Measure The Correct Intangible Asset Value Streams

Michael D. Moberly   June 7, 2010

Unfortunately, there remain a significant number of company management teams and boards that believe ‘the right things to measure’ insofar as revenue and profitability are concerned, are only those things (assets) that get reported on balance sheets! 

While that conventional view is understandable, most companies today have nuanced mixes of processes, procedures, and intangible assets that actually create-deliver the majority of (company) value, sources of revenue, and influence new areas of business.  In fact, U.K.’s Department of Trade and Industry (DTI) Future and Innovation Unit cited in their study/survey, seven specific (intangible) value streams that their study/survey revealed that warranted investment and management to literally form the basis-foundation for unlocking a company’s true potential. 

These seven ‘intangible value streams’ were the product of DTI’s 2001 study/survey titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’. 

The DTI report puts for the view that the seven intangible value streams comprise ‘the intangible raw materials that employees use to (a.) collaborate with one another, in order to, (b.) achieve company goals, (c.) solve company problems, and (d.) exploit opportunities for profitability and growth’.  

The seven intangible value streams identified in DTI’s survey, which consisted of in-depth interviews of 50 successful organizations, are:

1. Building an effective strategy for managing and maintaining relationships with key stakeholders.  This entails (a.) understanding how to identify key (internal, external) stakeholders and develop, organize and sustain that network of relationships, and (b.) recognizing that the nexus of ideas and opportunities evolving from that network will play an important role towards achieving and sustaining a company’s competitive advantage.

2. The added value a company can achieve from the effective management and use of its largely internally held knowledge and expertise.  In the current globally competitive and predatorial business transaction environment, a companies survival (sustainability) is interwoven with the ability of management teams and boards to ensure the knowledge and expertise (developed and/or acquired) are effectively and consistently shared and used throughout an enterprise, particularly the tacit knowledge and expertise that’s literally held in the minds of individual employees.  Absent the impetus – a system for knowledge and expertise dissemination and sharing within a company, they will be less likely (receptive) to (a.) identify gaps in their knowledge/expertise base, and (b.) respond quickly enough to identify, assess, and act on potential opportunities, and (c.) will become more vulnerable to sudden losses of knowledge/expertise, e.g.,  a key employee leaving and/or the misappropriation of key proprietary (competitive advantage delivering) information, etc.

3. Communicating (bringing) clarity of purpose to employees relative to their role in – contribution to company success.  Clarity of purpose also lends itself to building a ‘company culture’ in which employees are more inclined to recognize-understand the importance of achieving a balance between company goals and the daily (company) operational needs for building and sustaining intangible (asset) value streams, one of which is goodwill.

4. Building a sustainable company culture that encourages greater awareness of new and/or changing market developments that facilitates a quicker grasp and produces a more timely and effective response in terms of adapting to – exploiting those new developments and opportunities.

5. Regardless of the quality of product or service a company produces/delivers, they will likely count for little (in terms of value, etc.) if reputation with consumers, customers, clients, and/or suppliers is low, has been damaged, or is otherwise impaired.  A companies reputation and trust have literally become the foundations for building and sustaining competitive advantages and market position.  Company management teams and boards that are dismissive about or give little credence to those objective and essential components to success will likely be similarly dismissive about the rapidity which risks-threats to a company’s reputation (trust, image, goodwill, etc.) can materialize and create irrevocable damage and losses.

6. Maintaining the correct mix of employee competency, i.e., skills, knowledge, and expertise are key facilitators-enablers for companies to grow in both capacity and scope.  This requires, of course, management team and board committment to consistent investments in developing and maintaining employee talents’ that are essential to not merely support existing operations, processes, and programs, but also be effective contributors to future (company) initiatives and strategic planning.

7.  Maintaining market position and competitive advantages today involves, among other things, ensuring that management teams and boards have the right processes and systems in place, at the right time, and at the right location to support company activities and initiatives as needed.  It should be noted however, in today’s seemingly nanosecond time frames when markets, transactions, and the needs and demands of stakeholders can change and risks-threats rapidly materialize, those company processes and systems must be sufficiently flexible and adaptable to accommodate those changes and execute at an equally rapid pace. 

Financial reporting systems focus on historic balance sheets, profits, and cash flow, but management teams and boards don’t necessarily get the right perception of assets’ prospective value through such a historical lens only. 

Value is an uncertain and increasingly risk laden factor embedded in the global business environment with succcess being all-the-more dependant on objective assessments being conducted that address future options and opportunities and extrapolations of historic costs as well as current (asset) performance. 

(This post was inspired by a report – survey produced by U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written to provide insights for companies, their management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at [email protected].



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