Future of work is complex, implicit and intangible

The relationship between intangibles and tangibles reminds me of the implicit/explicit knowledge continuum. The explicit/tangible side is easier to measure, so that is where most management methods have concentrated their efforts. But as organizations, markets, and society become networked, intangibles create more of our value and this is much more difficult to measure. With the increasing complexity that networks bring, implicit knowledge-sharing becomes more important as well, but this is often ignored by both training and knowledge management programs.

Today, intangible assets are over 80% of current market value. Because intangible assets do not have to be shipped and stored like real assets do, they increase the volatility of the marketplace, with larger and more frequent fluctuations over perceived value. Unlike tangible assets, intangible assets can be lost and gained quite quickly. At the same time, we are witnessing that company lifespans are decreasing, which also increases market volatility.

Smarter Companies offers methods to look at intangible asset calculations. I recently spoke with Jay Deragon at Smarter Comanies about intangibles and the influence of technology on learning. A recent example of an intangible asset calculation is Mary Adams’ summary of Twitter’s valuation.

Human Capital: 2,000 employees. No clear leader. No woman in senior leadership
Relationship Capital: +100 million Daily Active Users, +Advertisers, 3 million websites that integrate Twitter, 6 million Registered Twitter Apps.
Structural Capital: 6 patents, the platform, and related data about use of the platform
Strategic Capital: 85% revenue on advertising; 5% sale of data. Model still isn’t profitable.

Mary Adams concludes that Twitter is most dependent on its relationship capital, which could be lost if investors try to extract too much tangible value that detracts from it. Another perspective on intangible, or intellectual capital is from Jay Cross, who says that; “Intellectual capital is largely a matter of mind and relationships”.

Intellectual capital comes in several forms. Human Capital is the know-how and abilities of an organization’s people; Relational Capital is personal and business links to customers, partners, and suppliers; and Structural Capital is the infrastructure, processes, culture, and intellectual property that define how the organization operates.

From an operational perspective, we can see that improving relationship capital is important for companies that offer intangible services. These types of companies need to invest in structuring work so that implicit knowledge can flow, not just between employees, but throughout the ecosystem. If most goods and services are intangible, the only way to stay current with their true value is to remain connected to those who influence relationship capital. These are employees, customers, suppliers, and partners.

To do this effectively, all support systems (OD, HR, Finance, Sales, Marketing, IT) need to understand how to support the implicit knowledge-sharing that is essential in creating the intangible value. Almost all valued work today is customized. We have seen this shift over the past three decades, as middle-skill jobs have disappeared. Low-skill (standardized work) jobs still exist where the work cannot be automated, but these are jobs with little advancement. High-skill (customized work) jobs have also increased and it is from these workers that much intangible value is derived. The new workplace of intangible assets is a complex environment, and one where traditional analytical methods no longer work. The future of work is complex, implicit, and intangible.

complex implicit intangible

6 Responses to “Future of work is complex, implicit and intangible”

  1. Steve Dale

    I think the accountancy business has finally woken up to the issue of “intangible assets” and has recognized the “off book” value of organizational knowledge. At least this is what I’m reading into the new Integrated Reporting initiative. Check it out at http://www.theiirc.org/

    Reply
  2. Tarik Taman

    Measuring intangible assets is complex but not impossible. But any reporting faces a serious challenge: intangible assets can change far more quickly than tangible assets. An organization’s knowledge base, talent pool and networking relationships can all change substantially quarter to quarter. Harold, I appreciate this isn’t the main point of your blog, but do you have any thoughts on how we can account for such a rapidly shifting asset base?

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