In today's turbulent markets - innovation is more imperative than any time that we have experienced in the history of business. Markets globally have dropped in value in many markets by 50%, the increasing dollar once again is putting more pressure on Canada's manufacturing industry which is already challenged in sustainability. This article introduces perspectives on the Intangible Principle, (intangible Assets) and also highlights recent dynamics of the Automotive sector as a lense to look at intangible a
What are Intangible Assets?
Intangible Assets are assets that are not physical in nature. Corporate Intellectual Property (items such as patents, trademarks, copyrights, business methodologies), good will and brand recognition are all common intangible assets in today's market place. An intangible asset can be classified as either indefinite or definite depending on the specifics of that asset. A company brand name is considered to be an indefinite asset, as it always stays with the company as long as the company's operations continue.
Unfortunately in today's current accounting systems and rules, the valuation of intangible assets is a not an easy task, and t is often unrecognized or underestimated in asset valuations. For example, a company such as: Coca Cola would not be as nearly as successful were it not for the high value obtained through its brand-name recognition. Although brand recognition is not a physical asset, you can see or touch, its' positive effects on bottom line profits can prove extremely valuable to firms such as Coca Cola, whose brand strength drives year over year growth. Good books to read on Intangible Assets that I have enjoyed reading are The Hidden Value of Intangibles, Testing Balance Sheet Strength, and Can you Count on Good Will?
A few other points that we think are key to understand the value of intangible assets are:
1.) Intangible Assets are identifiable non-monetary assets that cannot be seen, touched, or physically measured, which are created through time and/of effort that are identifiable as a separate asset.
2.) There are two primary forms of intangibles (eg: customer lists), copyrights, patents, trademarks, and goodwill and competitive intangibles such as knowledge or know-how activities such as knowledge, collaboration activities, leverageble team value dynamics for speed and trust making. Legal intangibles are IP, and generate legal property rights defensible in a court of law.
Competitive Intangibles, whilst legally non-ownable, directly impact effectiveness, productivity, wastage, and opportunity costs within an organization - and therefore costs, revenues, customer service, satisfactio, market value, and share price. Human Capital is the primary source of competitive intangibles for organizations today.
Why are Intangible Assets key to the manufacturing sector?
First, tangible assets are easily replicated due to reverse manufacturing and engineering capabilities. Competing on product and price is a no win proposition. Manufacturing companies by extending their customer services value chain(s) to create closer customer loyalty and branding experiences that increase customer servicing, professional services, community ecosystems with new channel partners to extend a core business model are all areas that need a focused business plan for growth acceleration.
Jim Basille Founder of RIM, and who helped drive the MIN ecosystem forward, has a new corporate mantra internally with his employees - it is Collaborate or Die?Although Jim was not the first to coin this phrase, he like many SMART CEO's understand growth from networks and community ecosystem knowledge flows will drive more value that simply investing in only products for distribution. In today's increasingly global economy - the realities are that we need a collaboration leadership approach to talent management, and also to develop more open and collaborative business processes to achieve competitive advantage.
I wrote Collaboration Commerce a book that is now three years old, but still sells actively on Amazon - We were the first to define Collaboration Commerce as a business process with linkages to innovation and growth impacting strategic planning methods and toolkits.
One of the Informative Google Groups I have joined is the Value Networks Group whose evangelistic leaders, John Maloney and Verna Allee are daily acting as global change agents to help change the world and help companies understand the value of business is in its networks. Unfortunately, the accounting and enterprise risk management realities of most F500 do not have mature innovation or value realization centers of excellence focus on Intangible Asset Management (IAM). One of the postings I quite enjoyed reading last week from John Maloney was he asked this Quiz:
Q - What do these names have in common: Caliber, Pacifica, Aspen?
A - They are all current products from Chrysler.
I have never heard of them - perhaps you also have not. However when you think of our past history, every North American would always know the names of all contemporary Chrysler products. Remember: Charger, GTO, Barracuda.
