New column in Mass High Tech
September 29, 2010 by Mary Adams · Leave a Comment
Read my new column in Mass High Tech:
It’s almost always when something goes wrong that reputation enters the conversation. BP’s dramatic oil leak. Toyota’s acceleration problems. These crises are not isolated cases. They happen all the time.
In the middle of the crisis, much of the conversation is about the message. With good reason. BP’s CEO should never have said “I want my life back.” Toyota management should not have insisted that “nothing is wrong.” A good communications strategy is critical in a crisis. It’s important to be transparent and proactive at moments like this.
But it’s wrong to think that better communication is enough. The real lesson for all of us in reputational crises is the hard work that goes into preventing and mitigating them…Read more
The Role of a Manager in the Knowledge Era
September 28, 2010 by Mary Adams · 2 Comments
In the knowledge era, the ability to access and leverage knowledge for competitive advantage is critical to corporate success. But knowledge is rarely concentrated at the top of organizations. There is still a need for top-down communication and direction but this must be balanced with knowledge flows from the bottom up and the outside in to organizations—and changes the job of a manager. Today’s manager is always working to balance these knowledge flows.
So what is the right balance? Read more
Are Managers Even Necessary?
September 27, 2010 by Mary Adams · Leave a Comment
Do knowledge workers need to be “managed?” Many will tell you no. This view says that if workers are smart enough to be “knowledge workers,” then they are smart enough to organize themselves. This thinking is also consistent with the view of networks as living organisms capable of self-organization.
There are a few interesting examples of a “leaderless” approach to management. One is the Orpheus Chamber Orchestra, which has no conductor and fills all other leadership roles on a rotating basis. Another example was Ternary Software, a small development shop that was run democratically from 2001 to 2006 through consensus (one of the founders has since left the company to productize and evangelize this management approach). Read more
Intangible Capital Reading List – Lost Tweets in September (TwitterTools come home…!)
September 24, 2010 by Mary Adams · Leave a Comment
Just realized that my Tweets haven’t been coming into my blog–something wrong with TwitterTools. Also means that my blog posts aren’t coming in either…Anyway, I like to keep them here so they are searchable with my other content. If you follow the Tweets this way, here you go:
Today’s organization is a network connecting employees to partners and people. This changes the job of the manager.
@IPStrategist Cool! Let me know how it goes…
…typical ERM “tells the CFO what he/she already knows” — that’s because they are ignoring the intangibles.
Enterprise risk management still immature (less than 50% uptake). Related to lack of intangible capital management http://bit.ly/cH441K
I’m back on line after travel and a cold. Writing up observations from intangibles symposium last week.
Why assessments better than standardized tests–lessons here for biz too. Measure what’s important http://nyti.ms/aa2mLM
In politics and business, it continues to get harder to control your message. Do the right thing. http://nyti.ms/diP75w
Too many today are trapped inside today’s practices for intangibles. But 50% goodwill in mergers should get a failing grade .
@IPStrategist You go girl…”-I wouldn’t want to be across the table from her.” High praise!
Really excited to have a conversation at the intersection of intangibles, valuation and accounting. Moving intangibles into mainstream!
Heading down to NJ today to speak at the Rutgers 1st Comprehensive Firm Valuation Symposium: Intangibles Come to Age. http://bit.ly/deRBnG
In today’s world, companies deserve competent, experienced, ethical consultants. ISO just accredited US CMC process http://bit.ly/8ZjhN4
New approaches to manufacturing are driven by intangible capital – What it will take to make the US competitive http://bit.ly/cFMoOY
Every worker today is a knowledge worker. If you don’t think so, you are missing out on an untapped resource right under your nose.
US at its best: Jewish woman who lost her husband on 9/11 to speak at a mosque in Boston about aid to Afghanistan http://nyti.ms/aeKckl
Interesting history of the vocabulary and ideas of IC and KM http://bit.ly/aFlLTW
Smart companies never stop learning and changing–it’s about human and structural capital http://bit.ly/btTPN3
It’s true for almost all co RT @glenndietzel: Biggest problem for info-based co is that most of real worth is hidden as intangible assets.
Intangible black hole RT @IntangibleBiz: goodwill (48%) and intangibles (28%) of S&P 100 acquisition value http://tinyurl.com/2vcrzd7
Why boards should be paying more attention to the 80% of value that is intangible: duties of care and loyalty http://bit.ly/c5sTnE
I like the incentives to promote capital expenditures but what about intangible capital expenditures? http://bit.ly/ds5rOx
RT @IPStrategist: R & D Tax Credits Mean Little to Businesses That Do Not Competently Manage Their Intangible Assets http://bit.ly/dyeict
Goodwill and acquired intangibles make up 10% of total corp assets of S&P 500 http://bit.ly/caLbbA internally-dev intangibles are invisible
Humans are now the nexus of value at almost every company shar.es/0qmOc
RT @IPStrategist: Broadening R&D tax credit http://nyti.ms/8YvTsX req corp do better job IDing, capturing, protecting intangibles.
