Executive Excellence: Leveraging Core Assets...

The current economic downturn, particularly in high-tech, has brought out the usual set of cost cutting actions – staff reductions and downsizing. But is this really the best way to maintain or enhance profitability for a business with a future?

Such cost cutting carries increased direct costs for implementation as well as hidden costs that reduce profits. Organizations are destabilized, the morale of surviving employees is decimated, productivity drops, and customer relationships are impaired.

Businesses running out of cash or facing severe declines and technology shifts have to reduce staff; however, most other businesses would be better served to discard practices that rarely payback financially.

A better way to maximize profitability involves building revenues and costs up from core assets. Revenues and costs are best modeled around intangible as well as tangible assets to leverage a firm’s most valuable assets. This approach to corporate profitability ensures that the right costs are cut and that any cost cutting balances revenue generation as the top priority.

Revenue Models Based on Core Assets

Revenue generation today is focused on customer programs and product development efforts or the implementation of new management systems. Identifying core assets critical to revenue generation, and then leveraging them, can produce far greater results. These core assets include employees, customers, intellectual property, and technology assets. Using an asset-based perspective, executives can generate new revenue models from employees and customers, and leverage these assets through intellectual property and technology assets.

New ways to increase revenues are obtained by identifying the core assets most critical to revenue generation – from selling functions and customer service to service delivery and support functions. Often the most valuable people are not even recognized as being instrumental to revenue generation. Likewise, greater revenue generation can be obtained from small enhancements to business and human processes, rather than through the acquisition of complicated management systems that straightjacket the organization and often screen-out customers.

Adding up all the ways revenues can be increased by better management of intangible assets (people and intellectual property) assets and tangible (technology) assets is where companies need to focus during an economic slowdown. Executives need to rethink how to better organize and operate their businesses.

Cost Models Based on Core Assets

Executive can also rethink their cost models. A firm interested in maximizing its profitability builds its costs up systematically from its core assets, not from around the fringes based on financial reporting mechanisms geared to narrowly defined, current-period cost elements. Cost budgeting and reporting is not the same as cost modeling. Well-designed cost models provide a systemic focus, enabling the best cost-reduction targets, critical interrelationships between cost components, and the relationship of costs to revenue generation to be both visible and actionable.

Many firms are not designed based on careful modeling of core assets to have the lowest possible cost structure while ably supporting revenue generation. What seems like a low-cost structure and related staffing model is often a high-cost one when all the direct, indirect and hidden costs are considered. Employee-disloyalty, continuous turnover, hiring activities, training and retraining, theft, damage and sabotage eat away at a firm’s margins.

New approaches to cost modeling generated from a firm’s core intangible and tangible assets show how these wasteful costs can be cut.

Profiling and Valuing Core Assets

Profiling and valuing core both tangible and intangible assets provides a complete view of people – employees, contract staff, consultants, and employees of customers, key suppliers and service providers. Usually there is a high degree of untapped business leverage for increased revenues and profits from managing these assets and relationships better.

A complete view of intellectual property allows executives to better manage all intangible assets, including patents, unique software code and content, critical data and documents, business process and logic, human process focused on relationships, accumulated knowledge and experience, trademarks, copyrights, and your company’s good name.

Firms increase revenues while reducing costs by having a strategic, company-wide focus on asset profiling; better managing valuable intellectual property through patenting, licensing and partnerships; and by managing people better across the board.

When a comprehensive profile is supported by new revenue and cost models generated from core intangible and tangible assets, executives have the means to increase revenues and margins. Selective investment eliminates the barriers, bottlenecks, and gaps in how these key “operating assets” are managed to increase revenues and focus spending for maximum asset-utilization.

After investing so much to put staff in place, how can firms so quickly dispose their valuable people and relationships? Sustaining profitability improvement does not come from downsizing. It comes from better managing and leveraging intangible and tangible assets.

First publication, copyrighted 2002 by System Change, Inc.:

Carlson, John G. “Leveraging Core Assets: Build revenues from your core assets.” Executive Excellence 19.2 (February 2002): 13.

John G. Carlson is Founder and CEO of System Change, Inc., a methods-based consulting firm featuring assessment services. He can be reached at jcarlson@systemchange.com or through his firm's website: www.systemchange.com.

