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As technology continues to change and challenge even the most successful incumbent organizations in every industry, the cost of inertia is growing. Consider the dramatic shift in the types of assets that create market value. Despite the shift to intangibleassets, executives and their strategists are sticking to the status quo.
In sum, digital strategies and rapid technological obsolescence increases the mortality rates among existing public firms, but does not correspondingly increase the demand for IPOs. Such acquisitions become more lucrative with rising first-mover advantages, pace of technological development, and network externality.
Manufacturers invest most of their capital into physical assets, while high-tech firms invest in R&D to create new intellectual capital. But all assets are not created equal, especially as the technological landscape changes. Organizational transformation must begin with a leadership transformation.
Put the most strategic pieces into the hands of up-and-comers passing through the leadership-development revolving door? Baseline financial skills are still essential, but international experience, industry knowledge, investor relations acumen, technology expertise, and strategic prowess are now just as much part of the package.
3) Update management and leadership practices: An extended analytics engine fueled by multiple information sources, however, can accomplish little without the ability to act on future predictions. The ultimate goal is to treat information as a tangible flow rather than an intangibleasset stuck on the balance sheet.
In a previous HBR article , we argued that, in contrast to physical assets that depreciate with use, intangibleassets might enhance with use. Therefore the most important aim for digital companies is to achieve market leadership, create network effects , and command a “winner-take-all” profit structure.
Today, however, by exploiting new digital technologies, firms like Apple, Lending Club, and AirBnB have made customer co-creation of value central to their business models and in doing so now rank among the world’s most innovative and valuable firms. Evaluate your leadership team’s openness to co-creation as well.
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