Dr. W. Edward Deming and Intangible Assets…

Michael D. Moberly   July 1, 2009

Of all things management attributed to Dr. W. Edward Deming perhaps one of the most often cited is the adage ‘you can’t manage what you don’t measure’.  As interpreted by most, this adage suggests that unless management teams can (a.) measure what they’re managing, it’s unlikely they will (b.) know if there’s improvement, or (c.) be able to manage for improvement.  (Adapted by Michael D. Moberly from the work of F. John Reh)

Another lessor known adage attributed to Dr. Deming is relevant to intangible assets, which is, ‘running a company on visible figures alone constitutes one of the seven deadly diseases of management’!  Here, Dr. Deming is pointing out that there are many important things (in businesses and company’s) that must be managed, but not all of them can be effectively managed or measured by relying on conventional techniques-methods, particularly those associated with the management – measurement of tangible-physical (bricks and mortar) types of assets.  (Adapted by Michael D. Moberly from the work of John Hunter)

At the time Dr. Deming’s adages were originally espoused, intangible assets were hardly on many radar screens in academia or even among the most forward looking management teams.  Consequently, it may be doubtful whether Dr. Deming fully appreciated just how relevant the ‘deadly managerial disease of running a company on visible figures alone’ would ultimately become in the 21st century as knowledge-based intangible assets eclipsed tangible/physical assets, i.e., today, 65+% of most company’s value, sources of revenue, sustainability, and future wealth creation lie in – are directly linked to intangible assets not tangible (physical) assets!

As most management teams have come to know in this economy, there is no other time in business management and/or governance history when measuring, managing, and monitoring the value of intangible assets is more necessary or more integral to a company’s stability, growth, profitability, and sustainability! 

Forward looking/thinking management teams’ continue to seek however, efficient, objective, and standardized techniques to measure and monitor company’s intangible assets, i.e., their origins, development, contributions, performance, and value, etc.  They’re also seeking reliable and objective techniques to identify and assess fluctuations and/or losses in intangible asset value, along with materiality changes, and asset obsolescence.  As both techniques evolve and receive confidence from management teams and the relevant regulatory agencies, Dr. Deming’s adage ‘manage what can be measured’ will be realized, which, among other things, will allow company’s to avoid devoting time and resources trying to sustain – preserve once valuable – useful intangible assets that have already experienced measurable losses, compromises, obsolescence, or been underminded or significantly de-valued!

This does not mean however, summarily casting those assets aside for a zero return.  Rather, it means identifying ways those assets’ remaining value – and potential use may still be leveraged, i.e., sell them, barter them, transfer them, license them, hold them, and/or explore ways to bundle them, perhaps with other assets, to extract as much value as possible!

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