Transcript MEASURING THE VALUE OF INTANGIBLES to discover the roots of company’s future success Geneva, July 11, 2006

MEASURING THE VALUE OF INTANGIBLES
to discover the roots of company’s future success
Geneva, July 11, 2006
When we want to assess future potential of a
company, what shall we look at?
LOOKING BEYOND FINANCIAL ASSETS...
• Managing an organisation by focusing simply on
its financial assets would be like driving a car
looking just in the rear mirror.
• Profits are fruits of the past performance – so
what indicators do you have about potential and
future value of a company?
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What are the intangibles?
DEFINITION OF INTANGIBLES
The factors not shown in the traditional
balance sheet,
but which are of critical importance for the
company’s future success.
We believe that future value of company depends
mainly on intangibles.
Different methods were developed to assess and
allow benchmarking of areas that are of critical
importance for the future of organisations, but still
are not shown in traditional financial or
operational reports.
3
Market value, book value and intangibles
TOTAL
VALUE
=
Country
Paese
Market
value
Financial
capital
Book
Value
+
%
tangible
tangibile
Intangible
capitals
Brand
value
Altri
Other
intangibles
intangibles
%
intangible
intangibile
Coca Cola
US
104,8
11,8
11%
69,64
23,36
89%
Microsoft
US
264,9
55,8
21%
64,09
145,01
79%
IBM
US
138,2
22,8
16%
51,19
64,21
84%
General Electrics
US
277,4
63,9
23%
41,31
172,19
77%
Intel
US
112,3
35,3
31%
30,86
46,14
69%
Nokia
Finland
71,1
15,4
22%
29,97
25,73
78%
In $ billions
Source: adaptation from AIAF, 2005
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Measuring the value of intangibles
Tobin’s Q
new accounting methods, since
those that have been implemented so
far:
Market to
Book value
.
VAIC TM
Are too focused on the past

Miss anticipatory “power”

Capture critical changes too late
•
Don’t take into adequate
consideration some resources,
such as intangible assets
Knowledge
Capital
Earnings
Calculated
Intangible
Value
EVA TM
IAMV TM
AFTF TM
IC - index TM
Atomistic Methods

