Intangible Assets as a Source of Competitive Advantage
Look No Further
Managing Intangibles seems to be a smart idea. But to bet on it, one has to create a whole new organization. The concept of intangibles is not new, but across the globe, companies are slowly coming to grips with it. tury back physical, tangible assets created wealth; today, it’s intangible assets that are creating wealth. It’s a concept that packs a lot of punch but has no form as such. It questions capitalism for its emphasis on buying assets like plant and machinery, and hiring executives and workers to run those to make money in the process. Managing Intangibles seems to be a smart idea. But to bet on it, one has to create a whole new organization. Management control systems are built around the framework of strategy, structure and systems. Typically, the top management is considered as the resource allocator and is the grand strategist, while the junior management is considered as implementors and middle management as administrators of the strategy. Using intangible assets means that you move from this structure to the purpose, process and people structure. Here the role of the top management is only to create an overarching purpose and allow people the freedom to deliver. Companies which are hot on intangible assets look out for a completely different set of signals in business than those which are not. Researches have shown that customer loyalty and employee commitment are two of the most important intangible assets. As such a company that believes in intangible assets wouldn’t so much look for market share figures as it would for customer satisfaction figures. As the concept of intangible assets gathers EFFECTIVE EXECUTIVE
S T RA T E G Y
orget plant, machinery, capital. Think of people, processes, brands, relationships…. World over, business is moving into a new era, where competitive advantage comes from intangible assets. Welcome to the age of a new asset, the Intangible Asset, which is changing the way businesses behave across the world. It is not openly available,
easily leverageable across businesses and not easily substitutable. As is evident, unlike tangible assets (like plant, land, machinery), there’s nothing solid about the intangible ones. They are a bit abstract, with the nature of intangible assets varying from company to company, and industry to industry. At least till about a quarter of a cen-
STRATEGY: Intangible Assets as a Source of Competitive Advantage
momentum, experts feel that the disclosure requirements of companies may alter radically. For example, future investors may look for things like a customer satisfaction index or employee satisfaction index in companies where they plan to put their money. Experts have predicted that in the very near future, intangible assets and their use will become the heart of the annual report and financial statements, added on as appendages. Clearly, the future of business cannot get more radical than this.
Changing Face of Business
Who are the Citizens of This Brave New Corporate World?
The concept of intangibles is not new, but across the globe, companies are slowly coming to grips with it. International companies like 3M, General Electric, Intel, Microsoft, ABB, Kao Corporation and Indian companies like Infosys, Hindustan Unilever Ltd., and Reliance in India have already started leveraging intangible assets smartly. To give an illustration, ABB (created by the merger of Asea & Brown Boveri) was launched from the platform of intangible assets: both companies wanted to benefit from the combined integrated pipeline of technological products that each possessed in its portfolio.
Swarup Kumar Dutta is a B-Tech and an MBM who has worked in the corporate sector for 13 years in fields as varied as Corporate Project Management, Supply Chain, Marketing, TQM Corporate Planning and academics. His current interests are in the areas of Business...
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