As the S&P Market Value chart indicates, in 1975 tangible assets which consists of your inventory, building and other balance sheet items, represented 83% of S&P 500 corporate value. By contrast intangible assets, which consists of primarily people and enabling technology, represented only 17% of S&P 500 corporate value.
Now turn the numbers upside down, because in 2015, intangible assets represented a whopping 87% of value and tangible assets was only 13%.
For the MI retailer this observation is key, because of the inordinate amount of time & resources invested in inventory & other tangible assets.
“In today’s knowledge economy, company value is no longer driven primarily by physical or tangible assets, but is increasingly attributable to non-financial business drivers — the intangible assets of an enterprise.” CGMA- Chartered Global Management Accountant
The two primary business models retailers can chose from is either the Apple model, or the Amazon model. A hybrid puts you in the middle which is not a very good place to be.
If you are following the Apple model, you are leading with customer experience, sharing stories, and creating a community.
If you are following the Amazon model, you are leading with logistics, fast delivery and cheap prices. The customer experience is essentially convenience.
Your intellectual capital is the sum of knowledge your organization knows which gives it a competitive edge which includes your trademarks and patents. Your intellectual capital includes your intangible assets which may be broken down into four themes to facilitate measuring and managing the asset.
1- TALENT consists of the talent your team owns. The goal is to monetize organizational talent by connecting with customers through the transfer of knowledge. Your employee and ownership talent is directly related to how the market views your brand.
2- RELATIONSHIPS with customers and vendors are key value drivers. Creating memorable customer experiences, and creating informal partnerships with vendors and suppliers is a smart business practice.
3- PROCESS & DATA where you are creating a repeatable process, is key to transfer value from the owner to employees and to employee to employee. Capturing relationship information in a CRM (Customer Relationship Management database) is essential to facilitate corporate memory.
4- ASPIRATIONS where the owner(s) and employees feel on track to achieve personal, and professional fulfillment is organization’s most valuable asset. Going to work with a sense of purpose, passion and pride pays real dividends on many levels. When aspirations are addressed, employee loyalty is realized.
When looking to find your competitive edge, look to your intangible assets for ideas. Invest time in the growth and learning of your employees. Invest time in new ways to create powerful customer experiences.
If your are a brick & mortar retailer with an internet presence, promote your in-store customer experience by spotlighting your employee talent. That’s how you turn intangibles into tangible profit.