In my workshop at the XPX Summit 2013, I’ll be leading some exercises to teach exit planners how to help their clients create realizable value from their intangibles. Today 80% of the value of the average business is intangible so we’re not talking about a trivial thing. In fact, making intangibles visible and understandable is one of the best ways to increase the exit value of a company. Here are some thoughts on one of the key components of intangible capital: relationships.
Organizations have always had customers, vendors and financing partners, to name a few. But the nature of these relationships has been changing more dramatically in recent years. First of all, networking technology has made it easier to outsource pieces of a business that were formerly inside the corporation. The relationships with critical outsourcing partners are closer than that of arms-length client-vendor relationships. You may find yourself on both sides of this dynamic, performing outsourced services for your customers but also outsourcing some of your internal processes to a vendor.
Technology also facilitates customization and co-creation, which has made it easier for customers to play the role of innovation partners with your organization, again more intimate than a classic customer relationship. These shifts help us understand relationships as a two-way knowledge asset. The line between customers, suppliers, users and relationships of all kinds are starting to blur. Every company has a unique set of knowledge assets and this uniqueness extends to its combination of relationships.
Where to look? There are three basic categories of relationship capital:
Customers: You know an enormous amount about your best customers: their history, their culture, their product or service requirements, their current market position and their goals for the future. You can probably name their management team and a large number of their staff. People in your organization have personal relationships with many of the people in their organization enabling any of you to pick up the phone and talk about challenges and opportunities you see. Sometime you will even know about the personal life of your counterpart. You will know and care about each other as individuals.
In today’s world, it is increasingly common for companies to share information electronically and even be directly networked together. This kind of link serves to strengthen your relationship but also to make it harder to end it. And the existence of an electronic network means that you are sharing information in real time. All this is knowledge. And all this knowledge gives you strength and power.
Partners: Relationships with other kinds of partners are growing stronger and more important for the same reasons as those described for customers: increased outsourcing, increased linking of systems and the need for co-creation and innovation. Traditional suppliers for a manufacturer would fall into this category as they provide an input to the ultimate product sold to the manufacturer’s customers. A service company that uses contractors for some of its workforce or for specific projects is using relationship capital as a substitute for its own human capital. You can see that the lines between the types of knowledge capital are blurry, which is why we devote the next chapter to the concept of understanding how knowledge assets work together as a system. Your organization develops a deep knowledge of your vendors’ businesses, their strengths and weaknesses, and how you can best work together. Technology makes it easier than ever for you to connect and collaborate with your vendors.
Brands and Reputation: The final category of relationship capital is brand and reputation capital. Brand is how your customers see your products. Reputation is about how all your stakeholders view your entire operation. Each is important. Brand communication is generally thought to leave more room for definition by the holder. That is, I can influence how you see my brand through my marketing and management of the customer experience. But really both brand and reputation are as much about your stakeholders’ knowledge of you as it is your knowledge of them. This shared knowledge is what make brand and reputation part of relationship capital.
The goal of our Make It Real session is for you to learn how to help your clients make these critical relationship assets visible and measurable to add to the overall value of their businesses. Join us at the 2013 XPX Summit and become an intangible capitalist!
About the Author: Mary Adams is the founder of Smarter-Companies, a marketplace of learning and consulting tools to optimize returns on the intangible capital that makes up 80% of corporate value in companies today. She is the co-author of Intangible Capital: Putting Knowledge to Work in the 21st Century Organization. Previously she spent 14 years as the founder of Trek Consulting and 14 years as a high-risk lender at Citicorp and Sanwa Business Credit.
This post is part of a series of posts that the upcoming speakers of the 2013 XPX (Exit Planning Exchange) Summit are contributing. The theme of this year’s summit is The Art and Science of Collaborative Innovation. The event will be widely attended by business owners and trusted advisors to privately-held companies which are preparing for a successful exit.
Originally posted by Mary Adams on April 8, 2013 at 10:30am
