While leaders and the concept of leadership have developed during the last 20 years, they still have a long way to go if firms hope to prosper and survive in the 21st century. There are many facets to leadership, and it has often been said that leadership is what separates the successful firms from the also-rans.But how can you become the leader who will cause your firm to move ahead of the pack? Your firm's future success depends on your ability to both manage and maximize three distinct and significant practice areas:
* Intellectual capital. This consists of the skills and knowledge of the firm.
* Organizational capital. This includes your client and market databases, proprietary software, files and networks. In short, the firm's systems capabilities.
* Client capital. This is the value that you derive from your unique relationships with your clients.
Twenty years ago, most firms did not pay much attention to these three areas. Twenty years ago, we didn't have the Internet, e-mail, Google, etc. Today, firms need to spend more time and attention on these areas. This article focuses on what you can do to maximize your firm's intellectual capital.
What is intellectual capital?
According to James Brian Quinn, Philip Anderson and Sydney Finkelstein ("Managing Professional Intellect: Making the Most of the Best," Harvard Business Review, March-April 1966), professional intellect is a body of knowledge that a professional must constantly update. This capital operates on four levels, and, depending on your leadership style, your return on your investment in intellectual capital may vary significantly.
Let's look at the four levels.
1. The most basic level is know-what. Professionals graduate from college with a diploma in hand and a lot of knowledge in their heads, but often with very little hands-on experience. While a recent graduate may know the latest generation of computer language or be able to whiz through an Excel spreadsheet, he hasn't had a lot of opportunity to apply this knowledge in the real world.
Know-what provides no guarantee that an individual or a firm will be successful. We all know highly intelligent people who can't find a job.
2. In order to enhance the firm's intellectual capital, you need to take your people to the next level - know-how. An individual with know-how can take their book knowledge and apply it in real-life situations.
For example, you can read about sailing all day long, know all the terms and nautical rules, but it isn't until you actually get the boat in the water and begin to tack, come about or jib, that you have moved from know-what to know-how.
3. For long-term success, even know-how is not sufficient. Professionals need to move to the next level - know-why. This requires that a professional understand the interrelationship of the elements of a system. Individuals with a deep understanding of know-why will tell you what will happen when you tinker with one element of a system, long before the final report is presented.
Think of the complexity of developing an estate plan and the knowledge required to make sure that all the pieces fit and work together.
4. The last stage of professional intellect is care-why. This consists of motivation and adaptability for success. Firms that operate at this level exhibit a high degree of motivation and creativity. Without this last level, a professional services firm often falls behinds and fails to adapt to a rapidly changing marketplace.
The intellectual capital of your firm increases as you move people through the four stages. Traditionally, the training, culture and environment of most accounting practices have focused on the first two stages.
When accountants controlled the "black box" of knowledge, clients wanted professionals who knew their stuff (know-what and know-how). Today, clients have access to the same technology and often as much information as the service provider. Clients today are looking for professionals who can bring the know-why and the care-why to the engagement.
In my next column, I will discuss ways that you can develop the firm's intellectual capital.
August J. Aquila, Ph.D, is the co-author of Client at the Core: Marketing and Managing Today's Professional Services Firm (Wiley 2004). He assists firms in the areas of mergers and acquisitions, strategic planning, and succession. Reach him at The Growth Partnership, firstname.lastname@example.org or (952) 930-1295.
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