Using knowledge To good effect

Companies, battered by ever-growing competition, are looking for alternative sources of profit. Some of them are using their management skills to find new opportunities.

The merits of keeping in shape are rarely questioned. Whether privately or in our business, the notion that well-marshalled resources, in pursuit of a clear goal, are a prerequisite to success seems logical and true. Faced with maturing markets and growing competitive pressure, however, the question many corporations might now ask themselves is not whether to keep in shape, but in what shape to keep?

What prompts me to mention this is the news (MW June 14) that Danone, in its quest for competitive advantage, has launched a Web-based venture (www.hrvalley.com) designed to exploit the company’s expertise in human resource management. The site offers industry news, a forum for raising human resources issues and the opportunity to buy “kits” covering key personnel management processes such as recruitment, pay and evaluation (interestingly, in view of the company’s packaged-goods roots, currently available by way of a “3-for-the-price-of-2” introductory offer). Managing director Jean-René Buisson explains the move as “part of the Danone group’s strategy to gain added value from its know-how” in the area of human resources.

What is interesting here is that, as the group is shedding products no longer considered “core” – such as beer – it is using its processes to open up new opportunities for growth.

Danone is not alone in trying to generate value from its intellectual property assets, rather than the grocery goods with which it is typically identified. Procter & Gamble, for example, has, since 1999, actively sought to exploit its intellectual and process expertise. Most recently this has resulted in Emmperative, a joint venture with Worldwide Magnifi designed to make P&G’s marketing know-how available commercially to a broad corporate base (MW February 1). Elsewhere the company has licensed manufacturing technology and brand trademarks.

Narrowly – though necessarily – defined, corporations exist to provide value for their shareholders. In the same way as they may generate this by developing the potential of individual brands, the factors cited at the beginning of this article will increasingly oblige them to ask what their true competencies are and what potential these hold. A good example is Centrica, for the way it has extended its expertise in managing large customer bases and the information that these generate.

In an age when companies are compelled to look beyond their shareholders and embrace the interests and concerns of all those who might be considered stakeholders, such thinking can be equally valuable. Last week Coca-Cola, the largest corporate employer in Africa, announced that it would put its logistics expertise and infrastructure across the continent at the disposal of charities engaged in the battle to stem the spread of AIDS.

P&G, too, has donated many of its patents to universities. As Gordon Brunner, the company’s recently-retired chief technology officer, said in explaining the decision to better exploit its intellectual capital: “You’ve got to use it, or lose it.”

John Shannon is president of Grey International

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