Intellectual capital and the essential role of marketers
PEOPLE are the core asset of services firms; they provide services for financial return. Through service provision, intellectual capital is built, which underpins a firm’s ability to budget its future revenue. Marketing professionals play a vital role in the identification, documentation, internal co-ordination and management of a firm’s intellectual capital, as well as using it as a differentiator in external communications to the marketplace.
Return on assets (ROA) is a standard measure for company performance in other industries, used by management and investors alike to make strategic decisions about a company and to gauge its financial status. ROA is easily calculated by using values for physical assets compared with sales generated. Physical assets, such as stock, raw materials, equipment and cash, are tangible and easily identified and measured.
However, for professional services firms intangibles come into play: technical expertise, knowledge of clients, relationships, industry experience, the brand or reputation of the firm, and service delivery. Given the practice group structures of professional services firms, critical questions arise: how is an overall understanding of these elements achieved and then used to yield financial returns?
Professional services firms must recognise the power of the intellectual capital they attract and generate. The responsibility to identify, interpret and relate intellectual capital often lies within the domain of in-house marketers. With their constant need to capture experience and credentials to meet market needs and through their direct work with the practitioners in different practice groups, marketers learn about existing clients, understand engagements and the service delivery of practitioners as well as market needs. Marketers are heavy users of intellectual capital.
Marketers have formal and informal knowledge of clients and their relationship with the firm through the client relationship systems. They manage some of the formal contact, such as sending publications, developing invitation lists or actually coming face-to-face with clients during events, plus they put considerable effort into tenders, publications and pitches.
Meeting market needs
Marketers are also integral to the constant collation of the firm’s intellectual capital and its interpretation to meet market needs (e.g. in tenders, collateral and media work). However, the marketer’s role in managing intellectual capital is not clearly defined or recognised for its strategic value.
Firms that invest in their people by exposing them to clients and improving their technical skills are actually investing in their market share, because they are enhancing intellectual capital. A ROA on these investments will lead to increased market share.
Clients will consider qualifications as part of their selection of a firm, but it is the intellectual capital component that provides the real differentiation. When evaluating the use of a service provider, often at short notice, a key consideration for clients is which organisation has the best knowledge of their key staff, operations, and processes. The firms with the best demonstration of this understanding tend to be the ones retained.
Intellectual capital is also linked through marketing to human resources. Essentially, using their understanding of the marketplace, firms must recruit people with relevant client relationships or industry skills, and then retain and develop them further in-house. Marketers, therefore, should be able to relate strategic marketplace data to the human resources unit to ensure that staff retention and development matches market needs and possible future needs, as well as being tied to current recruitment requirements.
Placing information in context
Marketers spend a lot of time identifying differentiating attributes to supplement their firm’s technical skills. Although knowledge managers are becoming more prevalent in larger firms, it is the marketers who are constantly called upon to find information and place it in a meaningful context for a client in an effort to win or retain work. Too often, the search for appropriate intellectual capital is reactive, incomplete or not understood and appears to fall within the marketing department’s duties as an addition to a client relationship database.
To assist professional services firms to capitalise on their investments in intellectual capital, marketers must play a leading role in understanding the elements that operate within the firm. Marketers must educate their firms to consider the strategic worth of intellectual capital and devote dedicated resources to finding, capturing, monitoring and updating it. This, in turn, will help to attract clients, who provide the revenue growth as well as help develop the skills of staff – and provide a sound ROA.
Marketers need to lead this process if firms are going to actively differentiate themselves through their investment in intellectual capital and through communicating the results to the marketplace. The role of the marketer is primarily to increase the firm’s revenue and market share. If marketers succeed, then the value proposition of a ROA on the marketing function can be devised – leading to a higher profile for marketing and its importance, more essential resources, and the ability to link strategy to revenue returns.
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