The idea factory and intangible capital. Thanks! @jdpuva Innovate on Purpose: Ideas and IP are the new product http://bit.ly/9HA2PL
#iafs Getting started in conversation about security and intangibles Guests Robert Liscouski and Sean Lyons http://bit.ly/7YFEyL
Innovation as the rate of change in knowledge! RT @ingenesist: The Definition Of Innovation Must Change http://bit.ly/d6YCSU
Outsourcing and the Networked Business
September 23, 2010 by Mary Adams · Leave a Comment
Last night, I attended the Association for Strategic Planning’s meeting at Suffolk University. The guest was Amit S. Mukherjee, author of The Spider’s Strategy: Creating Networks to Avert Crisis, Create Change, and Really Get Ahead. Amit gave a great talk showing the history of productivity leaps in business (he made the case that weapons manufacturers often lead the way). He, like us, sees the beginning of a new era of business roughly a decade ago.
So it was fun to open my file this morning for the next installment of excerpts from our book. The next topic is about the kind of shift that Amit described last night. And there is more to come in the coming days about what this means to managers. Maybe we can get him to comment along the way….
Today a lot of the work done for organizations is no longer done inside the organization by its own employees. Instead, partners with greater expertise or more efficient operations take on an aspect of your organization’s work. A big driver of this trend has been the differing costs of labor across the globe. During the past couple decades, countries like China grew their manufacturing base while information technology jobs went to countries like India. In intangible capital vocabulary, this converted internal human and structural capital into relationship capital.
Outsourcing has actually been around for a long time. In a course we delivered for mid-level information technology managers, we used an article about the outsourcing of IT jobs called, The End of Corporate Computing, by Nicholas Carr. Carr made an analogy between current trends in the IT market and the shift that occured when companies started purchasing their power from external suppliers in the early 20th century. One of the drivers of this shift was the efficient allocation of capacity. Carr points out that most corporate data centers use less than half the computing capacity of their computers. It’s not just the capacity; it is also about the work to maintain huge numbers of machines. This was an early call for the increased efficiency of what is now called cloud computing—solutions hosted on servers that can be managed more efficiently than can thousands of standalone personal computers.
All this is to say that the job of the manager has clearly migrated from being an internally-focused role that worked within a strict hierarchy to one that focuses on maximizing the effectiveness of the entire network of an operation. The makeup of your corporate knowledge factory and its many subsidiary networks can and will change over time.
Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization by Mary Adams and Michael Oleksak.
Sharing my notes on the Rutgers intangible symposium
September 22, 2010 by Mary Adams · Leave a Comment
As you probably know, I was thrilled to be invited to speak at the Rutgers symposium, “Intangibles Come of Age” organized by Miklos Vasarhelyi. The final title also called it a discussion about “comprehensive firm valuation.” And it was a wonderful discussion even though it showed us that we have a long way to go. Most of the presentations are on line—and there will be video later.
Dean Yaw Mensah opened up and said that intangibles were very much on his mind when he heard about UCLA’s Anderson business school considering a plan to go private. Would the taxpayers get their share of the value of the school’s IP that they helped build?
Baruch Lev, who never gives up on intangibles, opened the day with some fresh case studies about work he has done around specific aspects of intangibles including ROI on R&D, IT investment and IP. Also described an interesting study for a software company as to whether internal growth or acquisitions gave a better return (the answer was internal growth).
Lev insisted that “everyone recognizes the importance of intangibles.” This was a theme repeated over and over during the day. When I spoke I opened by saying that intangibles may be old news to people at this type of conference but that in general, the average businessperson doesn’t know what we are talking about, why intangibles are important or what to do about it.
For this reason, it was great to hear Amy Pawlicki’s summary of all the reasons that businesspeople are hesitant to improve their intangibles reporting—including good answers as to why each reason should not be a barrier to taking on this important challenge.
Feng Gu presented a paper that he wrote with Baruch Lev on goodwill and write-offs that makes the case that large goodwill often results from companies making acquisitions during periods when their stock is “over-valued.” Earlier in the day, Lev had said that he advocated capitalization of intangibles but that his accounting brethren have been so resistant to this that he no longer talks about it. I brought the subject back up as did Janet Hao.
Janet Hao works with Corrado, Hulten et al at The Conference Board who have done so much of the valuable macroeconomic research that has now shown that intangible investment now exceeds tangible investment in the U.S. She presented a pro forma set of J&J financials which were adjusted (based on public information) to capitalize spending on intangibles. It was very enlightening—showing that increased assets, profits and equity (by capitalizing intangibles) paint a very different picture of a company in common ratios such as return on assets return on equity and leverage. This set up a conversation about valuation and value.
