Video Transcripts

 
The Importance of Intangible Value to Your Business
Published on Aug 3, 2012

Jonathan Knowles of Type 2 Consulting explains the concept of intangible value and why it is an important driver for understanding the value of a company.

Transcript:

Intangible value is an important concept because it demonstrates the relationship between the physical assets that a company owns and the value of that company in the marketplace.

Intangible Value is the difference between the enterprise value of a company, that’s to say the market value of its equity plus its debt, versus the tangible assets of a company. In aggregate for the economy, only 45% of the value of a company can be explained by the balance sheet. For sectors such as healthcare, information technology, and consumer goods, the intangible value of companies represents 70% of the value. If you really want to understand what is driving the value of a company, you really need to look somewhere other than the balance sheet.

Ironically, the accountants have come to our aid because the accountants for a while have been very troubled by the observation that companies are getting taken over at many multiples of their tangible book value. So the question that the accountants asked is, “What are you paying for?” And the answer that they’ve provided is that there are 5 forms that can be recognized during a merger.

The first is what they call knowledge-based assets, which are like patents in IT and in Pharma particular. The second category are contract-based, like landing strips at airports or taxicab medallions here in New York. The third are artistic assets, typically anything that can be subject to copyright like music or a film script. The fourth is customer-based assets, which would be the contents of your CRM system or market research that you’ve conducted. And the fifth form of asset is what the accounts call marketing-based assets which, in their terminology, trademarks and associated good will. In marketing terminology, “brands.”

 
Two Worldviews of Business
Published on Aug 3, 2012

Jonathan Knowles of Type 2 Consulting shares his thoughts on rationality through a concept he calls Two Worldviews.

Transcript:

What we found in science engineering and finance cultures is that emotion is thought of as the opposite of logic.

In those cultures, if someone says to you you’re being emotional it means you’re not thinking straight. But the truth is emotion is not the opposite of reason. Emotions is so to speak, a parallel dimension to reason.

Our observation is that two worldviews are commonly found in business. The first is the Vulcan worldview that takes quite a narrow perspective on the things that matter. Typically, functionality and price.

The second worldview is what we’ve called the Earthling worldview, that takes a much broader perspective on the things that matter.

The V & E perspectives differ significantly on the topic of rationality. For a Vulcan, rationality is quite narrowly defined. Things either perform or they don’t perform and if they perform, what is the benefit that that generates and what is the logical price that you would pay to have that benefit.

For Earthlings, the question of rationality is a little bit more complicated because there are multiple currencies that come into play. Certainly, functionality and price but a whole lot of other things like status, belonging, meaning. So, if we were vulcans, every one of us would be driving a Hyundai or a Kia because that represents the best ratio of functionality to price. The fact that we can look out the window and recognize that there is a plethora of different types of cars out there all suggest that there’s something other than pure functionality that is at play.

 
What Marketers Need To Know About Finance
Published on Aug 3, 2012

Jonathan Knowles of Type 2 Consulting on the key differences and similarities between marketing and finance people.

Transcript:

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Value Proposition: Marketing’s Biggest Contribution
Published on Aug 3, 2012

Jonathan Knowles of Type 2 Consulting explains why the definition of a compelling value proposition is probably the single biggest contribution that marketing can make to the value of a business.

Transcript:

Most companies tend to talk about themselves, not the value they deliver to their customers and to their employees.

Value proposition in essence involves defining a specific promise of value to a specific audience. At the heart is certainly performance but there are other benefits in terms of reduction of risk, in making the customer’s life easier, in making the customer feel smarter. All of these are examples of benefit categories that need to be explicitly articulated, and that is what a value proposition does.

Differentiation is certainly part of a value proposition but it isn’t the entirety of it. In Business to Business markets in particular, the important thing is to have a coherent framework for the different types of benefits that will be received and to point out areas in which those benefits are differentiated.

The definition of a compelling value proposition is probably the single biggest contribution that marketing can make to the value of a business.
 

 
Brand Strategy Post-Merger
Published on Aug 3, 2012

Jonathan Knowles of Type 2 Consulting discusses 3 categories of post-merger brand strategy and shares some surprising research results concerning the significance of customer and employee goodwill.

Transcript:

If we believe, as we do, that the good will of customers and employees is a large economic asset of the company, then how you treat that asset during a merger is inherently of great interest.

Our initial research focused on documenting the number of options when the merged in terms of a post-merger brand. We identified 10 separate strategies that could be regrouped into 3 broad categories.

The first is what you might call, “backing the strong horse” – we choose one brand ad we lose the other one. The other set of strategies regroup under the heading, “business as usual” – I take you over, both brands survive. So, P&G takes over Gillette – from a customer point of view, nothing very much changed. The third strategy, which we called “Fusion Branding,” is where you choose to take an element form the identity of both brands, either the name and/or the symbol, combine them to signify that the merger is drawing on the strengths of both companies.

The second stage of our research involved testing whether there was evidence form the capital markets that any one of these strategies was inherently superior to the others.

Existing research shows that merging companies typically underperform the market by an average of 5–10% in the three years post-merger. Our research replicated the common finding – indeed, our companies underperformed the market in aggregate by 7% in 3 years post-merger. But this was a function of 2 very different forms of performance.

Fusion branded mergers actually out-performed the market by a small margin of around 5%, whereas business as usual and backing the stronger horse strategies underperformed the market by close to 20%. It was the net of the two that produced the minus 7%.

The strategic implications of our research are that in mergers where customer and employee good will are significant assets of the merging companies, then that merger would do well to consider a fusion-branded strategy.
 

 
Social Media and the CEO’s Agenda
Published on Aug 3, 2012

Jonathan Knowles of Type 2 Consulting shares 3 key issues on the CEO’s agenda that can be informed by the often overlooked long-term view of social media on the marketing measurement spectrum.

Transcript:

Social media, the working definition we have of that, is everything that is being said about a company, just not by the company itself.

Now, most of the focus of social media at the moment is really on the short term end of the marketing measurement spectrum. What are customers doing and can we accelerate the cash flow we expect from customers?

Type 2’s interest in social media really focuses on the longer term and specifically: how can social media be used to better understand the universe in which companies now exist?

There are 3 issues on the CEO’s agenda that we believe can be informed through social media mining or social market intelligence.

The first of these issues is effective marketplace strategies. How can we better understand the evolution of customer needs and how the companies new product pipeline can be tailored to suit those emerging needs?

The second area is really to do with thought leadership and corporate reputation. What are the issues around which the company needs to establish a position of authority and the position as being the go-to resource for people interested in that topic, whether it’s pain management or whether it’s corporate citizenship?

The third issue is really around corporate culture. What is the corporate culture, first and foremost, and, secondly, how can social media be used to attract prospective employees more effectively to the company?