Intangible Assets As Sources of Value, A Global Shift For Business!

December 30th, 2016. Published under Intangible asset training for management teams., Intangible Asset Value, Intangibles as strategic assets. No Comments.

Michael D. Moberly    December 30, 2016     ‘A business blog where attention span really matters’!

In the mid-to-late 1990’s, I had the good fortune and perhaps good sense, while faculty engaged in security-asset protection studies at Southern Illinois University, to read-study early products of a multi-year project undertaken by The Brookings Institution titled ‘Understanding Intangible Sources of Value’. This project was authored by a strong troupe of subject matter experts. In my judgment, ‘Understanding Intangibles’ remains a very insightful and illuminating treatise equal to the fine work on IA’s (intangible assets) developed-produced at prominent UK and Swedish institutions.

Then, as well as now, ‘Understanding Intangibles’ prompted debate and signaled change, away from tangible – physical assets to non-physical, intangible assets as the foundations to most company’s value and sources of revenue.  In no small part, this change grew out of recognition that conventional financial statements and balance sheets, with their traditional reporting-accounting of tangible assets, to the exclusion of IA’s (intangible assets), no longer captured – painted an inclusive portrait of company’s actual financial wealth or health.  That’s because growing percentages of companies globally, were engaging and benefitting from the ‘knowledge-technology era’ (which large segments of the world were immersed at the time).  This era was largely spear-headed by the infinite depth, breadth, and range of IA’s, broadly categorized as being comprised of intellectual, structural, and relationship capital.

From the ‘knowledge-technology era’  emerged a shift to – dominance of IA’s, and perhaps, not so coincidentally, influenced further sophistication, influence, and growth of the…

  • transformation of entire industry sectors, i.e., transportation, financial services, and telecommunications, etc., from regional and national, to global entities.
  • development and integration of new technologies and companion (efficient) work processes.
  • accessibility to globally coordinated and instantaneous (air, sea, land, and rail) supply and product-service distribution chains.
  • the ability for new companies to enter markets – industry sectors and secure rapid returns and competitive advantages by the prudent investment, acquisition, development, and monetization of strategic IA’s.
  • aggressive and predatorial market-sector entry tactics practiced on a global scale by ‘legacy free’ players and countries.

Collectively, these and other simultaneously occurring phenomenon intensified a global business investment and transaction environment, in which IA’s are consistently in play.  Similarly and inevitably, certain parallel demands on companies would surface. That is, businesses seeking strategically sustainable tracts would be obliged to be continually engaged in innovation, ala IA’s, as one requisite to remaining relevant, competitive, and financially sound coupled with the necessity to develop and introduce new products, services, create efficiencies, and add-on’s through increasingly higher levels (quality) of IA inputs.

Of the numerous positive-lucrative outcomes to this phenomenon, one is that business innovation, competitiveness, value, revenue, profitability, and sustainability were being acknowledged by the forward looking-thinking business leaders as injecting and commoditizing targeted and relevant IA’s, particularly intellectual, structural, relationship, and creative capital at the right place, at the right time!

A second positive-lucrative outcome to this phenomenon was that IA’s were being universally recognized as primary conduits-foundations to business innovation, competitiveness, value-adds, and creating new sources of revenue. The realities, pressures, and intensity of global competition continued to pivot on IA’s. Spearheading companies that were already (effectively, efficiently, successfully) engaging their IA’s, as well as those businesses on strategic paths to do so, would, in all likelihood, remain operationally sustainable, competitive, and profitable.

Importantly, investments in the development and utilization of relevant and innovative IA’s would provide resonate clarity to the economic fact – business operation reality that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability, and future wealth creation were being fueled, almost exclusively, by business decisions rooted in enhanced awareness and appreciation for the contributory role and value of IA’s.

The prominent work of Baruch Lev (NYU, Stearn School of Economics) in the IA arena cannot be understated as being a consistent and forward looking-thinking contributor.

To be sure, his work continues to impact-influence the intangibles community which, in many respects, I believe, is encapsulated in his remark…’if intangibles are so risky, their benefits so difficult to measure and secure, and their liquidity (tradability) so low, how did they become the most valuable assets most companies possess’?

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