So I always like to talk about, when I'm teaching a course on corporate entrepreneurship, I always like to talk about this issue of intangible assets of the corporation and how the return on investment for those assets are determined, or what is the return on investment, or what's the impact of intangible assets? The question is, is there an ROI for corporate entrepreneurship for large company? Okay, the answer is yes if you're looking at traditional ROI calculation to our 80% of assets in the corporation used to be tangible and generated the majority of the GDP in the country. Now, significant changes have occurred and a lot of companies now are looking at technology-based businesses and they're not tangible assets, they're intangible. So if you're looking at the new reality where 90% growth comes from intangible assets or what we call knowledge-based capital In the ROI, which has a completely different value, let's say. So knowledge-based capital is essentially research and development, product design or product development, and then human capital, okay? And that's where most of the growth has come and companies abuse those. But, the interesting part of this is that the methodology for calculating the result of economic activity still focuses on physical assets of the corporation. The real better example of this is that Google where only 5% of Google's worth is related to its physical plant, its physical assets. And research suggests that the use of Google's GPS and location based data could generate a half a billion dollars. Sorry. Half a trillion dollars in consumer value by 2020. So, it's a very different way of looking at ROI when we're talking about intangible assets and knowledge-based capital. So, as a corporate entrepreneur, you should be asking yourself these questions, does your organization view the cost of human capital as an expense or an investment? Right? Salaries and most companies strictly technology software companies make up and work between 50- 80% of the company's total spend. So that's a large investment in a large outflow of cash for human capital. Venture capitalists, they make an investment in a company they're primarily not what a significant factor in their decision to invest based upon the value they place on the people themselves. Who was, who are the people that are involved? Can they execute the business plan? Have they been successful in the past? And, you know, a lot of the companies, a lot of the early stage companies that are now being acquired are being acquired under what they call an acqui-hire. Acqui-hire is kind of a hybrid between an acquisition and a hire. You buy the company so you want to capture the human capital that is in the company and most of the time when these acqui-hires happen, you'll have a part of the agreement says that the person are key to them will have to be involved for, let's say some time frame, let's say two years or there'll be an adjustment. So, Again, ask yourself, ask your corporate command group, ask yourself this question. In my company what human capital are we purchasing in this company? Are we purchasing people who can be effective in the in the core business? Meaning sustaining status quote. Or are we hiring people who can build new and innovative growth businesses? The term, when you're talking about people, the term high potential may be completely different nuance when you're talking about whether you're being hired to be in the core business as the head of sales or the head of marketing in the core business versus a person who is going to come in and run a corporate entrepreneurship function. Remember that the growth of many of the big companies, giant companies, have been achieved by people working from inside the organization like Apple, Google, all the growth of those companies have all been created by the human capital. So human capital is extremely important. Knowledge-based capital is different than tangible assets and the calculation or the consideration of ROI should be different for those.
