Archive for 'Goodwill'

Reputation Risk: An Unwanted Dimension Following Aurora Theater Shootings…

July 25th, 2012. Published under Board oversight, Fiduciary Responsibility, Goodwill, Reputation risk.. No Comments.

Michael D. Moberly    July 25, 2012

Let me be very clear at the outset.  In no way do I, through the language I use in this post, intend to convey any disrespect to the victims and families or otherwise trivialize the recent tragic and senseless shootings that took place at the Aurora, Colorado movie theater.

It would be equally disturbing if this post was misinterpreted as representing an out-of-touch perspective interested only in Warner Brothers reputation and box office economics related to ‘The Dark Knight Rises’.

With that, allow me to explain to the global readership of this blog what influenced me to decide it was important to write this post.

First, while the words risk and threat have become firmly embedded in citizens’ lexicon following September 11, 2001, the Aurora theater tragedy served as one more kick-in-the-gut reality that risks-threats, of the type posed by James Holmes, are not especially difficult to foresee, after-the-fact.  In most instances, and Holmes will likely be no exception, an abundance of cautionary warning signs will surely be found.  Missing however, from those inevitable pieces of the puzzle though, is the essential ingredient we have come to call, connecting-the-dots.  Dot connection after all, is necessary for substantiation and probable cause to act proactively.  Correctly and consistently foreseeing the who, what, when, where, and how this or similar tragedies (risks, threats) materialize remains challenging on many levels.

One such level is identifying the presumed mental-emotional triggers (motives) that set in motion inexplicable elements such as Holmes’ site selection, timing, acquisition of weapons and ammunition, and planting explosive devices in his apartment, etc.  I must admit, I am not a strong advocate of so-called profilers.

A second factor that influenced me to write this post, very much integral to the first, evolved from a corporate reputation risk seminar which, coincidentally I attended just prior to the Aurora shootings.

There is certainly no shortage of examples in which corporate – institutional reputation risk has manifested itself with disastrous human and economic outcomes.  At Penn State, for example, the on-going revelations of child molestation were suppressed for 15+ years, while, in the Virginia Tech, Columbine, Gabby Gifford, and Aurora theater tragedies, everything unfolded in a matter of minutes.

For pundits reporting on the tragedies at Penn State it did not take long to ask the question or perhaps worse, offer an opinion, about whether and/or to what degree that series of tragedies would adversely affect student enrollment, fund raising, town and gown relations, and university economics, etc.   And, within 12 to 18 hours following the Aurora theater shootings, pundits were asking whether box office economics of ‘The Dark Knight Rises’ would be adversely affected and/or whether Warner Brothers should withdraw the movie from theaters in deference to the shooting victims and their families.  To be sure, Warner Brothers executives were asking the same questions and soliciting opinions from a bevy of reputation risk and public relations specialists nearby.   WB has now announced it would make a substantial donation to the shooting victims, presumably from the films’ box office receipts.

As most individuals occupying the c-suites and comprising the boards of companies understand; a company’s reputation, while it can be an extremely valuable intangible asset, it can also being a very fragile asset, vulnerable to an almost infinite number of risks and threats.

It used to take years of consistent mismanagement to destroy a company. Today, a company’s downward spiral, leading to an ultimate and premature demise can occur almost overnight.  But, it’s not just due to a broader range globally persistent and asymmetric risks, threats, and hazards that can impair a company’s reputation.  Rather, a company’s reputation demise is often linked to the speed which unchecked, dismissed, or overlooked reputational risks can materialize, escalate, and cascade throughout an enterprise and particularly to its stakeholders! (Adapted by Michael D. Moberly from remarks of Sir John Bond, Chairman of UK based HSBC)

Following the Aurora event, I’m quite confident that, in WB’s c-suites, someone posed the question whether the film should be pulled out of theaters altogether, not solely as a respectful gesture to the shooting victims and their families, but as part of a process to mitigate potential hemorrhaging of its reputation.  While I have no firsthand knowledge of such questions or conversations, I can apply Bob Woodward’s award winning narrative nonfiction style to suggest, with a high degree of confidence that such conversations did occur!

