Many efforts are underway to redefine wealth and value from a whole system perspective. These efforts include Balanced Scorecards, Intellectual Capital and Triple Bottom Line approaches.  We also now understand that exchanges of knowledge are key to building intangible assets. The emergence of these perspectives suggests that full understanding of value, at both the enterprise and macroeconomic levels, must include all these value domains.

 An Emerging Perspective of Wealth and Value

Business Relationships: Alliances and business relationships with customers, strategic partners, suppliers, investors, regulatory bodies and government groups.
 

Internal Structures: Systems and work processes that leverage competitiveness, including IT, communication technologies, systems and software, databases, documents, images, concepts and models of how the business operates, patents, copyrights and other codified knowledge.
 

Human Competence: Individual capabilities, knowledge, skills, experience and problem solving abilities that reside in people.
 

Social Citizenship: The quality and value of relationships enjoyed with larger society through the exercise of corporate citizenship as a member of local, regional and global communities.
 

Environmental Health: The value of one’s relationship with the earth and its resources as understood through calculation of the true costs of resources consumed by an enterprise or economy and determination of equitable exchange or contribution to the health and sustainability of the environment.
  

Corporate Identity: The value of one’s vision, purpose, values, ethical stance and leadership as it contributes to brand equity and economic success in business relationships.

Many people believe that intangibles such as knowledge and relationships are the key to success in this economy. The Brookings Institution defines intangibles as non-physical factors that contribute to or are used in producing goods or providing services. They are expected to generate future productive benefits for the individuals or firms that control their use. Physical and financial assets are rapidly becoming commodities and we are finding that intangibles t contribute most to building strong business relationships and providing unique competitive advantage. We can think of intangibles in three ways:

Intangibles are assets that accrue as a result of deliberate, manageable business activity. At the corporate level intangible assets include brand identity, the know-how of people, ways of working, business processes, customer and business relationships. At the national level, intangibles include the vitality of the social fabric, the health and beauty of the environment, and the educational level of the population.

Although intangibles can readily be viewed as business assets, these do not show up on the corporate balance sheet as assets. Indeed most of them show up as expenses if they show up at all. Karl-Erik Sveiby first defined such intangible assets and suggested ways to measure them. His website is a great learning resource for the story of intangibles as assets. There is enormous interest in intangible assets and the field is expanding rapidly, capturing the attention of governing bodies and companies all over the world. See my Intangible Value Framework for a more complete picture of intangibles as assets.

Intangibles are currencies of value that can be exchanged for other types of value – both tangible and intangible. As currencies of exchange, intangibles are very flexible. We can exchange knowledge for money, we can exchange knowledge for knowledge, or we can exchange knowledge for another intangible such as customer loyalty.

The core definition of currency is “a medium of exchange.” Knowledge and favors are often exchanged for other types of business value. In some cases intangibles that are held as assets may be converted to an intangible benefit that can be offered to someone else. For example: A company holds an intangible asset of high quality business relationships and may offer an intangible benefit to another partner of “access to our business network.” In exchange for that access, a return benefit might be offered of knowledge about a particular market or support on a regulatory issue. An example of using knowledge as currency was how the Java alliance of Oracle, Sun and Intel gave away free training in Java technology in order to build a loyal web of users and gain entry with innovation partners.

Intangibles are deliverables.

Intangibles are also real deliverables that we extend to others. We have traditionally considered only tangibles as deliverables when we think about our business models, as in the following example. Yet, we engage in deliberate activities to generate intangibles and extend them to customers and partners. As deliverables, these are intangibles that we actively manage to create or gain value. As with tangible deliverables, intangible deliverables incur costs and accrue benefits. To explore how this works go to understanding value networks.

From “The Value Evolution: Addressing the larger implications of an intellectual capital and intangibles perspective,” Verna Allee, Journal of Intellectual Capital, May 2000.

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