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We may or may not be good at strategic thinking, and we may or may not have developed a story which we can convey to others in the hopes of leading them in a particular direction. If we have, however, done our homework and have developed a story about where we think we should be going, then one can say that the northeast axis has “formed.”
Interestingly, intangibleassets are all the rage these days on Wall Street. Investors grapple daily in an effort to figure out how to value companies whose accounting assets — things like land, capital, products, and licenses — don't adequately express their true market value.
Consider the dramatic shift in the types of assets that create market value. According to Ocean Tomo, a consulting firm focused on intellectual capital, physical assets (plant, property, and equipment) made up more than 80% of the market value of the S&P 500 in 1975. How much is changing?
In a parallel development, the number of companies listed on U.S. stock exchanges has declined by almost 50% from its peak in 1996, despite dramatic increase in aggregate market capitalization. Such acquisitions become more lucrative with rising first-mover advantages, pace of technological development, and network externality.
Break up a strategic function in response to underperformance in the wake of severe market disruptions? Put the most strategic pieces into the hands of up-and-comers passing through the leadership-development revolving door? Lynanne Kunkle, VP-Global Talent Development and HR-Asia for Whirlpool, is a case in point.
Manufacturers invest most of their capital into physical assets, while high-tech firms invest in R&D to create new intellectual capital. But all assets are not created equal, especially as the technological landscape changes.
Though the story is still developing, there are a few big, interconnected lessons to be drawn from what we know so far. Decades ago, a company’s market value was nearly equivalent to its tangible assets—buildings, machinery, materials, financial capital, and so on. Being clean and green has real, bottom-line value.
We focus on economic profit rather than revenue size, market share, or productivity growth because these other metrics risk including firms that are simply large and may not create economic value. Often when superstar cities fall, they tend to be advanced economy cities, replaced by a developing economy city.
The most forward-thinking companies are developing new business models to create value from these kinds of information exchanges. (2) 2) Develop open multiple multi-sided relationships: Altruism or openness alone will not give rise to ready access to the diversity of data required to understand the predictive future.
In the 2016 book The End of Accounting , NYU Stern Professor Baruch Lev claimed that over the last 100 years or so, financial reports have become less useful in capital market decisions. The economic purpose of these intangible investments is no different than that of an industrial company’s factories and buildings.
Too many companies prioritize quarterly earnings over long-term innovation, human capital investment, and brand development, and many people believe short-term shareholders are to blame. Gathering information on a firm’s intangibleassets is costly, and so not worth doing if you own only a tiny bit of stock in a company.
Small startup firms are already developing proprietary technologies — such as machine vision, deep learning, and other innovations —– that could help large investors evaluate opportunities and risks with far greater accuracy and efficiency than was previously possible.
The most forward-thinking companies are developing new business models to create value from these kinds of information exchanges. (2) 2) Develop open multiple multi-sided relationships: Altruism or openness alone will not give rise to ready access to the diversity of data required to understand the predictive future.
The health technology and technology services industries are creating highly scalable, and highly desirable, intangibleassets. As we mentioned previously, physical assets have a number of drawbacks, compared to digital, intellectual, and relationship assets. Thus, they have low PPE but high multiples. Reallocate capital.
Through our research on network-centric businesses and our experience advising hundreds of companies we have developed a framework for understanding customer affinity. Through co-creation, companies can access a deep well of customer capabilities, knowledge and assets. Four levels of affinity. Insight Center. Growing Digital Business.
With interest rates at historic lows, market volatility, political uncertainty, the European crisis, severe commodity price fluctuations, and other unpredictable market conditions, corporate brands and executives have been understandably inclined to sit on the sidelines. But history shows that cash cannot sit idle indefinitely.
“How long does it take for her to interact with a market that isn’t nearly monopolized?” have grown more concentrated in the past 20 years, meaning that the biggest firms in the industry are capturing a greater share of the market than they used to. The result is that large firms are gaining market share.
Especially given the fragmentation of the ”splinternet,” dramatized by the development of a distinct internet ecology in China, this is currently a matter of much concern. But developments such as robotics and 3-D printing might end up reducing rather than increasing trade levels, depending on how quickly their costs drop.
Gross Domestic Product (GDP), our core measure of prosperity, was developed during the industrial age. It struggles to account for today’s intangibleassets—services, insights, and networks.
For example, they move corporate charters abroad through inversion transactions , and they move profits abroad by investing outside the United States or by using transactions that shift ownership of intangibleassets and reported income to their affiliates in tax havens in which they have little production or sales.
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