What is Intellectual Capital?, Part 2

By Pascal Dennis (bio)

In our last post, I suggested that, in the age of Apple, Facebook and Google, Intellectual Capital was at least as important is financial & physical capital.

If you agree, then our annual People Plan is as important as our Financial Plan.

What's the nature & current condition of our IC?

Does our IC match the needs of our Strategy?

What are our 'hot spots' with respect to IC?

How do we, as a management team, develop a shared understanding of our IC hot spots?

How do we grow our people so as to address our hot spots?

Difficult questions, which take time & skill to pose, let alone understand.

The best companies intuit such questions, and actively manage IC.

(Lean thinkers will remember Toyota's cornerstone: Respect for People.)

But these trail-blazers are still a small minority. We need to extend their insights & practices in the years to come.

Why is it so important to manage Intellectual Capital?

Because only thus you can prosper in high cost economies like Europe, America, Canada, Australia, Singapore etc...

Only by investing wisely in your people can you compete with low-cost competitors.

We have enough data points. The best companies in Germany, Switzerland, Denmark, Sweden and such out-compete their low-cost rivals by a wide margin.

China has a massive trade deficit with, wait for it, Switzerland...

Managing Intellectual Capital will be an on-going theme here.

Best,

Pascal


In case you missed our last few blogs... please feel free to have another look…

What is Intellectual Capital & Why Should You Care?
Value Stream Maps
What is a Key Thinker?
Macro Value Stream Kaizen – Zoology

What is Intellectual Capital & Why Should You Care?

By Pascal Dennis (bio)

I left engineering & business school well versed in how to take care of two kinds of assets:

• Financial, and
• Physical

Managing these kinds of capital is necessary, of course.

But in the world of Google, Apple, Amazon and Facebook, is it sufficient?

Clearly not. Nowadays, many extremely valuable companies. Have negligible physical assets.

What they do have is Intellectual Capital -- the sum total of all the knowledge, experience, capability, creativity and urgency of all team members.

How well do we manage Intellectual Capital?

The answer is obvious, is it not?

Do we harvest this splendid resource?

Do today's organizations grasp the catastrophic effect of thoughtless layoffs, excessive exec compensation, stifling bureaucracy and all other IC killers?

There are many kinds of wealth -- financial, physical, intellectual, relational, reputation, time and so on.

These are inter-convertible. For example, my daughter Eleanor has time wealth (& Dad's wallet...), which she is transforming into capability wealth.

When she graduates, God willing, she'll translate capability wealth into financial wealth.

But Intellectual Capital differs from financial & physical capital in that,

1. It can be withheld, and
2. It can walk away,

IC is controlled by our team members.

Treating them like dirt is akin to hitting yourself in the face with a two-by-four.

How many corporations understand this?

Best,

Pascal


In case you missed our last few blogs... please feel free to have another look…

Value Stream Maps
What is a Key Thinker?
Macro Value Stream Kaizen – Zoology
Poka-Yoke – Preventing Inadvertent Errors

What is Intellectual Capital, part 2

By Pascal Dennis

In an earlier blog, I suggested that, in the age of Apple, Facebook and Google, Intellectual Capital was at least as important is financial & physical capital.

If you agree, then our annual People Plan is as important as our Financial Plan.

What's the nature & current condition of our IC?

Does our IC match the needs of our Strategy?

What are our 'hot spots' with respect to IC?

How do we, as a management team, develop a shared understanding of our IC hot spots?

How do we grow our people so as to address our hot spots?

Difficult questions, which take time & skill to pose, let alone understand.

The best companies intuit such questions, and actively manage IC.

(Lean thinkers will remember Toyota's cornerstone: Respect for People.)

But these trail-blazers are still a small minority. We need to extend their insights & practices in the years to come.

Why is it so important to manage Intellectual Capital?

Because only thus you can prosper in high cost economies like Europe, America, Canada, Australia, Singapore etc...

Only by investing wisely in your people can you compete with low-cost competitors.

We have enough data points. The best companies in Germany, Switzerland, Denmark, Sweden and such out-compete their low-cost rivals by a wide margin.

China has a massive trade deficit with, wait for it, Switzerland...

