I’ve been active in the field of intangible capital for many years. So I had a flurry of emails in my inbox this week from colleagues making sure that I saw your new report Measuring the Full Impact of Digital Capital. Since you don’t invite comments on line, I am emailing this to you and also publishing it in my blog.
First of all, thank you for joining the conversation about intangibles. I agree with your subtitle, “Although largely uncounted, intangible digital assets may hold an important key to understanding competition and growth in the Internet era,” except that I wouldn’t include the “may.” Knowledge and collaboration are the raw material with which we can solve our global challenges and create greater prosperity and well being. Intangibles are changing our economy and our lives.
But please know that by entering the conversation, you are taking on a responsibility. There is a need for collaboration at every level of our economy to come up with ways of helping businesses and organizations see, measure and manage their intangibles more effectively. To pull this off, we all need to be working together. Given your stature in the international business community, you can make a powerful contribution to the conversation. But it may require you to think a little differently. (In case you need a few ideas on how to do this, I have a few suggestions:)
Use or acknowledge the vocabulary that is used by others – It the short run, it may feel like it is in your interest to try to create a new name (digital capital) for intangibles. But it also makes it hard for your work to contribute to the foundation of a lot of good thinking that has gone on to date in the fields of intellectual/intangible capital and knowledge management, among others. Creating a new vocabulary ends up closing, rather than opening conversations.
Be more transparent about how you calculate your numbers – The research you cite (such as The Conference Board data) does not identify digital capital as a category so it’s hard to understand how you came up with your numbers. There have been too many black box solutions in this space. This, too, closes rather than opens conversations.
Take a leap and be honest about the control issue – One of the key differences between tangible and intangible assets is the fact that most intangibles (especially digital assets) are not subject to the same economics as tangibles. This is not the 1950’s and organizations are not (or should not) be run exclusively by white men in white shirts giving orders from corporate headquarters. Intangibles are not controlled but, rather, they are attracted. A lot of the kinds of data that you talk about in your paper (such as user, behavioral and social media data) are provided through the consent of the user. That consent is earned through trust and can be withdrawn. The good news is that the marginal cost to use digital assets is generally low so the profits for responsible, productive use can be quite high.
Help your clients think holistically – The control issue is one of the reasons why it is dangerous to look at intangibles in isolation. To use your vocabulary, good digital capital only exists as long as there are users, customers, partners and employees contributing to it every day. And it only has value if there is a valid business model paired with a compelling value proposition. So talking about digital capital without talking about the ecosystem around it can be dangerous. The framework in use by most in the IC community for describing that ecosystem includes human, strategic, structural and relationship capital. Each element (including digital assets) needs to be identified, measured and optimized individually but also as part of a system.
Contribute to our open source community – Finally, there is a pressing need to help businesses develop basic skills around the identification and management of intangibles. These skills and methodologies cannot and should not belong to one company. They need to be developed in an open, dynamic way that memorializes the collective learning of us all. I hope that we can persuade you to participate in an open conversation. McKinsey can help lead the business community into an emerging future of undiscovered value from intangible capital and we’d be honored to work with you in sharing what we’ve discovered from our own work.
We’ve tried to lead by example by publishing a few basic open source tools on our Smarter-Companies website. We welcome ideas on how we can set these ideas free and create a truly open conversation about the future of measurement and management in the Digital Economy. I look forward to your future contributions to the intangibles conversation and would be more than happy to engage in open dialog.