In a past article Four Ways to Save Capitalism, Build Strategic Muscle and Advance the Professional Practice of Strategy, I said, “time is running out to save capitalism from the capitalists”. This was the headline of a CityAM article by the editor at that time, Allister Heath. Far from being anti-capitalist, Heath believes that “capitalism and free markets are the only way forward, and business and the profit motive [are a] huge force for good”. But making this case has been increasingly difficult for him due to “the incompetence and stupidity” of too many companies and business leaders. “Capitalists have become capitalism’s worst enemy”, Heath says. This is rather simplistic. There are far more fundamental problems that need dealing with — as discussed below.
Of the four ways to save capitalism introduced in the article (sustainable growth, integrated strategic management, valuing intangibles and re-thinking the future of the board), one is much more important than all the others. It has such a strong impact in itself, and on each of the other issues. It is valuing intangibles.
Today it is widely accepted that up to 90% of the current value, and future value creating capacity, of businesses comes from intangibles. That value does not appear on a balance sheet, and there are still no agreed measures of quantifying, reporting or auditing the intangibles. Yet these intangible assets (processes, patented and tactic knowledge, skills and talent, among others) are vital to strategy and to the growth of a business, and, therefore, to predicting its future value. Without agreed standards for measurement, trust, the lifeblood of capitalism, is destroyed.
Continue reading this article which was first published on Medium