What is an intangible asset?
An intangible asset is neither physical nor financial, it is often mishandled and not accounted for. Intangible assets include goodwill, brand recognition, intellectual property but also processes, employer brand, reputation, and other assets manifesting the potential of your company to create value in the future.
Why is it important to know your intangible assets?
They are the compass for your organization, both to navigate and to transform. Your company’s intangible assets do not (or hardly) appear on the balance sheet. Yet these assets are the source of the vast majority of the value created. It is from them that we can give meaning to our actions at the collective and individual levels.
The covid-19 pandemic accelerated a transformation process in which companies rethink their fundamentals – down to their business models and purpose – to address not only financial threats but also ongoing needs such as talent creation and retention, environmental standards compliance, strong relationships with suppliers, differentiated value to the customers, etc. This shift is driven by regulators, creditors, and investors emitting requirements regarding the Sustainable Development Goals (SDGs), such as mandatory sustainability reporting for SGX listed companies since 2017 or the launch of the Green and Sustainability-Linked Loan Grant Scheme (GSLS) in November 2020 by the MAS.
Whether they are well managed or not, your intangible assets have an impact on various aspects of your strategy and operations:
- Core Business
- Corporate personality
- Relationship with customers and suppliers
- Relationship with the territory and the ecosystem
- Partnership strategy
- Employee engagement
- Attracting talent
- Innovation dynamics
- Attracting investment
- Creation of sustainable value
Intangible assets are the gems of the organization, vehicles of non-copiable added value around a product or a service.
Knowing them explicitly sheds new light on strategic, managerial, and organizational issues.
Enhancing the value of a company’s intangible assets means formalizing a value proposition that goes far beyond the product or service delivered. It means creating wealth that is greater than mere financial profit and that will be sustained over time.
Because activating its intangible assets means allowing the company to reappropriate its personality, to rebalance the effort between singularity and mimicry, to feed its source of inspiration for innovation, to identify its value creation, to amplify it, to make it known and recognized.
How to identify, measure and activate your intangible capital?
You can conduct an assessment with Holo-Diag on the three categories of intangible assets:
Human Capital: “Everything that is in the head of employees” (experience, motivation, training, interpersonal relationships, leadership skills, values, founding myths, etc.)
Structural Capital: “Everything that remains in the company at the end of the day” (organization, internal communication, ownership, processes, tools & methods, rituals, intellectual property, etc.)
Relational Capital: “Everything that connects the company to its environment” (the brand, relationships with customers, suppliers, partners, the employer brand, etc.)
The assessment attributes a score to every item in each asset category. The item is defined in an actionable manner to enable both identification and transformation (or optimization) of your strongest and weakest assets.
When to conduct an assessment?
There are several times in the lifecycle of your company when you can benefit from an evaluation of your intangible assets:
- Business model transformation: to engage teams in an approach of economic and social performance. Improve attractivity of the employer brand.
- Company in crisis: rebuild trust with stakeholders. Capture, leverage and, secure key knowledge to strengthen competitivity. Develop resilience in front of adversity.
- Fundraising: to leverage the company’s history presentation and its potential, beyond conventional financial ratios (for shareholders and banks). Provide tangible evidence of your intangible current state to minimize the risk of your creditors or investors.
- External growth: succeed merger and acquisition project considering strength and weaknesses of both entities and valuing human determinant et companies DNA (culture, values, knowledge,…).
Bottom Line
In the “New Economy”, digitalization, growth of service activities, dematerialization of physical activities…. the company is not anymore a place disposing of physical production means but rather a structured and structuring framework for pooling and enhancing individual knowledge and skills.
The company creates conditions favorable:
- to innovation and creativity, watching for its talents and the well being of every collaborator
- for collaboration, offering exceeding information systems, a set of values, and common culture enabling fluid communication.
- to a relationship with its environment, offering to its work and production collective readability, a reputation.
- for everything enabling a company to differentiate itself to create value and to ensure its sustainability.
This New Economy implies making intangible assets the heart of the strategy and taking into account immaterial indicators, going beyond accounting information.
