Michael D. Moberly December 31, 2010
As stated numerous times in this blog, I am a long time advocate of exploring avenues to identify, use, and exploit intangible assets (non-financials) insofar as delivering value, sources of revenue, and developing tactical-strategic ’building blocks’ (foundations) for a company’s future growth and wealth creation opportunities.
In few instances can those outcomes however, be achieved-realized without effective and consistent management, stewardship, and oversight of the assets, which, in turn, will produce improvements in a company’s economic and competitive advantage health!
Respectfully, it just seems to me, that view does not quite rise to business management ’rocket science’. Make no mistake, I don’t say this in a condescending or disrespectful manner to the multiple millions of hard-driving management teams and boards who, for a variety of reasons and internal/external influences, apparently find crossing that particular business chasm to intangible assets more akin to the Grand Canyon versus a trickling stream.
Almost without exception, most company’s, regardless of size, industry sector, or maturity, produce, possess, and use intangible assets, sometimes without fully recognizing it, but, nevertheless, in most instances, they actually deliver (some) value, revenue, and competitive advantages for the company.
So where’s the challenge? Shouldn’t it be relatively easy to influence management teams, boards, and investors to really engage their intangibles in what I view as being relatively straightforward, non-intrusive, and inexpensive steps that can likely lead to improvements in their company’s financial and competitive health and mitigate risks?
For one thing, it’s increasingly clear today, that conventional financial statements and balance sheets are not providing management teams, boards, and prospective investors with a sufficiently complete or necessarily clear picture of the company’s overall soundness. That reality doesn’t always fall on deaf ears. Many decision makers recognize, in today’s rapidly progressing and irreversible knowledge-based (business) economy, that 65+% of most company’s value and sources of revenue actually do lie in – evolve directly from intangible assets and other forms of non-financials.
There’s little doubt in my view, that one of the challenges lies in continued and singular reliance on conventional financial statements and balance sheets. They do influence some management teams, boards, and investors to sustain a certain level of skepticism, uneasiness, and even dismissivness about how to best cross that aforementioned chasm. The chasm in this sense, again, represents the economic fact that the real sources and drivers of most company’s value and revenue today lie in (intangible) assets that seldom, if ever, get reported – accounted for on those conventional financial statements other than in the form of the all-inclusive ‘goodwill’!
True enough, conventional financial statements and balance sheets have value, and it is not the intent here to advocate their disregard because they do describe whether or not financial targets have been achieved, and, in that sense, remain a very necessary and important measurement tool . But still, they simply don’t tell the whole story about a company’s status or its potential. The prudence of striking a better balance between the oversight, stewardship, and management of financials and non-financials would likely reap solid benefits and should not be so readily dismissed.
Admittedly, conventional financial reports (balance sheets) were not really designed to capture (describe) the many and various qualitative aspects, vital signs, and indicators that we now know are directly related to businesses success, i.e., those found in a company’s intangibles (non-financials). Today’s reality is, tracking/monitoring non-financial aspects of company performance, i.e., its intangibles, is not a time-resource luxury rather it’s truly become a strategic necessity and fiduciary imperative.
There are a number of factors in play today that should be influencing management teams, boards, and even investors to pay more (consistent) attention to monitoring non-financial – intangible asset performance indicators. They include, among other things:
· Increasing global competition.
· Growing connection between a company’s intangible assets, their value-supply chain, and success, profitability, and sustainability.
· Heightened respect for the value of a company’s reputation (image, goodwill).
· Necessity for accelerated product innovation-launch times
· Boundary-less speed which information (assets) can be disseminated.
· Increasing (government) regulatory emphasis on reporting, measuring/accounting businesses non-financial performance, ala intangible assets.
While visiting my blog, you are encouraged to browse other topics/subjects (left column, below photograph) . Should you find particular topics of interest or relevant to your circumstance, I would welcome your inquiry about consulting, conducting an assessment, training program, or speaking engagement to your company or professional association at 314-440-3593.
Bottom line; through effective and consistent management, stewardship, and oversight of intangible assets, they can be one very plausible solution! Postponing or waiting until a company is partially or totally broken to take full advantage of intangibles and non-financials, while it may not be too late, is not the most prudent or forward looking course of action in today’s increasingly competitive, aggressive, global, and winner-take-all business environment.
The ‘Business IP and Intangible Asset Blog’ is researched and written by Michael D. Moberly, president and founder of Knowledge Protection Strategies – http://kpstrat.com. The intent of Mr. Moberly’s blog is to provide insights and perspective to aid in a cross-disciplinary approach for identifying, assessing, valuing, protecting, utilizing, and extracting value from intangible assets. Your comments regarding my blog posts are welcome at firstname.lastname@example.org.