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Madam, The Ribbon is Free
A wealthy American lady pays a visit to the most famous milliner in Paris. She saw a beautiful long ribbon and fell in love with it immediately. The milliner took the ribbon in his hand, twisted it a few times, and made a beautiful hat. outstanding! The hostess picked it up immediately. “How much? “she asked.”five thousand francs,’ replied the hat maker.five thousand francs! ‘ exclaimed the lady,’But it’s just a ribbon! “Miss,’ said the hatmaker, ‘ribbons are free“
Welcome to the “ribbon free” economy, or in other words, the knowledge economy. What matters is intelligence, skills, capabilities, expertise and human capital. Yes, you need financial capital as a tool, but you compete on the ability to create value, which lies more in intangible thought processes than tangible bank accounts. Yes, you’ll need ribbons too, but there’s something for everyone. A hat maker is unique, a ribbon is a commodity. Industries used to compete on quality. Today quality is the bottom line, qualified, the minimum entry. Other things like design, fashion or extra services have taken over. Knowledge is now currency. Companies should define themselves by what they know, not what they do.
It’s a “how to” world
There is nothing particularly new about the Parisian milliner’s story. Value has long been seen as going beyond the obvious product: either (a) unique know-how, (b) the ability to make ribbons on demand, or (c) how ribbons can be an excuse for something else – at The Hatmaker The store sells other more lucrative stuff, maybe? In 1999, US companies began offering free computers to anyone with a long-term Internet service contract (Fortune, October 2000). Ladies, computers are free. In the UK – and I suspect elsewhere – some mobile phone companies give away handsets as long as someone signs up for their airtime service. Ladies, the phone is free.
On the surface, Amazon.com is 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 is able to send you tailored recommendations and emails when a new book about something you care about comes out. On another level, it’s a public forum for book reviews, where readers can post their own and see what others think. On another parallel level, it’s an incredible search engine for topics, ideas, and cross-references. It’s all free, ladies – you only pay for the book.
Long before people started talking about the knowledge economy, the software economy had the upper hand. A good example of this is the parent company of American Airlines, which makes more money from licensing SABER (the software package that travel agencies and airlines use to make bookings) than the airline itself does. It’s a “how to” world. The software economy is a “how-to” economy.
This is also an access economy. Access to information, access to customers, access to people in general, but most importantly access to services. The “material” world is stuck in the access economy. Microsoft plans to stop selling software on CD in colorful boxes and instead offer – for a fee – constant access to downloadable software from its website, which has the added advantage of constant upgrades. In fact, everything programmable probably follows the same pattern. As someone once said (perhaps in Silicon Valley), “If you can, don’t own anything; if you can, rent your shoes“It’s rental time, knowledge time, access time and intangible time. The CD is free, ma’am, you pay to use the ‘how-to’.”
means the end
It is also a “means becomes an end” business world – a variant of the world of access. BAA, the owner of London’s Heathrow Airport, makes more money from retail activity than all airline traffic. Yes, in case you didn’t know, Heathrow Airport is a large shopping mall with a parking pad for planes ferrying people from point A to point B. The real business is shopping. It’s increasingly common for passengers to spend more in stores than on plane tickets. Airline traffic is the gateway into the pocket of the passenger.
Ma’am, is the transportation free?Not exactly, given the ridiculously high airfares, especially in
Europe. Here, the customer pays for everything: air transport, use of facilities (airport tax), and goods purchased during the wait. In other words, pay to be there, pay to wait, pay to buy while waiting, and pay to leave.
If anyone needs more convincing, they need only read the newspapers.quality
Daily newspapers in England sell them for pennies. News is an excuse or tool for advertising. Newspapers don’t make money from news. Yes, ladies, newspapers are (almost) free. In fact, the world of free newspapers and magazines is growing. I predict that a free premium daily will soon be a reality. All it needs is Stelios Haji-Ioannou, chairman of European low-cost airline easyJet, to wake up one day and decide to show the world that it can be done and that it can make money.
