Reshaping business and the world by leveraging knowledge intangibles
Why is IC Important?
To those of us who have been studying IC for a long time, we take it for granted that IC is important. There are a lot of statistics that we like to cite:
All this means that intangibles are a big factor in corporate value.
But does that make them important? I believe yes. These figures tell us that the future is already here. We already live in a knowledge economy. The drivers of success in this economy are knowledge-based intangibles. Yet we cannot even measure them. And we have only begun to understand the implications of managing them. That's why we need to study IC.
Do you agree? Why do you think IC is important?
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- Stock market data that shows a growing gap between total corporate value and book value. This gap started growing in the late 1970's and continues to fluctuate over time
- Corporate acquisition data from 700 mergers around the world in 2007 that shows the accounting for the average deal was 30% tangible, 23% in intangibles and 47% in goodwill
- Corporate investment data from 2007 that shows $1.6 trillion in intangible investment each year in the U.S. versus $1.2 trillion in tangible investment
Note: sources for this data can be found here: http://www.slideshare.net/maryadamsica/a-fresh-start
All this means that intangibles are a big factor in corporate value.
But does that make them important? I believe yes. These figures tell us that the future is already here. We already live in a knowledge economy. The drivers of success in this economy are knowledge-based intangibles. Yet we cannot even measure them. And we have only begun to understand the implications of managing them. That's why we need to study IC.
Do you agree? Why do you think IC is important?
Views: 18
Replies to This Discussion
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Permalink Reply by Andrea Gasperini on -
Hi Mary,
at least here in Italy I am not very convinced that your first affirmation is in absolute true.
It is true that from the years 70 the gap between market value and book value has begun to amplify but are you sure that also now continue to expand ? Do you know someone who has done this analysis during the actual situation of systemic crisis?
Still limited is the recognition from the management of the degree with which the intangible assets represent one of the principal sources of enterprise value creation, inadequate is the level of importance attributed to them for the guide and corporate management, especially in this phase of systemic crisis in which the decision makers are less prepared to manifest interest for the intangible assets when their corporate could be one of those that is in the situation of financial collapse and realistically in such situation they don't find justified of use, neither they assign them an elevated priority in the agenda of activities to effect for try to valorise and to get an additional value.
The intangible assets are not often considered in the definition of the business strategies and frequently there isn't an accord in the definition of standard sector non financial indicators. In other terms to set the theme of the intangible assets among the priorities of the CEO / CFO is already difficult in the times of economic prosperity and, to great reason, it is more difficult in these phase of cost cutting and downsizing, rethinking of the marketing strategies, outsourcing and the banks have reduced the credit line.
Despite this objective situation I believe that paradoxically the recent situation of systemic crisis could accelerate a process of attention, not only in academic circle, but above all professional as to use and valorise those intangible assets, on which depends a wider proportion of the corporate value depends its profitability, the position on the market, the competitive advantages and, in general, the sustainability.
It has become essential for the management:
1. to identify the potential value that is hidden in these resources;
2. to maintain the control to the intangible assets and the abilities of appropriation of their value, is an essential priority to come out of the actual phase of systemic crisis.
Just this is therefore the moment for the CEO / CFO, to identify the intangible assets internally produced or those externally acquired and to define as these resources can be better managed, better use and valorise so that to mitigate the adversities imputable to the contingent financial crisis.
All these themes are object of presentation in the next white paper of Aiaf "Intangibles value to come out of the systemic crisis"
Andrea Gasperini
Responsible of Aiaf "Mission Intangibles"
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Permalink Reply by Mary Adams on
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Hi Andrea - I guess what I meant by the statement that intangibles will continue to grow speaks to the nature of knowledge assets. The future growth in our economies and within companies will come from the application of knowledge to use physical resources with greater and greater efficiency. It is already happening. The markets don't understand it full and they will only give credit for knowledge that is operationalized and monetized (which is, of course, appropriate). But, over time, the trend will not be stopped.
I share your hope/belief that the current challenging times could be a catalyst for greater understanding.
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Permalink Reply by Galen McPherson on -
I agree that IC is important- in fact, I believe that it goes beyond important into the realm of crucial. I believe this because IC is, to me, a meta-science; IC encompasses "all the processes that underlie all the processes" and its universal necessity as well as its universal impact commend it as a key business fundamental that can NOT be overlooked
the challenge lies in the accurate measurement and the eventual correlation to business output; while we devotees can ascribe results to our practice, the "hard-nosed" business practitioners will insist, as they should, on data; to that end, I am in the process of establishing an assessment instrument that begins to get at this valuation challenge; several of our colleagues are also chasing that elusive goal, with varying degrees of completeness and success; I commend Joris Claeys and AEROPEA for their diligence and front-running in this endeavor
IC is to business as oxygen is to the human body, and I believe that that qualifies as important
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Excellent Galen - I'll have to quote you on that last line!
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Permalink Reply by Galen McPherson on
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feel free - IC [which includes quotable bits] is meant to be shared
Mary Adams said:Excellent Galen - I'll have to quote you on that last line!
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Permalink Reply by Johan Gyllin on -
Excellent quote mr McPherson. My name is Johan and I am new in this forum. I am currently writing a master thesis on the subject under supervision of Professor Leif Edvinsson. May I quote you on our blog www.icdgthesis.wordpress.com on your oxygen statement?
BR Johan
Galen McPherson said:feel free - IC [which includes quotable bits] is meant to be shared
Mary Adams said:Excellent Galen - I'll have to quote you on that last line!
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Permalink Reply by Galen McPherson on
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Absolutely, Johan, and thank you for your interest - and good luck with your thesis; if I can be of any assistance, I will be glad to contribute in any way
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