15 July, 2019
Organizations spend millions of dollars on annual staff salaries, in addition to the ongoing investment in training and development. However, how many companies actually capture the intangible assets of their workforce? i.e. ‘know how, human networks, confidential information, design, trade secrets, etc.’
Today, intangible assets make up 87% of company value. In fact, many of the top valued companies today exceed 95% in intangible assets. Measuring the value of intangibles is not easy, and even though they are often essential ingredients to future success, they more often than not remain invisible components of the innovation process.
I believe retaining insights, ideas and know-how should be part of an organization’s DNA. The concept of an organizational memory bank e.g. stored know-how and insights, should be fundamental in the innovation process. If this ‘know-how and insight’ is easily discoverable the knowledge would be invaluable in any innovation process. Accessing human cerebral capability at the right time, digitally, could be a competitive advantage that is currently not being leveraged.
Interestingly, the three key components that enabled the digital disruption of traditional market players were the ability to digitally discover, digitally distribute and digitally access. I believe these digital behaviors should be practiced internally within the workforce, enabling organization’s to leverage know-how as competitive advantage.
So what stops organizations from capturing, retaining and distributing the intangible assets that represents the majority of the value of their company? In the past it was the lack of networked technology and a fixation on tangible assets. Neither of these conditions exists today.
I worked on the product planning team for a high-end consumer electronics firm. One of our responsibilities was to align the market research and consumer demand with the contents of the R&D IP repository in order to create new products and features. This workflow produced new products and innovation; however, the questions still remained, “What were we missing?” “What insight did we miss from our thousands of employees?”
In the highly connected, highly distributed digital world, internal know-how and insights are immensely valuable in the innovation process, particularly if they can be easily accessed.
Most firms value the capability of their people; therefore, it would follow that firms are keen to retain the knowledge and expertise created by their staff. Capturing this would position firms to leverage the know-how, even when an employee exits. Most organizations have attrition levels of 20-25%pa, which means that over a 4-5-year period, 100% of head count is replaced. That’s a lot of lost wisdom and experience!
All organizations consist of three constituent groups – those that were there before, those active currently and those who will be in the future. The challenge is how to retain a collective " memory” across an essentially transient workforce over time. How do you avoid the “we tried that before and it didn’t work” syndrome? Just as importantly, how do siloed organizations leverage the wealth of distributed know-how when developing new solutions in a rapidly changing market.
To effectively compete companies need to unlock the value of their intangible assets from their employees. Transforming ‘know-how and insights’ into discoverable, distributable and accessible artifacts, means that know-how becomes living value versus latent value.