Issue of the Decade
I was sent a report on intangible assets (customer loyalty, know-how, talent, patents, innovativeness, leadership, reputation, ideas, etc.) that I highly recommend. The report is written by the Institute of Practitioners in Advertising and underscores the importance of intangible assets in the 21st century.
Because reputation is a core intangible, the report drew my interest. As the reports rightly says, “Intangible value is the issue of the decade.”
Here is some compelling evidence:
- Intangibles make up 78% of the market value of the Fortune 500, 72% of the value of the FTSE 350 and 35% of the market of all listed companies worldwide.
- In 1955, tangible assets accounted for nearly 80% of the value of non-financial businesses; by 2005 that figure fell to just over 50%.
- The value of intangibles has tripled over the past 30 years.
- Some sectors are more dependent on intangibles than others — Media (91% intangibles); Pharmaceuticals (89%); Food, Retail and Telecom; Oil and Gas; Banking. Those more dependent on tangibles include Insurance; Electricity; Automotive and Manufacturing.
- The country with the largest proportion of intangible assets is Switzerland (probably because of Roche and Novartis), followed by India, U.S., U.K., and Canada.
These amazing facts once again prove the importance of reputation and the need to manage it well. CEOs and other top leaders are increasingly held accountable for managing reputation and making sure no harm comes to it. For this very reason, CEOs receive more of the blame for any reputation erosion (Weber Shandwick’s research just found this to be the case).
Reputation could become the fourth bottom line.