Michael D. Moberly January 3, 2012
Unfortunately, discussions about a company’s intangible assets rarely prompt boards’, c-suites’ or management teams’ pulse to race as I consistently try to make the case that it should. There are a variety of reasons why either group tend not to attach higher priorities to engaging, utilizing, and building (more) value in their company’s intangibles.
For some, the subject of intangible assets remains shrouded in conventional ‘mba’ speak that sometimes is out-of-step with the realities of the knowledge-based economy and the economic fact that, conservatively speaking, 65+% of most company’s value, drivers/sources of revenue, and building blocks for growth and sustainability today have shifted from tangible (physical) assets, i.e., buildings, equipment, and inventory, etc., to intangible assets, i.e., intellectual property, knowhow, reputation, brand, goodwill, etc.
No doubt, some of the reluctance to aggressively engage and exploit intangibles is attributed to the still much admired Deming perspective which espouses ‘one can’t manage what one can’t measure’. Some company management teams, in my view, have misinterpreted this long standing tenant of business management to mean that intangibles, since they lack physicality, can’t be managed, measured, or accounted for effectively.
In other words, because a company’s key assets, i.e., its intangibles, lack physicality, management teams, absent contemporary training regarding their usefulness may be less inclined or receptive to recognizing and engaging them as (potential) sources of value and competitive advantage.
I have found numerous instances in which a company’s intangibles are lying stagnant and not being acknowledged or effectively utilized, merely awaiting management team action. But, because they’re not seeable or touchable in a conventional (Deming) context, their contributions to (company) value, revenue, and sustainability remain absent as action items on many board room – c-suite agendas.
There should not be any particular mystery, managerial, or otherwise, about how to identify and effectively utilize and exploit a company’s intangible assets! Yes, there is some specialization that is helpful insofar as identifying, unraveling, positioning, leveraging, and maximizing intangibles contributory value. In most instances, such expertise can be readily acquired without the encumbrances of conventional ’mba’ speak that I believe still tends to attach more credence to tangible (physical) assets.
Probably, the key ’managerial mysteries’ about intangible assets that must be universally overcome are the:
- challenges related to their lack of physicality, and
- notable absence from company balance sheets.
There’s little question that most management teams recognize their existence in the form of brand, reputation, image, goodwill, intellectual and relationship capital, etc. and the various ways they create competitive advantages and contribute to a company’s sustainability. But, management teams’ can’t necessarily touch or see those assets in the same manner they can conventional physical or tangible assets which are routinely accounted for – reported on company balance sheets.
To further help demystify intangible assets, important starting points are to recognize they exist in three broad categories:
1. Intangible goods and products whose value can be established in the marketplace, e.g., licenses, franchises, patents, trade secrets, and brand value, etc.
2. Intangible competencies which include distinctive and perhaps proprietary processes and practices, e.g., knowhow and intellectual capital held and practiced by employees and capable of being created and deployed to the right people, at the right time, in ways that deliver competitive advantages, value, and bottom-line profits.
3. Latent capabilities which include such things as reputation, image, leadership, innovativeness, and the caliber (capability, capacity) of the workforce as a whole to identify and respond to market opportunities to accommodate today’s globally competitive, predatorial, and winner-take-all business transaction environment.
The objective is to become a more forward looking – forward thinking company through more effective identification, assessment, utilization, management, and reporting of intangible assets.
(Perspective on the above was gleaned by Mr. Moberly from research conducted by the faculty of the Cass Business School, City of London, UK)
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