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Maximizing Resources

Maximizing Resources involves identifying all available resources both tangible and intangible, nurturing the creation and development of new and existing resources internally and externally to the organization in order to achieve optimum utilization of all available resources.  This can include:

  • Hidden Assets – untapped capabilities in personnel, accumulated know-how, data, etc.
  • Creativity and Innovation – (internally and externally) businesses must continually evolve or die.  Warning, no one ever said evolving was easy…
  • Building Relationship Capital with ALL Stakeholders (customers, employees, vendors, affiliates, financial partners, educational institutions, the community at large, etc) in a mutually beneficial way.  Major companies do this all the time, growing companies need to get on the bandwagon!

Hidden Assets

80% of a company’s market value can be attributed to its intangible assets (the ones you can’t see), according to Dean Spitzer in his book Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success.  Sometimes that number is even higher.  Take Microsoft’s purchase of Skype, for example.  In 2011 Microsoft paid $8.5 billion in cash for Skype, which seemed odd since eBay had purchased Skype in 2005 for $3.1 billion and then sold the majority of its stake in 2009 at a $1.2 billion LOSS.  Clearly, Microsoft saw value that no one else did…

What are these intangible assets anyway?  Some broad categories include:

  • Undervalued traditional intangible assets like patents or other intellectual property or organizational know-how.  Seeing hidden assets requires a new line of sight.

My favorite story on hidden assets is about Marvel Comics.  It’s hard to imagine but there was a time when printed comic books were losing their appeal because children were spending more time watching cartoons on television.  The existing personnel could not see a way to reignite children’s love of comic books against the competition of television and movies and thought all was lost.

Just before the owners closed the doors forever, they brought in a new management team.  These folks saw the value in the characters and story lines that Marvel Comics had created.  They suggesting licensing and marketing products like lunch boxes, clothing, and an endless list of other things children already used in their daily lives.  They also licensed the creation of Marvel characters in cartoons and movies, and the rest is history.

  • Unidentified or undervalued customer information or deeply embedded relationships.  One of the best known examples of deeply embedded customer relationships is IBM.  The company’s transition away from computer hardware to software and support services was made possible by its relationships with its customers.  When the average IT person leaves a message with a major company about a new service they’re offering, they’re not likely to get a response.  When an IBM representative calls, their chances of getting a call back are pretty darn good.
  • Strategic position in the market place or your industry.  A great example of strategic position is a medical supply distributor.  Through their traditional thinking, they felt squeezed by the manufacturers they represented on one side and their customers pricing pressure on the other side.  Eventually, they realized that they were in a great place to tap into their manufacturing contacts to develop and sell specialty packaged pills, surgical supplies and other customer related unmet needs that saved doctors and hospitals lots of money but provided the distributor with high margin products of its own.
  • Organizational information, capabilities, and/or relationships.  A good example of organizational information and capabilities includes a supplier of commodity gases used in a wide variety of industries.  Competition was fierce an margins were low.  One company took the time to walk through the day in the life of its largest customer.  What they discovered was that the organization did not have the knowledge and expertise to properly handle and store the gases that it purchased.  As a value added service, they began to support their customer’s use of its products.  The experience they gleaned empowered them to expand the service offering to other companies and dramatically improve their profitability.

Also, never lose sight of the fact that your employees have more capabilities than you hired them for, some in areas that you never dreamed of.  One small print based advertising agency developed a highly profitable video and TV advertising line of services after one employee, with an active interest in theater, developed a video based solution for a prospective client.

Identifying and getting maximum utilization of hidden assets means looking at our organizations differently.  Getting rid of the scarcity mindset and adopting an abundance mindset instead.  Think how can I add value where it’s needed most…

Creativity and Innovation

Creativity and innovation is a process.  It’s not like a rare gem that you scour the earth for.  The key is that creativity and innovation require the right environment to flourish.

  • First, there has to be trust.  People have to have confidence that if they fail, through no fault of their own, that they will not be forced to pay the ultimate sacrifice.  The organization has to have a tolerance for failure (for the right reasons).
  • Second, you need brainpower.  I’m not talking about hiring people you can’t afford.  I’m talking about taking care of the people that you have.  People in survival mode can’t be creative.  Their minds need to be rested, well nourished, and free of irrelevant stressors.
  • Third, those with the authority over resources have to have an open mind and be willing to consider new ideas.  Be willing to do small scale testing of viable options.
  • Forth, you need a documented process complete with a list of available internal and external resources.  People come and go as a regular cycle of life.  Having a documented process and resource list, ensures the new folks can keep things moving forward efficiently and effectively.
  • Fifth, facilitate interaction between the people who work with customers every day and those who are responsible for new product and service development.
  • Sixth, celebrate and reward success.   There’s nothing more disheartening that feeling like your hard work and success isn’t appreciated and valued.  It’s like nurturing a flowering plant just until it blooms and then never watering it again…
  • Seventh, share ALL lessons learned.  All education is valuable, particularly the things that we don’t want to repeat.

