I believe that intangible value is ultimately based on the deep conviction to place people first
Intangible Assets: Overview
There is something very powerful in getting relationships right. In the context of companies, this is part of the intangible value. Trust and loyalty translate into:
- “Growth”: Repeated purchases and business growth
- “Stability”: Low client and employee attrition rates
- “Peace”: An absence of legal issues
90% of market value is today based on intangibles
While there is a lot of strategic thinking on getting tangible’s right, they only translate to about 10% of the S&Ps market valuations. The other 90% market value stem from growth expectations that are routed in intangibles. (https://www.oceantomo.com/intangible-asset-market-value-study/)
Building trust and strong relationships that can weather inevitable crises takes time and commitment. We take ourselves to work with all our personal baggage and hang-ups. Corporate cultures that make space for people and navigating their relationships (with clients, employees, suppliers, public,…) build powerful intangible assets.
I have seen it many times that when economic or shareholder value becomes the ultimate target, businesses may be highly profitable in the short run, but are ultimately unsustainable. Clients and employees don’t put up with it being second class. They walk away.
The Future Growth Value of the firm is ultimately built on trust
Another way to look at the phenomenon of record high intangible values is the trust that is placed into the future growth of the company.
We can look at a market valuation in terms of “The Current Value of Operations”: what would the company be worth if it would run at the current rate and profitability for all eternity? All else is the “Future Growth Value” or trust that:
- Innovative new products and services keep coming
- (More) consumers keep buying
- Suppliers keep delivering according to requirements
- Employees keep being enthusiastic and committed
It is ultimately the trust that the company’s intellectual, human, marketing and relational capitals are paying off in the future. We can say it even shorter: The future Growth Value of your Company is based on trust or on intangible value.