As minimal evidence of this, wisely, WB did pull trailers of its upcoming ‘Gangster Squad’ and it’s reported they opted to literally cut a ‘violent movie theater shooting’ scene from that film.  In my book, that’s a fairly clear example of reputation risk management at work!

I have frequently heard my colleagues say that once a company’s reputation has compromised through unforeseen events in which they are ill or unprepared to sensitively address or the company has not ‘banked’ a substantial amount of goodwill with its stakeholders in advance, reputation damage may well be inevitable.  Recouping lost economics, competitive advantages, and consumer loyalty will be a long, costly, and time consuming endeavor.

In the end, it appears WB’s respectful silence immediately following the Aurora shootings, may well have, in this instance anyway, served as an important contributor to mitigating reputation risk to itself, and to one of its products, i.e., the film, ‘The Dark Knight Rises’!

When innocent people die or are harmed in an incident such as Aurora, Columbine, Gabby Gifford, Penn State, or Virginia Tech, it is the epitome of corporate, institutional, and/or government insensitivity to suggest there is ever any good that follows.  In this instance however, it may well open eyes, minds, and doors to re-examining and re-calculating reputational risk by incorporating the variables noted here and not just to reduce the probability for its re-occurrence, but truly understand consumer reaction and resiliency, and the reputation of the victims!

Intangible Asset Resilience…

February 8th, 2012. Published under Book Review, Goodwill, Intangibles as strategic assets, Value Propositions. 1 Comment.

Michael D. Moberly   February 8, 2012

I recently re-read Ranjay Gulati’s book ‘Reorganize For Resilience: Putting Customers At The Center Of Your Business’.  It is not, in my judgment, just another of the myriad of books who’s author tweaks or critiques an existing standard or presents a highly nuanced alternative about the re-emerged importance of customer centricity.  

Instead, it’s a book about recognizing a company’s customer relationships are intangible assets which can produce ‘relationship capital’.  Gulati however, takes this important perspective several steps further.  He suggests that in order for customer relationships to be as effective and profitable as possible, there needs to be (a.) consistent engagement, and (b.) high level inquiry with customers.  These components, he adds, must collectively extend well beyond the often times siloed boundaries of a company’s products and/or services.

This important perspective prompts me to draw an analogy comparable to conducting intangible asset assessments for companies. A frequent revelation flowing from an assessment is that company management teams may not recognize or they may even be dismissive about the contributory value, competitive advantages, and efficiencies delivered by intangible assets that are routinely embedded in (their company’s) processes, practices, know how, and culture.

Intangible assets as we all know, and customer centricity I might add, lack a conventional sense of physicality.  As such, neither is reported on company balance sheets or financial statements. This notable absence from conventional forms of performance measurement contributes no doubt, to the tendency for both to be neglected, overlooked, and often conceived as distanced abstractions, rather than the ‘in your face’ realities they really are!

In response Gulati suggests, if customers’ real needs continue to be unrecognized and unmet, this may influence them (customers-clients) to commence ‘commoditizing’ that company’s products and services.  In other words, customers-clients may begin making (their) purchase decisions based primarily on price rather than having developed a personal connection to a particular company’s products and/or services.  

In a similar vein, management teams and boards that assume their company’s brand (another form of intangible asset) standing alone, will serve as the perpetual or proverbial life saver, is an assumption Gulati points out, that no longer reflects the realities of a globalized market place that is filled with competing options, products and services.  I would add to that, it’s a global marketplace that is aggressive, predatorial, and winner-take-all.

Thus, to compete more effectively, Gulati points out, companies must define themselves well beyond the characteristics of a single intangible asset, i.e., a brand, etc.  Thus, being first to identify and address customer – client ’problem spaces’ represents a powerful and strategic intangible asset, offensive weapon if you will, that can produce value, create sources of revenue, and serve as distinctive and long lasting foundations for growth.

 (Dr. Ranjay Gulati is a professor at the Harvard Business School with expertise in leadership, strategy, and organizational issues.  His book, Reorganize for Resilience: Putting Customers at the Center of Your Organization (Harvard Business Press, 2009)  explores how “resilient” companies—those that prosper both in good times and bad—drive growth and increase profitability by immersing themselves in the lives of their customers.)

