Michael D. Moberly December 30, 2009
Building knowledge and intellectual capital into SME’s (small, medium enterprises) represents a prudent and much needed exercise for management teams which serves as a foundation to elevate the probability their company will not merely experience mediocre success, but stand out in their market space and among competitors by (a.) being innovative, (b.) sustaining/enhancing competitive advantages, and (c.) achieving profitability.
Respecting the economic fact – business reality that 65+% of most company’s value, sources of revenue, and future wealth creation and sustainability today lie in – are directly linked to intangible assets, there is, in my view, ample room-opportunity for managerial discretion and maneuverability to make such an initiative not merely worthy of the time, but lucrative and strategically beneficial to a company.
It’s still fair to say though, respectfully, and there is virtually no evidence to the contrary, that significant percentages of SME founders, owners, and management teams remain unfamiliar with and/or distinterested in (a.) the intangible assets their company has developed (produces), and (b.) strategies to effectively exploit those assets to add value to the company.
In this context, its nothing short of an operational imperative today, again, especially in this knowledge-based economy, that SME management teams seek opportunities to develop a strong and varied repertoire of best practices that include, among other tings, (a.) identifying and unraveling their intangibles, their origins, and their contributory value, and (b.) promote their utilization, i.e., leverage them internally to influence more innovation, and exploit them externally to enhance – secure competitive advantages, reputation, image, and goodwill, etc.
However, there remain persistent hindrances that effectively discourage, even deter some management teams from engaging their intangible assets and opportunities to exploit those that are internally produced. This is largely because intangibles are still not recognized on a company’s balance sheet. Consequently, those parties and institutions that would presumably have direct interest in using an SME’s financial reports (that include intangibles) such as banks for assessing lending decisions, or even SME management teams relative to fiduciary incentives to (better) manage and/or leverage intangibles, are discouraged from doing so, largely due to the perceived absence of commensurate financial incentives.
The prospect of receiving financial rewards (incentives) for engaging in an intangible asset focused course of action is a worthy foundation for most any business decision and/or transaction. Therefore, SME management teams should not overlook, especially in this knowledge-based economy, the reality that intangibles represent the dominant underliers – foundations to value, profitability, and sustainability.
Unfortunately, there are various rationales, and what some would describe as, real disincentives, which many SME management teams default, as their rationale for not engaging the intangible assets they have fiduciary responsibilities for managing, overseeing, and stewarding.