Recognizing Intellectual Capital

The traditional accounting model with its financial statements is increasingly inadequate in helping us understand what drives value in our business. These value drivers are highly intangible and the accounting model is not setup to measure and report these critical assets. Part of the problem is simple – it’s hard to measure intangible drivers of value. They can include things like:

• Your ability to retain and have loyal customers
• The fact that your workforce is highly motivated and requires minimal supervision
• Having strong leadership that creates the right culture for performance
• Obtaining brand recognition that makes it harder for others to compete against your company
• Turning ideas into real product improvements for continued market leadership
• Leveraging your know-how against the assets of others in a shared economy

A Better Way to Grow

The consensus amongst most is that bigger is better. With increased pressure on our natural capital (soil, water, oceans, etc.) and an ever increasing gap between rich and poor, it’s time for all businesses to re-think what growth is really about. Take for example inequality - the United States has the fourth-highest income inequality among the world’s developed countries; only Chile, Mexico and Turkey rank higher with trailing countries represented by Russia, Ukraine and Lebanon.

In their book The Big Enough Company, authors Adelaide Lancaster and Amy Abrams make the argument that owners should be true to themselves and grow a company to a size where they can still enjoy running the company. You should not grow just for growth’s sake. A “big enough” company delivers benefits to a broad audience and continues to have a positive impact as the owners originally envisioned.   

Is Knowledge Really Power?

We all recognize (at least I hope most of us) that knowledge is instrumental to value-creation and that knowledge as an asset is far more important than traditional assets such as equipment, real estate or buildings. And to a great extent, every organization must become a knowledge organization and every employee must become a knowledge professional.