Company Cultures’ Focused On Intangible Assets Are More Efficient, Effective, and Profitable!

January 13th, 2012. Published under Company culture and reputation., Goodwill, Intangible asset focused company culture.. No Comments.

Michael D. Moberly   January 13, 2012

In today’s globally competitive and predatorial business (transaction) environment, company management teams and boards are consistently seeking ways to be innovative and create (additional) value, revenue, and competitive advantages.  One way this can be achieved is through the ‘executable inspiration’ that evolves from building a company culture that effectively and consistently identifies, utilizes, and exploits its intangible assets.

But, let’s make an important point first.  Intangibles are not the elusive or esoteric constructs as they’re frequently characterized merely because they lack a conventional sense of physicality or don’t appear on company balance sheets or financial statements other than when they’re lumped together as goodwill.

So, to achieve this almost surely profitable state, i.e., a company culture focused on intangibles, and to do so consistently, requires the internalization of:

  • what intangible assets are
  • the various forms and contexts in which they exist
  • how they’re produced, and
  • recognize (measure) they’re  contributory relevance and value to a company and/or business unit, i.e., underpin sources of revenue, competitive advantages, and growth opportunities.

With respect to the development of a culture, it will emerge and become observable as employees (collectively) recognize and begin to act on…

  • a shared system of values
  • that brings clarity to (defines) what is important,  and
  • contains certain norms, values, beliefs and attitudes that manifest as acceptable means to solve problems
  • which, in turn, leads to efficiencies, competitive advantages, and reputational value, etc., on behalf of a company and/or business unit.  (Adapted by Michael D. Moberly from the fine work of Dr. Edgar Shein)

It’s worthy to note also that building a company culture, particularly one focused on intangible assets is not, in my view, something which evolves exclusively in a top-down fashion, nor is it a characteristic owned and executed solely by a management team or c-suite. 

Ultimately, as employees (companies) acquire confidence and expertise in identifying intangible assets, they will be assessed for, among other attributes, their contributory value to company processes or procedures and if marketable commonalities or combinations exist that can be bundled and used/exploited to advance a company process, product, or service.

A well-grounded (embedded) intangible asset focused company culture provides permanence, depth, and confidence to employees relative to their abilityt to:

  • understand and distinguish intangibles, recognize their importance, and how – where they exist and/or are in play in most all business processes and transactions
  • tweak and/or nuance intangibles to benefit themselves, their position, and the company, e.g., building, strengthening, and sustaining competitive advantages and customer and supplier relationships, etc.

While visiting  my blog, you are respectfully 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 at  314-440-3593 or m.moberly@kpstrat.com

What Happens When A Company’s Goodwill Goes To Zero?

January 10th, 2012. Published under Goodwill, Intangible Asset Value. No Comments.

 Michael D. Moberly    January 10, 2012

Goodwill represents an (intangible) bond between a company, its products and/or services, and its employees, clients, customers, investors, suppliers, distributors, and shareholders, in other words, stakeholders.  

Goodwill also represents a substantial underlying factor to a company’s profitability and sustainability?  After all, it’s an economic fact that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability lie in – evolve directly from intangible assets, one of which is goodwill which accounting principles recognize on balance sheets and financial statements.

Of late though, there is evidence that, with more frequency, companies are opting to play, what I refer to as the goodwill (impairment charge) write-off card in which other intangible assets are not distinguished as standalones rather merely lumped together, for accounting purposes as goodwill

 Putting aside for the moment, the accountancy and tax upsides relative to goodwill impairment charges, my question is; won’t there be some adverse consequences and/or reactions occurring from stakeholders at some point, as companies consistently opt to write-off large portions of their goodwill, or when their goodwill goes, figuratively speaking, to zero?

Are stakeholders oblivious to this, or have their reactions been neutralized and/or offset in some manner?  Or, perhaps more importantly, do stakeholders care? 

Quite understandably, if you are a stockholder in a company whose stock price plummets which the company in turn attributes (whole or in part) to diminished (impaired) goodwill and opts to write-off it off, there will eventually be consequences occurring at some point..  One of which is  a shareholder now holds less value in the company today than they did yesterday.

(This post was inspired and modified by Michael D. Moberly from a CFO.com article titled ‘Goodwill Hunting’.)

