Michael D. Moberly March 12, 2014 ‘A blog where attention span matters’.
Management team’s fiduciary responsibilities now include taking consistent and affirmative steps to sustain control, use, ownership, value, defensibility, and potential monetization – commercialization of intangible assets.
Too, it’s becoming somewhat common, that at least one aspect of assessing the effectiveness of senior management team members is by how well they engage in the stewardship, oversight, and management (S.O.M.) of company intangible assets. When such, usually board level, assessments occur, areas assessed (examined) include effectiveness in…
- capturing, exploiting, and converting intangibles to enhance company value, create sources of revenue and strategies to sustain future growth.
- strengthening and building competitive advantages by creating environments in which employees (peoples) relationship, intellectual, and structural capital are being maximized and effectively utilized.
In my view, there’s solid rationale for incorporating the S.O.M. of intangible assets in personnel performance assessments. For one, intangibles are the undisputable dominant driver of most company’s economic and competitive advantage health and value. If (when) they are dismissed or neglected by company management teams, there is a substantial probability that such initiatives as new project launches, competitive advantages, marketing programs, and strategic planning will be stifled, undermined, or certainly less than their potential, with asset value eroding quickly or ‘going to zero’!
Conventional financial statements and balance sheets do not provide management teams, c-suites, and boards with a complete or necessarily clear picture of a company’s fiscal soundness. 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.
So, management teams continued (perhaps sole) reliance on conventionally framed financial statements that are absent direct reference to intangibles. This circumstance unfortunately contributes to minimizing the importance of intangibles and further contributes to a sense, among some management teams, of skepticism and dismissiveness about the necessity to acquire operational familiarity with intangible assets well beyond merely goodwill!
True enough, conventional financial statements describe whether or not financial targets are being achieved, etc. In that context, they remain relevant, but 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.
Too, in fairness, conventional financial reports were not designed to capture qualitative aspects and/or what we now know more specifically today as vital signs – indicators related to businesses success and sustainability, particularly those found in – emanating from company’s intangible assets.
Today however, monitoring – measuring the performance of a company’s intangible assets is neither a time – resource luxury applicable only to Fortune ranked companies. Rather, those activities are a necessity and fiduciary imperative for most all firms, including SMM’s (small, medium multinationals) SME’s, (small, medium enterprises), start-up’s, early stage companies, and university-based spin-off’s.
The prudence of striking a better balance between the stewardship, oversight, and management, of tangible vs. intangible assets can produce positive benefits and multipliers that can favorably cascade throughout an enterprise.
There are numerous factors in play today that should be influencing management teams to pay more attention to (intangible) asset monitoring as indicators of performance and contributory value irrespective of company size, maturity, or industry sector. These factors include, among others…
- increasingly aggressive, competitive, and predatorial global competition.
- the growing connection between a company’s intangible assets, stakeholders, value-supply chain, 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.
- increasing government regulatory emphasis (globally) on reporting and measuring (accounting for) the value, performance, and materiality changes of intangible assets.
Each blog post is researched and written by me with the genuine intent they serve as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.
Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk. As such, my blog posts are not intended to be quick bites of information piggy-backed to other sources, or unsubstantiated commentary.
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