An asset that appreciates with time



We live in very interesting times. The economic transformations that are changing the fundamental s of our social behavior and the very fabric of our life are tremendous. For instance, email was unknown in the corporate world prior to 1990. Today in a span of just under 20 years email has become so pervasive that, most if not all, businesses would be unable to function efficiently without email communications. Mobile phones were largely unknown prior to 1994. Today, in a span of 15 years the mobile phone has become so ubiquitous that it has rapidly shed its image of a luxury item and now become a necessity. In the Indian context, ATM banking was largely unknown in the country prior to 2000. Today in a span of just 10 years ATMS have proliferated so fast and so much that some banks have actually started limiting the number of teller assisted cash withdrawals that customers can make each month.

Economic change is not only happening, it is happening more and more rapidly. Consider this. Until the 1800s, farming was the main occupation of people. The primary requirement for farming is land - the more the better. Unfortunately, the land that we have inherited is not only limited but with time the increasing population has only hastened to increase the per capita demand on it. In the 19th and 20th centuries the focus shifted from farming to manufacturing, driven to a large extent by the industrial revolution. The spotlight during this time was on increasing productivity, using machines in place of human labor. Machines had a huge advantage over humans – they could work faster, they produced output of consistent quality, they did not get tired and they could work all three shifts if needed. During these two centuries machines came to dominate our lives like never before – their acceptance eased by their promise of freeing us from drudgery and making more free time available for our creative use. While machines changed our lives forever during the industrial era, it took many centuries for the focus to shift from farming to manufacturing.

Yet the next change happened within the next 200 years, when we crossed over from the industrial era into the knowledge era. Today machines are no longer a source of competitive advantage. If I can buy a machine so can the competition. The increased productivity that both of us have is not enough of an advantage anymore. To sell our goods, we both need to add value. There are various ways of adding value – but all of them require leveraging the intellectual capital of the organization to provide a product or a service that is superior to what the competition can provide. This in turn requires the systematic management of Intellectual Capital, since that is the very source of competitive advantage in the knowledge era. In fact, unlike physical assets like machines and land which get depreciated over time and financial assets which get depleted with time, intellectual capital is the only asset that appreciates with time. Doesn’t this sound a bit like having your cake and eating it too? Yet it is true. Very few businesses have realized this truth since we are still in the formative years of the knowledge era. But those that have will surely survive and even thrive in this era and survive into the next.

 

 

Reach Multipliers

Teachers are a scarce lot nowadays. Teaching is a noble profession no doubt and a highly honorable one too, but like a lot of other noble professions nowadays it is losing its shin in this modern age. There is no glamor in being a teacher anymore; hence not very many of the younger generation aspire to become teachers these days. Consequently their tribe is only decreasing. Paradoxically with the increasing population, school enrollments are on the rise. With the result that the demand for teachers today is more than it was ever before. I see a shortage of teachers in primary schools, secondary schools, junior colleges, engineering colleges, medical colleges and Universities. In short, I see a shortage of teachers in the whole teaching system. Yet I also see more and more schools and colleges coming up everyday. It requires an explanation. How are these schools and colleges managing to teach their increasing number of students with lesser numbers of teachers? I was prepared to see visiting teachers from other faculties, cramped classrooms reflecting a higher student to teacher ratio and self-study student groups in those schools where teachers were missing altogether. And I did see all of these. But I also saw something else. A handful of innovative institutions had attacked this problem by multiplying the reach of their teachers. They had installed video conferencing equipment in their classrooms using which multiple students at dispersed locations could attend the lecture of a single teacher at the same time using the power of video conferencing. In effect these institutions had managed to solve the problem of scarcity of human capital by strapping structural capital in the form of video conferencing equipment to their human capital, the combined effect of which enabled them to reach out to a larger number of students in geographically dispersed locations!

 

I was hardly surprised this time when I saw the same solution being applied effectively in another noble profession – medicine. Like good teachers, good doctors are also becoming a rarity of late. And patients who can afford it always seek a second opinion especially when they have to make a decision based on the opinion of their doctor. Some innovative hospitals have resorted to video conferencing technology to enable their patients to seek a second opinion from doctors in other hospitals, perhaps those in their own network of hospitals. Case history of the patient is available to the remote doctor electronically which he can browse and consult with the patient simultaneously over video. This much is becoming pretty common. Meanwhile medical solution providers are working on building technology solutions that will enable doctors to remotely examine patients and even conduct surgeries remotely using remote controlled robotic arms. This may sound like science fiction right now, but we are getting there slowly but surely. This is one more instance of specialists reaching out to a larger audience beyond the confines of their own physical boundaries through the leveraged use of structural capital.

 

While video conferencing has been enabled in leaps and bounds by gigantic advances in telephony, the Internet has also been a great enabler in this regard. One example of this is webcasting, a medium that is being increasingly adopted by businesses nowadays to peddle their products and services. The traditional approach would have been to invite a select audience into an attractive downtown location, make the sales pitch, feed them lunch or dinner and offer them networking opportunities with their peers. This high cost approach is a rarity nowadays. Webcasts are not only cost-effective for the business itself but also time-effective for the target audience, since they do not have to commute anywhere but can attend the conference right from their desktop. Moreover, webcasts enable the business to reach out to a worldwide audience at the same time which would be physically impossible using the traditional approach.