Holistic Methods
Companies have to develop and utilise
Skandia
Navigator TM
Balanced
Scorecard
Value Chain
Scoreboard TM
Intangible
Assets
Monitor
Human
Capital
Intelligence
Non-monetary
methods
Citation
Weighted
Patents
HRCA
TVC TM
Inclusive
Valuation
Methodology
Technology
Broker
The Value
explorer TM
Intellectual
Asset
Valuation
Monetary
Methods
Main Intangible Assets Measuring
Models
Elaboration from Sveiby, 2001.
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IC RatingTM background: the Value Platform
There are 3 main perspectives behind IC
Rating Platform:
1)
Organisational
structural
capital
Human
capital
Human Capital
People, employees
2)
Organisational Structural Capital
All processes, procedures, systems and
culture that are left when employees are
Value
not in place
3)
Relational Structural Capital
Network of clients, suppliers and partners.
Relational
structural
capital
All these 3 perspectives work in the framework
of particular Business Recipe (market, strategy
Business
Recipe
of the firm), which is individual for every
company.
Good performance in all these areas builds
Financial Capital in the future.
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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IC Rating™ Platform
Intellectual
Capital
Organisational
Structural Capital
Business
Recipe
Intellectual
Properties
KEY ISSUES
KEY ISSUES
Business
environment;
- Competition
- Entry
threats
Demand from
competitors
Business idea
Strategy
Vision
Contribution
from I.P.
(attract
customers &
employees)
Protection of
I.P.
(long term/
hard to copy)
Processes
KEY
ISSUES
Structured
and documented
knowledge
(methods,
routines and
systems)
Organisation
& culture
Human
Capital
Management
Relational
Structural Capital
Employees
KEY ISSUES
KEY ISSUES
Business
related skills
Business
specific
knowledge
Internal
leadership
Co-operation
and complementary
experiences
in the management team
General
competence
Contribution
to development of
structural
capital
Network
Brand
Customers
KEY
ISSUES
KEY
ISSUES
KEY
ISSUES
Business
critical
networks
and
alliances
(excluding
current
customers)
Awareness
Loyalty
Reputation
Potential
Relevant
differentiation
Strength
- image
enhancing
- demanding
Dependence
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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IC Rating™: three perspectives
1. Effectiveness
2. Risk
3. Renewal and Development
Present day
Future
Accounting
Present value of IC effectiveness in creating future financial value
Threat against present effectiveness * probability of threat coming true
Efforts to renew and develop present effectiveness
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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IC RATING™ is done using
well-known Standard & Poors scales
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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IC RATING™ is mainly based on interviews
with people
PROCEDURE:
• Rating is primarily based on interviews with carefully select 35-50
respondents who knows most about this company, of which
 2/3 is external (customers, lobby organizations, competitors, suppliers,
partners, etc.)
 1/3 is internal (employees),
• rating of intellectual capital is weight average of answers for more than 150
questions that are strictly connected to business performance of the company,
• rating usually takes 4-6 weeks.
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
10
IC RATING™ and IP assessment
• 17 questions out of about 150 are focused on IP evaluation
• Examples of key issues to be pointed out during the evaluation process:
 Market awareness about company's IP
 IP influence on company’s brand
 Company's IP “replaceability”
 Time period during which the IP has value
 IP contribution to rise barriers to entry
 Etc.
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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Case Study: Effectiveness perspective
BB
Intellectual Capital
A
Business
Recipe
CC
BB
BBB
Organisation
Human
Relation
C
CC
BB
B
Intellectual
Properties
Process
Management
Employees
A
Network
BB
BBB
Brand
Customers
Selected findings: This rating was done for start-up company. As in case of most young and small companies,
structural capital is almost non-existent. But, company is operating in market with good perspectives. Good
score in relation box shows that company’s network is a main source of its current advantage. Customers
base as well can be assessed as satisfactory.
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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Case Study: Risk perspective
RR
Intellectual Capital
-
RR
RR
Business
Recipe
Human
Organisation
-
Intellectual
Properties
-
Process
RRR
R
Management
Relation
-
RR
Employees
Network
R
Brand
RRR
Customers
Selected findings: Organisational Capital shows almost no risk as its efficiency is to low to be threatened.
Although efficiency of relation capital was average (BBB), the risk perspective shows that it’s strongly
threatened by some aspects. It may be that there are very few customers or customers are heading to
bankruptcy or many more. To discover true reason we must look closer to the Customer box and see answers
to the questions of which the box is composed.
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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Case Study:
Renewal & Development perspective
BBB
Intellectual Capital
BB
BB
Business
Recipe
Organisation
BBB
BB
Intellectual
Properties
Process
A
BBB
Human
Relation
A
A
Management
Employees
BB
CCC
Network
Brand
A
Customers
Selected findings: In renewal and development perspective we can see substantial efforts in the Human
Capital box. These means that company currently conduct several initiatives, which are focused on improving
human capital effectiveness. Poor renewal efforts can be observed in the brand box, which together with not
so good efficiency (only BB) should make management put more attention in this area.
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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Case Study:
Customer relations box decomposition
Relation
Non-vulnerability
31
77
25
71
Process
Strengthening
75
86
57
Strategic
Supplier
Interaction
80
54
11
79
56
Share of
budget
76
78
73 79
Competence Enhancing
Duration
of
81
Customer
78
Relation
Image Creating
Company
Benchmark
Selected findings: It turned out that main threat for customer effectiveness comes from two things: being a
strategic supplier and vulnerability for the changes. The company itself had one big customer, which
