Intangible Assets Better Explanations!

Michael D. Moberly    August 18, 2015   ‘A blog where attention span really matters’.

Intangible assets, better explained will facilitate their integration in managerial – strategic lexicon…but, let there be no question, I am a strong and unapologetic advocate of intangible assets!

An occasionally frustrating aspect to my client work in the IA arena is sparked, in part to the murky and confusing language, sometimes perceived as contradictory, used to define (describe, distinguish) IA’s, e.g., they

  • are the non-physical ‘things’ of value that a company owns.
  • have no set monetary value and little or no objective (consistent) means of measurement.
  • lack conventional sense of physical presence, i.e., they’re not subject to being seen or touched.

I am not suggesting this occasional frustrations can…consistently fit the increasing number of IA intensive and dependent firms regardless of the multiple realities above, e.g.,

  • they lack a conventional sense of physicality.
  • their performance and value is challenging to objectively monitor and measure.

I have encountered countless circumstances in which uninitiated management teams, boards, investors alike, struggle to make sense of IA’s, i.e., what the British often describe as the ‘invisibles’ which actually, is quite realistic and even understandable because, among other things, seldom, if ever, are IA’s singularly reported on company balance sheets or financial statements, that is, unless they have been acquired externally, or ‘lumped together’ as goodwill.

Decision makers and strategists are hard pressed…to deny the reality that rising percentages of organizations have far fewer tangible (physical) assets in their inventory. Instead, their ‘inventory’ is conceived and built using an array of IA’s. Forward looking-thinking organizational strategists are apt to say, and, quite correctly, the development and effective use of IA’s is essential to organization’s near and long term success and serve as cornerstones for (organization) viability, sustainability, profitability, and competitiveness.

Still, to the uninitiated…i.e., those operationally unfamiliar with intangibles, including those who are suspect and/or dismissive about IA’s contributory role and value coupled with their ambiguous definitions, contribute little to achieving the much needed ‘eureka’ moments, i.e., I get it, which is critical to these irreversibly permanent fixtures to the knowledge (IA) based global economy which most would agree, we’re only in the initial stage.

An often overlooked and misunderstood reality about IA’s is that most every organization, not just the new, IA intensive-dependent ones, through their management teams and employees, routinely create, use, and ‘bank’ a substantial amount of IA’s in the form of intellectual, relationship, structural, and competitive capital. But, unfortunately, in conventionally led enterprises, these IA’s are less apt to be recognized or efficiently utilized, because in large part I find, a not insignificant number of leaders – decision makers still perceive their organizations functioning in traditional ‘brick and mortar’ contexts, dominated by physical – tangible assets, which are presumed to be their primary means for creating value and/or serving as sources revenue.

Through my lens, there are infinite types – categories of IA’s…i.e.,

  • knowledge-based, or are born out of the intellectual capital held between our ears,
  • issued to our company as intellectual property, i.e., patents primarily, or
  • merely the accumulation of relationships, experience, and specialized (operational) know how that creates efficiencies and adds value.

When IA’s are prudently and optimally linked to understanding how and when to effectively, efficiently, and profitably use-apply them, it’s all but sure they will produce desirable and profitable outcomes and competitive advantages.

So, whether one is operating an already successful business or overseeing an SUBUR (start-up based in university research), I find most leaders – decision makers – strategists gravitate to their respective comfort zones often comprised of facts, figures, formulas, and ratios, etc., which their operational familiarity is firmly ensconced. In other words, quantitatively tangible components unfortunately with far too much regularity remain the framework for business decisions and strategic planning.

Organization decision makers’ find these comfort zones are easy to sustain because the measurement and accounting tools they are accustom to using and relying upon remain conventionally framed through a very conventional tangible assets lens, and less acquiring confidence in IA’s!

Today, those conventional comfort zones…packed with tangible numbers which still fit neatly on balance sheets and financial statements are being, quite necessarily challenged in favor of embracing and engaging the intangible sides of organizations. Management teams are obliged to push their conventional thinking and practices beyond the tangible to the intangible relative to the contributory value IA’s consistently deliver.

So, welcome to the specialized, but ever expanding arena of the information age and its outgrowth, the knowledge (IA) based economies, wherein IA’s now routinely play increasingly significant roles as contributors – facilitators to most organization’s value, sources of revenue, competitive advantages, sustainability, and ‘building blocks’ for growth and profitability.

But, despite the rising importance of IA’s and the contributions they consistently deliver to organizations in all (industry) sectors, they unfortunately remain, for some management teams and boards, challenging to define, recognize, distinguish, and measure. Hey, you have to work at it! (Adapted by Michael D. Moberly from the work of Thomas A Stewart, ‘Trying To Grasp The Intangible’.)

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