Sharon VanderKaay Farrow Partnership Architects Inc.

www.farrowpartnership.com

UNDERSTANDING PRE-TANGIBLES

Let’sexaminetherela/onshipbetweentangiblesandintangibles…

tangibles intangibles

“too abstract”

“need more proof of cause and effect”

“that’s not my department”

“too soft”

“talking just wastes my time”

“only what we can count counts”

“if you can’t measure it you can’t manage it”

“hurts my brain!”

…tounderstandhowtheconceptofPRE‐TANGIBLESchangestheoldconversa/on.

“a matter of opinion” “numbers, more numbers!”

service aesthetic appeal

brand relationships

judgment, insight knowledge reputation

goodwill

revenue property buildings products customer retention research data bottom line balance sheet

tangibles intangibles Traditional View

Are they always two distinct states?

intangibles tangibles

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In business practice, a dynamic state of conversion is the norm.

intangibles

tangibles

service………..

design………..

attitude……….

judgment…….

insight………..

gut feeling……

revenue

market share

sales figures

products

great buildings

balance sheet

tangibles intangibles

reputation……..…

attraction……..….

retention…………

research…………

knowledge………

goodwill………….

For example, these dots connect states of conversion:

The term PRE-TANGIBLE captures this dynamic state

Sharon VanderKaay Farrow Partnership Architects Inc. www.farrowpartnership.com

…while emphasizing value-creating (or destroying)

cause and effect relationships for the benefit of

decision makers.

service………..

design………..

attitude……….

judgment…….

insight………..

gut feeling……

revenue?

market share?

sales figures?

products?

great building?

balance sheet?

tangibles intangibles

reputation………

attraction……….

retention………..

research….…….

knowledge….…..

goodwill………….

Pre-tangibles draw attention to the dynamics:

pre-tangibles

“too abstract”

“need more proof of cause and effect”

“that’s not my department”

soft?

“talking just wastes my time” “only what we can count counts”

“if you can’t measure it you can’t manage it”

“hurts my brain!”

“a matter of opinion”

“numbers, more numbers!”

The term PRE-TANGIBLES

also signals that there are consequences to neglecting

these relationships.

intangible

(in)significant (in)operable (in)sufficient (in)competent

Why are intangibles so frequently ignored?

Maybe the prefix “in” has negative associations:

pre-tangible

pre-condition pre-determine pre-nuptial pre-suppose pre-schedule pre-shrink pre-surgical

Whereas pre-tangible evokes things to come:

Feelings, beliefs and values that you do not intend to act on–that don’t matter to you or anyone you care about–are intangibles that are not pre-tangible.

What kinds of intangibles are NOT pre-tangible?

Although most business leaders have a sense they

cannot afford to ignore the impact of

intangibles…

service quality aesthetic appeal attitude foresight judgment insight knowledge reputation goodwill relationships gut feelings

…they have been trained to work with

numbers that measure past performance.

revenue property buildings products customer retention research data bottom line balance sheet

Various attempts have been made to find a

universal method for capturing and valuing

intangibles

…so that intangibles can be judged as objectively as

tangibles.

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But efforts to quantify

intangibles in a

universally verifiable way are ultimately frustrating…

…due to their organic nature.

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Meanwhile, attempts to assign misleading values to intangibles have led to

disastrous results.

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tangibles = “things that matter”

CONVENTIONAL WISDOM

tangibles = “things that matter”

intangibles = “matter of opinion”

CONVENTIONAL WISDOM

tangibles = “things that matter”

intangibles = “matter of opinion”

CONVENTIONAL WISDOM

difficult to ignore

easier to ignore

tangibles = “things that matter”

pre-tangibles = “let’s understand how the dots connect”

intangibles = “matter of opinion”

UNCONVENTIONAL WISDOM

“Pre-tangible connections should be obvious. But look what happened in my beloved,

long-suffering home town of Detroit when people focused on

managing numbers while neglecting interdependencies

between managers, employees, suppliers, customers, shareholders

and the community.” -Sharon VanderKaay

Aren’t these connections obvious?

What if we recognized our

interdependence? What if we treated our suppliers as

innovators who could make a valuable contribution to our

business, rather than starving them with monopolistic

price squeezes? …Discuss.

FOR EXAMPLE: One of the many conversations that didn’t happen in Detroit:

Will we miss the real challenge by focusing on a quest for more numbers?

How much proof do we need in order to justify action?

Instead, we can monitor the quality of intangibles and

the relationship between tangibles and intangibles. Ill

ustra

tions

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Instead of attempting to compete based

on better measurements,

we can change the game by getting better at

“seeing” how value is created.

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To make these pre-tangible

connections visible and understandable,

better quality conversations

are required.

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These conversations can also expose the

hidden costs of dismissing pre-tangible

warning signs.

Illustration: Susan Ottevanger / susan@seewater.com

An understanding of pre-tangibles will benefit decision makers

who are responsible for:

- finance - resource allocation - policy - research

so that they don’t succumb to 3 ILLUSIONS:

Illusion #1: Intangibles will always be intangible.

intangibles implies a fixed state

of being not tangible or being confined to a distinct

category…

…but bland design, for example, is a tangible thing that creates intangible feelings that cause a tangible loss of revenue leading to diminished intangible reputation–and on and on.

Illusion #2: Neat numbers are a substitute for messy conversations.

We need to develop the skills to describe the qualities

we aspire to, using authentic terms, rather than empty

generic words.

These skills are honed by participating through provocative conversations, rather than over-reliance on numbers for guidance.

Illusion #3: Intangibles reliably improve by looking at snapshots from recent history.

By the time negative intangibles show up on the bottom line they are expensive and difficult to fix.

Meanwhile, a disruptive event could be on the horizon that makes the numbers meaningless.

It’s the wrong time to act when the building is built or the

decision is made or the

vehicle is sitting in the inventory lot.

tangibles intangibles

Once we recognize the

true organic flow between tangibles and

intangibles, we can have more

illuminating conversations

regarding how value is created or destroyed.

This kind of conversation builds a shared sense of being engaged with things that matter.

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BOTTOM LINE: Pre-tangibles

provide us with a means to get

our arms around the dynamics

between intangibles and

tangibles.

Let’s change the conversation.

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Sharon VanderKaay Farrow Partnership Architects Inc. Toronto, Canada www.farrowpartnership.com