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These models were all important muscle branded cars and branded as such. Muscle cars were important as guys liked them - muscles or not. More importantly the advertising ads reinforced that women liked guys that drove them so guys thought this was the car they needed to drive. This double loop intangible branding strategy around a brand called muscle cars was a very successful lifestyle and contemporary marketing.
Chrysler strayed from it score in lifestyle marketing from the 60's and like many of the automotive giants simply did not focus on the intangible story/branding.
Just look at Opel, the prize division of GM -- rich with intangible branding value - which Magna is in the process of closing for a 20% stake in the business (>300M Euros).
Toyota is another company that focued very hard on engineering fun into their branding and offerings. Arrogant Executives in Detroit ignored the fun imagery of Toyota and well the rest is history.
This week Sabaru introduced their new marketing approach. What makes a Subaru a Subara? Love.
Yes it is love.
Some of the reasons many of us believe that the automotive sector is in the situation it is in NA is due to five key reasons:
1.) Not diversifying its manufacturing operations outside of NA
2.) Not focused on Intangible Value clarity
3.) Union Excess
4.) Corporate Narcissism
5.) Focusing on tangible Product /Feature positioning without (2) lifestyle marketing clarity.
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As Canadian manufacturers plan their growth and innovation strategy, engaging with partners that understand value ecosystem strategy, intangible asset management, customer services innovation, and customer loyalty strategy are critical for CEO's and leadership teams to embed new talent into or around their organizations.
In addition to these realities, a core competency for manufacturing executives will be on collaboration commerce, knowledge management, and leveraging new ways of working. These are all areas Helix Commerce specializies in. We simply help our clients leap frog ahead in new ways. The only competitive advantage remaining in business is human and customer capital strategies - leapfrogging for growth advantage requires more courage, not necessarily investment dollars.
What is clear is if organizations do not think out side the box and collaborate to find new solutions - they will simply die.
Collaborate or Die - Jim Basille has this line RIGHT!
2 Comments
This article has some really good insights, but I have trouble with the emphasis on marketing innovation. I think that the five key reasons why the North American domestic auto manufacturers are in trouble should have explicitly mentioned a failure to make high quality, innovative products. Simply put, Toyota and other foreign car makers are able to do product development and manufacturing more effectively than their North American competitors. This is in no small part due to their organizational culture (an intangible asset). The domestic auto manufacturers have all implemented versions of the Toyota manufacturing system (they call it "lean manufacturing", but don't get the same results as Toyota. The reasons #3 (Union Excess) and #4 (Corporate Narcissism), given in the article, relate to this point. I'm not sure about reason #1, since GM, for example, has done OK with its offshore manufacturing and sales operations. But GM, Ford, and Chrysler keep losing market share in North America. Toyota, Honda, etc, are able to manufacture better cars and build them at a profit in North America. This is not because the domestic companies fail to focus on lifestyle marketing clarity; rather they haven't focused effectively enough on tangible product attributes, i.e., making excellent, high quality products. Perhaps I'm not giving the domestic manufacturers enough credit for the improvements they've made in recent years, but its hard to make up for past quality failures by using innovative marketing.
The article places a lot of emphasis on innovation in marketing but I would bet a $C dollar to a Tim Horton's doughnut that Toyota et al employ a significantly lower ratio of marketing MBAs-to-engineers than do North American companies.
Thank you for your thoughtful comments. There are more builds than challenges. The reality is there are many dynamics which cause for major systemic failures in a business as complex as GM's operation. The simple facts are the company failed to see the shifting realities of globalization and rapidly reduced their cost infrastructures to remain competitive. The Unions and higher employee base eroded profit margins against global lower cost products that had to your point also higher quality.
I appreciate your comments - they are thoughtful and insightful.
What is important to understand however is the fundamental point that we are living in a knowledge and experience economy now and that what differentiates and creates a brand is not the product but the customer and service experience around the product. Canadian manufacturers are not as strong as they need to be in understanding services innovation are now more important that product innovation and that each dollar they invest also needs a services allocation.
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