Your intangible assets are ripe with value

If a professional services firm's value is mostly intangible, how does its leadership maximise that value? 

This question taxes leaders in many organisations, as a very large proportion of the market value of most organisations is intangible. This value appears on the balance sheet in the form of goodwill and the valuation of patents and agreements. However, in a professional firm, it seems to be more of an art than a science. 

There aren't any simple global answers, but here are some ways to approach the issue to either uncover value or reveal hidden risk. 

Map your intangibles

Depending on your research source, you'll find many answers to the definition of intangibles, including all of the accounting standards on the subject. Are your categories based on know-how & definable IP? Or are strong relationships within and outside the organisation more important? 

You'll find one answer by listening. The 'secret sauce' that makes the firm hum, is so often an aspect of the firm that everyone knows about but can't pinpoint. It's a composite object, a collective view from multiple perspectives. That means that your colleagues, advisors and clients will have different terms to describe the same thing - but you'll detect furious agreement, when you sit back and uncover the patterns in their responses. 

You could start with your own reputation as leader, as that's a core component of reputational value across all organisations. The reputation of the leadership group as a whole, mapped according to what that reputation is for, and with whom, is a key asset. 

The interesting and useful notions will come through open, safe, curious enquiry. You may find yourself drawing connections. The web of hidden connections across the firm and with the client cohort is how information is transmitted, including soft information such as how people are feeling about things which in turn affects innovation, concentration and quality. Hidden networks are also where issues are resolved before they become problems to solve. It's where growth happens through informal coaching and mentoring. 

Your map of these forms of asset forms the basis for a map of value. 

Measure

The categorical problem with intangible assets is that they are hard to measure, especially when there isn't a transaction or document to give you a proxy in the tangible world. They are often expressed in fuzzy ways, as feelings, perspectives, intuitions.

Intangible assets often only yield value through an indirect chain of connections. Two people talk. Six weeks later one of them remembers an insight they shared. That person researches an issue through that lens, uncovers new knowledge and starts to do a task more quickly or more effectively. Yet none of this sequence is recorded. One conversation, two steps, real value. 

That would suggest you explore how chains of events lead from the intangible asset to value even where no one link seems important. Perhaps your firm has

• a culture value of 'open curiosity',
• combined with safety to talk through issues without requiring immediate answers,
• plus access to time & resources to enquire about things,
• plus freedom to play around with a process

Are you able to track this through to tangible value such as better outcomes for clients, more secure fees and strong talent retention? 

This long chain, with a soft connection between events and a dollar, puts some leaders off. Persevere and you'll likely uncover something important. 

Nurture

Once you know that you have some intangible assets and that they have value, it quickly becomes the responsibility of the senior team to nurture them. 

In fact, if you know your business well, design them. Bring the best thinking together to ask: 

• What works best? 
• Where should we invest?
• What is a good process for locking in, growing and developing our intangible assets? 
• What should we do to design out any risks we've uncovered? 
• What should we take better care of, since we are the custodians of the intangible assets of the firm? 

This translates a general idea of 'secret sauce' into some specific initiatives that you may choose to do differently from the past. People will notice. 

Act

Your visible actions to drive value through intangibles is one of the differentiators between your firm and others. It is part of your uniqueness and may be an important factor in attracting talent, winning over clients or maintaining the pace of professional innovation in the firm. 

You and your senior team, as well as some of the other wise heads across the firm, should know enough to identify a handful of initiatives to focus on. I can't tell you what they are, but you'll 'know them when you see them' precisely because they are part of the essence of the firm. 

My clients have taken the following initiatives: 

• Assessed the hidden value generated by junior members of the firm, uncovering indivduals whom clients valued far beyond their seniority. A new awards scheme became a key influence in recruiting and retaining talent in depth. 
• Rearranged the office so that people could more easily accidentally meet. This led to a dramatic improvement in collaboration between specialist teams. (It's called the Boardwalk effect). 
• Invited the heads of the top 5 clients to a panel discussing their future expectations of the firm. Only non-partners attended; but one-third of the attendees were partners within the next five years, some of them taking a key relationship role with a panelist. 

In all of these cases, the action required cooperation and creative engagement between different areas of the organisation. Humility and humour were also useful especially where the enquiry led to ideas that were counterintuitive to those who liked their ivory towers.  

The importance of spaces

An intriguing aspect of intangible assets is that they are often found in the gaps. The 'boardwalk' is the corridor between the rooms, trust and collaboration sit in the space between people, innovation focuses on what is not happening (yet). It's like looking at a room and admiring the distance between the chairs, rather than the design of the chairs. That distance may be what makes the room welcoming, spacious or calming. That can mean a shift of focus that's not always easy.

Despite sometimes talking about 'nothing' or 'what's in the spaces', my conversations on this topic with MDs and senior members of firms usually take off in fruitful directions. Addressing it with curiosity and creativity inevitably uncovers a wealth of possibility and ideas. 

After all there's more to any firm than the office and the equipment. Wrap your arms around your intangibles and you have one key to a better future.