generated most of the revenues. Relations with this customer was great, duration was long, it was process
competence and image enhancing customers. The only thing that made the risk so high was that customer
was preparing to conduct services offered by the company itself.
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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IC RATING™ - A Comprehensive View
RR
BB +
BBB +
BB
BB
BB
BB
BBB
BBB
CC
R
RR
BB
BBB
R
-
RR
A
R
59
IR:s varaktighet
55 37
79
Vår lönsamhet med
utgångspunkt i vårt
affärsrecept
50
32
36
74
49
Affärsmiljöns
IR:s förmåga att skapa
100
konkurrenssituation
inträdesbarriärer
Vår tillväxt med utgångspunkt
Potentiella hot mot
i vårt affärsrecept
affärsmiljön
67
48
Processer produktion
45
77
77
86
RR
RR
77
BB
BBB
Processer för utveckling
av medarbetarna
84
75
59
59
Effektivitet
79
58
61
55
Processer för
80
Affärsegenskaper
distribution och
logistik
Processer för försäljning
BBB
Ledningens fokus
85 Kundhantering
Sakkunskaper
72
35
70
86
RR
Processer innovation
Intern atmosfär 75
51
B
RR
R
Processer för
Affärsmiljöns tillväxt
intern administration
på 5 års sikt
IR:s förmåga att göra
Processer för
94
oss oberoende av
Affärsmiljöns lönsamhet
kundhantering
Vår position i affärsmiljön
80
prissättning
77
på 5 årskonkurrenternas
sikt
59
55
BB
61
77
76
B
B
B
82
B
22
47
69
85
Kundlojalitet
94
Kännedom
67
Ledningens samspel
84
Kundbaspotential
Internt ledarskapTydlighet i ledarskapet
CCC
BB +
Nätverk för försäljning
Nätverk för personal
Kompetensutvecklande 92
och kompetens
kunder 80
82
Leverantörs- och
71 65
86
Imagekunder
63
86 75
65 distributionsnätverk
Sårbarhet mot
81
kundavhopp
62
51
B
55
67
76
85
Anseende
Relevant
differentiering
Förmåga att förmedla visioner, värderingar, strategier och mål:
”De har långsiktiga mål och vill vara fristående och oberoende.”
”Ledningen skulle vinna på att bli mer synlig i organisationen, att gå omkring i högre utsträckning och
tala med medarbetarna.”
Förmåga att förmedla visioner, värderingar, strategier och mål:
”De har långsiktiga mål och vill vara fristående och oberoende.”
”Ledningen skulle vinna på att bli mer synlig i organisationen, att gå omkring i högre utsträckning och
tala med medarbetarna.”
Förmåga att förmedla visioner, värderingar, strategier och mål:
”De har långsiktiga mål och vill vara fristående och oberoende.”
”Ledningen skulle vinna på att bli mer synlig i organisationen, att gå omkring i högre utsträckning och
tala med medarbetarna.”
Dedikering:
”Man har löst de problem som uppkommit på ett rakt och snyggt sätt. Man är engagerad på alla nivåer.”
”Företagets högsta ledning engagerar sig personligen i kunderna och bryr sig.”
Dedikering:
”Man har löst de problem som uppkommit på ett rakt och snyggt sätt. Man är engagerad på alla nivåer.”
”Företagets högsta ledning engagerar sig personligen i kunderna och bryr sig.”
Dedikering:
”Man har löst de problem som uppkommit på ett rakt och snyggt sätt. Man är engagerad på alla nivåer.”
”Företagets högsta ledning engagerar sig personligen i kunderna och bryr sig.”
Ledningens incitament:
”De får sina incitament genom den ökande börskursen.”
”Optionsprogram som fungerar väl.”
Ledningens incitament:
”De får sina incitament genom den ökande börskursen.”
”Optionsprogram som fungerar väl.”
Ledningens incitament:
”De får sina incitament genom den ökande börskursen.”
”Optionsprogram som fungerar väl.”
Samspel och gemensamma mål:
”Väl fungerade samspel.”
”Bra kommunikation i ledningen men ej bra kommunikation nedåt. Ledningen måste ändra sig och få
affärsidé och strategi att genomsyra hela organisationen.”
”De har delat upp ansvarsområdena väl men VD har det övergripande ansvaret.”
”De har en gemensam målbild till 90%.”
Samspel och gemensamma mål:
”Väl fungerade samspel.”
”Bra kommunikation i ledningen men ej bra kommunikation nedåt. Ledningen måste ändra sig och få
affärsidé och strategi att genomsyra hela organisationen.”
”De har delat upp ansvarsområdena väl men VD har det övergripande ansvaret.”
”De har en gemensam målbild till 90%.”
Samspel och gemensamma mål:
”Väl fungerade samspel.”
”Bra kommunikation i ledningen men ej bra kommunikation nedåt. Ledningen måste ändra sig och få
affärsidé och strategi att genomsyra hela organisationen.”
”De har delat upp ansvarsområdena väl men VD har det övergripande ansvaret.”
”De har en gemensam målbild till 90%.”
Ledningspersonerna kompletterar varandra:
”Bra att kvalitetschefen är personligen ansvarig för processer och metodik, dvs uppbyggnad av
processkapitalet.”
Ledningspersonerna kompletterar varandra:
”Bra att kvalitetschefen är personligen ansvarig för processer och metodik, dvs uppbyggnad av
processkapitalet.”
Ledningspersonerna kompletterar varandra:
”Bra att kvalitetschefen är personligen ansvarig för processer och metodik, dvs uppbyggnad av
processkapitalet.”
Delegeringsförmåga:
”De är bara fyra stycken i ledningen vilket är mycket bra.”
Delegeringsförmåga:
”De är bara fyra stycken i ledningen vilket är mycket bra.”
Delegeringsförmåga:
”De är bara fyra stycken i ledningen vilket är mycket bra.”
•
•
Source:
•
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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IC RATING™ and financial performance
• A high IC RATING value, indicates a
to come.
• IC RATING alone is a better
predictor of future profits, than
methods only using financial input
IC Rating™ 2000
high turnover growth in the years
Rxy = .80; p< .01
data.
Increase in turnover 2001 (%)
Source:
Intellectual Capital Sweden
www.intellectualcapitalsweden.se
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Beyond IC RATING™:
IP “monetization” and brand equity
•
Monetary evaluation of some IP forms (e.g.: brands) can complement methods
like IC RATING that basically provide qualitative findings and point out
improvement areas
•
There are many methods to evaluate the brand equity:
•

Based on cost criteria, oriented to the past and to the resources spent on
the brand

Based on the “benefits flows”: the value of the brand is determined by the
cash flows that it generates

Based on market indicators and, therefore, on ex post performances
The monetary assessment of the brand allows the company to have immediate
benefits, e.g.:

Further financing from investors trough specific financial tools (e.g.: salelease back)

A better rating according to Basel II criteria
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Thanks
Mauro De Bona
Campus - Innova Group
+39 320 6130308
[email protected]
skype: maurodebona
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