| A rich American lady visits the most famous hat | | | | entire business models based not only on human, |
| maker in Paris. She sees an exquisite, long ribbon | | | | social or intellectual capital but less well known |
| and immediately falls in love with it. The hat | | | | forms, including structural, consumer, digital, |
| maker takes the ribbon in his hands, does a few | | | | process and innovation capital. The main challenge |
| twists with it and creates a stunning hat. Brilliant! | | | | for companies is how to measure them. |
| The lady grabs it immediately. "How much is it?" | | | | New-economy organisations emphasise them to |
| she asks. "Five thousand francs," the hat maker | | | | different degrees. Skandia, a Swedish insurance |
| replies. "Five thousand francs!" the lady exclaims, | | | | company, has long publicly reported all those |
| "but, it's just a ribbon!" "Madam," the hat maker | | | | forms of capital and its flow in its annual report, |
| says, "the ribbon is free." | | | | (Skandia Navigator). Another Swedish company, |
| Welcome to 'the-ribbon-is-free' economy or, in | | | | the consultancy Celemi, which is better known for |
| other words, the knowledge economy. What | | | | its business simulation game, Tango, incorporates |
| matters is the intellect, the skills, the capabilities, | | | | an 'Intangible Assets Monitor', on similar lines to |
| the know-how, the human capital. Yes, you need | | | | Skandia. It will not be long before it becomes the |
| the financial capital as a vehicle, but you compete | | | | norm for companies to attempt to provide |
| on your ability to create value, and this ability lies | | | | detailed measurement of intangible assets. |
| more in intangible thinking processes than in the | | | | The investor's metaphor |
| tangible one of your bank account. Yes, you also | | | | But let's go back to the ribbon-is-free economy, |
| need ribbons, but everybody has them. Hat | | | | where one single thing defines current times: the |
| makers are unique, ribbons are a commodity. | | | | triumph of the brain over the hands. Henry Ford |
| Industries used to compete on quality. Today | | | | used to complain: "Why is it that every time I ask |
| quality is the baseline, a pass, the minimum entry. | | | | for a pair of hands, a brain comes attached?" He |
| Other things like design, fashion or extra services | | | | obviously did not like the attachment. Today he |
| have taken over. Knowledge is now the currency. | | | | would have got minds, occasionally attached to a |
| Companies should define themselves by what | | | | pair of hands. |
| they know, not by what they do. | | | | In this new world of business, one thing, for me, |
| It's a 'how-to' world | | | | stands out in the crowd of ideas, new concepts, |
| There is nothing terribly new in the story of the | | | | old concepts disguised as new, jargon and new |
| Parisian hat maker. Value has long been seen as | | | | business-talk. It is the so-called 'investor's |
| being beyond the obvious product: either in (a) | | | | metaphor'. |
| unique know-how, (b) the ability to make | | | | In the beginning, the employee was a cost: indeed |
| ribbons-on-demand, or (c) how the ribbon | | | | is still a cost in many current business models. By |
| becomes the excuse for something else - to sell | | | | the 1980s, employees became assets. Indeed, |
| other more profitable things in the hat maker's | | | | CEOs and human resources (HR) executives |
| shop, perhaps? In 1999, American companies | | | | around the world told us that employees were a |
| began to offer free computers to anyone who | | | | company's most important assets. |
| signed a long-term contract for an Internet | | | | The re-engineering/downsizing movement of the |
| service (Fortune, October 2000). Madam, the | | | | Western world, and to a lesser extent of other |
| computer is free. In the UK - and I suspect | | | | economies, added little to the credibility of the |
| elsewhere - some mobile telephone companies | | | | statement. As one friend of mine used to say, |
| give away the handset as long as one signs for | | | | they forgot one word: disposable. Employees are |
| their airtime service. Madam, the mobile phone is | | | | our more important (disposable) assets. |
| free. | | | | Nevertheless, 'asset' is an improvement on 'cost'; |
| is, at a superficial level, a bookstore. At a more | | | | after all, one prefers to feel like an asset than a |
| serious level it is a system that knows who you | | | | number of dollars in the operating expenses |
| are and what you have bought in the past, | | | | report. |
| enabling it to send you tailored recommendations | | | | A third shift in understanding employees, after |
| and e-mails when a new book on something that | | | | cost and assets, is the one promoted by Terilyn |
| you care about has been written. At another level | | | | Davenport and others: employees as investors. In |
| still, it is a public forum of book reviews where | | | | other words, investors of (their own) human |
| readers can post their own reviews and see what | | | | capital. And, what do you do when you have |
| other people think. And at a different, parallel, | | | | capital to invest? You make it grow by allocating it |
| level, it is an incredible search engine for topics, | | | | to a growth environment; you look after it, you |
| ideas and cross-references. Madam, all this is free | | | | manage it, you withdraw it if it is not growing, |
| - you just pay for the book. | | | | and, at the end of each year, you look at the |
| Well before people started talking about the | | | | return on investment. |
| knowledge economy, the software economy had | | | | If individuals treat their own human capital (talent, |
| taken over. A good example of this is the parent | | | | capabilities, skills, knowledge, wisdom) as atrue |
| company of American Airlines, which made more | | | | capital, things start looking very different in the |
