Intangible Capital = 70% of Your Company

The shift to a knowledge economy has been underway for decades.  It is estimated that 70% of the value of the average company today is intangible and depends on invisible assets like personal networks, company reputation, or capacity to innovate.  Yet, when most managers go to work in the morning, they use tools optimized for industrial organizations and tangible assets, which represent just 30 percent of the value of their companies.

Leif Edvinsson in his forward to

Intangible Capital – Putting knowledge to work in the 21st-Century Organization

by Mary Adams and Michael Oleksak

This concept helps to explain the difference between companies that look pretty much the same to their CPAs at a single point in time.  The company that does the better job of capturing and monetizing its intangible capital will be the one that thrives over time.  This is especially true when discussing mergers and acquisitions.

“Intangible Capital” is high on my recommended reading list.   The authors will introduce you to the four types of intangible capital:

  1. Human Capital – the capital that goes home at hight
  2. Relationship Capital – all those key external relationships that drive your business
  3. Structural Capital – recorded knowledge, processes, software, and IP
  4. Strategic Capital – purpose and culture, including your knowledge of market and business model.

The book also explains how to use your intangible capital to increase innovation, optimize performance, increase valuation and improve reputation.  Those are all good things whether you are selling your business next year or two decades from now.

Shrimp Tank talks Intangible CapitalThe Shrimp Tank guys, Rich Jensen and David Sims, invited us to do a two part podcast on the topic.

  • Episode 30 introduces the topic of “intangible capital” and talks about the first two components: human capital and relationship capital.
  • Episode 31 continues the conversation covering structural and strategic capital.

We license a patent pending technology (from Corporate Insight Strategy) that helps our clients inventory their own intangible capital – specifically the structural and strategic components.   This inventory is a key component of the Vortylon Experience.  We use the results both to help market your company and also to develop a strategy for long term post-deal success.

If you would like to take a look at your own companies’ intangible capital, drop me a note at astroud@vortylon.com.

By Alese Stroud

5/28/18

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