Michael D. Moberly June 18, 2012
Business management and marketing curriculum content in universities must address intangible asset identification, management, stewardship, oversight, and risks! While preparing to teach a graduate (MBA) business management course for a mid-west university last year, I purposefully framed and sequenced my teaching/course materials to reflect my determination and eagerness to introduce students to intangible assets and strategies related to their management, stewardship, oversight, and risk mitigation.
Being a long time proponent/advocate of intangible assets insofar as their contributory value to companies of all sizes and sectors, I believe intangibles must be an integral teaching-learning component in most every business management course taught today! That’s because steadily rising percentages (i.e., 65+%) of most companies’ value, sources of revenue, and ‘building blocks’ for growth and future wealth creation evolve directly from these non-physical assets, e.g., intellectual, structural, relationship capital, brand, reputation, goodwill, competitive advantages, and intellectual property, etc. Not introducing students to the fundamentals of intangible asset identification, development, valuation, exploitation, management, and risk mitigation, especially in business management and marketing curricula, in my view, is tantamount to business school heresy.
Once my aforementioned class commenced and the subject of intangible assets was introduced as constituting an integral component of the course, it became apparent that, for even the most experienced and already employed (MBA) students, intangible assets were yet to be part of their lexicon and/or skill set repertoire other than in the context of individual and generally unrelated assets. That is, a percentage of students possessed a fundamental, but sometimes limited familiarity for specific intangible assets, once they were identified, particularly intellectual property (patents), reputation, and brand. Students generally portrayed intangibles in standalone (individual) contexts, not reliant on or connected to other company assets.
Teaching assessments coupled with student responses to essay questions related to intangible asset issues revealed remaining challenges relative to achieving a sufficient (operational) grasp of intangibles in several key areas, among them being how…
- intangibles’ could be subject to a collective framework of management, stewardship, and oversight.
- to recognize and assess intangibles’ contributory value (to a company, a particular product, service, or launch).
- to related and distinguish particular intangibles’ as contributing to – driving specific sources of revenue, and
- the assets’ could be subject – vulnerable to persistent, various, and asymmetric risks that if materialized, could erode and/or undermine company value, the value of competitive advantages and (company, product) reputation, and new product launches, etc.
Respectfully intangible assets (and their management) admittedly represent a variously challenging concept to grasp and apply in quantifiable (value-add, revenue generation, and exploitation) contexts. I sensed then, and still do, that an important initial (intellectual, conceptual) hurdle with respect to the understanding intangible assets lies largely in the word ‘intangible’. That is, intangible assets are just that, they’re intangible, they lack a conventional sense of physicality, unlike tangible (physical) assets which one can see, touch, and report on balance sheets and financial statement such a property, inventory, vehicles, buildings, machinery, etc.
Again, respectfully, this was, for most, if not all, of these high achieving MBA students, quite literally their initial (in-depth) introduction to intangible assets. I sense their reactions and ability to grasp the management, stewardship, and oversight was not reflective of this university’s graduate programming or curriculum as it was, and remains, in my view, a reflection of the larger business community and its management teams, who themselves respectfully struggle with how to effectively and efficiently engage and utilize the intangible assets their company’s produces, acquires, and possesses.
As the nine week class progressed a significant percentage of the students appeared to concede the role, function, and contributory value of intangible assets. However, it’s worth noting, one student with a solid career in financial services, consistently challenged and resisted the positive view I was espousing regarding the relevance and contributory value of intangible assets across sectors.
This particular student articulated his (resistive) position well by (privately) describing numerous multi-million dollar loan and acquisition deals which he personally oversaw, in which, as he stated, there was absolutely no mention, recognition, or accounting of intangible assets in either valuation, collateral (securitization) or due diligence contexts.
At the conclusion of the last class, this student said to me in a respectful, yet defiant tone, ‘I understand what you’re saying Mr. Moberly about intangible assets, but I just don’t see intangible assets ever becoming an issue in my bank as you are suggesting they should and will, at least while the current (bank) officers remain in place. In my bank, its solely about identifying and assessing the value of physical assets as collateral.
Of course, the point to all of this is, does the same attitude and perspective hold true for business management teams, c-suites, and boards, in general? The answer, in my view, is yes, with of course, some very positive and very dynamic exceptions. But again, it is indeed an economic fact and a business reality that a steadily increasing majority of companies’ value, sources of revenue, and ‘building blocks’ for growth and future wealth creation do, in fact, evolve directly from or are generated by intangible (non-physical) assets, not tangible (physical) assets!
Introducing intelligent, seasoned, and already successful business decision-makers to intangible assets, and that the time they devote to learning about intangibles, their valuation, and strategies to effectively use and extract value from those assets, along with the necessity to protect, preserve, and monitor the assets’ value, are indeed worthy teaching – learning objectives, whether one is a promising MBA student or an already astute, experienced, and successful business decision maker. Unfortunately however, intangible assets remain somewhat of a hard sell!
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