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New study shows importance of communicating intangible assets

Value of IABC Research Foundation Luncheon was Intangible<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

By Edward Lundquist, ABC

The IABC Research Foundation’s annual luncheon, held June 10 at the International Conference in <?xml:namespace prefix = st1 ns = “urn:schemas-microsoft-com:office:smarttags” />Toronto, provided a solid understanding about something that’s intangible.

Dr. Tamara Gillis, ABC, past chair of the foundation, presented an overview of recent foundation-sponsored research titled “Intangible Assets and Communication” by a team of researchers from the Norwegian School of Management including Hanno Roberts, Peggy Simcic Bronn and Karl-Joachim Bruenig.  

What are intangible assets?  Like cash, facilities, inventory, and equipment, they are things that add value to a company or organization, but they can’t be touched, felt or seen.  The term is defined by the British Department of Inland Revenue as “non financial fixed assets that do not have physical substance but are identifiable and are controlled by the entity through custody or legal rights.”  Intangible assets include things like brand names, patents, copyrights, goodwill, ideas and relationships.  Companies may carry these assets on their balance sheets, or they may tout them when trying to promote their stock or sale price.  But these “blue sky” assets have real value to a company, but cannot easily be measured, weighed, divided up or distributed to shareholders.

“Today companies derive their value from more than just things. Their value and future success depends on intangible assets,” says Gillis, an associate professor of communication at Elizabethtown College in Pennsylvania. 

For intellectual property and intangible assets to have value, stakeholders must know about them.  That’s a communication function.

“From a communication point of view, intangible assets are important because stakeholders such as consumers, political authorities, interest organizations and potential employees are more conscious today and are highly knowledgeable about where they stand and what they want from our companies,” says Gillis.

Where companies used to be capital-intensive, with large factories, significant investments in machine tools or other equipment, and real estate, today’s companies more often draw upon the intellectual capacity of their employees. 

A new IABC Research Foundation study titled “Intangible Assets and Communication” by a team of researchers from the Norwegian School of Management including Hanno Roberts, Peggy Simcic Bronn and Karl-Joachim Bruenig.  The team defines companies by their use of knowledge. All organizations are knowledge organizations, the team says, ranging from knowledge-intensive service providers to high-tech manufacturers, building upon knowledge work as their primary value-adding process.

Firms always have had knowledge as one of their resources, but its competitive relevance and intensity has dramatically increased over the last decade. Knowledge organizations can be categorized on the basis of their knowledge utilization, i.e., the way they deploy their knowledge resource. Within the knowledge economy, firms can be either:

–         knowledge-based;

–         knowledge-intensive, or;

–         knowledge-driven.

Knowledge-based firms have knowledge as the only outcome of their transformation processes, such as consultancies or educational institutions.  Knowledge-intensive firms have knowledge as one of their outcomes in parallel to their manufacturing or service production such as software development or car manufacturing. Finally, knowledge-driven firms do not have knowledge as their main output but rather as their input, nor have they centered their transformation process on it.  An example of a knowledge-driven firm is an electrical installation firm where the professional training of the operators is the key knowledge input.

According to Gillis, communication as an element that is reflected in financial documentation only as an expense. Yet, the research team shows through this study that managing communication is a key to creating value and revealing the value of other intangible assets.

“The researchers suggest that elements of the communication function must be acknowledged as assets for the company in financial documentation, since without this and other intangible assets, the structural and tangible assets would not exist. For example, without acknowledging the value of human capital and relational capital, tangible assets such as products and services would not exist for the company to make an end profit,” Gillis said.

In essence, those assets that add value to a company only have true value if stakeholders know about them.  The better job the organization’s communications staff does telling the organization’s story, the greater the value of those intangible assets.

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