Right after Janet spoke, Benedetto Bongiorno presented based on his long experience in valuation of intangibles in the real estate sector. A lot of his themes were reflected in the practitioner panel after lunch with Steve Rivera, Kevin Tom, and Shawn Suttmiller. The valuation and accounting professions are focusing very heavily on fair value and have sophisticated approaches to value intangibles acquired in mergers. Listening to these professionals, I was struck by the complexity of their valuation models. I’m not totally convinced that this is the way balance sheets should be constructed…
The panel actually got caught in the middle of an energetic discussion of goodwill. Current practitioners believe that they are identifying all the intangibles that they can and that goodwill truly is excess value, synergies and the good will of stakeholders. Others (I’m in this camp) believe that we are missing a big portion of intangibles investment and that we can and should be able to explain the origin of almost all goodwill, even though some of the elements may not end up on the balance sheet. This is the logic behind what we call i-capex. Discussant Tony Tinker urged us to look at history (apparently, full expensing of R&D in the U.S. is a legacy of a scandal in the pharma market–I can’t find anything on this, let me know if you know)
Marcus Spies presented a refreshing alternative to reporting, explaining a large project he worked on for the EU that extracted data of many kinds from corporate systems to create leading information on the performance of intangibles. This is very complex work—not surprising given the amount of data that exists within the average company. It is this kind of work that provides a clue how reporting and (assurance/auditing of that reporting) can become a continuous process.
Miklos Vasarhelyi also spoke on continuous assurance, doing a good job of showing how “the most interesting things have already happened by the time a transaction is booked” which made Spies work all the more relevant.
Stefano Zambon closed the day with a sweeping summary of work being done around the world in the field of intangibles. Stefano brought me back to some of the work I have been doing lately. As some of you know from the IC Knowledge Center, I have been developing a table that details the sometimes starkly different perspectives on intangibles held by various professions (accountants and lawyers among them).
It is increasingly clear to me that we have to face these differences head on if we are to advance the cause of filling in the enormous (80% and counting) intangibles information gap. I continue to believe that this gap holds back our thinking and our collective action, limiting innovation and growth in a time when we desperately need both.
Thanks to Miklos, all the folks at Rutgers and all the attendees for keeping this important conversation going.
Are Workers a Cost or a Resource in Your Organization?
September 13, 2010 by Mary Adams · 2 Comments
Businesspeople today are facing two simultaneous challenges: the current lackluster economy and the shift to the knowledge economy. The lackluster economy makes it tempting and often necessary to cut headcount. People are one of the major expenses in a business and are often seen as a cost as opposed to a resource. But success in the knowledge economy depends on a strong cadre of people to fuel your intangible capital. People are both the source of knowledge and the medium by which your organization learns, adapts and innovates.
Why do we make this distinction? Read more
Making the choice to become an intangible capitalist
September 10, 2010 by Mary Adams · 4 Comments
Intangible capital. It’s all I talk about. Mostly in pieces, explaining all the little pieces and nuances.
But today, I want to take a step back and describe what a company would look like if it were maximizing its intangible capital. So open your mind and imagine a company where: Read more
How Many Workers Are Knowledge Workers?
September 9, 2010 by Mary Adams · Leave a Comment
The change in the American workforce has been evolving slowly over the past century. Over this time, the dominant jobs have shifted from materials extraction and processing to information processing. The trend was constant and consistent over the century for the primary and tertiary sectors. The secondary sector actually peaked at 50% in 1960 and then trended back down to end the century where it started. The following chart is from PBS The First Measured Century (a fun book and website). Read more
Program on Intangible Capital Sept 30, 2010
September 8, 2010 by Mary Adams · Leave a Comment
The Exit Planner’s Guide to Increasing Corporate Value:
How to become an intangible capitalist
Mary Adams will be appearing at a breakfast meeting of the Boston Exit Planning Exchange (XPX) on September 30 at Babson College. The focus of her talk will be:
Today, roughly 75% of the value of the average private business is intangible—invisible
in financial statements and not well understood, even by those inside
the organization. Exit Planners, like their clients, are handicapped by
their business education and tools, which were optimized for the
factories of the industrial era. To maximize the value of a business,
you need new tools that focus on intangibles.
What does Intangible Capital mean to the advisors of business owners?
- Corporate and M&A Attorneys have new challenges when documenting and protecting their clients.
- Consultants focus on value for clients need the tools to zero in on and improve performance and corporate value.
- Investment Bankers and Business Brokers want to
present their clients in the best light possible so they must understand
and explain the key intangibles driving corporate value to potential
partners and acquirers. - Financial Advisors who want to better understand
their client’s business need to gain a whole new vocabulary around the
strength and sustainability of the business and why. - CPAs need to embrace these new concepts to help plan for, track and measure investments and returns on intangible capital.
Get more information and register.
