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One of the most important pieces of advice that I offer as an accountant is this: the financial output of your company is dependent upon the richness of your structural, social, human, and intellectual capital.

This isn’t the first time I’ve written about this, and it won’t be the last. When a business focuses all of its energies on the cold, hard, and logic-driven financial statement, they miss the importance of human, social, structural, and intellectual capital in driving the bottom line.

When all of these capitals come together, though, you will be able to feel it — and so will your employees, vendors, clients, costumers, and colleagues. I call it “pixie dust,” and it is when all five of your capitals meet in perfect confluence. It is the reason your clients or customers turn to you — and only you.

So how do you find your pixie dust? Here are five questions that can get you started:

  1. Financial capital: What is realistic in the context of the money that is available to my firm?

Realistic. That might seem an odd word choice. After all, realistic is safe, boring, and probable.

So, to be clear: Think big. Think hairy. Think audacious.

But when it comes to the money, be realistic. Too many entrepreneurs have fabulous ideas and great abilities but lack the financial resources to implement those ideas. They plan to take their business from 0 to 80 in 5 seconds.

While this might happen for some companies, it isn’t likely to happen for most.

I look at it like this: If you have ever seen the Judy Garland and Mickey Rooney movies, you might remember a scene that looked something like this: They had a problem. They needed to raise money to solve this problem. So, they decided to put on a show.

Voila! As if by magic, the show would be produced. Elaborate set design that cost a fortune? Not a problem! Beautiful costumes? A huge orchestra? Not a problem!

Is this real life? Not a chance!

But it is with this same Hollywood grandeur that many entrepreneurs go forth. While I embrace big dreams and bold moves, right sizing the expectations for capitalizing on pixie dust should be realistic and incremental.

Building your pixie dust must be viewed as a process that works within the context of the monetary resources that are available. So, have big ideas, but make sure that you can act on those big ideas by having sufficient resources to implement those ideas.

If one starts a restaurant that is to serve only the best quality meat and produce, having a very small operating budget while the establishment cultivates a following is pretty unrealistic. The pricing per plate of the items on the menu is going to be higher than a normal restaurant. Your waste is liable to be very expensive waste. It takes time for customers to find the restaurant. Having a larger than normal operating capital reserve is required for such a venture.

  1. Intellectual capital: What is superior about my product, service, or company?

What do your clients say is different, unique, or superior about your intellectual capital? And let’s be honest here about whether your intellectual capital truly is superior.

Prior to the emergence of Uber and Lyft, a taxicab company might have said that its cars were cleaner, but this was not enough to dominate an industry. No one will ever be in awe of a clean car.

If your product or service is lacking that wow factor that blows its competitors out of the water, ask a second question: What can I do to strengthen my product or service so that it dominates its industry?

Cab companies who were looking for pixie dust would have known that their clients would be blown away if they had a tracking device that coupled as a real-time estimate of when the car would arrive, as well as an auto-payment option and a method of communicating with the driver.

Cab companies were not looking for pixie dust, but Uber was.

To be certain, you do not need to have unique intellectual capital to find your pixie dust. A standard product or service can be part of pixie dust, so long as it joins forces with the other four capitals in such a way that it creates magic and bonds a client with a company.

Ask these questions nonetheless and keep asking them over the years. As technology and the industry changes, you might or might not find that your pixie dust is becoming less and less powerful absent the addition of new intellectual capital.

  1. Human capital: When is my team really in the groove?

Think back to a time when you, your partners, and your employees really pulled together to meet a deadline or reach a goal. What conditions were present that allowed your team to band together?

Now consider the answer to this in the context of your team’s values, intelligences, and striving instincts.

When you know and can replicate the conditions that must be met for your team to produce, you can create that magical in the groove feeling with your team. Indeed, the application of top values, as well as your allegiance to the attributes and motivators of your team members, creates the condition for your team to click.

  1. Social capital: If my product or service was dominating its industry, who are the people or groups who would be using it, promoting it, and supporting it?

When you find a way to reach and become sticky with these people or groups, you will have part of the formula for pixie dust.

Think back to the taxicab example. Taxicabs need the support of hotels, airports, business people, travelers, and late-night drinkers. And while taxicabs certainly had the market share, this was due only to a lack of competition. Perhaps the staff at the hotel, club, or restaurant received and appreciated tips by cab companies, but few — if any — companies or customers felt deeply bonded to any one taxi service. Most riders were burdened by their taxi service and felt inconvenienced by the need to call a cab, wait for its arrival, and then suffer the jarring and often unpleasant ride.

Compare this to Uber, which has a loyal band of users who rave about its service, promote it to friends, and wouldn’t dream of taking a taxi.

This is what it means to become sticky.

  1. Structural capital: If I had an integrated process in place to make sure that my company was constantly evaluating, improving, and leveraging its social, human, intellectual, and financial capital, what would that process look like?

Disney’s Pixar Animation Studios uses a unique structure called the Braintrust to provide feedback to directors during the filmmaking process. Unlike most committees charged with providing feedback on a project, the Braintrust has absolutely no authority over the director. The director can take or leave the constructive criticism and suggestions, many of which are major.

In an article published in Fast Company magazine, Pixar’s president, Ed Catmull, explained why this is an essential component of Pixar’s process. “The Braintrust’s notes, then, are intended to bring the true causes of problems to the surface — not to demand a specific remedy.”

So instead of having to deal solely with studio heads, who are making demands independent of the creative process and focused more exclusively on the bottom line, Pixar’s directors get creative feedback from creative-types that is intended to spark their own artistic resourcefulness.

Although Disney’s Pixar has a creative process much larger and more complex than the Braintrust, this is the type of structural capital that helps a company find its pixie dust.

(And I suspect Disney knows something about finding pixie dust.)

Critical to this process is finding the right people to sit in the right spots. Pixar asks people intimately familiar with the storytelling process to sit on the Braintrust. Heads of studios, also known as Suits, are invited only if they also have a knack for storytelling. This is likely because the Suits are typically charged with making sure the movie performs in the box office, regardless of whether story is compromised in the process. They are bottom-line guys and gals, and they may or may not be creative types.

So, when considering the best structure, also ask yourself who should sit in which seats within this process. A high-functioning company can create a structure for putting a group of people, each with their own pixie dust, in the right seats for delivering the best possible product or service to its constituents. If you are a suit, you might need creative types who can develop your intellectual capital, brainstorming initially without your financial worries about cost-effectiveness being part of the process.

A Final Word About Pixie Dust

The truth is that even by asking externally and looking internally, the process of finding your pixie dust isn’t as precise as you might want.

Many people emotionally or conatively seek precision before they are able to move. Some entrepreneurs, on the other hand, tend to move on a whim. Both of these groups are wrong, and both of them are right.

Any business’s progress is based upon sets of assumption about the future. So many things affect the future — the global economy, new innovation, politics, and the like — that any move by the business is never likely to create the exact result intended.

Initially, a business’s behaviors will result in some unexpected results, some of which might be good and some of which might be bad. That does not mean that you should never make a move. What it means rather is: Be thoughtful about what results can be expected, and then measure the actual against that expected.

Once measured, the next set of predictions is likely to be closer to the target if those predictions are predicated on the new information gleaned from the past results. It is like refining a site on a gun.

Finding your pixie dust is about some trial and error, but it is based on good and reliable feedback.

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