Based upon numerous client engagements and countless detailed conversations with…business owners, leadership, management teams, investors, and entrepreneurs regarding the relevance of intangible assets, I have concluded that, in a significant percentage of circumstances in which there is acknowledged underperformance of (a.) business, or (b.) transaction…
- the reason is variously related to challenges incurred in exploiting and converting the contributory role and value of key intangible assets to sources of revenue and competitive advantage
- for each initiative, process, and/or transaction undertaken.
Underlying these challenges is the irrefutable and irreversible economic fact that 80+% of most business’s value…sources of revenue, competitiveness, future wealth creation, reputation, brand, and sustainability today, lie in – emerge directly from intangible assets.
Unfortunately, a percentage of business leaders and management teams, for various reasons, exhibit a…
- dismissiveness of this economic fact, and instead convey contentment with the status quo which typically translates as continuation of time-
honored convention and past practice.
- operationally unfamiliarity with the rapid expansion of intangible asset intensive and dependent businesses and instead, interpret intangible asset intensity and dependency as theoretical embellishments, rather than factual business realities.
It is here that I introduce business leadership to Alan Alda’s newly published book…titled ‘If I Understood You, Would I Have This Look on My Face?’, which I have taken the liberty of applying here. In this book, Alda introduces various scenarios having to do with ‘communicating for understanding and action’, e.g.,
- medical patients not understanding their doctor’s orders sufficiently
to follow them.
- a state’s flood mitigation and dam engineers are unable to convince
relevant authorities to dedicate resources to reinforce-repair a dam
with a high probability-risk of breach.
- parents apparent inability to develop sufficient trust with their teenage son and daughter to mitigate the probability one or both will engage in
taking-using illegal (addictive) drugs.
In each instance, if the recipient of the information…does not understand, is unreceptive to the cautionary forewarning or taking pre-emptive (mitigating) action, adverse outcomes are likely to materialize.
Admittedly, on several occasions, and at various stages of client engagement…regarding their intangible assets, I have sensed my counsel is being variously dismissed.
Respectful follow-up questions with clients often reveal…they have construed the intellectual-managerial task of (a.) achieving operational familiarity with their firms’ intangible assets, and (b.) work (efforts, resources) toward developing an intangible asset intelligent culture, exceeds their immediate preference. Instead, retaining the status quo of convention and past practice suddenly appears less stressful.
In practical terms, I find their ‘status quo’…often translates as applying only the aspects of intangible asset management which they deem the most essential without distinguishing good, better, best!
The importance of bringing operational relevance and clarity to companies-business’s intangible assets is apparent from a conversation I had several years ago…
- I was standing near the tarmac in the early morning hours of a chilly spring day with a senior executive of a global air freight company.
- From our vantage point, we could readily observe ‘as far as our vision would allow’, what I would characterize as, nothing short of…
…a highly choreographed convergence of activities wherein cargo jets were
landing, taxiing, unloading, re-fueling, changing crews, loading and preparing for on-time departure to strategic ‘hubs’ globally.
While we were observing these highly orchestrated activities occurring before us, I turned to the executive and remarked that…
…through my lens, I am looking at what must be billions of dollars of
of continuously tweaked intangible assets, i.e., intellectual, structural, and relationship capital which are converging, seamlessly, efficiently, and timely, but not just at this location, but comparable locations globally!
Interestingly, the senior executive’s immediate response to my observation was very matter-of-fact and quite different…
…no Mike, what I see before us, are billions of dollars of tangible – physical
assets; aircraft, equipment, technologies, and trained-skilled personnel
interacting to make this company competitive, efficient, and operate faster, better, cheaper, that our competitors, as it must do 24-7-365.
Readers are free to draw their own conclusions from the above exchange. However, I ask each to do so in the context of…
…the globally universal economic fact that 80+% of most business’s value, sources of revenue, competitiveness, reputation, brand, and sustainability, etc., today, lie in – emerge directly from intangible assets, primarily variations of intellectual, structural, and relationship capital.
That’s not to suggest the difference in what and how we observed… occurring on that tarmac that morning were (wholly) right or wrong. In this instance, both of our perspectives obviously held merit.
Mine, I would argue, may have greater relevance in the long term…insofar as this global air cargo carrier sustaining its’ value, competitive advantages, brand, and reputation…
- that’s because, this company, like so many others today, is indeed ‘intangible asset intensive and dependent’.
There is absolutely no debate that aircraft and the associated machinery and equipment are expensive tangible assets…however, the contributory role and value of each aircraft is being maximized by…
- continuously developing, integrating, and aligning relevant
intangible asset efficiencies, i.e., updates, rejuvenations, and re-
purposed processes and systems, ala intellectual, relationship, and
- effectively communicating same in 100+ languages and dialects wherever this air cargo company has or proposes business
- converging each of the above at the right time, right place, and
right way delivers – produces value to the company and its customers
along with competitive advantages that collectively sustain – enhance
its brand, image, and goodwill that is expected and demanded 24-7-365.
So, regardless of what, how, or why I or the senior executive characterize ‘what we observe’ differently…it’s important to affirm, the tangible-physical assets the senior executive referred to are, in my judgment…
- what follows, not precedes, coordinated and timely integration of ‘go, no go’ intellectual, structural, relationship, and competitive capital (intangible assets), ala origins vs. outcomes! IA’s are indeed the foundational requisites underlying the sustainability, competitiveness, and profitability this, and other IA rich (intensive, dependent) companies project and enjoy.
I genuinely enjoy contributing to clients engagements…wherein business leadership (a.) sense the excitement, passion, and (b.) recognize the economic and competitive advantage benefits from (c.) engaging their intangible assets…
- after all, IA’s produce-deliver economic and social realities which are observable, evidentiary, monitorable, and measurable, and contribute to a company’s value, sources of revenue, and sustainability.
This is not merely subjective opinion or ‘lecture hall’ theory… admittedly, merely developing – engaging – exploiting a company’s intangible assets is not the final word. There remains more research and practice, but this is a prudent, necessary, and lucrative starting point, and…
- the economic fact that 80+% of most company’s value, sources of revenue, competitiveness, and sustainability are inextricably linked to intangible assets is not going away!
NOTE: This post, was in part, influenced by Alan Alda’s newly published book titled ‘If I Understood You, Would I Have This Look on My Face?’
Michael D. Moberly June 5, 2017 St. Louis [email protected], the ‘Business Intangible Asset Blog’ since May 2006, 650+ blog posts published, ‘where one’s attention span, intangible assets, and solutions converge’!
Readers are invited to explore other published blog posts, video, and position papers at https://kpstrat.com/blog