Content area
Full Text
At their core, most successful enterprises today can be considered "intelligent enterprises," converting intellectual resources into a chain of service outputs and integrating these into a form most useful for certain customers. Clearly, enterprises providing low, accounting, financial, architectural, applied research, health care, education, consulting, design, and most forms of entertainment services primarily sell the skills and intellect of key professionals. But in manufacturing as well, materials without human inputs have little intrinsic value, and--as analysis will demonstrate--most of the processes which add value to materials derive from knowledge-based service activities. In the past, investors--and particularly venture capitalists--shied away from companies with a strong service orientation, "because their assets could walk away any night and leave you with nothing." They wanted "solid assets to offset downside risks." Now that view is changing.
REWARDS COME FROM INTELLECT, NOT BRICKS AND MORTAR
In manufacturing today, most venture capitalists recognize that investments in bricks and mortar provide little security and warrant only mortgage rates of return. They make their money by: (1) investing in the special skills and intellect which only highly motivated, knowledgeable people can provide, and then (2) leveraging this intellect in the marketplace through a few "best in world" internal systems and the integrated management of many outsourced activities. Virtually all high technology start-ups work in this fashion today. Venture capitalists try to keep conventional plant and equipment investments limited--in part because they can be so quickly supplanted by new technologies--and focus their client companies' management talent and investments on effectively building the intellectual assets and personal attitudes most important to the needs of a selected customer group. Unless the facilities and manufacturing technologies are themselves part of the core competencies of the company, strategy dictates that they should be limited--and be selectively outsourced--whenever feasible. This is not an argument against facilities investment per se. It does suggest, however, that those fixed facilities that remain should, themselves, ordinarily embody as much of the firm's uniqueness and critical intellect as possible.
Every few years Inc. or Venture magazine runs a special article in which they feature the garages in which today's great companies started, as a reminder that companies start small and that ideas and intellect--no physical assets--build great companies. TA Associates, one of the longer...