SecTrainer
05-21-2008, 10:59 PM
It's only natural to focus on the things we can sense in the physical world--the things we can touch, see, count, measure, etc. This is just how we're put together. As business owners, we think a lot about plant, inventory, personnel, equipment, supplies, computers, cash on hand, the bank balance, etc. We invest in these things heavily, and consider that they are pivotal to our success.
But, there are other assets that can be far more important than physical assets in providing sustained growth and development, and most of these fall under the category of "intellectual assets", which means all of the following:
1. Human capital. This could be called "expertise", but another way to think about it is "capabilities", or "what walks out the door every night at quitting time". It's the money you've invested in training. It's whatever your people can do that a new employee walking in the door would have to learn how to do.
2. Intellectual property. Lots of businesses don't think they have any IP, but every business has IP. Your business system is intellectual property, for instance. Your policies and practices constitute IP. Your customer list is IP. Your vendor list is IP. Your instruction manual is IP. Your employee handbook is IP. Your chart of accounts is IP. Your marketing materials are IP. Your website, web pages and applications like databases are IP.
3. Relationship capital. Your customer list is IP, but your relationship with your customers is relationship capital. Your vendor list is IP, but your relationship with your vendors is relationship capital. Joint ventures, co-marketing, licensing, franchising, strategic partnerships and membership in professional associations all give rise to relationship capital.
It's worth spending considerable time thinking about the value of these soft assets and how they contribute to profits.
Take relationship capital, for instance, and especially joint ventures, co-marketing arrangements, licensing and strategic partnerships. If your relationship capital does not include any of these types of assets, you're leaving profit dollars on the table. It's impossible to say how many dollars, but it's probably some multiple of the business you're doing now without any of these assets in your hip pocket.
There is not a single business operating anywhere in the country that does not have some natural connection to other businesses. It's a shame to think of a bookstore owner and a theater owner, living in the same town, who each follow their own narrow orbits and never realize what a natural connection they have with one another. Yet, each one knows that the book store sells books that are made into movies, and the theater shows movies that are derived from books.
The bookstore owner could create exhibits featuring the books (and others by the same author) when a relevant movie comes to town, and the theater owner could put a movie poster in the bookstore window beside the exhibit. This is co-marketing, in one of its millions of forms.
It's a shame to think of a security guard vendor who has no strategic relationships with specialized investigative agencies, security system vendors, locksmiths, fencing companies, etc. And who else might qualify as a potential partner? How about property management companies? Special events planners? Management consultants? Car dealership owners? "You know, we drive patrol cars around the whole county night and day, and lots of people see our cars out and around. We've got high visibility and you've got cars...Is there some way we could help each other?"
The great thing about the process of developing relationship capital is that it costs practically nothing except the time and effort to reach out to potential partners, who as often as not have never thought of the idea themselves and will jump at the chance to build their own relationship capital (although they might not think of it in exactly those terms). If they say "no" for some reason, what have you lost? Just offer the opportunity to their competitors!!
And there's something else. Once you start putting some of your time into developing different kinds of soft assets, you'll find that a kind of synergy begins to grow around them. Thinking about our bookstore and theater owners, for instance, they start to think about other forms of co-marketing, and so the bookstore owner puts a link to the theater's website on his website, and the theater owner does the same for the bookstore. Or, the bookstore owner mentions the movie (with a link!) in a blog post about the book, and the theater owner posts a little YouTube blurb about the movie and mentions the book store. And, the possibilities begin to grow exponentially as the number of relationships grow linearly.
This is the network effect, and it's even greater in human networks than in physical networks because the interconnections between nodes can be multidimensional, can involve more than two nodes, etc.
A lot more could be said about the other categories of soft assets, but this should start you thinking about them in new ways. You will think about sending an employee to a training session in a different way, and you'll probably think of ways to leverage that investment...for instance, by having the employee come home and teach what he has learned to everyone else, or by teaching your employees how to network effectively when they attend such events, how to gather competitive intelligence from their fellow attendees, etc.
