IC and Manufacturing

For a long time, intangible capital has been seen as some abstract and theoretical concept. Indeed, many people call it intellectual capital (here’s why we don’t use the term intellectual capital). But I spend a lot of my day every day refuting this. Intangible capital is very real and very practical. It drives how and why businesses get paid by their customers.

There were two great explanations of the practical side of IC in discussions of manufacturing in the past week. Read more

Thoughts on the Shift to the Knowledge Economy

I had a great time last week with the Association for Strategic Planning in Boston. I shared with the group a summary of the shift to the knowledge era and then led them in an exercise to talk about the significance of this shift to business.  Having been involved with ASP and well as the Institute of Management Consultants (IMCNE), I told the organizers that I wanted to avoid being a talking head–but rather to engage the group in a conversation. And it worked really well!

The group was great. It included consultants and corporates as well as grad students and professors from Suffolk University’s business school (our hosts). Read more

Don’t Separate Innovation and Intangible Capital

There has been a discussion going on at Blogging Innovation and BankerVision about the move from the knowledge economy to the innovation economy–and the need for companies to develop innovation capital.

I would like to argue that the knowledge economy and the innovation economy are the same thing.  Not just to argue but to keep the focus where it needs to be. Read more

Accounting for Intangibles - The Income Statement is Not the Answer

I guess it’s time to talk about Accounting for Intangible Assets: There is Also an Income Statement by Stephen Penman. When this new paper first came out from the Center for Excellence in Accounting & Security Analysis at Columbia University, I decided to ignore it as an apology for current accounting standards–which are completely inadequate for the knowledge era.

But now the paper is getting more attention so I feel the need to answer it.

We are not talking about some theoretical accounting issue.  70% of the value of the average M&A deal is intangible. 60% of the average corporate investment is intangible. 50-80% of the average public company is intangible. That means that intangibles are ignored by accountants (the only real exception is in the case of a merger, when the lack of understanding ends up as 50% of the purchase price going to goodwill). None of this is helpful to the cause (and stated mission of Columbia’s center) of “excellence in accounting and security analysis.” Read more

Goodwill is a Metric of the Failure of the Accounting Model

At least once a week, I see articles or blog posts bemoaning goodwill. One of the latest was an article in Business Week entitled Magic Tricks on the Corporate Books. This article is typical in its interpretation that goodwill represents funny money. It is often also assumed that management teams are playing games with goodwill. While this may sometimes be the case, goodwill usually represents actual, identifiable value. The problem is that no one really knows when and where this value exists. The accountants could produce data but they don’t. Read more

What will next year’s Labor Day look like?

Today is a strange Labor Day. The holiday was created as a way to get back to work. Yet the U.S. economy currently has a high unemployment rate, not counting those that have stopped looking for work and those that are independent and/or permanent contractors, whose work (or lack of) does not get counted in these statistics.

This unemployment is happening at a moment of incredible challenge (and, yes, opportunity). The challenges facing our nation (and our globe) include the need for sustainable energy production and use (to avoid wars and to save the environment), the need for sensible health care, the need for healthy food and the need for better education (I’m sure you can think of many more). Each one of these challenges represents opportunities that could fuel our economy for decades.

Yet here we sit. Paralyzed by assumptions and models that are failing us. Read more

Knowledge is the New Oil - And Intellectual Capital is Your New Factory

If I ask you whether we live in the industrial or the knowledge era, you wouldn’t hesitate. You know that our economy has transitioned.

That doesn’t mean that industry and manufacturing have gone away, just that they are not the dominant source of value creation. Agriculture didn’t go away when the industrial era began. Industry won’t go away with the rise of the knowledge era.

But I find that most managers don’t have explicit models for the role of knowledge in their business. They know it’s there. They know what to do with it. But they are dealing with it all on a gut level. But you don’t want to rely exclusively on your gut to manage your business. Read more

Redeploying Agricultural Intellectual Capital

The challenges facing the food industry provide an important chapter in the story about the end of the industrial era.

In past posts, I have talked about how the large industrial model has lead to dangerous monocultures in bananas and unsustainable concentration of salad green production in the Salinas Valley. There is a growing realization that we need to think about sustainability in agriculture. This is a significant challenge–but also an enormous opportunity. Read more

The Winning Vision

Last Tuesday, the U.S. inaugurated a new president. Challenging times created the opportunity for an unlikely candidate, Barack Obama, to step into this role. Throughout his campaign and in his acceptance speech, he outlined a new vision for the role of his country and his approach to government.

But his vision was not his alone. The best visions-in government and in business-are Read more