Michael D. Moberly June 4, 2012
Going way, way back to 2004, Accenture commissioned the Economist Intelligence Unit to conduct a survey regarding ‘asset’ management. More specifically, 120 senior executives representing globally operating companies were asked to share their views on the management of strategic assets, both tangible and intangible.
Not surprisingly, 94 of the 120 executives (respondents) stated that ‘managing intangible assets and/or intellectual capital was an important management issue’. While, at first blush, this may appear to be a favorable finding, especially to those of us who are intangible asset advocates and strategists, 95% of the respondents went on to state that (again, keep in mind, this survey was conducted in 2004) they ‘did not have a robust system in place to actually measure the performance of (their company’s) intangible assets’.
Perhaps even more unfortunate in my view, from a managerial and financial perspective, was the revelation that a full third of the senior executives surveyed stated they ‘had no such system in place at all’. At the same time however, nearly half admitted they recognized that ‘the stock market actually rewarded companies that invested in (their) intangible assets’. Now that’s irony and missed opportunities!
In my view, the respondents’ should be applauded for admitting they lacked the means and/or systems within their companies’ (at least in 2004) to measure intangible assets , but a single clap of the hands would be sufficient in this case as it’s certainly time to reverse that trend. performance.
Emphasis now, should be placed up front, on aiding management teams, c-suites, and boards to achieve their respective fiduciary responsibilities, i.e.,
- recognize precisely what intangible assets really are and how to unravel and approximate their contributory value…
- relative to goodwill, reputation, brand, relationship, intellectual, and structural capital, etc.
- as sources of revenue and ‘building blocks’ for future wealth creation, i.e.,
- insofar as bringing greater tactical – strategic clarity to
- how intangibles can be most effectively utilized
- strategies to extract as much value as possible.
Two general and perhaps larger points are worthy of making irrespective of the survey.
The first is this; intangible assets are not the sole province of large, multi-national corporations. Rather, intangible assets are widely embedded in most every company, ranging from start-ups and spin-off’s to SME’s (small, medium enterprises) to mature, as well as, maturing firms. In other words, intangible assets have little, if virtually nothing to do with a company’s size. It’s truly a case where size does not matter! Rather, it’s a matter of business decision makers recognizing what intangible assets their company possesses, produces, and/or has acquired and how they can be effectively and profitably (exploited) used.
The second point is that most issues today related to – affecting a company’s intangible assets have moved from merely being voluntary (I’ll do it if I have time) to truly constituting a fiduciary responsibility!
So, as most management teams, c-suites, and boards already know, whether they actually elect to act on that knowledge or not, is that the value, sources of revenue, and growth potential of most companies is increasingly embedded not in physical or strictly financial assets that are reported on balance sheets and financial statements, but in intangible assets, i.e., brands, patents, franchises, software, R&D, ideas, proprietary expertise, and competitive advantages.
But, as the Accenture – Economist survey clearly revealed, few companies try to measure either the performance or returns of their intangible assets. Yet intangibles are certainly the clear and unequivocal underliers to most company’s profitability and success. Quoting Dr. Roya Ghafele a proponent of intangible asset specialist and prolific Oxford University-based author, balance sheets and financial statements that do not encompass intangible assets simply do not provide the whole picture of a company.
Based on my own experience however, there appears to be growing enthusiasm, albeit, at times, excruciatingly slow, for better management, stewardship, oversight, and monitoring and measuring (the performance of) a company’s intangible assets.
With respect to my particular corner of the world of intangible assets, the radar of accounting firms, IP law practices, and insurance companies should surely be picking up the scent for developing and offering new business services specifically related to clients’ intangible assets.
For the still skeptical or reluctant, I’m hopeful your time will permit examination and reflection of numerous other posts at this blog!
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