Did you know that in 1975, the S&P 500 stock index as a percentage of corporate net worth was made up of 17% tangible assets and 23% intangible assets?
Fast forward just 20 years into the future, and things looked very different. In 1997, the split was 32% tangible assets and 68% intangible assets.
By January 2015, the ratio had completely flipped. Tangible assets made up just 15% of the S&P 500’s corporate net worth and intangible assets made up 85%!
This data comes from the advisory firm Ocean Tomo’s annual study of intangible asset market value, and it reflects how changes in the macro-environment over the years have caused a sea-change in Corporate America, too.
As U.S. companies shifted away from manufacturing and towards technology and service-based business models, the importance of intangible assets exploded. A study conducted by Interbrand and J.P. Morgan to identify the top 100 brands of 2002 found that brands (an intangible asset) contributed significantly to shareholder value among public companies. For example, the study revealed that the brand value of Coca-Cola in 2002 was $69.6 billion, and the brand contribution to the market capitalization of the parent company was calculated at 51%! Disney’s brand contribution was calculated at 68% and McDonald’s was 71%!
The Value of Intangible Assets is Undeniable
Bottom-line, research has shown us for decades that intangible assets have enormous value to business, and companies that invest in building, protecting, and exploiting their intangible assets are reaping the rewards.
Show someone the Coca-Cola, Disney, or McDonald’s logo and ask them to argue that each of those logos, which represent intangible assets—trademarked brands, do not have value. They’ll have a very hard time coming up with valid arguments that discount the value of those intangible assets.
And that is why companies that understand the importance and value of their intangible assets will fight to protect them. They’ll invest time, money, and effort into identifying those assets, monitoring them, and making sure they’re secure. Those intangible assets give the companies that own them significant competitive advantages, and those competitive advantages enable the companies to continually increase company value.
Take the First Step to Deriving Value from Your Intangible Assets
The first step to building and leveraging the value of your organization’s intangible assets is to identify them. There are three primary types of intangible assets:
- Intellectual Property: patents, trademarks, copyrights, and trade secrets
- Intellectual Capital: human capital (i.e., employees), which can extend to knowledge, innovation, and even business relationships
- Goodwill: The assets that cannot be specifically identified such as the effects of a corporate social responsibility program, charitable donations, community involvement, pro bono work, and so on
A comprehensive audit is the best way to ensure you’ve captured all of your intangible assets and are positioned to not only protect those assets in the future but also to identify new assets and asset opportunities as they arise in the future.
Don’t undervalue these business assets! Prioritize them and your business value will grow.