A rich American woman visits the most famous milliner in Paris. She sees an exquisite, long ribbon and immediately falls in love with it. The milliner takes the ribbon, gives it a few twists, and makes a stunning hat. Brilliant! The lady grabs it immediately. “How much is it?” She asks. “Five thousand francs‘ replies the Hatter. “Five thousand francs!” exclaims the lady, “but it’s just a band!” “Madam‘ says the Hatter, ‘The tape is free.”
Welcome to the “The Ribbon is Free” economy, or in other words, the knowledge economy. What matters is the intellect, the skills, the skills, the know-how, the human capital. Yes, you need financial capital as a vehicle, but you compete for your ability to create value, and that ability resides more in intangible thought processes than the tangible one of your bank account. Yes, you also need ribbons, but everyone has them. Hat makers are unique, ribbons are a commodity. Industries used to compete for quality. Today, quality is the baseline, a pass, the minimum entry. Other things like design, fashion or additional services have taken over. Knowledge is now the currency. Organizations should be defined by what they know, not what they do.
It’s a “how-to” world
There is nothing terribly new in the story of the Parisian hatter. Value has long been seen as beyond the obvious product: either in (a) unique know-how, (b) the ability to make ribbon on demand, or (c) how the ribbon becomes an excuse for something else – to perhaps other more lucrative ones Sell things in the milliner’s shop? In 1999, American companies began offering free computers to anyone who signed up for a long-term contract for an Internet service (Fortune, October 2000). Madam, the computer is free. In the UK – and I suspect elsewhere too – some mobile operators give away the handset as long as you sign up for their airtime service. Madam, the cell phone is free.
Amazon.com is, on the surface, a bookstore. On a more serious level, it’s a system that knows who you are and what you’ve bought in the past, and allows them to send you tailored recommendations and emails when a new book is written about something you love important is. On another level, it’s a public book review forum where readers can post their own reviews and see what other people think. And on another, parallel level, it’s an incredible search engine for topics, ideas, and cross-referencing. Madam, all of this is free – you only pay for the book.
Long before people started talking about the knowledge economy, the software economy had taken over. A good example of this is American Airlines’ parent company, which made more money from licensing SABER, a software package used by travel agents and airlines to make bookings, than from the airline’s traffic itself. to” world. Software economics is a how-to economy.
It’s also an access economy. Access to information, to the customer, to people in general, but above all to a service. The “material” world is in trouble in the access economy. Microsoft plans to stop selling CD software in colorful boxes and instead offer – for a fee – continuous access to downloadable software from its website, which has the added benefit of being constantly updated. In fact, anything that is programmable can follow the same pattern. As someone once said (perhaps in Silicon Valley): “Don’t own anything if you can avoid it; If you can, rent your shoesIt’s rental time, knowledge time, access time, and intangibles time. Madam, the CD is free, you pay to use the ‘how-to’.
means for the purpose
It is also a business world that becomes a purpose – a variant of the access world. BAA, the owner of London’s Heathrow Airport, makes more money from its retail activities than from all air travel. Yes, in case you didn’t know, Heathrow Airport is a large shopping center with landing pads for so-called airplanes that take people from A to B. The real business is shopping. It is becoming increasingly common for passengers to spend more money in shops than on their plane ticket. Air travel is the gateway to the passenger’s pocket.
Madam, the traffic is free? Not quite given the ridiculously high plane ticket prices, especially in
Europe. Here the customer pays for everything: the flight transport, the use of the facility (airport tax) and the goods purchased during the waiting time. In other words, pay to be, pay to wait, pay to buy while waiting, and pay to go.
If anyone needs more persuasion, they need look no further than the newspapers. A quality
Daily newspaper in the UK costs pennies. The news is the excuse or the vehicle for advertising. Newspapers don’t make money from news. Yes, madam, the newspaper is (almost) free. In fact, the world of free newspapers and magazines is growing. I predict that a free quality daily newspaper will soon be a reality. All it takes is another Stelios Haji-Ioannou, chairman of easyJet, the European low-cost airline, to wake up one day and decide to show the world that it can be done and that money can be made.
