If you're in "industry" your Capital will mostly be solidly bolted down as assembly lines, production facilities, distribution channels and your "Brand". Altogether making the basis for the entirety of your value and wealth creation.
If you're in "services" the same basis for your value and wealth creation will be solidly lodged in the brains of your employees, who, by the way, could leave by lunch tomorrow. Bye, bye Capital.
Industrial Capital can be used to it's full extent and almost instantly by the newly hired.
Intellectual Capital on the other hands, requires years of training, workshops and mentoring before the newly hired can use it fully to create value and wealth.
In other words, we have a two-lane economy.
One fast lane, one extremely slow lane.
The crazy thing is that the wealth and value created in the slow lane (as expressed in world wide GDP) is twice the amount that is created in the fast lane.
Imagine what would happen if the slow lane became a fast lane!
Thus time to challenge the assumption that the two types of Capital has to be treated differently and try a new set of "ground rules":
1. "How you do things" is the core - call it what you will, "Industrial" or "Intellectual", it's all Capital.
2. Ownership and retainability must be the same for both types of Capital.
3. Time-to-full-productivity and speed of growth of both types of Capital should be the same.
To ensure better use of Intellectual Capital all knowledge work and practices must be sufficiently, albeit not suffocatingly, structured so the paths and choices - "how you do things" - becomes tangible:
1. The Intellectual Capital must be embedded in every task as it's delivered with all pertinent information and the required tools allowing the Capital to be instantly used to full effect with little or no training.
2. The process must have real time visibility and real choices, again reflecting the Intellectual Capital, in order to amplify the value of the human creativity and it's use of the Capital.
3. Every step, every word, every choice must be captured real time (and historically) thus building the Intellectual Capital continuously and keeping it for the future.
Some "systems" do actually try to deliver these kind of effects - BPM comes to mind, CRM, KM systems and Enterprise 2.0 tries it's best as well. Common though is that these are restricted to certain limited practices / processes, and whatever the sales pitch says, precious little holistic process structure is offered. While "Capital" is all-encompassing and can only be fully utilised by holistic solutions.
[Disclosure: This issue is one of many that we (try to) address with Thingamy.]
The only reason the lane is slow, is that the other one has had sympathetic systems built around and for it ... give the "slow" lane the right support and infrastructure and it will speed up plenty. Unfortunately, so many of our employers still see people as a liability rather than an asset (there's Pacioli at work again!) - they are condemned to watching their value creators move slowly ...
Posted by: Account Deleted | February 11, 2009 at 15:03
Ric,
true, true - one could argue that it's five (or even more) lanes - one for industrial value add, four (or more) for services value add: Services; twice the value add already, and only half (or less) capital potential in use!
Posted by: sig | February 11, 2009 at 15:36
Althoug we all recignised the intellectual capital as "capital", we can easily see the limits of this analogy when we work on a balance sheet or with a bank. Service industry has apparently no available capital to "grab" when things start getting in the wrong direction. And here sadly ends the analogy.
We probably should stop defining as "capital" an intellectual resource which is not easily moveable.
Knowledge or experience or intellectual property can be "trasformed" into capital, but (despite all cultivated discussions) it is not capital, yet.
This reminds me an example our professor of Accounting told us at Harvard Business School: to tell that "our employees are our most valuable asset" is plain wrong, as technically an employee can never show up in the asset section in your balance sheet :-)
Posted by: Account Deleted | February 14, 2009 at 13:33
Luca,
yes and no (as always :))!
Agree that Capital takes different forms - reflected on the balance sheet as Current or Fixed (or similar), the former being cash or near cash, the latter being quite stuck. But both has the same purpose, to be used as basis by the firm to create more value.
Now to that iffy intellectual capital - as long as it stands today, lodged in people's brains you cannot flip it to anything, your only option is to use it to create value.
My point is that it should be captured by the firm (they pay for the work don't they?) so it can be reused by anybody, freshmen and old hands alike. In fact the moment that happens, the intellectual capital becomes a real asset that in theory could be sold just like machinery, property or other fixed assets!
Another good argument why Thingamy should be used - you amass a real book-able asset every day! Just have to have a good word with the accountants... ;)
Posted by: sig | February 14, 2009 at 18:36
Sig,
Great post as usual. You should write a book!
Since you took the trouble of walking me through a build of Thingamy, I have more than a fuzzy idea about how it captures each and every event of a 'project' transaction.
1. It becomes a 'live' log of whatever's being done/needs to be done and a flow is captured dynamically.
2. It also gives you a way to reassign the 'flow' to be able to overcome contingencies of time and availability.
3. It is intuitive, well I'll have to change that, intuition helps when you have to guess whereas Thingamy gives you a way to capture each 'event' in the flow.
I do have some concerns however about how others can use the 'log' meaningfully in their own context. Trending apart, I wonder if we need a meta layer that facilitates storing the essence of the interactions or transcations to augment organisational knowledge.
Posted by: Sunil | February 17, 2009 at 10:40