Managing Intellectual Capital will be an on-going theme here.

Best,

Pascal

What is Intellectual Capital & Why Should You Care?

By Pascal Dennis

I left engineering & business school well versed in how to take care of two kinds of assets:

• Financial, and
• Physical

Managing these kinds of capital is necessary, of course.

But in the world of Google, Apple, Amazon and Facebook, is it sufficient?

Clearly not. Nowadays, many extremely valuable companies. Have negligible physical assets.

What they do have is Intellectual Capital -- the sum total of all the knowledge, experience, capability, creativity and urgency of all team members.

How well do we manage Intellectual Capital?

The answer is obvious, is it not?

Do we harvest this splendid resource?

Do today's organizations grasp the catastrophic effect of thoughtless layoffs, excessive exec compensation, stifling bureaucracy and all other IC killers?

There are many kinds of wealth -- financial, physical, intellectual, relational, reputation, time and so on.

These are inter-convertible. For example, my daughter Eleanor has time wealth (& Dad's wallet...), which she is transforming into capability wealth.

When she graduates, God willing, she'll translate capability wealth into financial wealth.

But Intellectual Capital differs from financial & physical capital in that,

1. It can be withheld, and
2. It can walk away,

IC is controlled by our team members.

Treating them like dirt is akin to hitting yourself in the face with a two-by-four.

How many corporations understand this?

Best,

Pascal

Building Intellectual Capital

By Pascal Dennis

What's the proper role of the Kaizen/Continuous Improvement Office?

I was taught that it was three-fold:

1. To create capability
2. To share learning
3. To create kaizen spirit

More and more though, I think about the great Taiichi Ohno.

"I am not just building cars - I am building people!"

A splendid concept from a true revolutionary.

I am building people!

Underlying this sentiment was Ohno's remarkable respect for people - expressed by challenging them to do their very best!

Tough love indeed.

I've been privileged to have such senseis, both at Toyota and in Aikido.

But how does this help the corporation? Where does this show up on the Balance Sheet?

Sadly, it doesn't - for now.

But I am hopeful that before too long Intellectual Capital will begin to appear on Balance Sheets

Intellectual Capital means people - and their capability, creativity, flexibility, sense of urgency, knowledge, relationships and camaraderie.

At companies like Google, Apple, Amazon, Facebook, Intellectual Capital dwarfs financial and physical assets.

So how can we continue to ignore it?

So, let me suggest that in the next decade, the Kaizen/CI Office needs to think as follows:

Our job is to create Intellectual Capital - by growing people.

Best,

Pascal

Is Our Thinking Up to the Challenge of the 21st Century?

By Pascal Dennis

In an earlier blog I asked the above question.

I'd compared our situation in 2013, with that of the designers, engineers and managers of the Titanic, a century earlier.

I suggested that we, too, we unprepared for our century's management challenges.

(Don't want to be misunderstood - I am NOT suggesting any imminent catastrophe.)

I've dedicated myself to deepening & extending our mental models.

I'd like to help teach the thinking way I was so fortunate to learn.

In my view, our deepest and most common management dysfunction is in our treatment of people.

We are very good at managing Financial and Physical Assets (Capital), and a good part of the curriculum of business and engineering school focuses here.

This is necessary, of course, but is it sufficient?

In a world dominated by Google, Apple, Facebook and Amazon, isn't Intellectual Capital even more important?

(Lean thinkers, please forgive the accounting jargon.)

Yet, we manage people, the source of our Intellectual Capital, in haphazard or even plainly foolish ways.

Jack Welch famously said that Human Resources are the most important department.

Jack took some heat for it, but, as usual, he was prescient.

The world's best organizations invest heavily in their people.

The explicit deal is:

• We'll invest in you, make you more skilled and employable, and give you a job for as long as you want it.
• You'll help us be successful

Taiichi Ohno's Respect for People concept, remarkable in the late 1940's, with WWII's scars still open, is an early expression.

In blogs to come I'll dig deeper into how we might manage Intellectual Capital better.

Again, please forgive the accounting jargon, but we need to learn to talk to the CFO.

Best,

Pascal