INTANGIBLE CAPITAL VALUE
by Erwan COATNOAN DE KERDU
Your copilot in creating a successful company
Why should you protect your intangible capital?
Why do we need to protect our intangible capital?
What does a company’s intangible capital consist of?
Intangible capital corresponds to the qualities of the company and what differentiates it from its competitors. There are five main elements which combine to form the concept known as the ‘intangible capital’ of a company:
- People: the vision, expertise, dynamism, and capacity of a company’s workforce. This includes the skills of the employees, their experiences, their know-how (expertise), their motivation, their sense of belonging, their involvement in the company as well as the social climate present within the company. The entrepreneurial spirit of its leader also falls under this element.
- Client base: the number of clients as well as their profiles; customer loyalty and the relationships that a company builds and maintains with its clients.
- The market: the nature and size of the market in which the company operates; knowledge of and position in this market.
- The organizational model: the working methods and the managerial style in place in the company; the importance placed on training within the company and the budget allocated thereto; the quality of administration and information management.
- Commercial power: the network of commercial partners (suppliers and distributors) of the company as well as the relationships it maintains with them.
Elements to be worked on by the manager of the company.
The manner in which a leader builds and directs the business has a major impact on its likelihood of success. This impact is measurable through the observation of the economic health of the organization. To achieve sustainability, a leader must focus on three major aspects:
- Product quality: the entrepreneur/manager must concentrate their efforts on the quality of the product or service being sold. Expertise which is exclusive to the company constitutes its distinctive competence, which is essential for its long-term existence. This allows it to create and exploit a niche of protection. Likewise, a reliably high-quality offering allows it to build and retain a loyal customer base who will have no need to seek out alternative suppliers since their expectations are being met or (ideally) exceeded. Many consumers are fiercely loyal to a company or a brand because of a high quality-to-price ratio and are not willing to compromise on price nor quality.
- The organizational model: particular attention must be paid to ensuring that the organizational model does not undermine the development process within, nor growth of the company. This depends partly on the qualifications of the personnel and the codification of work procedures, but also on the company’s social climate. The management style also helps foster this social climate and motivate employees. Attentive and motivated employees will be very productive and will not hesitate to give the company the best of their skills and know-how. Qualified and attentive staff can sometimes be the differentiating factor of the company and bring a unique quality to it.
- Proximity to the customer: this aspect determines the quality of the relationship between the company and its customers. It should in no case be neglected since it is essential to the existence of the company. Loyalty is best maintained by ensuring it now. Customer loyalty can be built by providing an attentive and personalized follow-up of the company’s offer by offering, for example, little “extras” which are usually highly appreciated by customers. This inspires confidence in a customer in their decision to work with and remain loyal to a particular company. If all these factors are considered and worked on, it is possible to prevent market predation by competing companies. The goal is to make it as difficult as possible for your competitor to poach your customers. This also applies to companies that try to position themselves in a market by slashing prices.
Why should you protect your intangible capital as a business?
The role of intangible capital and its importance for the company
Intangible capital holds immense value for companies. Its promotion has become essential in businesses which have innovation at the core of their existence. Intangible capital constitutes the company’s heritage. It defines its qualities as well as its capacity to generate value. Among its components are the products (or services), the organizational system, the commercial power, the workforce and the market. Each of these five elements makes it possible to define the qualities of companies and their capacities. In addition, all these elements allow the company to establish competitiveness and often differentiation. The latter constitutes a competitive advantage that can sometimes prove to be decisive.
The quality of intangible assets is also what allows a company to become more efficient than its competitors. In short, it includes everything that makes up the existence of the company and everything that qualifies it as such. Electronic business exchanges are constantly evolving. It often results in the storage of a large amounts of data. The safeguarding of this data is a strategic priority for economic players and of course, companies.
Intangible capital makes it possible to understand the very identity of the company as well as its history, which leads to progress and therefore is its real heritage.
Study: the influence of intangible capital on the annual reports of a company
A recent study (“How companies are born, develop and disappear”, LEXTENSO edition) conducted an analysis of the intangible capital of around 1,000 French SMEs and micro businesses. A rating system was used to assign them a score on a scale from 0 to 20. This data (or IP score) was then compared to the scoring and economic performance of these companies. The results proved the existence of a link between the quality of the intangible assets of a company and the growth rate of its turnover.
Over the course of a year, we observe a difference of nearly 10 annual growth points between SMEs that have compelling arguments of differentiation (intangible capital) and those that do not. In addition, another proportional link is established between the profitability of the company and the quality of its intangible capital. This difference amounts to 5 points of the operating ratio.
How to protect the company’s data.
Digitization: a threat and an opportunity
The digital transition has allowed companies to enter a whole new dimension with almost endless possibilities. But now, nearly all the data they use is exchanged digitally. Thus, it is necessary for companies to keep this information safe. Technology has proven more than once that it is not without flaws. From computer failures to hacking and hijacking of security systems, many have found themselves in hot water due to the fact that technology is not foolproof. Despite all the real-world cases that have been recorded, 40% of companies still do not back their data up. Knowing this, solutions have been developed to allow companies to secure their information, and therefore, their intangible capital.
The Cloud: a powerful security solution
Several backup methods exist, such as NAS (network attached storage). Even if these methods are widely used, they do not offer sufficient security and even present their own risks: theft, fires, hardware/software malfunction, etc. which can lead to total loss of data. In this complicated context, Cloud Computing was born. With the cloud system, data is stored outside the company, in several separate locations (in France or abroad). Therefore, even if a problem occurs in one of the sites, the data is protected since it is duplicated in several storage locations. The user has only to run a restoration program to recover all their data in just a few hours.
This is particularly useful when you have several years of work and data behind your company. Consideration should also be given to the grade of devices used. Consumer grade devices, as opposed to enterprise grade devices, usually do not have advanced security measures built in and so be caution in the devices used across your company is advised.
An industrial and periodic approach is preferable.
It is essential for organizations to set up an automated system in order to protect its intangible assets. By mapping the data and understanding its structure, it is possible to identify the most appropriate hardware and software for quick dissemination. Every business is unique and there are many ways to meet its specific needs and expectations.
We must pay particular attention to the user experience and operational continuity in the face of threats. Even when the storage device/method being used is still only in the deployment or processing phase. Safeguarding electronic documents is not an option, but an obligation for companies. They must secure their information and thus, protect all its intangible capital. Companies that have taken the necessary protective measures can thrive without fear of seeing their “data” capital wither or even disappear. In addition, the ability to operate is essential for the development of the company and ensuring constant protection allows them to ensure continuity in the event of a system fault.
A disaster at this level can quickly destroy the productivity of the company as well as its image. Many potential customers will completely disregard a business that does not take the necessary precautions to protect its data. Thus, many qualitative aspects of the company are based on not only its ability to use, but also to protect its data and, as a result, its intangible capital.
There is a suitable solution for every company. It is therefore necessary for a company to define its needs and develop a quality multipoint storage system as soon as possible so as never to have to start from scratch. All companies of all sizes must make this task a priority and under no circumstances neglect the means of protection to be allocated to the electronic data at their disposal.