New Generation of Intangibles

The new generation of intangibles comes in many shapes and forms. Almost all of them are triggered by companies with new types of business models, with a significantly different configuration compared to its competitors.

In order to rank the uniqueness of such new generation and make a distinction vis-à-vis the more regular intangibles, the following criteria could be used:

1. A clearer definition of non-traditional intangibles is required;
2. Certain elements in a business model need to excluded from the definition of intangibles, e.g. certain value-drivers are not per se risk-bearing;
3. A practical set of criteria to use in determining whether an intangibles is present in particular cases;
4. A distinction to be made between routine and non-routine intangibles;
5. Clear indication that only intangible assets which are protected and/or protectable and which can be legally transferred constitute genuine intangibles;

A few categories of new generation of intangibles can be identified:

• New configurations of platform/content/brand intangibles, such as Google, Skype and Facebook;
• New business models which allow multinationals to be more agile than its competitors to changes in demand, such as ZARA, which company can stock its retails shops with a whole new collection in 14 days by using European rather than Asian suppliers of apparel, in combination with a cutting-edge supply chain/distribution system;
• New configurations of business models and people, where a certain configuration of an embedded and trained workforce does sometimes create a separately identifiable intangible, which might be recognized for tax purposes, but for accounting reasons might be treated as goodwill. Various R&D teams are being created as subcontractors, but at a later stage of maturity becomes a source of intangibles creation;
• New technological standard for a certain industry with an innovative way of usage, such as Samsung tablets and Apple its iPad.

New business models do create a new generation of intangibles, but also generate a new type of questions on the sustainability, i.e. economic lifetime, of such intangibles, such as:

• Who owns the content on Facebook?
• How many VOIP systems like Skype do create VOIP systems to become a commodity?
• Will there be future search engines with more auxiliary services provided than Google?
• When will the apparel industry turn to a ‘made to order’ supply chain with ZARA being a ‘best practices’ case story, thereby avoiding its most obvious risk: the obsolete stock at the end of a season?
• Which multinationals will be able to survive the rat race on audio/visual fast moving consumer goods, with a unique concept of portfolio management on R&D projects converted into successful marketable and consumer-friendly products?

Although the new generation of intangibles is a reflection of strong innovative powers, the economic lifetime often is no more than 1 to 2 years, depending on how smart and unique competition will be. Such short life cycles do impact the relationship between R&D cost and/or marketing spend and the – potentially superior - return on such new generation of intangibles.