What do Microsoft, Sun Microsystems, and Gillette have in common? They are publicly held companies with huge market capitalizations based on high stock-market multiples. These companies enjoy lofty valuations from Wall Street because of their profitability, which is based on innovation. And their innovation is not just a matter of luck, but the result of their ability to leverage their corporate intelligence.
Your company doesn't need to have a Bill Gates or a Scott McNealy as CEO to be smart. The intellectual value of an organization isn't the sum of its managers' IQs. Instead, the intellectual value is based on how the collective knowledge of the organization's individuals is distributed and applied to the challenges it faces.
Thomas Koulopoulos, president of The Delphi Group
Organizations seeking to measure how well they are leveraging and applying their "knowledge" can take a corporate IQ test. By answering a series of questions and calculating scores based on a proprietary weighting system, a manager can determine the intelligence of his or her organization.
Companies that demonstrate high intelligence and success in their ability to innovate are usually incredibly responsive. Look at Microsoft, which turned on a dime to refocus its applications and operating-systems software development on the Internet, or Sun, which reworked a cross-platform desktop operating system into Java, the widely hailed universal platform for the Internet.
A corporate IQ test administered by The Delphi Group looks at about 100 attributes, from how teams are structured, to the specific technologies used to assist the exchange of information and ideas, to the percentage of profits attributable to recent products. Several hundred individuals within an organization take the quiz. Their answers are compiled and analyzed to determine a corporate IQ.
Last year, The Delphi Group conducted a corporate IQ survey of large U.S. companies via the Web. The results from the 350 responding companies can be found at http://www.delphigroup.com/km/ci_responses.html.
The questions on the survey, as in the corporate IQ tests The Delphi Group administers for client companies, focus on four areas of organizational behavior and function:
1. Internal awareness
2. Internal responsiveness
3. External awareness
4. External responsiveness
Internal awareness is most basic. Corporate intelligence is primarily about an organization's ability to understand itself. Internal awareness is not only having your house in order, but knowing what order your house is in. In simplest terms, internal awareness is the ability to answer the question: What do you do? In other words, what are your core competencies? Sun knew its competencies were in universal platforms long before Java and the Web. If you know your competency, you can quickly map it to the market.
A company that is internally aware has access to disparate pools of knowledge within the organization, even if they might not be considered relevant in the current market context.
Can you answer "yes" to the following corporate IQ questions?
Do you have initiatives to capture and share corporate knowledge?
Do you have an organizational knowledge base?
Do you have numerous "communities of practice?" Communities of practice are groups of individuals who are aligned by their skills and interests rather than by organizational affiliation.
Do you have a culture that encourages innovation and allows employees to circumvent the organizational hierarchy?
Awareness of its own competencies does not guarantee an organization a clear path to successful products or services. An organization may be well aware of its strengths and of the market demand, yet be unable to effect change within itself quickly enough to meet market requirements.
The Delphi Group's analysis of its survey of 350 companies indicates that the respondents' external awareness was 30% greater than their internal responsiveness. In other words, they said they were better at understanding the market than at rallying and coordinating their resources to prepare for a response. No wonder so many of the survey respondents indicated that a good idea had a better chance of resulting in a new startup or ending up at a competitor than of being capitalized on by their own organizations.
Internal responsiveness is a company's ability to translate competencies into teams with the skills and tools to bring a product to market. If you can't move quickly, all the market awareness in the world won't help.
Can you answer "yes" to the following questions?
Do you have a basic skills library that defines the competencies and intellectual products of individuals?
Do you have the ability to organize teams based on skills and not on organizational structure?
Do you have the involvement of workers on a regular basis in designing their work?
Do you have a technology infrastructure that provides workflow, groupware, or collaboration tools for quick team building?
External awareness is an organization's understanding of how the market perceives the value associated with its products and services. When coupled with internal awareness, external awareness may allow a company to exploit spontaneous market opportunities. External awareness can be heightened through extranets, call centers, and methods that increase your organization's intimacy with the market.
