A major trend affecting business is the trend toward the “intellectualization” of property. Simply put, the majority of a business’s assets used to be tangible (real estate, equipment). But over the past 25 years that has all changed. Now the majority of a business’s value is in intangible property (know-how, patents, systems, “goodwill”).
This trend is enormously significant and affects businesses of all sizes–small, medium, large, and jumbo.
In fact, it is at the heart of why manufacturing jobs are declining worldwide and will continue to decline. Why? Because as more of a manufacturing company’s critical differentiating value resides in its intellectual property (sometimes referred to in shorthand as “technology”), the company becomes more efficient and productive. In short, it can produce more, with fewer people.
The most recent edition of the Small Business Advocate newsletter made this very point:
- “Here are three examples of how the marketplace has been affected by the journey of intellectual property.
1. In a report by Kenneth Crosin, titled, “Management of IP Assets,” he states that in 1978, 80% of a corporation’s assets were tangible, such as buildings, equipment, etc., while the rest was in the form of intangible intellectual assets, like patents, systems, and documentation. But as cogs have given way to computers, and motors have been replaced by megabytes, Crosin reports that by 1997, the relative value of tangible and intangible assets had essentially reversed, with 73% of corporate assets being in the form of intellectual property.
How does this shift manifest in the marketplace? In two ways: increases in productivity, and a redefining of how we work and do business.
2. During a recent speech by the plant manager of a green field paper plant, he was asked how many of his employees used technology in the direct performance of their jobs. Answer: 100%. When he was asked how many employees he needed for his new plant, his answer was, half as many as the new plant he had managed 10 years previously. The difference? Technology.
3. This manager’s experience matches up with the results of a 2003 Alliance Capital Management, LP report, which indicated that in the 20 largest world economies, from 1995 to 2002, manufacturing jobs declined by more than 22 million, or 11%. And here’s some news: America wasn’t the biggest loser.
Even though it’s true that China is the recipient of the migration of many of the world’s manufacturing jobs, even this capitalism rookie saw a 15% decline in its manufacturing sector. The reason? Increased productivity due to technology – even in China.”