What kind of capital moves in this new economy where intangible assets and access to an asset are more important than the solid bricks or ownership of the asset itself? The types of capital seem endless. You will find countless conceptual information, references, essays and entire business models based not only on human, social or intellectual capital, but also lesser known forms including structural, consumer, digital, process and innovation capital. The biggest challenge for companies is how to measure them.
New Economy organizations emphasize them to varying degrees. Skandia, a Swedish insurance company, has long reported publicly on all these forms of capital and their flow in its annual report (Skandia Navigator). Another Swedish company, consulting firm Celemi, better known for its business simulation game Tango, is integrating an “intangible assets monitor” similar to Skandia. It will not be long before it becomes the norm for companies to attempt to provide detailed valuations of intangible assets.
The investor metaphor
But let’s get back to the ribbon-free economy, where one thing rules today: the triumph of the brain over the hands. Henry Ford used to complain, “Why every time I ask for a pair of hands, does a brain come along?” He obviously didn’t like the attachment. Today he would have a mind, occasionally attached to two hands.
In this new world of business, one thing stands out to me in the crowd of ideas, new concepts, old concepts re-disguised, jargon and new business talk. It’s the so-called “investor metaphor.”
In the beginning, the employee was a cost factor and is still a cost factor in many current business models. In the 1980s, employees became assets. In fact, CEOs and HR leaders around the world have told us that people are a company’s most important asset.
The re-engineering/downsizing movement of the western world, and to a lesser extent other economies, did little to add credence to the statement. As a friend of mine used to say, they forgot one word: disposables. Employees are our more important (disposable) asset. Nonetheless, Asset is an improvement over Cost; After all, you’d rather feel like an asset than a few euros in the utility bill.
Terilyn Davenport and others advocate a third shift in understanding employees after costs and assets: employees as investors. In other words, investors of (their own) human capital. And what do you do when you have capital to invest? You make it grow by assigning it to a growth environment; You nurture it, you manage it, you retire it when it’s not growing, and at the end of each year you look at the return on investment.
When individuals use their own human capital (talent, ability, skill, knowledge, wisdom) as a
real capital, things are very different in HR. The workplace should allow for personal capital growth—no one would invest in a no-growth or negative-growth environment.
HR departments then become more like venture capitalists or incubators that take care of all these investments. The main task of leadership is to create the conditions for the growth of this capital. The investor metaphor applied to employee relationships puts “brain holder value” first; Shareholder value is the result. And the person responsible is the one who has the capital to be invested, not the one who receives it.
There is a profound difference in this new model, beyond metaphor. It’s revolutionary, not just semantically. For better or for worse, Silicon Valley has followed the investor metaphor more than other places.
In the Valley, people are brains. Actually, the valley = nuts + (resources x power x fame), according to Michael Lewis, author of Liar’s Poker and recently The new new thing. Given the way the Silicon Boys hop from one company to another and how deals for brains dominate the market, perhaps we should call it a “mercenary metaphor.” But that’s a topic for another day.
In this Brains-R-Us economy, the individual calls the shots. The only problem is that the message has yet to reach a few million people. When the time comes, things will look different. Compensation and Benefits (C&B), for example, is still largely a one-size-fits-all model. OK, two sizes, part-time and full-time, plus/minus perks. The time is fast approaching an “individualized deal”, an “individualized brain”.
At some point companies will need to offer a C&B portfolio: number/breakdown of hours (in line with local labor laws but personalized and tailored), training packages, sponsored higher education, personalized bonus, family benefits and so on. It will be a “pick-your-own” package, with people making trade-offs between the perks on offer: a ten-hour, four-day week, sponsored education rather than a bonus, no car but a creche, extended vacations, access to unpaid vacation and sabbatical.
According to consultancy Towers Perrin, by 2003 up to 60% of C&B packages in the western world could be highly customized. In other words, people will create their own deals. The Fordian “You can have any C&B package you want as long as it’s what we’re offering everyone here” is going away. The transformation of work practices in the western world has not yet seen anything.
Madam, what I do is in vain; You pay me for what I know. Monthly salary is last on my list
C&B rewards for my investment in intellectual capital. I expect the following annual ROI…