The real sources of value: Assets and Performance

Companies tend to focus on financial assets and financial performance. They measure every aspect of these, and in known periodicity. They report these internally and externally, and are pleased that they are following the really important factors for the company’s success and future wellbeing. These people are sometimes called bean counters aka finance people. They also track investor assets because they feel they have to compete in the market place for the investors’ capital.

Because of this focus, the company loses track of other important assets, and do not get the bean counters to track them well:

Employee Assets

Customer Assets

Partners as assets

Social Assets

Intellectual Property, knowhow, and innovation assets

Brand Assets

Value Creation Assets

Investors as Assets

Note you could use the word Capital instead of assets, although I prefer assets.

Just as an aside, traditional assets in a company have to be maintained. There is a maintenance and depreciation plan for them. Plant and machinery, mobile phones and laptops, furniture, buildings.

The other assets mentioned above are not always maintained well. In fact many of them can appreciate in time (unlike physical assets that might depreciate), unless an employee leaves or a customer leaves. There are poor maintenance plans for them: Just enough for them to stay on and perform. In fact we are more interested in the performance than in the asset itself.

Non-financial assets are often shrugged away as intangible, difficult to measure (and therefore difficult to manage?) Or is our management and focus inadequate? Some will even say these intangible assets form 80% of the investor’s focus of the company value. So if we cared about our investors assets we would care about the non-financial or “soft” assets (and make them as important as “hard” assets).

I think most people understand the various intangible assets and broadly know how they are defined. Value Creation assets are less well understood and developed. Your value creation assets exist in:

Plant and machinery assets: you will certainly overhaul your manufacturing capabilities and watch, analyse and revamp them to create more value

Product offering assets: You work on creating products that will create more value

Employee assets: You create value for employees in order for them to create more value and you invest in teaching your employees assets to create more value for the customers, the partners and society and thereby for the company. You set up an environment conducive to, and encouraging value creation (for example value creation councils)

Customer assets: How do you create more value for the customer, thereby increasing loyalty, market share, prices and profit assets?

Social assets: Where do you put funds that your customers perceive as adding value, thereby making them prefer your company more than competition? Do you understand how Values create value for the company? Values include trust, honesty, and loyalty (to customers), sustainability, safety etc. How do you get employees to create more value here?

Brand assets: As value creation increases, brand assets increase. Value creating employees have brand equity that increases the brand assets of the company

Innovation, proprietary information, know how, intellectual property assets: Value creation in the minds of the employee increases these assets, because they work consciously to create innovation and value

Do your investor assets really know about these intangible assets and the true value of these and how you are growing these, resulting in value for your company? Can shareholders really judge the true source of value creation? Are you giving them the tools to do so?

And are you putting the tools into place to create and measure value: the processes, structure and the organisational skills to do so. Are you creating value for the employees? Do you have a Chief Employee Value creator? And do you have Value Creation councils to bring to the fore Value creation by employees for themselves, their colleagues and other employees, their customers and society? And can you measure this value creation, and the increase in assets and performance? Do we have the competences to create more value, and to encourage value creation?

So let us encourage Value Creation Councils. Let us report our intangible assets and its performance as much as we do the financial performance.

Your comments are welcome! 

Call at (+91) 7838333300

Gautam Mahajan, President-Customer Value Foundation
M: +91 9810060368
Tel: 11-26831226, Fax: 11-26929055

Customer Value foundation (CVF) helps companies to Create Value and profit by Creating Value for the Customers, employee and for each person working with the companies.

Total Customer Value Management (Total CVM) transform the entire company to focus on Creating Value for the Customer by aligning each person’s role in Creating Customer Value and getting shareholder wealth and Value.

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