Hesitancy – Reluctance To Engage Intangible Assets!

Engaging various business leadership as I regularly do, many of those discussions still reveal some…hesitancy – reluctance to engage their company’s intangible assets, which I presume, at least in part, is due to an absence of operational familiarity with businesses intangible assets, i.e., their contributory roles in terms of delivering value, competitive advantages, and sources of revenue.  https://kpstrat.com/wp-admin/post.php?post=5989

So, here we are, well into the 21st century…and the role of intangible assets appears to be welcomed and understood, but, primarily at the 5,000 foot altitudes.  That is not to suggest other business leaders are oblivious to the significance of sustaining – enhancing brand, knowhow, and competitiveness, etc.  What appears to be lacking, in my judgement is leaderships’ recognition – appreciation for how intangible assets are thoroughly embedded in company cultures and play consistent contributory roles in company’s value, revenue generation, competitiveness, and sustainability. Respectfully, below the 5,000 feet altitudes, the economic realities associated with the global shift away from tangible (physical) assets to intangible (non-physical) assets, remains variously elusive, e.g., the significance attached to the mere presence and a multi-hundred million dollar super computer vs. the intellectual, structural, and relationship capital that must be acquired, assimilated, and synchronized to ensure the ‘inputs’ represent the necessary and objective ‘outputs’.  https://kpstrat.com/wp-admin/post.php?post=6573

A sustaining and perplexing question is…why isn’t this ‘business reality – economic fact’ resonating, on an operational level with business leadership in a far broader sense? After all, there is relevance and urgency for businesses operating at any altitude or sector, e.g., small and medium size enterprises (SME’s) and research-based startups (RBSU’s), etc., where intangible assets clearly play much more visible and prominent roles, should one (1.) be aware, and (2.) possess an interest for objectively scouring their internal landscape for intellectual, structural, and relationship capital.

  • It’s puzzling, not just for me, but also for my colleagues, why business decision makers are not acting on this economic fact as rapidly and as thoroughly as the circumstances would appear to dictate.  Whether the awareness – insights originate from me, my blog, or myriad of other sources, operational familiarity with intangible assets has proven to directly benefit companies, irrespective of sector, in contexts of adding value, creating new/additional sources of revenue, enhancing competitiveness, and reasonably assuring sustainability, all, frequently overlooked, neglected, or, even wholly dismissed by those who are shy on (intangible asset) interest, awareness, and/or familiarity.

Influencing business leadership to seek and learn about…how to identify, unravel, and pursue strategies to extract – leverage as much value and competitive advantage as possible from the intangible assets at hand, is largely dependent on (1.) recognizing intangible assets relevance, (2.) their contributory role and value to a business, and (3.) their relationship to company value, sources of revenue, competitiveness, and overall sustainability.

I, like numerous other ‘voices’ advocating for…business leadership to assume greater (fiduciary) responsibility for recognizing and utilizing their intangible assets have opportunities – entrées to meet astute, experienced, intelligent, and talented business leaders and managers across sectors. Respectfully, a not insignificant number, may tout the benefits of applying relatively sophisticated (software) programs to coordinate employee work schedules as a means to minimize overtime pay, but mention the words ‘intangible assets’ and their attention span and interest may visibly wane. https://kpstrat.com/wp-admin/post.php?post=1488

It’s understandable some portion of a business leader’s lack of interest-enthusiasm for pursuing intangible assets, may be attributed to…accountants (internal, external) who may or may not fully grasp the contributory significance of intangibles or find accounting for intangibles to be challenging or assumed to be a task full of vagaries, therefore they may be reticent to introduce or explain the relevance of intangible assets to their clients…

  1. a consequence of Sarbanes-Oxley fatigue, i.e., here we go again…
  2. faux strategic planning, akin to near term – quarterly-based only projections…
  3. intangible asset advocates’ poorly framed explanations, distinctions, immediacy, or relevance of intangibles…
  4. business leaders misunderstanding – misinterpretation of intangible assets, influencing them to assume a dominance of, or no distinction with (conventional) intellectual properties…
  5. business leaders conveying self-deprecation relative to the intangible assets their company possesses, have little or no value worthy of the time necessary to identify, unravel, or assess…
  6. the absence of a conventional sense of physicality with respect to distinguishing tangible and intangible assets…
  7. consultants’ that characterize the process of identifying, assessing, and extracting value from intangible assets as being far more complicated and time consuming than necessary…

otherwise, not demonstrating the interest or need for taking affirmative steps to elevate and extract value from the intangible assets a company has developed, is not rocket science, its just good business!