| money from licensing SABRE, a software | | | | HR field. The workplace should enable personal |
| package used by travel agencies and airlines to | | | | capital growth - no-one would invest in a |
| make bookings, than from the traffic of the airline | | | | no-growth or negative growth environment. |
| itself. It is a 'how-to' world. The software | | | | HR departments then become more like venture |
| economy is a 'how-to' economy. | | | | capital providers or incubators, looking after all |
| It is an access economy as well. Access to | | | | those investments. Leadership's main role is to |
| information, to the customer, to people in general, | | | | create the conditions for that capital to grow. The |
| but, above all, to a service. The 'material' world is | | | | investor's metaphor applied to employee |
| in trouble in the access economy. Microsoft plans | | | | relationships puts 'brain-holder value' first; |
| to stop selling CD software in colourful boxes, | | | | shareholder value is the consequence. And the |
| instead providing - for a fee - continuous access | | | | one in charge is the one with the capital to invest, |
| to downloadable software from its website, which | | | | not the one who receives it. |
| has the additional advantage of being constantly | | | | There is a profound difference in this new model, |
| upgraded. Indeed, everything that is | | | | beyond the metaphor. It is revolutionary, not |
| programmable may follow the same pattern. As | | | | simply semantic. Silicon Valley, for better or |
| somebody once said (perhaps in Silicon Valley), | | | | worse, has followed the investor's metaphor |
| "Don't own anything if you can help it; if you can, | | | | more than other places. |
| rent your shoes." It is rent time, knowledge time, | | | | People equals brains in the Valley. Actually the |
| access time, and intangible assets time. Madam, | | | | Valley = nuts + (resources x power x glory), |
| the CD is free, you pay for the use of the | | | | according to Michael Lewis, author of Liar's Poker |
| 'how-to'. | | | | and, more recently, The New New Thing. Given |
| Means to an end | | | | the way the Silicon boys jump from one |
| It is also a 'means-become-ends' business world - | | | | company to another and how bids for brains |
| a variant of the access world. BAA, the owner of | | | | dominate the marketplace, we should perhaps talk |
| London's Heathrow Airport, makes more money | | | | about a 'mercenary metaphor'. But this is a topic |
| from the retail activity than all the airline traffic. | | | | for another day. |
| Yes, in case you didn't know, Heathrow Airport is | | | | In this Brains-R-Us economy, the individual is in |
| a big shopping mall which has landing pads for | | | | charge. The only problem is that the message has |
| things called aeroplanes that move people from A | | | | yet to reach a few million people. When it does, |
| to B. The real business is in the shopping. It is | | | | things will look different. For example, |
| becoming increasingly common for passengers to | | | | compensation and benefits (C&B) is still |
| spend more money in the shops than on their air | | | | largely a one-size-fits-all model. OK, two sizes, |
| ticket. The airline traffic is the access to the | | | | part-time and full-time, plus/minus perks. The time |
| passenger's pocket. | | | | is rapidly approaching an 'individualised deal' an |
| Madam, the traffic is free? Not quite, given the | | | | 'individualised brain'. |
| ridiculously high air ticket prices, particularly in | | | | At some point, companies will have to offer a |
| Europe. Here the customer pays for everything: | | | | portfolio of C&B: number/allocation of hours |
| the air transport, the use of the facility (airport | | | | (complying with local labour laws but personalised |
| tax) and the goods bought while waiting. In other | | | | and tailored), training packages, sponsored higher |
| words, pay for being there, pay for waiting, pay | | | | education, personalised bonus, family benefits and |
| for buying while waiting, and pay to go. | | | | so on. It will be a 'pick-your-own' package with |
| If anyone needs more convincing, they need look | | | | people making trade-offs between the benefits |
| no further than the newspapers. A qualitydaily | | | | on offer: a ten-hour, four-day week, sponsored |
| paper in the UK costs pennies. The news is the | | | | education instead of bonus, no car but a |
| excuse, or vehicle, for advertising. Newspapers | | | | crêche, extended holiday, access to unpaid |
| don't make money with the news. Yes, madam, | | | | and sabbatical leave. |
| the newspaper is (almost) free. Indeed, the world | | | | By 2003, as much as 60% of the C&B |
| of free newspapers and magazines is growing. I | | | | packages in the Western world may be highly |
| predict that a free quality daily newspaper will | | | | customised, according to consultants Towers |
| soon be a reality. All it needs is another Stelios | | | | Perrin. In other words, people will create their own |
| Haji-Ioannou, chairman of easyJet, the European | | | | deals. The Fordian 'You can have any C&B |
| low-cost airline, to wake up one day and decide to | | | | package you want as long as it is the one that |
| show the world it can be done and that money | | | | we offer here to all' will be gone. The |
| can be made. | | | | transformation of work practices in the Western |
| What kind of capital moves around in this new | | | | world hasn't seen anything yet. |
| economy, where intangible assets, and access to | | | | Madam, what I do is for free; you pay me for |
| an asset, are more relevant than the solid bricks | | | | what I know. Monthly pay comes last on my list |
| or possession of the asset itself? The types of | | | | of |
| capital seem endless. You can find reams of | | | | C&B rewards for my intellectual capital |
| conceptual information, references, essays and | | | | investment. I expect the following annual ROI... |