Michael D. Moberly March 12, 2013 ‘A blog where attention span matters.’
Achieving operational familiarity with company’s intangible assets will lead to improvements in economic and competitive advantage health!
While intangible assets represent the dominant drivers of most company’s economic and competitive advantage health and value, if they are dismissed or neglected by company management teams, there is a substantial, perhaps I should say very real, probability that initiatives such as new project launches, competitive advantages, marketing programs, and strategic planning will be stifled, undermined, or certainly produce less than their potential, with asset value eroding quickly or worse, ‘go to zero’!
Conventional financial statements do not provide management teams with a complete or necessarily clear picture of a company’s fiscal soundness absent inclusion of intangible assets. This is especially relevant in today’s increasingly knowledge (intangible asset) dominant business (transaction) global economy in which it’s an economic fact that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability, and profitability lie in – evolve directly from intangible assets.
Management teams’ continued reliance on conventionally framed financial statements that are largely absent reference to intangibles contributes to sustaining a sense of skepticism, dismissiveness, and reluctance about the economic fact that the real sources and drivers of most company’s value and revenue today evolve directly from assets that are seldom, if ever reported on financial statements, other than in the form of goodwill!
True enough, conventional financial statements describe whether or not financial targets are being achieved, etc. In that context, they remain relevant, but agin, they simply don’t convey the whole story (picture) about a company’s status or its’ potential with respect to the production and exploitation of intangible assets.
In fairness, conventional financial reports were not designed to capture qualitative aspects, vital signs, and/or indicators that we now know are directly related to businesses success, i.e., those found – embedded in a company’s intangible assets. Today, tracking and monitoring the performance of a company’s intangible assets is not a time-resource luxury applicable only to Fortune ranked companies, rather it’s a necessity and fiduciary imperative for most every company including SMM’s (small, medium multinationals) SME’s, (small, medium enterprises) start-up’s, university-based spin-off’s as well as maturing firms.
The business prudence of striking a better balance between the stewardship, oversight, and management, i.e., S.O.M., of tangible vs. intangible assets can produce benefits and multiplier effects that will favorably cascade throughout an enterprise.
There are a number of factors in play today that should be influencing management teams to pay more attention to monitoring (indicators of) intangible asset performance, irrespective of company size, maturity, or industry sector. These factors include, among others,
- increasingly aggressive and predatorial global competition.
- the growing connection between a company’s intangible assets, stakeholders, its value-supply chain, and company profitability and sustainability.
- a heightened respect for the risks to and value of a company’s reputation (image, goodwill).
- accelerated innovation, product development, and launch times .
- the geographically boundary-less speed which information (intangible assets) can be developed, acquired, and disseminated, and
- increasing government regulatory emphasis (globally) on reporting and measuring (accounting) the value, performance, and materiality of intangible assets.
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