The desire of a company’s leadership to put forth time and effort to…elevate, generate, and extract value  and competitive advantages from its intangible assets is directly related to its ability to sustain indeterminate control, use, ownership and preserve the value of those assets.

Once again, that’s because…80+% of most companies’ value, sources of revenue and future wealth creation are embedded in those assets, however...

  • no government entity issues a certificate to companies stating ‘these are your proprietary intangible assets, trade secrets, or competitive advantages’…
    • instead, its every company’s and leadership’s responsibility to safeguard and preserve the value, revenue generation, and competitive advantages those assets produce…
  • proof of IP ownership (certificate of patent registration) no longer constitutes a deterrent to would-be counterfeiters, misappropriators, or infringers…
    • nor does it provide assurance of economic benefits to the rightful owner!
  • infringement, misappropriation, counterfeiting and assorted other forms of asset compromises should no loner be characterized as mere ‘risks of doing business’, because, when risk remains unchecked today, those risks-probabilities rapidly become inevitabilities in the hyper-competitive, predatorial, winner-take-all global business environment!

In these circumstances, decision makers are obliged to…

  • know precisely what-which intangible assets warrant safeguarding and risk mitigation, i.e., when, from what, and from whom!
  • recognize intangible assets as being perishable, seldom fully renewable, or irretrievable, because, once they’re gone or compromised, their value, revenue generation capabilities, and competitive advantages, will have been substantially diminished, if not ‘go to zero’, along with reputation.
  • recognize that computer/IT security (safeguards) are not synonymous with preserving intangible asset value or sustaining control, use and ownership
    • in no small part because intangible assets exist in many forms, other than electronic ‘bits and bytes’!

In Fall of 2006, while teaching a (classroom) graduate management (MBA) course at a university…I was determined to incorporate intangible assets into each presentation, however, much to my chagrin, I quickly learned, for even the seasoned – employed graduate students in this course, intangible assets were challenging, conceptually and practically, to grasp and apply (to their employer’s circumstances) in quantifiable – monetary, or even value contexts.

I sensed then, and still do…that the primary (initial) hurdle with respect to the speed and level of acceptance, be it an MBA student or seasoned practitioner gives to intangible assets lies in the word ‘intangible’, that is, intangible assets lack a conventional sense of physicality, therefore the perception of subjective measurement.  Respectfully, for most, if not all of these graduate students, this served as their initial introduction to intangible assets which, in my view, is not necessarily reflective of this university’s graduate students, rather, a faux allegiance to business past practices. https://kpstrat.com/wp-admin/post.php?post=5942

A significant percentage of the graduate students ultimately conveyed…a sense of acknowledging the role, function, and value of intangible assets, perhaps as a result of being periodically peppered with (my) remarks, real examples-applications of intangibles, and their immediate-consistent relevance to the art and science of managing and the management of businesses, which presumably these MBA students aspired.

One graduate student however...who had entered this MBA program with an established and solid career in financial services, challenged, and on some occasions resisted my advocacy for the relevance and importance of intangibles.

This student defended his position, in part by…describing numerous multi-million dollar loan and acquisition transactions which he had lead (referencing conventional banking – legal forms) in which there was absolutely no mention or recognition of the intangible assets being in play, in terms of (a.) contributory value being observed, (b.) a valuation having occurred, or (c.) applied as collateral (securitization).

At the close of the last class session for the semester…this student approached me, and described in a respectful tone, “I understand what you’re talking about (reference to intangible assets) but I just don’t see it happening in my bank, at least while the current officers remain in place…’!

Of course, one question being…does the same hold true for today’s business decision-makers in light of the economic fact that substantially smaller percentages, perhaps 15%-18%, of companies’ value, sources of revenue, and competitive advantages today are generated from tangible – physical assets!

Should there be a bottom line to this, it may be this...introducing intelligent, seasoned, and already successful business decision-makers to intangible assets, and that time devoted to learning about intangibles and strategies to maximize and extract (safeguard, preserve, monitor, and license) value are indeed, worthy strategic objectives, but unfortunately, remain no easy sell!

Michael D. Moberly – September 6, 2018 – St. Louis – kpstrat.com. – [email protected] – ‘Business Intangible Asset Blog’ (since May 2006) https://kpstrat.com/blog where attention span, business realities, and solutions meet!  Intangible Asset Strategist and Risk Specialist

Readers are invited to explore other papers and books I have published at https://kpstrat.com/books/


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