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Intangible Benefits Can Play Key Role in Business Case

By Jack Keen

September 01, 2003 — CIO — When it comes to adding muscle to business cases, there is an unjustified fear of measuring what are considered intangible benefits. But a more astute handling of intangibles—those goals that can’t be easily measured in dollar terms—can provide a big boost. Too often, eligible but soft potential benefits are not assessed as valid results. To help your business cases be as strong as possible, here is a closer look at how to maximize the inherent power of intangibles.

One reason that intangibles deserve more respect is that they are now a significant part of a business’s worth. More than 25 percent of the value of enterprises is now based on intangible assets, such as brand image and market share, according to economists. But decision-makers have not yet accepted this financial reality. Burned by failed project implementations, and noting that such projects had a heavy dependence on intangible benefits, they jump to the erroneous conclusion that all intangibles are bad. Unfortunately, when business cases are devoid of intangible analysis, projects vital to the enterprise go unfunded because intangibles can’t add to the hard number ROI. Strategically marginal projects showing a high ROI (often because the investment is small) get the money. Such misguided project investments can undermine critical strategic goals, such as improvement of market share and sharpening of competitive advantage.

The first step in fighting that and getting the proper respect for intangibles is to clarify terms: When used in business cases, intangibles are IT investment payoff areas not expressed in monetary ways. "Less frequent use of temporary workers makes hourly employees feel better" is intangible if no believable dollar impact is shown. Conversely, "Less frequent use of temporary workers will save $100,000 annually in labor costs" is tangible when expressed in believable dollar terms.

Here are three dangerous myths that undermine our quest for delivering value.

Myth No. 1: Intangibles Always Remain So

A major reason why intangibles are held in disrepute is that they shouldn’t be intangibles in the first place. In my experience, as much as 75 percent of the intangibles cited in business cases could have been converted into tangibles. Here are three examples of ways to flip these "false intangibles" into brawny goals: 1. Follow the data; 2. Ask those who know; and 3. Find the cause of silence.

"Follow the data" means uncovering hidden tangibles’ payoffs by looking at better decisions available to users of new, improved information. For example, a CFO I know found more than $1 million in savings from an improved financial system only when someone pointed out that many store managers were compensating for out-of-date sales figures by over-scheduling expensive discretionary labor on the store floors.

 

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