Archive for 'Competitive advantages.'

Performance-Based Company Culture Is A Valuable Intangible Asset!

January 2nd, 2014. Published under Company culture and reputation., Competitive advantages., Intangible Asset Value. No Comments.

Michael D. Moberly   January 2, 2014    ‘A blog where attention span matters’!

What follows is, in my view, an excellent example of a company culture melding into an attractive, valuable, and very powerful competitive advantage.  In 1987, the former and now late Nucor Steel CEO, F. Kenneth Iverson embarked on an admittedly risky proposition (business model) at the time, in which he came to embrace the perspective that most all employees (at Nucor) would likely perform better if they were provided with, at the time, were deemed quite innovative incentives. (Byrnes & Arndt, 2006).

There is little doubt that Iverson himself, was the driving force for developing, what was described at the time, as a uniquely egalitarian (companywide) culture for Nucor.  Being somewhat familiar with Iverson’s initiative as it evolved in the late 1980’s, I sensed the key differentiator for this particular company culture Iverson that was fabricating sprung from its (employee) performance-based features.

That ‘cultural’ change Iverson set in motion was to ‘empower’ Nucor’s employees with probably the most significant tool in any management teams’ tool box at that time, which was to treat them (employees) with respect!  To this component, I suspicion Iverson was not just an admirer of McGregor’s Theory Y, he strongly embraced it, and it probably influenced his views on particular (differentiating) components he sought to embed in Nucor’s company culture.

As such, an integral component prominently embedded in Nucor’s overall (employee) compensation strategy was designed to foster (employee) motivation and productivity on a companywide basis. That is,  salary reconstruction aspects of Nucor’s company culture allowed for sixty-six percent of Nucor employee’s weekly pay to be linked to performance with up to 20% of this total coming from Nucor’s profit sharing program, which took 10% of operating profits and divided them among all employees (excluding senior officers).

Very simply, but respectfully stated, Iverson’s premise was that by rewarding individual and collective employee productivity, rather than the conventional job title or higher-level degree methodologies, Nucor would be positioned to empower its employees to consistently work hard because risks and rewards were being shared and would ultimately come to benefit stakeholders as well.  Thus, individual employee empowerment, as a method for rewarding employee productivity, would ultimately fall to how well employees recognized and utilized their intellectual, structural, and relationship capital, each of which are, of course, intangible assets.

Therefore, the wellbeing of Nucor executives was dependent on the productivity of Nucor’s employees. So, if productivity declines, employee salaries will decline as well, but, the CEO’s salary and benefits will decline also. Thus employees know that the same factors impacting their income also impact c-suite executives, providing for a shared sense of risks and rewards on an enterprise wide basis. (Byrnes & Arndt, 2006)

So, once Nucor’s (Iverson’s) ‘company culture’ is in place, and I take the position it is a very positive step, it will elevate Nucor’s competitiveness.  But, relevant question is, what is the absolute best and most objective method for capturing this contributory value when Nucor is sold?

This post was inspired by Business Roundtable Institute for Corporate Ethics blog post written by Kevin Belt in October, 2009.

This blog post has been researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   My blog posts focus on a wide range of issues related to intangible assets and intellectual property.   Respectfully, each post is not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected.  Should a reader elect to utilize all or a portion of my posts, full attribution is expected and appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Competitive Advantages: Recognizing What Your Company Has Developed…

May 21st, 2012. Published under Competitive advantages., Intangible asset strategy, Intangible Asset Value. No Comments.

Michael D. Moberly     May 21, 2012

First, it’s important to recognize that a company’s competitive advantages or business differentiators are embedded in its intangible assets, e.g., brand, image, goodwill, reputation, relationship capital, etc.

Second, in today’s globally predatorial and aggressive business (transaction) environment in which consumers have multiple, sometimes infinite and instantaneous choices that are literally a ‘mouse click’ away, competitive advantages must be durable, resilient, and always monitored.

To achieve these necessary (product – service) characteristics, the assets’ stability, fragility, defensibility, and universality must, not should, be regularly assessed with particular attention to:

  • vulnerability to replication, and
  • reputation risk.

Should either of the above materialize it can rapidly undermine and/or erode an assets’ value, competitive advantage and reputation which can persist for extended periods of time term, or worse, become irreversible, if not lethal to a company.

So, the following represent two useful starting points or perspectives which I have found to resonate with management teams, c-suites, and boards insofar as characterizing competitive advantages, i.e., they can be…

  • embedded in unique and sometimes proprietary knowhow and/or blends of particular attributes, processes, assets, relationships, history, and even market conditions that a company exploits to differentiate itself, and thus create value. (adapted by Michael D. Moberly from the work of Michael Porter).
  • the special contributory value that flows from understanding how, when, and where to apply a company’s unique knowhow to provide a competitive edge. (adapted by Michael D. Moberly from the work of McKinsey)

Obviously, the word unique is, and should, in my view, serve as a framing point, particularly for management teams that are operationally unfamiliar with intangibles, or find them challenging to articulate in a ‘laundry list’ fashion, i.e., state precisely what differentiates their company’s products – services in their market space.

Successful and profitable companies already know this, but, sustaining product – service competitive advantages, in what I refer to as an ‘instantaneous global market space’, is an increasingly challenging proposition.  Unfortunately, such challenges are due, in part, to the reality that management teams, c-suites, and boards overlook, or through ‘permissive neglect’, fail, at least in a timely fashion, to recognize that a significant percentage of new products, services, improvements, efficiencies, and the contributory (proprietary) knowhow is consistently vulnerable, unless effective safeguards are in place.

However, the reality is, intangible and other assets are consistently at risk by ever expanding and diverse groups of global competitors and/or state sponsored entities!

Developing competitive advantages (intangible assets) is one thing, but nurturing, monitoring, and managing the attendant risks, isn’t nearly as straightforward and it’s an aspect notably absent from conventional ‘mba’ curricula.  In part, that’s attributable to competitive advantages are often ‘built into’ a product or service before launch and marketed accordingly.  By this time, asset recognition, assessment, nurturing, and risk management must be well in place.

This should be an extended (internal) process that indeed requires involvement (i.e., stewardship, oversight, collaboration) from management teams, c-suites, and boards.  The not-to-be-overlooked objectives are to create enterprise-wide circumstances in which it is more, not less difficult for adversaries to acquire and replicate valuable and competitive advantage driving assets, and certainly not as quickly.

Collectively, the persistent risks attendant to a company’s competitive advantage (intangible) assets represents another adverse business (risk) reality that makes it all-the-more-important for management teams, c-suites, and boards to consistently devote the time necessary to ‘drill down’ into the array of intangible assets their company produces to assess their contributory value and potential for effective (profitable) exploitation as a competitive advantage.

Regardless, when it became an economic fact – business reality more than a decade ago, that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability evolve directly from intangible assets, among them being competitive advantages, ensuring they are routine action items on management team, c-suite, and board agendas for oversight, stewardship, and management is an absolutely necessary requisite!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com