One of the difficulties of understanding the Intangible Economy is that even the description of intangibles is rather (pardon the pun) intangible. Intangibles run from worker skills and know-how and informal relationships that feed creativity and new ideas to formal intellectual property and brand names. The term is often used narrowly only to describe these latter “hard” intangibles, which are often also categorized (along with software) as intangible goods. The former set of intangibles – worker know-how, relationships, tacit knowledge – is some times referred to as intangible competencies. (See the Athena Alliance paper Reporting Intangibles: Lessons from the US Experience for a more in-depth discussion.)
Intangibles are used both internally in a company (as part of the production process) and marketed externally. The business model for marketing/selling intangible goods outside the company is well known: licensing, royalties, etc. Marketing intangible competencies is another matter – especially if that intangible was developed for internal use (e.g. a better production process) rather than specifically as an external product (e.g. a specific set of skills to sell to a client).
It can be done, however. Steven Pearlstein’s column in this morning’s Washington Post has a perfect example – “GE’s Wealth of Free Advice”. As Pearlstein relates, GE has been giving away free consulting services on its legendary Six Sigma process, especially to companies who borrow money from their financing arm:
For the $15 million that Six Sigma costs a year, GE Commercial Finance buys a ton of customer loyalty and sets itself apart in what is otherwise a commodity-service business. Perhaps even more important, the program increases the odds that the mid-size firms to which GE is lending money will not only stay in business long enough to pay back the loans, but will be more likely to grow in the future — as will their need for capital. “We know instinctively that the benefits to us are substantial,” said Sharon Garavel, who heads up the program. “Our customers have told us that they intend to give us a larger share of their business.” By her reckoning, it has already generated 350,000 hours of free consulting services to more than 3,000 customers since 2002, saving them collectively more than $1.2 billion.
In fact, under chief executive Jeffrey Immelt, who started offering Six Sigma assistance to customers when he ran GE’s medical equipment division, all of General Electric’s units have an “At the Customer, for the Customer” program. It is a brilliant example of how a company has taken an internal skill — in this case, change management and continuous improvement, for which it is world-renowned — and turned it into a marketable product.
Exactly – turning an internal intangible competency into an external intangible good. But with a very important twist: it is not marketed as a separate product, like licensing out a non-core technology. This model links the intangible directly back to the core product. In other words, GE Commercial Capital is not going into the Six Sigma consulting business. They are using this intangible asset to enhance its core business of lending money.
Smart – very smart.