Michael D. Moberly April 6, 2009
Intangible assets should be integral components of MBA – MHR programming – curricula. While preparing the syllabi and lectures for a graduate management course recently I was determined to introduce (and integrate throughout the course) the economic fact – business reality that 65+% of most company’s value, sources of revenue, future wealth creation, and sustainability lie in – are directly linked to intangible assets. Business – organization management in my judgment, must now include the stewardship and oversight of intangibles which encompass identifying, assessing, positioning, maximizing, leveraging, and extracting as much value as possible from an organization’s intangible assets.
Even though for most students, this would serve as their initial introducation (conceptually speaking) to intangible assets, presumably, it would be a relatively un-challenging, welcomed, and readily grasped element of an MBA course, if, for no other reason, it represented a (albeit a forward looking) business reality – economic fact . For some students though, it became evident that intangible assets was a challenging concept to apply in quantifiable (monetary, value) contexts. The primary (at least, initial) hurdle with respect to their receptivity, understanding, and ultimately the credence most attached to intangible assets appeared to evolve around the reality that intangibles lacked a conventional sense of physicality, that is, they’re intangible!
By the end of the abbreviated term however, most students could articulate a familiarity for intangibles commensurate with their graduate standing in terms of the contribution intangibles make to a company’s value, revenue, and sustainability in the context of the art and science of ‘managing and management’ of both public and private sector entities.
One graduate student though, with a solid career in financial services routinely challenged the notion of intangible assets, i.e., their relevance and especially their contributions to business operations, transactions, and value. This student defended his position by using numerous examples of multi-million dollar business loan and acquisition transactions which he lead in which there was absolutely no mention (verbal or contractual) of intangible assets in either value, collateral, securitization, or due diligence contexts. This student said to me following the last class, in somewhat of a defiant tone, “I understand what you’re saying Mr. Moberly, but I just don’t see it happening in my bank, at least while the current officers remain in place; they are stuck in the tangible – physical asset domain; if they can’t touch or see an asset insofar as collateralization – securitization are concerned they just don’t recognize how to extract value from it if a deal goes south”.
Again, there is absolutedly no question only 25% to 35% of most companies’ value, sources of revenue, and future wealth creation are generated from their tangible – physical assets, i.e., buildings, plants, equipment, machinery, etc. The remainder is generated from their specialized and often times proprietary know how (intellectual-human capital), competitive advantages, intellectual property, image, goodwill, reputation, relationships, etc.
Introducing seasoned and successful business decision makers, or MBA students, to intangible assets, admittedly remains somewhat of a hard sell for some, perhaps more so when ‘one is up to his or her hip’s in this recession as we are now and fighting for financial survival unfortunely, does not leave much time for reflection on how to best utilize your intangible assets’. All that said, intangible assets are integral to most every company’s value, sources of revenue, future wealth creation, and overall sustainability and should not be overlooked, dismissed, under-valued, or neglected!