Why I use the term intangible capital

Words matter.

They shape our thinking and shape our conversations.

Here are some really common conversations I have with new business acquaintances:

I ask what they do. They ask what I do. I say (of course!) that I work with intangible capital. Some people ask what I mean by that. Most immediately add their own mental interpretation of what I mean by “intangible capital:”

…If they work mostly with the law (and sometime technology), they say, “Oh, like intellectual property!”

…If they are accountants or financial types, they say skeptically, “Oh, like Goodwill…”

…If they are bankers, they might say, “Oh, like intangible assets? We don’t lend on them.”

…If they are in marketing, they say, “Oh, you mean brand and reputation!”

…Many business people say, “Oh intellectual capital, that’s tied closely to people…”

And so on. The point is that it can be hard to talk about intangible capital when people bring so many preconceptions to the conversation. That’s why we often use the Blind Men and the Elephant example. In this poem, each blind man feels a part of the elephant and makes an assumption about what the whole elephant looks like. That’s what happens with intangibles. Most people are trained to just look at one part and they miss the significant of the whole.

And the whole is really important. 80% of the value of the average business today is intangible and yet mainstream business continues to dismiss intangibles as soft and/or unknowable. I guess I really don’t care what word people use but I do hope that people will develop a holistic understanding of intangible capital.

...It’s not just IP. It’s not just people. It’s not just knowledge or data. It’s not just brands or relationships. It’s not just culture.

...It’s all these things working together in a dynamic, social system. Intangible capital requires holistic thinking and holistic management. And it works best when there is a shared understanding of collaborative advantage.

Good intangible capital management fuels growth, innovation and performance. Don’t be a blind man (or woman). Start looking at the big picture before the elephant stomps all over you.

This drawing was done by Collective Next in Boston.

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