Making Better Corporate Decisions with Intangible Capital Visualization

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ICA-1 Using Intangible Visualization to Support Corporate Decisions Mary Adams I-Capital Advisors How to become an intangible capitalist

description

These slides are from a meeting of the KM Forum in Boston where Mary Adams told five stories of the power of intangibles visualization: performance, value, innovation, reputation and growth. For more information visit http://i-capitaladvisors.com/

Transcript of Making Better Corporate Decisions with Intangible Capital Visualization

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Using Intangible Visualization to Support Corporate Decisions

Mary Adams

I-Capital Advisors

How to become an intangible

capitalist

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Intro to intangible capital

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Research: Ned Davis

Components of

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1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Market Premium

Intangible Book Value

Tangible Book Value

Components of S&P 500® Market Capitalization

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1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

S&P 500 Market Cap ($ billions)

Market Premium

Intangible Book Value

Tangible Book Value

Undefined, intangible portion of corporate value

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Knowledge Assets

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Model of how IC pieces fit together

From You Can Grow Like Google on YouTube

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Investment (financial)

Assessment (qualitative)

Performance Management (quantitative)

Corporate Intangibles

Three ways to measure

intangibles

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1. How to grow?

Scaled business using balanced IC investment, especially structural capital

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Gaps in structural

capital

National relationships

Need to add headcount

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2. How to improve performance?

Optimized structural capital infrastructure

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Motivating Referral

Closing Sale

Developing Program

Relationships

Developing HCO Relationships

ID four core processes

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Role

Role

Intangible exchange

Tangible exchange

Tangible exchange

Intangible exchange

Map each process as a

value network

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3. How to innovate?

Evaluated IC as the innovation ecosystem

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AA BBB A BBB

BBB

Customers

A

BBB

Human Capital

BBB AA BB A

Bus. Recipe

Intellectual Capital

Relational

I.P Process Management Employees Network Brand

Organisational

Bus. Recipe

Intellectual Capital

Relational

I.P Process Management Employees Network Brand

Organisational

BBBCustomers

BB

BBB

Human Capital

BB CC B AA

BBB BBB CCC BBB

R R R R

No value RCustomers

R

Human Capital

RR R RR R

Bus. Recipe

Intellectual Capital

Relational

I.P Process Management Employees Network Brand

Organisational

Current strength

Preparation for future

Risk

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83

74

39

74

55

57

Experience in corecompetencies

Ability tackle new projects

Training/education

Equal competence level

Vulnerability defection

Renewal of productivity

Employees AA CC R

While the staff is perceived as having the capacity to deliver world class performance, other capabilities are less certain . . Developing or expanding capabilities could be hindered by the fact that training and education efforts are largely informal and non-standardized.

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4. How to acquire knowledge?

In mergers, most people ignore important structural capital and fail to understand relationship between IC and valuation

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Tangible, 30%

Intangible, 23%

Goodwill, 47%

Mergers are 70% intangible

E&Y: Acquisition Accounting – What’s Next for You? Global sample of 700+ mergers in 2007

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Most deals ignore SC

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Human Structural Relationship Strategic

Map multiples against IC

Low

Average

Best 8x

4x

2x

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5. How to build reputation?

Helped stakeholders see inside the IC “black box” to attract new clients at higher rates

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Visualization of a six-inch methodology

notebook

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For better decision making…

• Remember that intangibles dominate value creation, revenue and expenses

• Use IC buckets to be clear about type of knowledge asset (human, relationship, structural capital)

• Use all three kinds of measurement (financial, quantitative, qualitative)

• Visualization cuts through complexity

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Resources

Slides at slideshare.com/maryadamsicaNewsletter: Management 2.0 last Tues of month Book: www.intangiblecapitalbook.comCommunity: www.icknowledgecenter.comBlog: www.smartercompaniesblog.com

Mary Adams, [email protected]: maryadamsica