What kind of capital is flowing in this new economy where intangibles and access to assets are more important than solid bricks or possession of the asset itself? The types of capital seem endless. You can find a wealth of conceptual information, references, papers and entire business models based not only on human capital, social capital or intellectual capital but also on lesser known forms including structural capital, consumer capital, digital capital, Process capital and innovation capital. The main challenge for companies is how to measure them.
New economic organizations attach different importance to them. The Swedish insurance company Skandia has long publicly reported all these forms of capital and their flows in its annual report (Skandia Navigator). Another Swedish firm, Celemi Consulting, best known for its business simulation game Tango, uses an “intangible asset monitor” similar to Skandia. Before long, it will be the norm for companies to attempt to provide detailed measurements of intangible assets.
investor metaphor
But let’s go back to an economy without ribbons, where only one thing defines the current era: the triumph of the brain over the hands. Henry Ford once complained, “Why do I attach a brain every time I want hands?” He clearly didn’t like attachments. Today he has a head, occasionally attached to a pair of hands.
In this new world of business, for me, there is one thing that stands out among the multitude of ideas, new concepts, old concepts masquerading as new concepts, jargon and new business talk. This is the so-called “investor’s metaphor”.
In the beginning, employees were a cost: indeed, they remain a cost in many current business models. By the 1980s, employees had become assets. In fact, CEOs and human resources (HR) leaders around the world tell us that people are a company’s most important asset.
The redesign/layoff movement in the western world, and to a lesser extent in other economies, adds little credibility to the statement. As a friend of mine once said, they forget one word: disposable. People are our more important (one-time) asset. However, an “asset” is an improvement over a “cost”; after all, people would rather feel like an asset than a few dollars on an operating expense report.
After costs and assets, a third shift in understanding employees is advocated by Terilyn Davenport and others: viewing employees as investors. In other words, investors in (their own) human capital. And, when you have capital to invest, what do you do? You let it grow by assigning it to a growing environment; you take care of it, you manage it, you withdraw it if it’s not growing, and at the end of each year, you look at the return on investment.
If individuals view their human capital (talents, abilities, skills, knowledge, wisdom) as
Real capital, things start to look very different in the HR space. The workplace should foster personal capital growth – no one invests in a no-growth or negative-growth environment.
HR is becoming more like a venture capital provider or incubator, managing all of these investments. The primary role of leadership is to create the conditions for the growth of capital. The investor metaphor applied to employee relations puts “brain tank value” at the forefront; shareholder value is the result. The person in charge is the one who owns the invested funds, not the one who receives them.
This new model has a profound difference that goes beyond metaphors. It’s revolutionary, not just semantics. For better or worse, Silicon Valley has followed the investor trope more than anywhere else.
In Silicon Valley, people are brains. Actually Silicon Valley = Nuts + (Resources x Power x Glory) According to Michael Lewis liar’s poker And, recently, new new things. Given the way the Silicon Boys hop from company to company, and how the bidding for talent dominates the market, we should perhaps talk about the “mercenary trope.” But that’s a topic for another day.
In this Brains-R-Us economy, individuals are in charge. The only problem is that the message hasn’t reached millions of people. When it does, things will look different. Compensation and benefits (C&B), for example, remains largely a one-size-fits-all model. OK, two sizes, part-time and full-time, plus/minus stipends. The era is rapidly approaching “personalized transactions” and “personalized brains”.
At some point, companies will have to offer a C&B package: hours/assignments (in line with local labor laws, but personalized and tailored), training packages, sponsored higher education, personalized bonuses, family benefits, etc. It would be a “pick and choose” scheme where people would weigh up the benefits offered: 10 hours a week, 4 days, sponsored education instead of bonuses, no cars, only childcare, extended Vacation, get unpaid time off.
According to consultants Towers Perrin, by 2003 as much as 60 percent of C&B packages in the Western world may be highly customized. In other words, people will create their own transactions. Fordian’s “you can have any C&B package you want as long as it’s the one we offer here to everyone” will be gone. The shift in work practices in the western world has yet to see anything.
Ladies, what I do is free; you pay for what I know.Monthly salary is last on my list
C&B rewards my intellectual capital investment. I expect the following annual return on investment…
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