chapter  4
42 Pages

Intangible Capability through People

Author: ‘The formal definition of intangibles is that they are things which are incapable of being realized or defined. They’re without physical substance, they’re non-monetary and they cannot be seen or touched. They behave in a very different way to tangible assets. So, for example, physical resources can only be used for one activity at a time. Intangibles can be deployed for various purposes at the same time.Tangible assets depreciate with use and get used up through production, so they have limited numbers of applications. Intangibles have multiple applications without any reduction in their value and some intangibles like knowledge even appreciate and develop the more they are used. The law of decreasing returns means that the more a tangible asset is used, the lower the marginal return. So tangible assets need to be controlled and managed with a scarcity mentality. Network effects mean that the more some intangibles are used, the higher the return. You’re best off with an abundance mentality to manage these: a mental model that assumes there are always opportunities for adding and creating value.