Michael D. Moberly April 19, 2010
Intangible assets evolving from small and mid-sized companies (SME’s) tend to be knowledge-based and serve as market/competitive differentiators, that is, if management/leadership teams and boards recognize and utilize them as such.
Intangible assets seldom contribute as ‘stand alones’ in companies. Instead they more likely serve to support, facilitate, and enable other assets’ contributory value embedded in a companies products, services, and/or capabilities. In other words, they frequently exist in clusters and/or collections (of assets) which together, favorably influence a firms’ overall reputation.
But, the development, accumulation, and effective utilization of intangibles in SME’s are reflective of the entrepreneurial and forward looking/thinking orientation of a management team and/or board. To say then, that it’s essential, if not critical today, that SME management teams and boards recognize and effectively utilize the intangible assets being produced in their company is certainly not an over-statement!
Personally, I advocate a three step process or practice to producing and utilizing intangible assets:
1. Intangibles should be thoughtfully produced and objectively monitored, rather than merely permitted – hoped to evolve over a period of time.
2. Proper and effective integration of intangible assets in the appropriate (company) processes, products, and services, so they can not only enhance (company) value, but also contribute to potentially new sources of revenue, is a key.
3. Perhaps equally important, intangible assets should be developed in ways so they can, if feasible, serve as hindrances, inconveniences, and/or barriers to (market) entry by competitors.
The latter can be achieved by purposefully designing those intangibles’ that can deliver value, revenue, and competitive advantages to include certain degrees of (proprietary) complexity and obscurity that create certain challenges and/or hurdles that will require competitors’ significant time, expense, and resources to try to replicate or imitate.
In addition, its essential for SME management/leadership teams and boards to recognize that, as their company matures, its likely there will be a commensurate increase in experience, expertise, and knowledge that will enable/facilitate the development and integration of additional sets of intangibles that mirror an SME’s stage and/or life cycle, for example, (1.) a start-up with little or no customer capital/relationships as yet, (2.) established SME’s which have already developed customer bases and reputations, but have few, if any other intangible assets, and (3.) established SME’s built exclusively around one or two specific intangibles, or (4.) SME’s that have established multiple (clusters of) intangibles.
(This post was inspired by a 2006 research report titled ‘SME Intangible Assets’ produced by the (Association of Chartered Certified Accountants with Chris Martin and Julie Hartley serving as principle investigators.)