Can you answer "yes" to the following questions?
Do you learn from customer interactions?
Do you track customer behavior and buying patterns?
Can you interact with the market in a mixed-media mode? For example, can you instantly switch to a telephone conversation from a Web-based dialog?
Do you provide mechanisms for customers or prospective customers to tell you what is wrong with your products or processes? Several Internet players are currently developing a company that would gather complaints from consumers and compile them into reports to be sold to consumer-products companies.
The single most important component of corporate intelligence is the ability to respond to turbulence. An organization should set its strategy in terms of broad goals and guidelines, and rely on its ability to "turn on a dime" when the organization's competencies align with a new market trend. The intelligent organization's marketing is, in this regard, as removed from traditional marketing as a Patriot missile is from a cannon ball.
|The scorecard |
Companies that focus on innovation as the most important competitive criterion consistently have a higher corporate IQ--and are 56% more likely to be responsive in their external environments.
"Knowledge companies"--professional services firms or software developers, where all workers can be described as knowledge workers--are 75% more likely to have high external responsiveness levels.
Companies in mature industries are 40% less likely to have above-average corporate IQs.
Companies where employees are involved in shaping their work have much greater flexibility to adapt to changing circumstances; as a result, these companies are 500% more likely to rank highly for internal and external responsiveness.
High-IQ organizations are three times more likely than average organizations to prefer a well-honed learning ability, as opposed to an experience of how things are usually done, in their employees.
High-IQ organizations are twice as likely to generate innovations from nontraditional sources throughout the organization, including nonmanagement individuals and teams that are not explicitly charged with generating innovations.
Almost two-thirds of organizations make little or no use of "skunkworks" (off-site locations where unusual ideas are developed and tested) as a means for driving innovation. These same companies acknowledge that serendipity plays only a minor role in their ability to innovate.
"Risk-friendly" companies have levels of external awareness and responsiveness that are as much as one-third higher than the levels at "risk-averse" companies.
Most of the organizations believe that corporate culture plays a disproportionately high role shaping their corporate IQ, especially their internal awareness and responsiveness.
High-IQ companies are almost twice as likely to be made up of cross-functional teams from across the organization.
The often-repeated advice about listening to customers is just the first step to establishing external responsiveness. External responsiveness is most often enhanced by using intelligent push/pull technologies or intelligent call centers that deliver products to customers who may not even have thought to ask for them. The survey found a marketing VP who claimed to be able to come up with a new product idea at 8 a.m., roll it out to his call center the same morning, and find out if it would sell by noon.
Can your company answer "yes" to the following questions?
Do you emphasize the speed of accomplishing a task, rather than focusing on its cost?
Do you have a focus on building lifetime customers?
Do you have a decentralized structure and a cultural commitment to innovation?
Do you have a low threshold of innovation investment? In other words, the more you have to spend to verify a good idea, the less likely you are to get the good idea out the door.
Do you have leadership that encourages high levels of experimentation? For example, do you have off-site labs where out-of-the-mainstream ideas can be developed and tested? These are known in the aerospace industry as skunkworks.
Do you have empowered employees who make decisions at the point of contact with the external environment rather than deferring to higher corporate levels?
Do you have digital product-distribution channels that allow you to deploy your products and services via the Web? This applies also to companies such as the Web-based bookseller Amazon.com that sell physical products but use "smart" electronic-commerce channels.
While an individual may be stuck with his or her IQ, there are techniques and tools to increase the corporate IQ. Some are information-technology related, such as call centers, knowledge management systems, and groupware, but the most important way of increasing corporate IQ is changing the corporate culture. Unfortunately, there's no Cliff's Notes a company can use to make that leap. It takes time. //
Thomas Koulopoulos is president of The Delphi Group of Boston. He is the author of several books, including Corporate Instinct: Building a Knowing Enterprise for the 21st Century, John Wiley & Sons, N.Y., 1997, and Smart Companies, Smart Tools: Transforming Business Processes into Business Assets, VNR, N.Y., 1997.