Lisk Associates

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The Importance of Intangible Assets to an Organization The success of companies today depends less upon production facilities, machines and buildings and more upon their non-monetary intangible assets. These are assets that cannot be seen or touched, and do not show up on the balance sheet. And yet, these assets directly impact effectiveness, productivity, waste, communication, innovation and opportunities in an organization. They therefore also impact costs, revenues, customer service and market value. Intangible assets include individuals’ skills and talents, relationships and trust, culture, teamwork customer loyalty and work processes, along with trade secrets, patents and copyrights. In the early 1980s the portion of a company’s total value that exceeded book value was 40%. At the end of the 1990s it was over 80%, and for knowledge-based companies it is 90% or more. This means that, in these cases, less than 10% of a company’s market value is reflected in its accounting system. That is one reason many managers overlook the value of investing in and improving their intangible assets. They see, for example, providing employees with training to improve communications between departments as a cost. In a knowledge-based economy having clear and open communications between departments, which increases the intangible value of the company, also allows those departments to provide better products and services in a shorter time, creating a competitive value stream for the company over an extended time. We work with managers and leaders who realize their accounting systems are not reflective of what creates competitive advantage today. We help them transform intangible assets into tangible results.

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