Invisible Advantage: How Intangibles Are Driving Business Performance

Consider the following: IBM spends three and a half billion dollars to acquire Lotus Development Corporation, but more importantly, its chief programmer. French corporation LVMH creates the first luxury brands conglomerate, recognizing the potential operational and marketing benefits from combining opulent brands like Louis Vuitton, Moet Hennessey, TAG Heuer and Givenchy under one managerial umbrella. Meanwhile, Monsanto's stock price plummets, losing 35 % of its value in a year, when the company's carefully considered strategy to enhance growth, diversification and public acclaim through leadership in genetically modified crops, is met instead with public revulsion for "Frankenfoods." The common theme among these, and dozens of other examples analyzed in Invisible Advantage, is the profound degree to which "intangible assets" are defining corporate value and revolutionizing the ways in which business is conducted.

Drawing from their extensive research in corporate valuation, strategy, and consumer behavior, Jonathan Low and Pam Cohen Kalafut estimate that fully one-third of an organization's value is derived from elements that can't be seen, such as brand equity, strategy execution, reputation, and innovative culture. Ideas and relationships: these are the new currency of the economy-and their influence on decision-making can now be quantified.

From leadership to communication, technology to human resources, the authors identify twelve "measures that matter" and convincingly demonstrate the bottom-line implications of investing in (or ignoring) each of them. Achieving, and then sustaining, a competitive edge will depend on how well you and your company balance all twelve factors. Highlighting the most innovative strategies of organizations around the world, the authors present strategies for succeeding in the age of intangibles, and propose an ambitious agenda for reforming the ways in which corporate performance is recorded and evaluated.

Challenging and provocative, Invisible Advantage is a decoder ring to the intangibles economy-a new playbook by which managers can learn to attract the most talented employees, profitable customers, collaborative partners, and aggressive investors.

Amazon.com Review
Invisible Advantage, by Jonathan Low and Pam Cohen Kalafut, is a thoughtful analysis of the value of intangible assets in today's corporate world with solid recommendations for turning them into a competitive edge. Low and Kalafut, who have undertaken several major research projects on this topic and presented their results at forums worldwide, say a dozen nonmaterial resources in particular have played a significant role in business success since the days of Ford and GM. The 12--which they identify as leadership, strategy execution, communication and transparency, brand equity, reputation, alliances and networks, technology and processes, human capital, workplace organization and culture, innovation, intellectual capital, and adaptability--"don't show on a balance sheet or an income statement," they write, "yet they are manageable and usually quantifiable drivers of corporate-value creation." After offering some historical perspective and a look at their methodology, the pair explain how each of these factors works in the real world today and show how highfliers like Dell and McDonald's have managed to capitalize on them "quickly and quietly, before competitors or anyone else caught on to what they were doing." Practical advice such as "five key steps" for managing intangibles elevates this from an interesting academic exercise to a more pragmatic how-to. --Howard Rothman

Customer Reviews:

Review #1: Most people just don't see it.
2006-02-09
This book gives great insight into an underappreciated area. More executives should manage these issues, but in the end, if it can't be measured easily, compensation plans won't reward those who create value.

Review #2: Very poor job on Important Topic
2005-01-03
This book is full of appeal to authority fallacies, cliches, anecdotes and references to articles in newspapers which is sad state of affairs considering that one of the authors is a Ph.D. The "used" price for this book is in the basement for a reason. This may entertain a first year student at a low level college somewhere or a high level high school student but it's really unfortunate that this subject was treated in such a sloppy manner.

Review #3: Stating the obvious on not a very novel topic
2003-03-02
The book is basically about how capital markets value intangibles and also how intangibles influence the company performance in general. The authors have conducted an apparently detailed research and worked out a Value Creation Index on which, they show, intangibles have a significant impact. From this proof, they move on to list 12 intangibles which are important (at present time) for company performance. They then conclude that a major challenge for today's companies is to work out a method to MANAGE those intangibles which are CRITICAL to the industry that the company is working in.

The idea is good. However, it is NOT NEW at all. Banking training companies, like Euromoney Training have been showing in their 'Bank Credit Analysis' classes for the last 14 years the importance of Non-Financial Analysis in evaluating creditworthiness of a company. They have been pointing out ever since that non-financial analysis is far more important than financial analysis (but should be carried out jointly) in understanding potential company performance. Also, there are various books published in late 1980s and early 1990s which elaborated on that point. So you see, the idea of valuing 'non-financial' intangible factors has been around for quite a while. We can only say, regarding this book, that it provides further evidence to a well-known argument. That's all.

When it comes to other points and 12 areas, i.e. the importance of branding and brands, human capital, property rights (intellectual capital), strategy execution, innovation, networking and alliances etc., there is also ample literature on the importance and detailing of these issues. We have known these factors for at least 15-20 years in their coming. So, if the book is pointing to the increasing incidence of these occurences, we can only agree with the authors. However, the discovery of these developments date back to much earlier times and the points are already "obvious" for the students of "doing business in modern times".

So, I would reccommend the book if you are a novice to the field. However, if you have a more than slight familiarity with the changing conditions of doing business in the last 10 years, the book is certainly NOT for you. It is just an ecclectic effort on a very familiar subject.

Review #4: Making the Business Case for Intangibles
2002-06-09
Invisible Advantage is an excellent resource on how the capital markets value intangible factors and their impact on the bottom line. The authors clearly describe 12 measures-ranging from leadership and reputation to talent and innovation-which contribute to opinion makers' and market movers' investment decisions. Low's and Kalafut's research on how nonfinancial factors are taken into account by buy-side and sell-side analysts is revolutionary and finally answers the age-old question of which factors are most important in how companies are valued and perceived. In these uncertain times, the authors' hierarchy of intangibles provides a welcome roadmap for CEOs and other top officers looking to understand what to prioritize- customer know-how, technological prowess, intellectual property, or talent? Because market capitalization and reputation are often influenced by factors other than the bottom line, this book is extraordinarily useful in making the business case for communicating the invisible equity often hidden within corporations. This is a book that matters.