>> Create a baseline and benchmark it against competitors. The purpose of managing intangibles isn't simply to get better scores; it's to outflank competitors with moves that are difficult or impossible to copy. It's necessary to know where competitors' strengths and weaknesses are, and to gauge them against those of your firm. This can involve substantial research by third-party consultants that can conduct surveys to assess a company's performance on a variety of scales against that of competitors.
Undertake initiatives to improve performance on key intangibles. Assessing and measuring intangibles helps to determine where to invest time and resources, and undertaking initiatives to improve performance helps to build value. Consider innovation, a metric that ranks as one of the most important intangibles in many industries. Innovation entails R&D. One measure of a company's success in R&D is the number of patents it holds; a second is the number of new products in the pipeline; a third is the proportion of revenues and profits accounted for by products or services that are less than, say, three years old. Tracking several such measures -- and setting annual targets for improvement -- will focus people's attention on them.
Communicate -- far and wide. The fall of Enron Corp. made it clear that transparency is the order of the day. Enron was lauded for its adaptability and innovative culture. For a while, it was extraordinarily successful, but the success turned out to be built on something like a house of cards -- unknown by investors, as many of its dealings were cloaked in secrecy. The antithesis to such secrecy -- and a watchword for companies that want to manage intangibles effectively -- is "open systems." This means sharing insights into intangibles with employees, customers, suppliers, industry groups, investors and Wall Street analysts. Share metrics and targets, and let the interested parties know what you expect to achieve and why it's important. Don't worry about spilling company secrets -- the information itself has limited competitive value. It's what a company does with the information that matters.
A company can gain credibility and be rewarded in the marketplace if it can show why a particular intangible is important, along with improving the company's performance. Additionally, consider adding an "intangibles audit" to the annual report.
Today's companies cannot afford to sit back and wait for others to take the lead -- or for standards to emerge for measuring intangibles. Managing a company's intangible assets provides a first-mover advantage -- and those who take the lead will set the standards. As such, these companies will be viewed as innovators and rewarded accordingly.
Pam Cohen Kalafut, Ph.D., is Director of Intangibles Methodology in Cap Gemini Ernst & Young's Corporate Accountability Practice. She can be reached at pamela.kalafut@cgey.com |
