Michael D. Moberly June 14, 2010
Because 65+% of most company’s value, sources of revenue, building blocks for growth, future wealth creation and sustainability today lie in – evolve directly from intangible assets, its increasingly likely that business investments will include intangibles.
An effective way for business investors to increase the probability that the desired – projected returns will be achieved is to ensure that investment planning and due diligence not be solely balance sheet oriented or focused on current assessments of the intangible assets’ value. Rather, invest – don’t invest decisions should include the question, are the assets’ value and materiality sustainable?
In other words, investment due diligence today must include an assessment of the assets’ fragility, their vulnerability, and the probability that value erosion or undermining will occur and/or assets will become impaired prior to, or immediately following, deal closure which, in either instance, will adversely affect projected returns.
A good starting point, in my view, is for investors to examine a survey produced by U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’ and consider integrating the findings into their overall investment strategies, i.e., to manage and maintain:
1. Relationships with key (internal, external) stakeholders.
2. Use of internal stakeholders’ knowledge, expertise, skills, and competencies which serve as facilitators -enablers for company growth.
3. Communication channels to bring clarity of purpose to internal stakeholders (employees of the business being invested in) relative to their role in – contribution to on-going company success.
4. Continuation of (or building) a company culture that is prepared to adapt to – exploit new/changing market developments and opportunities.
5. Reputation with consumers, customers, clients, and/or suppliers.
6. The right (existing) processes and systems to build market position and competitive advantages.
Of course, a percentage of business investments do not produce the desired or projected returns. The reasons are as varied as the investments themselves. Often overlooked causes of an investments’ failure is not having effective strategies in place to manage and maintain the ‘intangible asset’ factors noted above.
(This post was inspired by a report – survey produced by U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)
The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets. I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.
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