In tough economic times, business leaders try not only to generate more revenues from existing activities and save money in cost-cutting, but they also try to discover assets they already have and activities they already perform that could generate revenue. These assets and activities are called hidden capital. Business leaders also work to discover what the business "knows" and what skills and ideas employees might have. That’s called intellectual capital.
A prime example of hidden capital at work is the familiar story of the creation of Post-It Notes, manufactured by Minneapolis-based 3M and found in nearly every office around the world-from tiny "flags" for files to flip chart paper to stick on walls. A 3M chemist also sang in his church choir and marked hymnal pages with scrap paper. A little gust of wind or a drop of the hymnal meant page markers might fly off. But if he used Scotch-brand tape (another 3M product), the adhesive could damage those pages.
While in the midst of product development using adhesives, a large batch of glue had a defect in it. It failed to cause the product to bind securely. But the chemist, not wanting to waste the product, examined how the adhesive caused the product to stick, but also to pull up easily. He tried it on paper, and then on a hymnal. Then the "aha" moment struck as he thought about many potential uses for this "defective" adhesive.
His managers were singularly unimpressed. Who would buy an adhesive product that would lift from the surface? The chemist insisted that the idea had merit, and he pursued its development in the "skunk works" in the back of a 3M lab. And, as they say, the rest is history. Post-It Notes have been, and continue to be, incredible revenue generators for the company. The chemist and his team shared in the profits. But the idea and the capital belong to 3M. A big change: They fund the "skunk works" to tap into worker ingenuity and intelligence.
Both kinds of capital lay around undiscovered and unutilized or underutilized in your large or small business. There are defects that turn out to have a positive dimension to them-a way to turn corporate lemons into lemonade. Employees have ideas or concepts that could revolutionize your manufacturing process or service delivery. Your business is giving away services and activities for which other businesses or individuals will pay. There are three ethical questions, however, every business leader needs to ponder in the search for hidden capital or intellectual capital.
- Whose property is it? Employees have varying notions about intellectual capital and intellectual property. Some understand that, as employees, the ideas and processes relating to the business they may generate anywhere, anytime belong to the employer. Others seem to think because they thought of it or implemented it, they "own" it-or at least have a stake in it. That’s wrong. The assets ultimately belong to the business. The business is paying for access to intellect and talent, and they already have created the assets that are hidden.
- What’s your method for inspiring such capital development? While the business may own the rights to the ideas, processes, mock-ups, and prototypes, it’s prudent (and it certainly is ethically sound) to give employees an opportunity to develop their concepts (the "skunk works" idea), to provide plenty of recognition and credit, and to help the idea generators or the capital developers to share in the income. If you want inventiveness and resourcefulness, consider how to inspire that in your employees. It’s unethical to keep the profits only in the hands of the executives, owners, or shareholders when employees really do the work.
- How will you offer it? Sometimes customers, clients, and business partners who’ve been accustomed to receiving a service or activity for free start to object when they have to pay for it. There’s a sense of entitlement. For example, one health care nonprofit with which I worked provided financial planning and claims review services for potential clients as part of the qualification process.
The claims review process took valuable time. So they decided to offer it as a value-added service, telling clients (truthfully) they could save a lot of money with claims reviews. Instead of objecting, potential clients loved the idea, paid a fee, and referred their friends. It became a major revenue generator and provided a valuable service.
We need to do away with the notion that "people are our most important asset." The people aren’t the capital. People are people, and their ideas and skills add value. We’re ethical in the utilization of intellectual capital and hidden assets when we’re clear that they aren’t there to be exploited, but to be offered so they can generate more revenue and, more importantly, so those assets can provide something of value to other people. IBI