Strategies That Build Intangible Value

by Jay Deragon on 06/20/2013

strategy The theories around development and execution of strategic management disciplines have evolved over time. We have shifted from long drawn out planning processes around “hard numbers” to real time simulation based on leveraging intangible assets.

Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. He stressed the value of managing by targeting well-defined objectives. This evolved into his theory of management by objectives (MBO).

Strategy theorist Michael Porter argued that strategy target either cost leadershipdifferentiation, or focus. These are known as Porter’s three generic strategies and can be applied to any size or form of business.

W. Chan Kim and Renée Mauborgne countered that an organization can achieve high growth and profits by creating a Blue Ocean Strategy that breaks the trade off by pursuing both differentiation and low cost.

Over-reliance on any particular approach to strategy is dangerous and that multiple methods can be used to combine the creativity and analytics to create an “approach to shaping the future” that is difficult to copy.  What we know and continue to learn is that intangible value, and how an organization’s creates it, is very difficult to copy.

Emphasize Strategies That Build Intangible Value

Greg Satell writes in Forbes “How Technology Is Changing the Way Organizations Learn“: Just as the first industrial revolution transformed business and society, this new algorithmic age will bring not just efficiency, but significant, cultural changes.  While the future is unclear, some of the shifts are already becoming apparent:

Bayesian Strategy:  The knowledge economy coincided with the rising influence of business strategists.  Highly trained executives would analyze business conditions and devise intricate plans for the future.   Managerial performance, therefore, was widely evaluated as a function of their ability to “execute the plan.”

However, good strategy is becoming less visionary and more Bayesian. Strategic plans will play a similar role to “God parameters” that will be honed through an evolutionary process of simulation and feedback.  Strategists, to a great extent, will become hackers rather than planners.

Brands as Open API’s:  One little noted consequence of the knowledge economy is the rise of intangible value, which often far exceeds tangible assets in corporations.  

Brands, therefore, became tightly controlled assets that were nurtured and protected. That’s beginning to change as brands are becoming platforms for collaboration rather than assets to be leveraged.  

Marketers who used to jealously guard their brands are now aggressively courting outside developers with Application Programming Interfaces (API’s) and Software Development Kits (SDK’s).  Our economy is increasingly becoming a semantic economy.

According to The Wall Street Journal the most valuable companies today, with a few exceptions, make most of their money from intangible assets. In today’s post-industrial society, the preponderance of corporate wealth is created from the elements of intangible capital: human, strategic, structural and relationship capital.

Smarter Companies enables organizations to build intangible value by providing tools to inventory their intangibles measure them against peers and define the internal strengths and weaknesses (see their 3 Step method here). Only then can you begin to create strategies that build more value from those intangibles.

Comments on this entry are closed.

Previous post:

Next post: