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Here''s a real shocker: In a survey of 3,300 senior managers and human resource professionals reported by Rob Lebow in his Washington CEO magazine. Most organizations say their most important assets are their people, but few behave as if this were true. 75% of all organizational change programs fail. Why is change so hard ?
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.
Say that in a roomful of managers, and you get nervous laughter. Hitler's human extermination empire was quite new in its scope, organization, and technology. The Balanced Scorecard's primary form of novelty is that it takes into account the intangibleassets that are so crucial for information-age companies.
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. These assets are typically overlooked, undervalued, and under-managed.
Medicines, instruments, consumables, and exercise devices belong to material assets; intangibleassets involve medical expertise on board and on the ground, processes, procedures, and protocols. Training crew members to manage their care. The physician requested an ultrasound examination of the affected joint.
Just lengthening that second stage of full-time work may secure the financial assets needed for a 100-year life, but such relentless work will inevitably deplete precious intangibleassets such as productive skills, vitality, happiness, and friendship. The same is true for education.
Benjamin Graham , the father of value investing, seldom met the managers of the companies he invested in because he felt they would tell him only what they wished him to hear and because he didn’t want to be influenced by impressions of personality. So is there something different about the managers who do succeed?
In the July/August issue of HBR , Ram Charan argues that the Chief Human Resources Officer (CHRO) role should be eliminated, with HR responsibilities funneled in two separate directions — administration , led by traditional HR-types, reporting to the CFO; and talent strategy , led by high-potential line managers, reporting to the corner office.
But while such information exchanges have become technically feasible, they are not yet financially beneficial to the information provider and difficult for the customer to value and incorporate into their management systems. The practice of management itself must evolve for this capability to emerge.
We typically imagine that the young can help the old understand technology and the old can impart general wisdom. What we asked people was, at this point in their lives, are they actively building, maintaining, or depleting their tangible and intangibleassets? Coaching and mentoring across age groups makes sense.
The companies that provide those services and enable us to share what we have (insights, relationships, assets) with others not only are valued more highly by investors but also are relatively asset-light themselves. And equipment must be maintained in a world that is becoming virtual and augmented by technology (VR and AR).
Earnings also seem to matter less for CEO pay: companies are reducing profits-based cash bonuses and shifting toward stock-based CEO compensation, partly to keep opportunistic managers from cutting back on valuable investments as a way to report higher profits. For example, see Item 7 of Facebook’s annual report.).
Small startup firms are already developing proprietary technologies — such as machine vision, deep learning, and other innovations —– that could help large investors evaluate opportunities and risks with far greater accuracy and efficiency than was previously possible. But right now that’s not happening.
And academic research has found that rising industry concentration correlates with the patent-intensity of an industry, suggesting “that the industries becoming more concentrated are those with faster technological progress.” ” Carr distinguished between proprietary technologies and “infrastructural” ones.
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.
Second, for small and rapid-growth technology companies, the problem is compounded by the fact that, while rich in intangibleassets, they typically lack the kind of collateral (equipment, inventory, real estate, etc.) banks require to secure commercial loans.
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