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Intangible.But very real.

Mary Adams, I-Capital Advisors

Risk in the knowledge era

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Economic value is increasingly intangible

Research: Ned Davis

Components of

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Market Premium

Intangible Book Value

Tangible Book Value

Components of S&P 500® Market Capitalization

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

S&P 500 Market Cap ($ billions)

Market Premium

Intangible Book Value

Tangible Book Value

2009: 81% intangible

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This change touches all sectors

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Energy

Materials

Industrials

Consumer Discretionary

Consumer Staples

Health Care

Financials

Telecommunications Services

Information Technology

Utilities

Intangible Value as a % of Total Market Capitalization by Sector

1975

2005

Research: Ned Davis

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The intangible info gap

standard info sources don’t help you see inside.

intangible assets are invisible and make your business seem like a “black box”

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knowledge raw

material

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From You Can Grow Like Google on YouTube

IC raw material is put to work in a knowledge factory system

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How to keep it from falling apart?

…a few thoughts

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One of the big risks is knowledge walking out the door at night

But it’s not that simple….

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Structural capital is your greatest defense

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The right solution looks at all IC as a system

1. Start with basic map of intangible capital related to key revenue/value creation

2. Prioritize by strategic importance3. Understand stakeholder expectations4. Have strategies for all categories:

• Human capital: contracts, policies, training, procedures• Relationship capital: contracts, audits, systems• Structural capital: IP filings, process documentation/audit,

procedures• (Good security is grounded in structural capital)

5. The ultimate protection is a good business model

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Reputation is the new bottom line…and your license to operate

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The biggest risk to American companies today?

MISSED OPPORTUNITIES!

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Resources

Slides at slideshare.com/maryadamsicaNewsletter: Management 2.0 last Tues of month Book: www.intangiblecapitalbook.comCommunity: www.icknowledgecenter.comBlog: www.smartercompaniesblog.com

Mary Adams, 781-729-9650adams@i-capitaladvisors.comTwitter: maryadamsica