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How to Track Your Key Intangible Business Assets

Anthony | February 7, 2021

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Whether you choose to believe it or not your competitors are looking to take your strategic edge.

How do you deal with this?

Focus on strengthening your intangible, hard-to-copy assets such as customer satisfaction, systemization of your business, core values, working environment, efficiency, and innovation. These intangibles define what your business does best.

To strengthen these capabilities, you have to measure them, and as you might expect they are difficult to track.

If you’re wondering how to identify the intangibles in your business conduct an audit.

This will uncover the two or three essential capabilities to carrying out your strategy so you can come up with a plan for improving them.

There’s no magic list of intangible capabilities for every business. However, we’ve listed below some that most well-managed businesses tend to have.

When a business falls below the norm in any of these core areas, dysfunction and competitive disadvantage follows.

Talent:

Competent employees have the skills.  Committed employees use their skills regularly and predictably.

Leaders can earn commitment from employees by ensuring that the ones who contribute more receive more of what matters to them.

Innovation:

We are good at doing something new. Innovation whether in products or services, administrative processes, business strategies, channel strategies, geographic reach, brand identity, or customer service focuses on the future rather than on past successes.

It excites employees, delights customers, and builds confidence among investors.

Learn 

Compare your business with businesses that have world-class performance in your target capabilities.

It’s a possibility that these companies won’t be in the same industry as your business.  It’s helpful to look for industries outside of yours where companies may have developed strength in the capability you desire.

For example, hotels and airlines have many differences, but they’re similar when it comes to: pleasing travelers, employing service workers, and so on. The advantage of looking outside your own industry for models is that you can emulate them without competing with them.

They’re more likely to share insights with you.

Clients or Customers:

20% of customers account for 80% of your profits, the ability to connect with targeted customers is a strength.

Clients or Customers may come from dedicated account teams and databases that track preferences.

When a large portion of the employee population has meaningful exposure to or interaction with customers, connectivity is enhanced.

Shared Mind-Set and Brand Identity:

To gauge shared mind-set, ask each member of your team to answer the following question: What are the top three things we want to be known for in the future by our best customers?

Measure the degree of consensus by calculating the percent of responses that match one of the three most commonly mentioned items.

The next step is to invite key customers to provide feedback on brand identity. The greater the degree of alignment between internal and external mind-sets, the greater the value of this capability.

Accountability:

Are you able to obtain high performance from your employees?

The way to determine accountability is to review how your managing employee performance.  The following questions can help:

  • What percent of employees receive an appraisal each year?
  • How much does compensation vary based on employee performance?

Collaboration:

Collaboration occurs when business as a whole gains efficiencies of operation through the pooling of services or systems, or through the sharing of ideas and talent across boundaries.

Collaboration can be tracked both throughout the organization and among teams. You can determine whether your organization is truly collaborative by calculating its breakup value.

Estimate what each division of your company might be worth to a potential buyer, then add up these numbers and compare the total with your current market value.

if the breakup value is 25% more than the current market value of assets, collaboration is not one of your business’s strengths.

Learning:

Businesses can generate new ideas through benchmarking (that is, by looking at what other companies are doing), experimentation, hiring or developing people with new skills and ideas, and continuous improvement.

Such ideas are generalized when you move from one leader to the next, from one geographic location to another, or from one structural entity to another.

For individuals, learning means letting go of old practices and adopting new ones.

Leadership:

Businesses that consistently produce effective leaders have a clear leadership common understanding of what leaders should be, do and know.

These business leaders are easily distinguished from their competitors.

You can track your organization’s leadership brand by monitoring the pool of future leaders.

How many backups do you have for your top employees?

Next Steps

Carefully review your Business and identify your key intangible components. 

Note: ou tangibles will likely be measured against Key Performance Indicators and we will cover this in the next post KP

Here’s an example list of indicators

  • Innovative
  • Leading-edge of the market
  • Customer satisfaction (comfortable and confident)
  • Systemization of our business
  • Inspiring working environment
  • Core Values

Establish Key Intangible Progress indicators

Once you have identified your list of intangibles the next step is to establish your progress indicators and record them in a Progress Tracking Worksheet.

A simple Excel spreadsheet works fine for this. 

Create a Scoring System for Intangible Indicators

To create a scoring system for your Intangible Indicators, you can assign numbers to the best-case and worst-case scenarios and the range in between. For simplicity, you can use five benchmark ratings (+10, +5, 0 , -5, -10).

You can then use these benchmark ratings to create a legend.

Here is an example of a Rating Sheet for Intangible Indicators (courtesy: The Emyth):

Notice the degrees of extremes.

The circled numbers show what the rating results might be after creating a legend and evaluating the indicators.

When you are scoring the Intangible Indicators, watch out for traps, such as trying to think in terms of “units” of employee morale.

There is no such thing. Just because you have put a number to something intangible, don’t let yourself think that you have made it tangible. 

Create a Legend

Now create a narrative for each of the five benchmark ratings for all Intangible Indicators that you’ve listed. This will become a legend that you will use to determine where you think the company ranks for each Intangible Indicator.

The legend should include as much detail as you need to create a clear understanding of your standards and expectations. Once complete, the legend will become an invaluable tool by giving you an accurate picture of each rating. It will help you assess where the business is, and how close it is to achieving a +10 ranking.

Here are some ways to think about creating the legend:

Ask yourself,

  • “What would +10 in systemization look like in my company?”
  • “What would be in place and happening?”
  • “How would I know it is a +10?”

Next,

  • if the rating were a +5 what would be missing or incomplete compared to +10?
  • How about –5?
  • What would be happening (or not) that would cause that rating to be selected?

Here’s an example: (courtesy: The Emyth)

Studying this example will help you see how to create your legends.

Once you have designed a scoring table and legend for each of your Intangible Progress Indicators, you are ready to evaluate your business.

Create a Progress Indicators tracking sheet and a system for periodically tracking and evaluating your business against it

The Tracking Sheet contains the ratings of both the tangible and intangible elements of your business.

Results for the Tangible Indicators will come from your one-page scorecard (refer to “Traction” the book if you’re unsure about what w one-page scorecard is).

Results for the Intangible Indicators will come from the Intangible Indicators Rating Sheet. While the Intangible Indicators Rating Sheet shows a snapshot of each component at a specific point in time, the Tracking Sheet shows an overview of how the Progress Indicators change over time.

Customize your Tracking Sheet for whatever time interval you want to measure. You can keep a running spreadsheet and capture information every month, just like with your financial statements.

Here’s an example: (courtesy: The Emyth)

Customize your Tracking Sheet for whatever time interval you want to measure. You can keep a running spreadsheet and capture information every month, just like with your financial statements.

 

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About the Author

Anthony

How would you like to attract more leads, convert these leads into paying clients and deliver more value to these clients? Join a team of like-minded entrepreneurs who are generating more money, delivering meaning and have more freedom to live the lifestyle they choose