

 © 2010 by Daryl D. Green