Intellectual Capital – The Key to Growth

The performance threshold of an enterprise is its intellectual capital.  This means, it is the key understanding and preparedness of what an enterprise can achieve together. When we talk about a shared vision, a transparent information system and an evolved strategic enterprise, we are connoting to the fact that the organization has a certain intellectual capital which allows it to grow continuously.

Intellectual Capital can be mathematically organized deriving from

  1. The delta between the Invention / Innovation performance parameters versus enterprise performance
  2. The delta between the external environment demands versus the enterprise performance
  3. The delta between the customer expectations and the enterprise performance

The first delta provides the demography and psychograph of customers and markets not served currently while the second provides an insight into what competition provides in the space and the third provides an understanding of current customer satisfaction. In the first two instances, it is about acquiring customers the enterprise does not attract and interact currently but the third one is about keeping the current customers within the fold and not losing them to either competition playing at the second level or a new market interloper playing at the first level. It should never be an either / or situation but an and / or solution.

There is a lot of talk in management about sharing vision, action and other blah, blah, blah. All this sharing is relevant only when the input to this sharing is marked with integrity. This means that the data generated has to be at the source in the process and the information generation and interpretation has to be on agreed enterprise parameters. This will permit for each member of the enterprise to be prepared for the consequences of one’s action in that process.

I had recently come across the case of a friend who was fired from his senior management position because he performed way above the average of the organizational intellectual capital. His boss when firing him told him, ‘it is not about you, the organization has no growth plans’. My friend had been confronted with the choice of either being in tune with the average of the enterprise or show the path to succeed in new difficult circumstances that the enterprise was wading through. By firing him, the enterprise filtered out a change leader who had the courage of conviction to show the candle when other leaders where getting comfortable in the darkness of the caves.

It is not only at the enterprise level, but also at the level of governments in each country. If America needs to become a leading global force once again, it will have to increase its threshold of capability. In India, such thought seems to be far from the minds of the people who run the government who are still embattled with old world views of proletarian socialism when each individual is trying to compete and be one better than the other in every possible term. The conflict between what an individual aspires and wants as opposed to what the government and its leaders has so far created the chasm of unrest in the society and similar is the case with the business enterprises as well.

The prognosis therefore is to address each of the above three inputs to Intellectual Capital development, acting upon

  1. Creating an Invention / Innovation Network in a continuous process that will feed into the enterprise information system with meta data about the potential for growth providing insights on new markets, new customers, new products and / or services and new processes to distribute and reach customers.
  2. Benchmarking Competition and Best Practices from the perspective of the customer aspirations as opposed to the limitations of one’s enterprise. This will provide an accurate view of what needs to be addressed in terms of Products and Services with respect to Quality, Cost, Delivery, Service and / or Flexibility of the processes.
  3. Improving Quality from continuously obtaining customer feedback at the end of delivery and acting upon key information / data that is gathered as a feedback. This will enable to keep existing customers happy and save attrition.

Business enterprises should always look for talent that can perform higher than its current threshold of capability. It needs to identify people who necessarily do not have to agree with the heavy weights already recruited in the organization. A good boxer performs well in the ring when he is light and easily maneuvering on his feet to weave in and out of his opponent’s punches and land his own on the opponent! When enterprises do not allow talent to keep their leaders on their toes, they are making sure that the heavy weights take the entire organization down with them, whenever that might be depending on the amount of crap they accumulate.

About Subbu Iyer

Subbu Iyer is an Innovation & Transformation Leader as with 28 years of serving customers globally. He is currently the Chief Designer & Transformer at Energizing Innovation, an enterprise that is being founded to facilitate continuous growth in enterprises and as a consequence create societal wealth. The Radical Shift that this enterprise intends to employ is focusing on the Potential rather than the Performance of a business. He has been a serial entrepreneur and an intrapreneur in his past life, having founded Nihilent Technologies and Nandaki Systems besides being associated in senior leadership roles with firms such as Coopers & Lybrand, Cambridge Technology Partners, Tata Consultancy Services, Wipro Technologies and Steria.
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4 Responses to Intellectual Capital – The Key to Growth

  1. Doug McDavid says:

    @Subbu — You make a number of good points here, and your overall perspective is spot on. I wanted to mention that of my business partners has a service offering that leads companies into a continuous valuation of their intellectual capital. This starts from the perspective that there are various major types (human c., customer c., structural c., and alliance c. They have a number of formulas (70+) that build on a number of socio-economic parameters to produce a balance sheet of intangibles that are “borrowed” (because the enterprise does not fully own them), therefore liabilitiies, and tangibles that are “owned”, and therefore assets. This approach has been approved by the International Accounting Standards Board (IASB) as conforming to their standards 38 & 36 on intangibles and impaired assets.

    I don’t want to over burden a comment here. Let me know if this is interesting to you and we can take the conversation off-line.

  2. Alok Darshan says:

    Dear Subbu,

    Great Article. India has developed more in line of Software Service Provider rather then Software creater and that is legacy we seems to be carrying on.
    ICM should be next logical step in getting up in value chain for IT industry. But not sure if Indian Software Major has long term strategy and vision to pursue it.
    Till that time it is only Fte’s.

    thanks

    Alok

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