Airbnb, which doesn’t own a single square meter of real estate, is estimated to be worth $30 billion, which is more than the combined value of the Hyatt and Marriott hotel chains, and two and a half times that of the Accor Hotels Group. As of January 2017, Facebook is worth $385 billion, which is more than triple the value of Total and seven times that of Airbus. Google is currently the top enterprise firm worldwide in terms of market capitalization, with an amount of $560 billion.
Uber, while not possessing a single vehicle, is the largest taxi company in the world and is valued at $62 billion, two and a half times the market capitalization of Renault. Microsoft has spent $26 billion acquiring LinkedIn, the foremost business networking service in the world; and Netflix, the online video subscription service, is weightier with its $60 billion value than Kellogg’s, the Campbell Soup Company, and chocolatier Lindt combined. Snap, which owns the temporary-photo app Snapchat, is valued at $25 billion, equivalent to Saint-Gobain, Essilor, or Vivendi, and considerably more than Michelin, Carrefour, or Publicis.
This list could continue on for quite a few pages, but the message is clear enough: The companies that create the most value today are not those that have physical or financial assets. They are companies that manage intangible assets effectively, whether this be software, patents, intellectual property, copyright, client data, brands, or human capital. Today, such intangible assets represent around 85 percent of the value of companies in the Standard & Poor’s index, compared with less than 20 percent in 1975, according to Ocean Tomo, the American intellectual-property specialist. The new champions of value creation no longer rely on holding physical assets like factories, equipment, or real estate, but on using the excess capacity of other players in the economy.
A study published in 2015 by the Chartered Global Management Accountant (CGMA) association and sponsored by Oracle focused on the measurement and management of new key indicators in the era of digital finance. This study, based on a sample of 744 senior executives in industry, finance, and general management in 34 different countries, revealed that the five most important levers in value creation are currently:
- Customer satisfaction
- The quality of business processes
- Customer relations
- Human capital
- Brand reputation
These levers are considerably far removed from traditional value drivers. And though they are still pertinent, the traditional value drivers have lost a great deal of their preeminence. This change affects all economic sectors, undermining traditional management models and generating an excess of conflicting data (often with a lack of information and analyses).
Financial directors must embrace technological innovations to ensure that the finance function keeps pace with marketing, sales, and other client-contact areas that invest massively in digital technology to collect precious data on intangible assets. The finance function must broaden its skills base and develop new performance indicators to evaluate these “sectors poor in assets and rich in ideas,” to use the phrase made popular by the McKinsey organization.
The financial officer has a long tradition of professional integrity, recognized expertise in the meticulous analysis of pertinent information, a long-established collaboration with data scientists, and a global vision of business that incorporates all stakeholders. Therefore, the finance function must take on a fundamental role of cross-disciplinary collaboration as a provider of both information and measures relative to the drivers of intangible values. It also means that the “new wave” finance function will be no easy ride.