 

Structural capital that enables businesses to address much larger audiences than they can do at present is a very attractive proposition to every business. It is so attractive that I have coined the term “Reach Multipliers’ to denote such capital. Reach multipliers are critical for any business to increase the reach of its human capital manifold. Those businesses that have devised reach multipliers are well on their way to achieving the next level of growth in their business lifecycle. Others will be constrained by the limits of reach of their human capital.

 

As attractive as Reach multipliers are they still are dependent on the presence of human capital in the back-end. The scale that can be achieved using Reach multipliers is a limited therefore by the amount of human capital in the back-end. The question that arises then is – Is there a way of achieving unlimited scale? Turns out that there is and some have already done it. Wait to read about it in my next post.

 

 

The Power of Personalization

Have you ever wondered why in this day and age of giant shopping malls, branded retail chains, self help shopping and barcode based point of sale systems, there are still some Mom and Pop stores that manage to survive and even do well despite having none of the above mentioned advantages? Perhaps, you yourself frequent one or more such stores regularly – it could be your neighborhood baker, convenience store, grocery store or even your local co-operative bank – without realizing why it is you do so. Here are some clues - Does the owner of the store greet you with a smile? Does she know you by name and address you by your name? Does he go out of his way to suggest good deals? Does he even engage in a bit of a casual conversation with you at times? In short, does he try to personalize your visit to the store? Do you leave the store with the feeling that you have been served well, served personally and have been given preference over other customers. That last point is the essence of generating repeat business. As human beings, we all have the innate need to be recognized and for our desires to be pampered. Personalization is just a high sounding term that satisfies this need.

 

Mom and Pop stores have known for years that big name commercial chains cannot compete with them on the personalization front – it is just impossible to know every customer by name when you have thousands of them. And hence they have leveraged this knowledge to their advantage and managed to survive and even thrive during the retail boom of recent years. Yet what I am about to discuss today is not the friendly personalization in neighborhood stores that you and I have come to experience often. I am going to discuss the commercialization of personalization itself. Yes, you read it right – the commercialization of personalization itself. But wait a minute - Isn’t personalization an intangible thing? – is the thought that crosses your mind immediately. How can you even describe an intangible, leave alone make any attempt to commercialize it? This sounds insane.

 

Does it? I could have perhaps agreed with your thinking had I not had two very compelling experiences of the commercialization of personalization. The first one was when a good friend of mine had a need to hand out corporate gifts in his company’s name to a select list of his prospects in order to promote his business. I short-listed a corporate gift provider for him and together along with him visited the provider’s office. There we were presented with a variety of gift articles ranging from pens, cups, mugs, key-chains, card holders, stress busters, T-shirts, etc. all of which could be personalized with the corporate logo and the tag line. The shape of the gift did not matter. Neither did its size nor the material from which it was made of. The corporate logo could either be printed or it could be embossed or outlined or even engraved on the gift. Having being sufficiently impressed by this personalized display, all that was left for us to do was to select the gifts that fitted our budget and place our order, which we did right then and there. The gifts were delivered to my client after three days, which he is handing out to his clients and prospects and impressing them every day. Business is also picking up of late, he informs me.

 

My next experience was more personal. I recently came across a retail chain which sells T-shirts, mugs, clocks, picture frames and other articles that can be personalized with your picture and slogan of your choice. They have a variety of such articles on display in their store, which you can browse through and select. In the middle of the store is a table full of sleek computers where you can choose the background design of your choice. Having done that, you get your photo clicked (handy nowadays due to mobile cameras), add a slogan and hand it over to the designer behind the computer to put it all together. Within 15 minutes or so the designer mixes your picture, the selected background pattern and the slogan text to create a design that will fit on the article that you have selected. After you are satisfied with the design, it is finalized and the design is printed on the article in the store itself. After 30 minutes or so you can walk out of the store with your personalized article.

 

Do you see now how personalization is being commercialized? Yet you ask, what is so great about it? It looks so straightforward and simple. Let me tell you, it wouldn’t be great if it wasn’t simple. And in hindsight things always look straight forward. But if you apply your mind you will realize that commercialization of personalization requires a mixture of human, structural and relational capital. The human capital is by way of skilled designers who can apply their creative and designing skills to quickly create computer based designs. The structural capital is by way of having computers, a catalog of readymade designs and special transparency printers and embossing machines that can transfer the design to the article at hand. And finally relational capital is by way of having links with suppliers who supply the bland gift articles of the desired quality and of course customers such as yourself who will go out and spread the word once you have experienced delight with this service.

 

What about price? My experience was that personalized articles are being sold at a price which is at least two to three times the price of the bland article. Can you imagine what that does to the seller’s profit margins? Your guess is as good as mine. The power of personalization is in not only leaving the Customer with a sense of delight but also in doing it in a highly profitable manner.

 


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