Having both tangible and intangible skills in new product development is a given, right? Not so fast -- intangible is better and financial literacy even better for small to medium enterprises (SME).
In a recent study, authors Salman, Guihau, Yang, Kramat, and Yousaf researched new product development and concluded that financial literacy is almost mandatory for market managers. New product development failure is high in the competitive business arena, and marketing managers with tangible and intangible skills can give their companies the most benefit.
Tangible versus Intangible Skills
Studies have been mixed regarding which is the better of the two—tangible or intangible skills. Many managers feel that tangible skills are the most important, such as technology, accessing enough financial capital, and infrastructure. Others believe its intangible skills which are ideal, such as networking, market knowledge, intellectual capital, and reputation.
Although both tangible and intangible are important, SMEs have difficulty gathering enough financial resources to invest in intangible skills, plus these companies lack public support. Intangible skills are necessary for competitive advantage and superior performance.
Intangible Skills
The most important intangible skills a manager should have for sustainable competitive performance are intellectual capital, financial literacy, and business experience. All three are essential, but intellectual capital and financial literacy are the most important for sustainable competitive performance.
Financial Literacy
Financial literacy is needed to access loans and help with decision making. One study showed that 46.3% of managers in developed and undeveloped economies lack financial awareness. Lack of financial literacy stifles creativity because proper financial decisions about new product development are necessary to move the project forward. According to Salman et al., “Marketing managers with financial education will easily acquire external knowledge related to market, customers, and products that in turn will spur business performance.”
Managers who lack financial knowledge can do much damage to business operations. Financial skills are a necessity in today’s business environment. In another study, it showed that managers who do not possess financial literacy do not like to participate in financial planning, they make the mistake of borrowing money at a higher interest rate and also make more wrong decisions relative to their peers.
Intellectual Capital and Business Experience
Besides financial literacy, the authors discuss intellectual capital and business experience. Both are also necessary for new product development. Intellectual capital is right up there with financial literacy.
Intellectual capital epitomizes knowledge and “spurs” financial literacy. It also instills innovation to keep companies abreast within the market. Intellectual capital helps with nonfinancial and innovative performance and gives companies a competitive advantage. It is necessary either directly or indirectly for new product development.
In today’s global market, business experience encompasses exposure and expertise in innovation and ignoring this talent could lead to a competitive disadvantage. Experienced managers can outdo other companies whose managers do not have the same knowledge. Overall, they have more experience in operating a business and can assimilate knowledge in a better way.
Finally, SMEs need to take advantage of and encourage intellectual capital, financial literacy, and business experience. Thus, SMEs need to cultivate intangible skills to gain a sustainable competitive advantage. This was a great article and I highly recommend it!
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