Intangible Assets: Still Not Easy To Explain or Define

December 2nd, 2011. Published under Analysis & Commentary: Studies, Research, White Pap, Business Applications, Goodwill. No Comments.

 Michael D. Moberly    December 2, 2011

Intangible assets are not easy to explain or define, particularly for those unfamiliar with their existence or unaccustomed to recognizing, let alone, measuring their contribution and performance, i.e., to company value, revenue, and sustainability.  For some, intangible assets are likely to be interpreted more as theoretical business concepts best espoused in a university lecture hall absent ’real world’ applicability.  For these individuals, intangible assets are interpreted more as theoretical (esoteric) accounting or business concepts best espoused in  university lecture halls and absent ’real business world’ application. 

Part of the definitional challenge lies in the fact that intangibles lack physicality.  So, regardless whether they’re called assets or not, it often boils down to a question about how one identifies, manages, and measures things which lack a conventional sense (state) of physicality?  While an experienced business person can’t really see or hear intangibles, even the casual business observer can distinguish companies that effectively capture and exploit their intangibles.

The definitional and application challenges astute business persons routinely face about intangibles can largely be attributed to they’re…

  • lack physicality
  • seldom reported on balance sheets or other company financials
  • often being undistinguished as standalone assets, but merely lumped together as goodwill

Intangible asset specialists who conduct briefings and awareness training on intangibles should always be prepared to field an array of critical and skeptical questions about intangibles and their contribution and valuation.  How such questions are answered of course, affects, as it does in any profession, the overall credibility of intangible asset proponents insofar as articulating better, smarter, and more effective techniques to capture, utilize, manage, and monetize intangible assets.  This includes clearly articulating what intangible assets are, what they’re not, the various forms they take, how they originate, and equally important how and when they can be effectively and profitably applied as ‘building blocks’ to enhance a company’s value and create sources of revenue.

Ironically, in the midst of this extended economic downturn, conventional wisdom would suggest that company management teams and boards would be receptive to considering alternative and proven strategies to elevate and safeguard their company’s potential for successfully weathering this lingering recession.

Respectfully though, it’s often challenging for some management teams and boards to step outside their past practice comfort zones and disengage from what they believe has worked well in the past..  Successful companies ran by successful management teams are, for the most part realists and pragmatic risk takers and therefore understandably skeptical about intangibles for all the reasons cited above.  However, when such skepticism keeps companies tied to practices and strategies of a tangible (physical) asset based economy (world) instead of a knowledge-intangible asset based global economy, we’re not likely to experience the growth which we know we’re capable.

While visiting/reading 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 at  314-440-3593 or m.moberly@kpstrat.com

Writing Off Goodwill: What Happens When A Company’s Goodwill Goes To Zero?

March 26th, 2010. Published under Goodwill. 2 Comments.

Michael D. Moberly    March 26, 2010

Goodwill represents an intangible bond between a company, its products and/or services, and its employees, clients, customers, investors, suppliers, distributors, shareholders, and stakeholders, etc. 

Of late though, there is evidence that some companies are opting, with more frequency and less (adverse) stigma, to play the so-called goodwill (impairment charge) write-off card under a variety of circumstances and for a variety of reasons. 

Putting aside for the moment, the accountancy and tax upsides relative to goodwill impairment charges, my question is, what are, are there, or won’t there be adverse consequences and/or reactions at some point when companies opt to literally write-off large sums of their goodwill, or when their goodwill goes, figuratively speaking, to zero?

Are employees, clients, customers, investors, suppliers, distributors, shareholders, and stakeholders oblivious to this?, are their reactions neutralized?, do they care?  Is it not an axiom of good business practice that goodwill represents a substantial and underlying factor to a company’s profitability and sustainability?

Quite understandably, if you are a stockholder in a company whose stock price plummets which the company in turn attributes (whole or in part) to diminished (impaired) goodwill and opts to write-off it off there are, intuitively, consequences.  One of which is a stockholder now holds less value in the company today than they did yesterday which presents the stockholder with some unwanted options.

(This post was inspired and modified by Michael D. Moberly from a CFO.com article titled ‘Goodwill Hunting’.)