Your business growth will always be tied to your soft assets. Invest in them with at least the same degree of attention that you pay to your hard assets.
But, there are other assets that can be far more important than physical assets in providing sustained growth and development, and most of these fall under the category of "intellectual assets", which means all of the following:
1. Human capital. This could be called "expertise", but another way to think about it is "capabilities", or "what walks out the door every night at quitting time". It's the money you've invested in training. It's whatever your people can do that a new employee walking in the door would have to learn how to do.
2. Intellectual property. Lots of businesses don't think they have any IP, but every business has IP. Your business system is intellectual property, for instance. Your policies and practices constitute IP. Your customer list is IP. Your vendor list is IP. Your instruction manual is IP. Your employee handbook is IP. Your chart of accounts is IP. Your marketing materials are IP. Your website, web pages and applications like databases are IP.
3. Relationship capital. Your customer list is IP, but your relationship with your customers is relationship capital. Your vendor list is IP, but your relationship with your vendors is relationship capital. Joint ventures, co-marketing, licensing, franchising, strategic partnerships and membership in professional associations all give rise to relationship capital.
It's worth spending considerable time thinking about the value of these soft assets and how they contribute to profits.
Take relationship capital, for instance, and especially joint ventures, co-marketing arrangements, licensing and strategic partnerships. If your relationship capital does not include any of these types of assets, you're leaving profit dollars on the table. It's impossible to say how many dollars, but it's probably some multiple of the business you're doing now without any of these assets in your hip pocket.
There is not a single business operating anywhere in the country that does not have some natural connection to other businesses. It's a shame to think of a bookstore owner and a theater owner, living in the same town, who each follow their own narrow orbits and never realize what a natural connection they have with one another. Yet, each one knows that the book store sells books that are made into movies, and the theater shows movies that are derived from books.
The bookstore owner could create exhibits featuring the books (and others by the same author) when a relevant movie comes to town, and the theater owner could put a movie poster in the bookstore window beside the exhibit. This is co-marketing, in one of its millions of forms.
It's a shame to think of a security guard vendor who has no strategic relationships with specialized investigative agencies, security system vendors, locksmiths, fencing companies, etc. And who else might qualify as a potential partner? How about property management companies? Special events planners? Management consultants? Car dealership owners? "You know, we drive patrol cars around the whole county night and day, and lots of people see our cars out and around. We've got high visibility and you've got cars...Is there some way we could help each other?"
The great thing about the process of developing relationship capital is that it costs practically nothing except the time and effort to reach out to potential partners, who as often as not have never thought of the idea themselves and will jump at the chance to build their own relationship capital (although they might not think of it in exactly those terms). If they say "no" for some reason, what have you lost? Just offer the opportunity to their competitors!!
And there's something else. Once you start putting some of your time into developing different kinds of soft assets, you'll find that a kind of synergy begins to grow around them. Thinking about our bookstore and theater owners, for instance, they start to think about other forms of co-marketing, and so the bookstore owner puts a link to the theater's website on his website, and the theater owner does the same for the bookstore. Or, the bookstore owner mentions the movie (with a link!) in a blog post about the book, and the theater owner posts a little YouTube blurb about the movie and mentions the book store. And, the possibilities begin to grow exponentially as the number of relationships grow linearly.
This is the network effect, and it's even greater in human networks than in physical networks because the interconnections between nodes can be multidimensional, can involve more than two nodes, etc.
A lot more could be said about the other categories of soft assets, but this should start you thinking about them in new ways. You will think about sending an employee to a training session in a different way, and you'll probably think of ways to leverage that investment...for instance, by having the employee come home and teach what he has learned to everyone else, or by teaching your employees how to network effectively when they attend such events, how to gather competitive intelligence from their fellow attendees, etc.
Your business growth will always be tied to your soft assets. Invest in them with at least the same degree of attention that you pay to your hard assets.