Did you notice that I didn’t include anything about writing blank checks or what percent of sales you should dedicate to creativity and innovation?  It’s because not only is it subjective, it also depends on your industry and your available resources.  The disruptive breakthroughs that we see these days doesn’t necessarily come from deep pockets.  Often, it grows from a burning need.  Every organization has competing demands for limited resources.  It’s just a way of life.  The difference is in your priorities and having an abundance mindset.  Instead of trying to decide between two really good ideas, ask yourself how you can explore both of them and let their results guide your decision.  Explore the resources that are out in the world.  How can they be leveraged to wow your customers and make our world a better place.

Building Relationship Capital

Think in terms of not only what your organization’s capabilities are but how you can work with other organizations to provide your customers with holistic solutions beyond what you could supply alone.  A great example of mutually beneficial relationships is Walmart and P&G.  The two companies began their supplier-retailer partnership in 1987. The City Wire reported in November 2013 that the relationship between the two corporate giants has had its ups and downs over the years.  Yet over a 25 year period, P&G grew its Walmart business from $400 million to $10 billion.  They created a model of transparency and trust that allowed them to build their businesses together, sharing information and expertise towards a common goal.  For example, P&G has created new products that give consumers lower cost options for higher priced goods they were buying anyway at other retailers like candles from specialty stores or expensive teeth whitening products and services from their local dentist.

Zappos has maintained a symbiotic and transparent relationship with it’s vendors from inception with outstanding results.  The online retailer was able to achieve its annual sales target of $1 billion after only 8 of the projected 10 years.  Creating a positive work environment, maintaining high hiring standards, establishing and maintaining an employee development program, not to mention their well known customer service, have all contributed to their ongoing success, providing us with an excellent example of the benefits of progressive business practices.

Evolve or Die! It’s the mantra of business survival today.  David Teece, a professor at UC Berkeley, explains the urgent need for companies to  focus their efforts on developing Dynamic Capabilities or evolving in ways no one else can match in order to gain and maintain a competitive edge.

In his 2007 article in the Strategic Management Journal entitled “Explicating Dynamic Capabilities – The Nature and Microfoundations of Sustainable Enterprise Performance” David Teece describes the importance of building relationship capital like this:

“Within the dynamic capabilities framework, the ‘environmental’ context recognized for analytical purposes is not that of the industry, but that of the business ‘ecosystem’ – the community of organizations, institutions, and individuals that impact the enterprise and the enterprise’s customers and supplies.  The relevant community there fore includes complementors, suppliers, regulatory authorities, standard-setting bodies, the judiciary, and educational and research institutions.”

Teece goes on to say:

A key strategic function of management is to find new value-enhancing combinations inside the enterprise, and between and amongst enterprises, and with supporting institutions external to the enterprise.

The goal is to combine complementary innovations to create a holistic solution (that doesn’t currently exist) to a customer problem that the organization couldn’t resolve acting alone.

This relationship building sentiment is reiterated by professor R. Edward Freeman in his explanation of Stakeholder Theory.  In his book Strategic Management: A Stakeholder Approach, he goes into great detail describing the various stakeholders as they pertain to different managerial positions and how to to implement stakeholder theory into strategic management processes.  One piece of advice that he offers sticks in my mind and that is the value of working through the discomfort of resolving issues with the organization’s critics to find mutually satisfactory solutions.  While it may take considerable time and effort, the long-term benefit is worth the investment and often transforms critics into fans.

Dave Gray, in The Connected Company, explains the importance of the networks that are forming around companies every day.  Many of these networks include our stakeholders.  He says, “To adapt, companies must operate not as machines but as learning organisms, purposefully interacting with their environment and continuously improving, based on experiments and feedback.”

Dave Gray also talks about Network Power, which is the ability to detect changes in the environment (in real time) and respond in an effective manner (influence), as well as, the ability to influence the network as a whole (like standards setting).  It’s easy to see how quickly networks can change, how complicated they will become as they continue to grow, and how visible we become whether we want to or not.

As an accounting professional, one of my favorite sections of The Connected Company is about “bad profits.”  Bad profits produce revenue for the organization “at the expense of happy customers and long-term sustainable growth.”  Examples given include nuisance fees charged by airlines, car rental companies, retail banking, and mobile telecom providers.

I think it’s interesting how these “bad profits” have opened the doors for new competitors to enter into some of these markets.  Most people have heard the story about the Blockbuster late fee that antagonized Reed Hastings so much that he started Netflix and now Blockbuster is out of the brick and mortar DVD rental business, only their streaming services have survived.

Bad (or questionable) business behavior, whether it’s pricing, nuisance fees, poor customer service, poor product quality, you name it, can’t be kept a secret anymore.  Social media has seen to that.  Building relationship capital will continue to grow in importance to the success of every business.  It’s time to shift our thinking to a broader scope, develop a mindset of abundance – how can we structure our businesses to grow and succeed while simultaneously benefiting everyone we interface with…essentially making our world a better place.

For example, a great opportunity exists for organizations (businesses and non-profits) to work with governmental agencies and educational institutions to address the simultaneous issues of high employment and many areas that are suffering from a lack of a skilled work force.  I was surprised to see an article reporting a severe shortage of welders in Texas. The article described a mobile unit (trailer for a 16 wheeled tractor trailer rig) that was being moved to various communities so participants could complete a multi-week training course to become welders.  While the volume of participants was severely limited, it did appear to be a cost effective way to address a pressing need.  I’m sure more units could be made available with greater participation from the business and non-profit communities, but it’s a start…

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