20, 1998 Design News
Tips on guiding product development
Develop your intellectual capital
Ted Gautschi Consultant
Wellesley Hills, MA
The concept of intellectual capital is rapidly becoming
an important asset for most companies, although it often
goes unrecognized. Unfortunately, the phrase "intellectual
capital" has a vagueness about it that makes it
difficult to define or quantify, let alone manage.
Recently, I came across the following simple, yet useful
definition: intellectual capital equals the product
of competence and commitment.
A necessary balance. Neither element
is sufficient in or of itself. Competence without commitment
is often directed away from an organization's goals.
Commitment without competence will frequently produce
sub-optimized products. However, when competence and
commitment are considered together, they can provide
a useful paradigm for dealing with intellectual capital.
Management must recognize that with the increasing
emphasis on knowledge work, intellectual capital is
rapidly becoming a vital, but often neglected concept.
Management should resolve to give it some priority.
The question is, how can management assure that their
firms' intellectual capital will continue to grow, and
not depreciate over time?
The intellectual capital paradigm requires:
A common vision or strategy that everyone
Develop competencies. Competencies,
whether they be technical or management, must first
support the business strategy. To do this, most managers
use some combination of the following:
Replace the less-qualified performers with people
who are more qualified. This is not an easy task,
especially when the labor market is tight. Also,
there is a risk that the new person will not perform
as well as the person replaced, since "the
grass often looks greener on the other side of the
fence." Such action also risks alienating the
good performers who were not terminated.
Invest in the current workforce to make it stronger
by concentrating on activities that will help employees
learn new technical and management skills that will
increase the organization's intellectual capital.
Contract out what cannot be done efficiently or
effectively in-house, or use a consultant who has
Many firms, especially those in high-tech businesses,
tend to focus almost entirely on the competence dimension
in an effort to increase their intellectual capital.
They tend to ignore tools for the creation and maintenance
of commitment. This they relegate to the category of
"soft stuff," which they believe has little
to contribute to a hard-hitting, fast-moving organization.
However, today's businesses also need committed employees
who are involved emotionally as well as intellectually
if the business is to continue successfully.
Ask the Manager
Q: As I read and learn about improving U.S.
competitiveness, two opposing positions seem to pop
out. One relates to downsizing or laying off as many
people as you can. The other says competitiveness requires
a knowledgeable and dedicated workforce. How do you
reconcile these seemingly opposing views?
A: The answer is to try to do both.
That is, try to build a strong, dedicated workforce
while at the same time trying to keep costs competitive.
The problem is that, until recently, many firms were
able to operate on a cost-plus basis without a lot of
competition. Now, competition, and improving technology,
is forcing companies to design to the price customers
are able, and willing, to pay. And, at the same time,
they must also be more flexible and produce in shorter
Operating in such an environment makes reorganizing
and downsizing to produce the same product a must. Large,
inflexible, and inefficient organizations can no longer
be tolerated. They are going the way of the dinosaur.
At the same time, high employee skills, lifelong learning,
teamwork, employee empowerment, and employee involvement
are all essential elements for a firm to be competitive.
The virtual corporation may be the answer. Such an operation
would have a core of owners and managers and technological
skills. Then other workers would be hired temporarily,
on short-term contracts, or provided by another contractor
or vendor. This gives the corporation flexibility in
terms of how it does its business, while it provides
a range of opportunities to those workers who keep up
with their fields and remain productive. Much like the
free-agent system in baseball or football, this approach
requires a whole new mindset, but it is in our future.