		Leveraging Core Assets: Build revenues from your core assets by John G. Carlson, System Change, Inc. The current economic downturn, particularly in high-tech, has brought out the usual set of cost cutting actions – staff reductions and downsizing. But is this really the best way to maintain or enhance profitability for a business with a future? Such cost cutting carries increased direct costs for implementation as well as hidden costs that reduce profits. Organizations are destabilized, the morale of surviving employees is decimated, productivity drops, and customer relationships are impaired. Businesses running out of cash or facing severe declines and technology shifts have to reduce staff; however, most other businesses would be better served to discard practices that rarely payback financially. A better way to maximize profitability involves building revenues and costs up from core assets. Revenues and costs are best modeled around intangible as well as tangible assets to leverage a firm’s most valuable assets. This approach to corporate profitability ensures that the right costs are cut and that any cost cutting balances revenue generation as the top priority. Revenue Models Based on Core Assets Revenue generation today is focused on customer programs and product development efforts or the implementation of new management systems. Identifying core assets critical to revenue generation, and then leveraging them, can produce far greater results. These core assets include employees, customers, intellectual property, and technology assets. Using an asset-based perspective, executives can generate new revenue models from employees and customers, and leverage these assets through intellectual property and technology assets. New ways to increase revenues are obtained by identifying the core assets most critical to revenue generation – from selling functions and customer service to service delivery and support functions. Often the most valuable people are not even recognized as being instrumental to revenue generation. Likewise, greater revenue generation can be obtained from small enhancements to business and human processes, rather than through the acquisition of complicated management systems that straightjacket the organization and often screen-out customers. Adding up all the ways revenues can be increased by better management of intangible assets (people and intellectual property) assets and tangible (technology) assets is where companies need to focus during an economic slowdown. Executives need to rethink how to better organize and operate their businesses. Cost Models Based on Core Assets Executive can also rethink their cost models. A firm interested in maximizing its profitability builds its costs up systematically from its core assets, not from around the fringes based on financial reporting mechanisms geared to narrowly defined, current-period cost elements. Cost budgeting and reporting is not the same as cost modeling. Well-designed cost models provide a systemic focus, enabling the best cost-reduction targets, critical interrelationships between cost components, and the relationship of costs to revenue generation to be both visible and actionable. Many firms are not designed based on careful modeling of core assets to have the lowest possible cost structure while ably supporting revenue generation. What seems like a low-cost structure and related staffing model is often a high-cost one when all the direct, indirect and hidden costs are considered. Employee-disloyalty, continuous turnover, hiring activities, training and retraining, theft, damage and sabotage eat away at a firm’s margins. New approaches to cost modeling generated from a firm’s core intangible and tangible assets show how these wasteful costs can be cut. Profiling and Valuing Core Assets Profiling and valuing core both tangible and intangible assets provides a complete view of people – employees, contract staff, consultants, and employees of customers, key suppliers and service providers. Usually there is a high degree of untapped business leverage for increased revenues and profits from managing these assets and relationships better. A complete view of intellectual property allows executives to better manage all intangible assets, including patents, unique software code and content, critical data and documents, business process and logic, human process focused on relationships, accumulated knowledge and experience, trademarks, copyrights, and your company’s good name. Firms increase revenues while reducing costs by having a strategic, company-wide focus on asset profiling; better managing valuable intellectual property through patenting, licensing and partnerships; and by managing people better across the board. When a comprehensive profile is supported by new revenue and cost models generated from core intangible and tangible assets, executives have the means to increase revenues and margins. Selective investment eliminates the barriers, bottlenecks, and gaps in how these key “operating assets” are managed to increase revenues and focus spending for maximum asset-utilization. After investing so much to put staff in place, how can firms so quickly dispose their valuable people and relationships? Sustaining profitability improvement does not come from downsizing. It comes from better managing and leveraging intangible and tangible assets. First publication, copyrighted 2002 by System Change, Inc.: Carlson, John G. “Leveraging Core Assets: Build revenues from your core assets.” Executive Excellence 19.2 (February 2002): 13. John G. Carlson is Founder and CEO of System Change, Inc., a methods-based consulting firm featuring assessment services. He can be reached at jcarlson@systemchange.com or through his firm's website: www.systemchange.com.
		Copyright 2002 by John G. Carlson, System Change, Inc. All rights reserved.