This is what struck me these last weeks in helping clients discover new growth opportunities: To arrive at breakthrough solutions and change the course of an organization, it is not enough to create new things, re-design or restructure. Today’s innovators and market leaders leverage existing, often under-valued assets to gain competitive advantage in a completely different area, such as leverage the success of a free online community to generate revenue from advertisers.
They convert intangible value, such as social interaction and intimate experience (Starbucks), customer feedback (Amazon), unique search capabilities (Google) and speed and customization (Zappos), into competitive advantage and million or billion-dollar industries.
Things don’t work in straight, predictable lines: we produce seminars, course material and discounted products/you buy and use; we add more products and new business lines to grow. It is alchemy rather than chemistry! Treasure hunting rather than hunting! It's all about deconstructing and re-building a different edifice. And this requires the ability to completely disassociate everything around you from the way it is currently used and think of its potential value in a different context. Can you think this way? It is easier said than done.
Amazon became a leader in cloud computing by capitalizing on its data center expertise to build a vast cloud computing platform. Amazon Web Services is dominant in hosting. Its success stemmed from Bezos and his team brainstorming on ways to solve a problem their applications engineers had in communicating with their networking infrastructure engineers. Realizing that the problem could be solved by addressing infrastructure needs, they first built an infrastructure for internal use and later realized that it had value for everybody and, hence, commercial applicability.
The path from selling books to cloud computing has involved leverage and a string of continuous conversions.
It is what Verna Allee, influential author of value networks and organizational knowledge, calls “value conversion” and is what is fueling growth and innovation today. The questions leaders should be asking, she believes is: “How do we convert intangible assets such as human knowledge, internal structures, ways of working, reputation, and business relationships into negotiable forms of value?”
Most of the associations we worked with or interviewed cannot think in terms of value conversion and leverage, even in the safe environment of executive workshops and ideal design exercises. How would they address a market opportunity or help a member company address a strategic problem? The answers usually range from courses or benefits already in their portfolio; information on the web site, referrals etc.
Allee calls value conversion “the act of converting or transforming financial to non-financial value or transforming an intangible input or asset into a financial value or asset." "Knowledge," she says, "an intangible asset, is one of the most interchangeable commodities.”
Think of it this way. Your association possesses many of the intangible sources of value that market leaders in other sectors have leveraged into phenomenal growth and innovation. How can you jump start a new level of growth by converting some of them into commercial and economic value?
Knowledge: The Advisory Board Company has leveraged its knowledge assets into a research-based membership model in which member companies join one of several study groups and share the costs of custom research on a topic of interest to the group. In 2012 the company generated $370.3M in sales and achieved a 27.6% growth. Associations have a great deal of passive knowledge resources that are scattered and under-utilized or are given away for free. How can you convert passive knowledge assets into active learning tracks, paths to custom solutions or collaborative exchanges of knowledge and information – all of which can generate both value and revenue?
Customer Experience: Facilitating, enhancing, reinventing or creating customer experience is one of the most effective sources of new customer value and basis of business model innovation today from Amazon and eBay reinventing the retail experience to Starbucks’ selling coffee as an experience. Social technologies todays give you an ocean of option for reinventing customer experience and service by introducing elements such as, real time responses, 24/7 service, interactivity, community-based membership models, etc.
Speed: Zappos may sell shoes but it is the speed of its delivery and no-hassles customer experience that make stand out over competitors and become customers’ first choice. How much might you increase your competitive advantage and market differentiation by speeding up and customizing delivery?
Interaction: Have you considered that you don’t have to think of content and formal educational programs that your organization creates as the only sources of value? Interaction and collaboration around content that members create is a powerful source of value today. Entire business models have been spawned that convert community-based interaction into social and/or economic value, such as Facebook, Linked-In, e-bay, etc.
Associations complain of competition from free content and peer communities on the Internet. Strictly social, unstructured interactions on social media may be free but targeted and unique ways of networking (LinkedIn or dating services for example) are revenue-generating businesses. Facilitated, hard-to-make connections and moderated, solutions-oriented, strategic interactions can be the basis of new business models and command high fees. For example, Sermo, a virtual physicians’ network, has a lucrative corporate membership arm. It consists of companies that do business with healthcare and want a front row seat at the case-based discussions among physicians who represent the buyers and/or users of their products. Sermo brokers and customizes their access to physicians’ conversations, helping them extract and use the right market intelligence to get them ahead of competition. Associations can develop new lines of business by structuring, moderating and brokering various interactions among its members to facilitate results.
Member/customer relationships: Creating, sharing and delivering value through networks of relationships today is at the heart of competitive advantage and demand-centered organizational and service delivery models.
For most associations, members’ value is measured only in terms of membership revenue. This is a narrow, product-driven view. Innovative and growth-oriented companies understand how to leverage and convert into value customers’ intangible assets, e.g. expertise, contacts, knowledge, skills, motivation etc. Leveraging what the company calls "economies of intellect” the Advisory Board makes use of the insights and solutions it helps members arrive at to build its intellectual capital of best cases, analytical data and benchmarks. Combined with additional research and the expertise the company has been developing, it can re-package and sell in this content a myriad forms and combinations, including more than 200 customizable forecasting and decision-support tools, industry expertise, news and analysis services and trends and developments in a number of healthcare industries. The company is one of several service providers that utilizing members’ own knowledge capital—business cases, insights they share, expertise – to constantly increase and update their own knowledge assets. The customer also becomes the co-creator.
Associations have not even begun to scratch the surface of the potential of their intangible assets , especially the value of their own customers and the interactions among them.