Today, achieving operational familiarity with businesses intangible assets is rapidly becoming an operational – managerial norm, especially for intangible asset intensive – dependent businesses…with key – strategic intangible assets consistently being in play.
More often than not, they are collaboratives – collections of…non-physical’s (assets) which exist and applied as various forms of intellectual, structural, and relationship capital.
However, my own experience suggests…it is often the ‘intangibleness’, i.e., non-physical nature) of these assets, that contributes to business leadership and management to exhibit a personal reluctance – hesitancy to consistently engage, differentiate, mine, and effectively exploit these assets. In part because, again, intangible assets are not necessarily subject to human physical senses of sight, sound, and touch, etc., whereas tangible-physical assets routinely oblige.
Anecdotally, such cautionary reluctance – hesitancy does influence many management – leadership teams to…wholly overlook, neglect, and otherwise dismiss the economic – competitive advantage benefits of crossing the chasm into the realm of intangible assets. That is, even though intangibles consistently play dominant roles in business efficiencies, competitiveness, and transaction outcomes.
Preferably, readers will find this post leaves them with…substantially less – no doubt about recognizing, engaging, differentiating, and exploiting intangible assets, i.e., having achieved operational level familiarity with intangibles as conveyed throughout this blog.
With respect to the materialization of (business) risk to intangible assets, there are two words – phrases I endeavor to express – convey to business leadership insofar as describing (risk) impact – outcomes to intangible asset intensive and dependent company’s, i.e.,
- the suddenness and ‘keystroke speed which asymmetric risks can materialize to adversely affect intangibles, i.e., company reputation, etc., and the
- frequent ‘ripple – cascading affects’ to materialized risks throughout an enterprise.
Absent the continual flow and monitoring of data, observations, and experiential insights regarding...the performance, status, and contributory role and value of a company’s intellectual, structural, and relationship capital…
- under various circumstances, transactions, and stressors,
- preempting-mitigating intangible asset risk, aside from Ouija boards or crystal balls, will fall short.
More specifically, absent business leadership’s operational familiarity with the intangible assets they hold…it’s likely, their company will have little, or no, ‘radar’ regarding the (potential) ‘scalability’ of risk to intangibles, i.e.,
- when, where, why, and how risks materialize.
- the beneficiaries of risk (asset) targeting and materialization,
- the adverse impacts – affects (economic, competitive advantage, reputation, etc.) of materialized risk, and
- the probability the risk will cascade throughout their company.
Too, its not infrequent that the contributory roles and value produced by intangible assets…i.e., to a business initiative or transaction, are obscured because the assets have been…
- packaged as mere constituting goodwill, or
- conventional investigative ‘GPS’ company’s may have, is unlikely to have identified, unraveled, and ‘plugged’ the source of risk – asset compromise relative to value, revenue, or competitive advantage in advance, because
- those intangibles have likely not been consistently monitored for compromise.
Circumstances such as these, clearly suggest, at least through this practitioners ‘all things intangible’ lens…
- that relying solely on reviews of financial statements, balance sheets, or subjective anecdotes,
- as a primary means to acquire comprehensive portraits of a company’s financial – competitive advantage health, via its intangible assets,
- or have timely awareness of risk laden impediments – predicaments that warrant attention,
- are likely to be perceived as insufficient, arbitrary, and ultimately fail.
So, unless – until business leadership, routinely assume operational familiarity with intangible assets is a…legitimate (managerial) requisite,
- then, its likely, guesswork and subjectivity will remain the dominant techniques for assessing and safeguarding assets, and
- those doing so, should be prepared to incur numerous, and often irreversible missteps, miscues, and oversights (strategic as well as tactical) insofar as business operation and transaction execution.
- which lead to under-performance, loss of competitiveness, and even business failure.
That said, it would be imprudent to infer…every transaction risk – business adversity is born solely from operational unfamiliarity with, acting dismissively toward, or under-utilizing a company’s intangible assets.
Still, prudent business leaders and management teams are obliged to… recognize this irreversible and universal economic fact…
- 80+% of most company’s value, sources of revenue, competitiveness, and sustainability lie in – emerge directly from intangible assets!
Not infrequently, when a business transaction is undertaken by a company…but, not initially thought to be particularly challenging or risky, but, nevertheless, ‘goes south’, it should prompt business leadership to secure a transaction review by an intangible asset strategist and risk specialist.
Not infrequently, one revelation of such a review, is that transaction under-performance or failure is variously attributable to operational – circumstantial unfamiliarity with, how, when, why, where, and which intangible assets were actually in play but, for various reasons…
- were not acted on effectively, lucratively, or competitively. or,
- the transaction was negotiated absent sufficient safeguards ala pre – post transaction due diligence in place regarding the intangible assets in play,
- leaving risks unnoticed, unmonitored, and unmitigated.
Still, when business leadership are operationally unfamiliar with how, when, and why intangible assets are in play…in a particular transaction, initiative, or project, it frequently translates-materializes as the omission of all things intangible from planning, assessing, and execution. This leaves intangibles’ contributory role, value, projected sources of revenue, competitiveness, and sustainability out of a transaction’s ‘go, no go’ equation, and otherwise, off a (transaction) negotiating table.
It is true, that the dominant drivers and ‘underwriters’ to most every business transaction…are intangible assets which will, inevitably, be in play. As such, they will be vulnerable – receptive to various types-levels of risk, e.g., competitive advantage under-mining, targeted erosion of (asset) value, and/or numerous other types-levels of (asset) compromise.
As such, it is necessary today, that businesses and their management teams recognize that asset risk can materialize…in other than single, seemingly unrelated or ‘one off’ acts or events.
Quite the opposite, any one, or multiples of risks may occur simultaneously and/or in ‘chain reaction’ contexts…to wholly negate or substantially minimize projected-desired (transaction) outcomes, even more so when intangible asset unfamiliarity and risk mitigation are absent or executed in a mediocre manner.
With numerous (intangible asset dominant) engagements behind me…I have respectfully come to conclude that not an insignificant percentage of the challenges businesses and management teams experience, irrespective of how evident they may appear to those operationally familiar with intangibles, are variously attributable to the ‘non-physical’ characteristics of intangible assets, e.g.,
- difficult to converge the intangible with the conventions of tangible-physical assets.
Another consequence to asset ‘intangibility’ is that it…can dissuade some business leaders and management teams from recognizing intangible assets as being relevant contributors to a company’s value, competitiveness, revenue, or sustainability.
After all, it is true, a percentage of business leadership…still remain variously dismissive and under-appreciative of intangible assets they hold, i.e., especially, how to utilize – exploit them effectively, lucratively, and competitively.
Not so coincidentally then, when intangible assets are treated dismissively or wholly neglected…their contributory role and value can be…
- significantly weakened,
- conceded to competitors, or
- relegated to the non-denominational and virtually unusable ‘catch-all’ of goodwill.
Either way, I find there is no single mechanism to overcome these detrimental shortcomings…aside from seeking – achieving operational level familiarity with intangible assets for which business leaders and management teams have control, use, ownership, and (fiduciary) responsibility to safeguard, exploit, and monetize well beyond merely what’s posted on conventional financial statements and balance sheets.
Michael D. Moberly March 22, 2019 St. Louis [email protected] the ‘Business Intangible Asset Blog’ since May 2006, 650+ published posts, read in 137 countries, ‘where one’s attention span, businesses intangible assets, and solutions converge’! (The above has undergone substantial revisions since it initial publication on May 10-11, 2017.)
Readers are invited to explore more blog posts, position papers, video, and books at https://kpstrat.com/blog
As always, comments are encouraged and most welcome.