By Dr Bruce Copley
It is common practice to evaluate an organisation's performance and success by considering only its TANGIBLE FINANCIAL ASSETS such as market value and share and net book value. There is however another very important " hidden " component known as the INTANGIBLE VALUE that does not appear on an organisation's balance sheet. The Intangible Value of a company is simply the difference between its Market value (share price multiplied by the number of shares issued) and its Net Book Value (recorded value of all tangible assets). The Intangible Value is rarely lower than 50% of the market value and in larger quoted companies is frequently much higher. Microsoft has a figure of 85% while Nokia's value is in excess of 90% of its market value.
Since the large majority of companies ONLY MANAGE WHAT GETS MEASURED namely the tangible values, it is patently clear that not recognising, understanding and managing Intangible Values constitutes a serious corporate " blind spot" that has far reaching implications. With companies such as Ford whose intangible assets are in the region of 35 billion US dollars, even a 1% loss through poor Intangible Value Management constitutes a significant loss for shareholders. Conversely a 1% gain through efficient Intangible Value Management represents substantial shareholder profits.
A growing body of research is providing conclusive evidence that an Intangible Value Management programme is the MOST IMPORTANT AND SIGNIFICANT ENTERPRISE-WIDE intervention any organisation can undertake. In simple terms a company's ability to flourish depends on its capacity to create, develop and integrate the full spectrum of its intangibles. When intangibles are not properly managed they are diluted and dissipated within the system in much the same way that untrained eyes overlook diamonds in the rough.
The United Kingdom's Department of Trade and Industry (DTI) has in a recent document(2004) entitled " Creating Value for your Intangible Assets" identified 7 key intangible assets which are the following:
RELATIONSHIPS: Only by developing an effective strategy for managing and maintaining excellent relationships with both external and internal customers can a company hope to achieve its full potential.
KNOWLEDGE: It is essential to continuously expand the knowledge base and also to ensure that this knowledge is shared and used effectively throughout the organisation. Explicit or codified knowledge can be written down and easily replicated and copied. Tacit knowledge on the other hand is held in the minds and hearts of individuals and is shared through stories, dialogues and gatherings.
LEADERSHIP AND COMMUNICATION:
Clear goals and strategies must be embedded throughout the organisation and this is only possible through strong and visionary leadership and effective and authentic communication. Good leadership involves responding to change by encouraging new innovative thinking that seeks a sustainable future rather than seeking to sustain the past.
CULTURE AND VALUES:
These contribute to the quality of the workplace environment, the care for each other and the tangible assets, the happiness, safety, openness, cooperation, teamwork, empathy and other important human dynamics. Ensuring the continual health and maintenance of these values and also recognising that different groups have different cultures that need to be integrated and managed, is essential for optimal functioning.
REPUTATION AND TRUST: While these may be influenced by tangible assets, location of property or intellectual property, in the long run things such as empathy with needs, reliability, responsiveness, friendliness and quality sustain image, brand, trust and reputation. Issues, which could damage these key intangible assets, need to be continually monitored and steps taken to reduce the risks as far as possible.
SKILLS AND COMPETENCIES: It is not sufficient to simply know about things, to possess the tangible facilities or to own the intellectual property, what is needed is the talent to make use of resources to create value for the organisation. Core competencies are identified as the ability to seize opportunities at the right time and to be innovative in order to create value for all concerned. The importance of creating the space and opportunity for everyone to continuously learn both individually and collectively cannot be overemphasized.
PROCESSES AND SYSTEMS: It is important to consider in a balanced fashion not only how to do things but also to consider the implications of the way in which things are done. Investing in systems is primarily about improving efficiency, but simply putting a system into place will not fix a busted process … processes must be sorted out first and then systems introduced to automate them.
The reporting of Intangible Value in UK companies has been strongly recommended for implementation. The primary purpose of the Operating and Financial Review (OFR) would be to provide greater transparency and to improve the quality, usefulness and relevance of information that is provided by quoted companies. This would enable shareholders to exercise effective and responsible control.
The 7 areas outlined above comprise the intangible raw materials that talented people use to collaborate with each other in order to achieve goals, solve problems, seize opportunities and unlock their full potential. Since all organisations have a diverse mix of assets, both tangible and intangible, there is no simple formula that will fit all circumstances. What is clear however is that these 7 areas require investment, maintenance and management in a strategic and forward looking way in order to yield new areas of business and profit.
With 20 years of both national and international experience in the delicate art and science of identifying, managing and monitoring organisation’s Intangible Value, Dr Bruce Copley and his extensive network of associates combine ancient wisdom and cutting-edge systems theory and practice to address and integrate all seven key intangibles identified by the DTI.
Our internationally recognised holistic approach widely acknowledged as the “missing link” in education and training avoids the common pitfall characterising the large majority of conventional programmes, interventions, workshops, conferences, seminars, certifications, degrees and diplomas. The illustration below succinctly portrays what most people have and continue to experience in their quest for meaningful education and training.
The concepts of software and hardware are well known to all computer users. They can also be usefully applied to human systems. The HARDWARE consists of a company’s properties, buildings, products and equipment, while its SOFTWARE comprises the systems, services, policies and procedures that enable it to function and interact with its hardware. A third and vitally important “ware”, the WETWARE, refers to PEOPLE whose blood, sweat and tears are the cornerstone of everything else. Of course this wetware is an integral part of an organisation’s Intangible Value. We are uncompromisingly passionate and dedicated to holistic learning, soulful education and life-affirming wetware development and maintenance. We strive to restore a sense of reverence to learning and education to deepen our connection with everything on the planet and to give meaning to living and loving.
For further information please Contact AAHA Learning.