Tuesday, December 2, 2008

Prospecting Customers using IC Reports

Intellectual Capital has come to represent the most valuable asset of Companies in the Knowledge era. This is quite unlike the industrial era where capital expenditure in the form of factories and productivity in the form of economies of scale represented drivers of growth and value. The most effective businesses today drive growth by continuously focusing on high value added activities such as research, design and innovation and by outsourcing low value added activities such as manufacturing to low cost producers. Growth in the knowledge era is influenced not so much by economies of scale as it is by a constant churn of innovative products and services. If this be true, then the challenge before Companies today is to effectively communicate their value added drivers to prospective customers in order to gain their trust and their business.

An Intellectual Capital Report is a statement of changes in the company’s intangible assets for a given period much like a balance sheet is a statement of changes in the company’s financial assets for the period. Hence, just as the balance sheet shows whether the company’s financial assets are increasing or decreasing, an Intellectual Capital Report also quantifies the amount and direction of change of the company’s intangible assets. Further, a well written Intellectual Capital Report helps the reader understand the linkages of the Company’s intangible assets to its core competencies and helps explain the value adding processes inside the Company. Prospective Customers can use such a report to understand precisely whether the drivers of value that they seek from their supplier exist there without suffering multitudes of Powerpoint slides from its sales staff. In other words, just as the balance sheet can be used to ascertain the financial health of a supplier, an Intellectual Capital Report can be used to ascertain its Knowledge health. In so doing, the Intellectual Capital Report also becomes an important pull based marketing tool, albeit much more effective than marketing based on costly push based advertising.

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