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So it is with most breakthrough innovations and banner financial years. Interestingly, intangibleassets are all the rage these days on Wall Street. There is no line on the balance sheet for "ability to innovate" or "skill at managing brand." If ego and time allow, the list can be quite long.
The shutdown will be completed by early 2014, bringing to a close a dramatic story of rise and fall at the hands of disruptive technological innovation, or what we have called “ big bang disruption.” As recently as 2002, the company had a market value of $5 billion. The Blockbuster-Netflix skirmish is a case in point.
For many years, beginning in 1942, Premarin was the only hormone replacement therapy drug on the market derived from a natural source. A series of patents were issued on the drug in the 1940s, but long after they had expired, there were still no generic competitors on the market. Such was not the case.
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. Acquisitions, bold investment in intangibleassets, and attracting talent can ultimately make the difference.
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.
Innovation has the potential to transform the investment industry. Yet the world’s largest funds are closed off from these innovations. Research we have collected in recent months shows that pension funds, sovereign wealth funds, and endowments expect imminent breakthrough innovations in investment technology.
They’re more productive , more profitable , more innovative , and they pay better. “How long does it take for her to interact with a market that isn’t nearly monopolized?” Walmart went from a 3% share of the general merchandise retail market in 1982 to over 50% today. Andrew Brookes/Getty Images.
It struggles to account for today’s intangibleassets—services, insights, and networks. Education and access may also need to evolve, to ensure that the benefits of technological innovation aren’t limited to an elite.
Today, however, by exploiting new digital technologies, firms like Apple, Lending Club, and AirBnB have made customer co-creation of value central to their business models and in doing so now rank among the world’s most innovative and valuable firms. But they might see a dramatic change in engagement and innovation if they did.
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.
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