Qualitative IntangiblesBy Faisal Hoque | Posted 2008-06-23 Email Print
Money makes the world go ‘round. And money makes our heads spin when it comes to wise technology investments.
Intangibles are more qualitative and, thus, more subjective than tangible measures. Tangibles include operating costs, income, assets, liabilities, profit margins, returns on assets and other measures that lend themselves to being expressed as financial ratios. Intangibles, on the other hand, may include strategic fit, goal alignment, opportunity costs, customer connectivity, competitive threat, return horizons, business impact, process optimization, intellectual capital, skills and innovation.
There are three problems with only relying on tangible measures. First, there is a cultural proclivity to “work the numbers” to make them say what people want them to say. Second, tangible measures are largely reactive, while intangible measures lend themselves to forward-looking views, since they often drive the tangibles. (Intangible measures often contribute directly to productivity, profitability and return on investment, for example.)
Finally, many of the benefits that follow from technology deployment are hard to define in the direct, financial terms that tangible measures require. For example, a company may notice that after installing a sales-force-automation platform, its revenue increased over previous quarters. But this says nothing about how much of the increase is due to the software and how much is the result of other factors such as a growing market or a new compensation structure for the sales team.
What business technology is, meaning its life as a capital or physical asset, warrants evaluation with a tangible set of measures. But the majority of what technology actually does falls more into the sphere of the intangible.
A good balance of tangible and intangible measures allows technology portfolio managers to anticipate the potential value of technology investments by providing:
· Visibility into around-the-bend risks and causal relationships;
· Safeguards against slippery-slope conclusions;
· Counterweights to overinflated promises and expectations; and
· Flexible accommodation for rapidly changing environmental influences.
By formulating a more holistic picture of the potential value that both resides within and can be generated by business technology, executives can offer their organizations more realistic valuations of investment returns.
FAISAL HOQUE is the Chairman and CEO of BTM Corporation. He is the author of The Alignment Effect, Winning the 3-Legged Race, Six Billion Minds, and Sustained Innovation. BTM innovates new business models and enhances financial performance by converging business and technology with its unique products and intellectual property. © 2008 Faisal Hoque
IT Solutions Builder TOP IT RESOURCES TO MOVE YOUR BUSINESS FORWARD
Which topic are you interested in?
What is your company size?
What is your job title?
What is your job function?
Searching our resource database to find your matches...