IC and Manufacturing

For a long time, intangible capital has been seen as some abstract and theoretical concept. Indeed, many people call it intellectual capital (here’s why we don’t use the term intellectual capital). But I spend a lot of my day every day refuting this. Intangible capital is very real and very practical. It drives how and why businesses get paid by their customers.

There were two great explanations of the practical side of IC in discussions of manufacturing in the past week.

The first is a cover story in Wired magazine called The Next Industrial Revolution. It is a great explanation of how the knowledge era is intersecting with new manufacturing models. Here’s the essence of the article:

“Hardware is becoming much more like software,” as MIT professor Eric von Hippel puts it. That’s not just because there’s so much software in hardware these days, with products becoming little more than intellectual property wrapped in commodity materials, whether it’s the code that drives the off-the-shelf chips in gadgets or the 3-D design files that drive manufacturing. It’s also because of the availability of common platforms, easy-to-use tools, Web-based collaboration, and Internet distribution.

Remember that.  “products becoming little more than intellectual property wrapped in commodity materials.” It says a lot about the way you should be thinking about your business. Intangibles and tangibles are wrapped up together. Yes you will need to learn new skills to manage intangibles–but you will apply those to the whole system. Intangibles management should not be happening in a silo….

An aside: the article also features Local Motors, a company we first learned about when our son’s friend worked there as an intern last year. We feature it in our book as a great example of  an open business model in a traditional industry.

The second new source is a policy paper by Ken Jarboe and the Athena Alliance, Intellectual Capital and Revitalizing Manufacturing. Ken is a person that has always seen the connection between intangibles and economic growth. He wants to make sure that the efforts of the government to fuel the “next” industrial revolution recognize this critical link with IC.  He has some practical suggestions for how to support this agenda:

• Expand the Manufacturing Extension Partnership (MEP) to Boost IC.
• Help Entrepreneurs Manage IC.
• Transform the Baldrige National Quality Program into the Baldrige Quality, Productivity, and Innovation Award.
• Increase Worker Training.
• Use IP to Provide Capital.
• Include IC and Intangible Assets in the Financial Regulatory System.
• Promote Better Understanding of IC and Intangible Assets.
• Commission a National Academies’ study on intangibles.
• Manage the government’s intangible assets more effectively

There is obviously a lot to say about each. The policy brief provides a great introduction to the issues. There are a few that I will try to highlight in coming days.

For now, the message is clear: the knowledge era is not just about high tech business. It is changing everything we do and creating opportunities even in industrial practices and manufacturing.