Intangible Assets…Better Explanations Will Make Them Part Of Business Management Lexicon!

Michael D. Moberly    May 7, 2012

Let’s get serious about defining and explaining what intangible assets are. Unfortunately however, there remain some challenges throughout much of the business community insofar as defining and explaining precisely what intangible assets are, how and by whom are they’re produced, and how they contribute to a company’s value, etc.

Even with more experienced, astute and successful business management teams the words intangible assets are seldom part of their discourse, and certainly not part of their regular business lexicon.  The reason for this varies, along a continuum of…

  • not fully understanding or appreciating what intangible assets actually are
  • being unaccustomed to identifying, assessing, or exploiting intangible assets
  • erroneously assuming intangible assets are the (exclusive) domain of accountants and/or intellectual property (legal) counsel
  • dismissing intangible assets because they’re not characterized as standalone assets, reported on company balance sheets or financial statements, instead they’re often ‘lumped together’ as goodwill.

Thus, recognizing the necessity to engage and exploit their intangible assets or determine – measure their contributory value and performance is perceived as being un-justifiable even though today 65+% of most company’s value, sources of revenue and building blocks to achieve growth, greater wealth creation, and sustainability evolve directly from intangible assets.

Too, intangible assets are often mistakenly characterized more aligned with business and accounting theoretical concepts best espoused in university lecture halls rather than boardrooms, c-suites, or shop floors.

This challenge of defining and explaining intangible assets also evolves from the reality that intangible assets are just that, they’re intangible!  They lack a conventional sense of physicality. But, even though management teams are unable to necessarily see or touch these assets, intuitively they ‘feel’ their presence and certainly, their absence through, for example, declines  and/or erosion of a company’s reputation, image, goodwill, intellectual capital, value, market space, competitive advantages, etc.  So, regardless whether they’re called assets or not, it often boils down to management teams’ inclination and ability to  identify, assess, manage, and measure these increasingly important, valuable, and strategic assets.

Interestingly though, conversations with countless business owners and managers, they can routinely distinguish companies that effectively capture and exploit their intangible assets over those that don’t, even though it’s quite unlikely the terms intangible assets will be used in their critique.

Thus, for all of the above reasons, intangible asset specialists who conduct briefings, awareness training, and consult with companies about their intangible assets should always be prepared to field an array of skeptical and even critical questions, particularly with respect to asset valuation and/or contributory value.

A responsibility intangible asset specialists must assume today with respect to defining and explaining what intangible asset are is through articulating and demonstrating smarter and more effective techniques and rationales for companies to capture, utilize, manage, and monetize their intangible assets. This includes clearly distinguishing:

  • what intangible assets are
  • what they’re not
  • the various forms they take
  • how they originate, and equally important
  • how and when intangibles can be effectively and profitably applied as ‘building blocks’ to enhance a company’s value and create sources of revenue  and competitive advantage.

Ironically, at least in my view, in the midst of this extended economic downturn, conventional wisdom would suggest that company management teams and boards would be looking for and be receptive to applying alternative and proven strategies to engage and exploit their company’s intangible assets particularly as they endeavor to weather this lingering recession.

The bottom line though is, some management teams, c-suites, and boards find it professionally challenging to step outside their comfort zones to engage concepts and strategies which (a.) they have not personally tested, (b.) significantly depart from their past practice, and (c.) are well under conventional ‘mba radar’.

Successful companies are typically ran by successful management teams.  For the most part, those management teams are realists and pragmatic risk takers.  Therefore, quite understandably, they may express some well-intended skepticism about intangible assets for all the reasons cited above.

However, when such skepticism translates into companies being restrictively tied to practices and strategies of a tangible (physical) asset based economy versus a knowledge-intangible asset based global economy, they’re not likely to experience the growth which they are probably capable!

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