Arthur Andersen, Board of Trade of Metropolitan Montreal
Montreal, June 6, 2000 With the growing demand of investors for information, the leaders of the new economy are managers who can identify and manage the assets that have become essential to creating corporate value. These new managers show they have the ability required to adapt to a highly complex and intangible environment.
For Arthur Andersen, a consulting firm with offices around the world, the challenge is to partner with enterprises that want to set themselves apart. Being on the lookout for new trends among investors, whose needs for information on intangibles continue to grow, is the first step in a process that promotes asset disclosure.
"The rules have changed dramatically: intangibles are an intrinsic part of assets, and provide added value. The creation of wealth lies essentially in the value derived from an asset portfolio comprising a combination of traditional assets (book value) and intangibles (business relationships, intellectual capital, goodwill, brands, patents, etc.)," maintains Barry D. Libert, co-author of Cracking the Value Code, and a partner at Arthur Andersen in Boston. According to the author, this management manual, recently published in the U.S., is based on an international exhaustive review of the management trends of 10,000 publicly traded companies.
The most successful companies had all been repositioned to increase the value of their assets. According to Mr. Libert, every company must develop its own specific business model, taking into consideration the issues related to its competitive environment and to its asset mix. The unique business model provides companies with an original approach of new parameters to consider in order to identify all the assets likely to create value and raises questions regarding how this value is evaluated and managed.
Performance of Quebec enterprises
For his part, Roger Desrosiers, partner and general director of Arthur Andersen for Eastern Canada, explained that while wealth is created and evaluated after a transaction is completed, we sometimes forget that this wealth was gestating for years before, as is the case in R&D activities. At this time, there are no universally recognized measurement practices that track these precursors to wealth creation, until after the fact. However, he did state that the Canadian Institute of Chartered Accountants has recently mandated a newly formed committee to study how existing measurement methods can be adapted to take into consideration the reporting of intangibles.
Arthur Andersen's consultants can help companies develop their assets to their fullest potential by evaluating all the assets that contribute to the creation of value, including difficult to measure intangible assets. At the same time, the disclosure to shareholders by the Company's auditors will take into consideration all the elements comprising the assets, be it for example, ratios of staff turnover, the number of patents obtained or R&D investments. Transparent information is essential to the creation of value.
Walking the talk, Mr. Desrosiers pointed out that value management of intangibles will in fact be one of the criteria used in a contest organized jointly by Arthur Andersen and the National Post that recognizes Canada's 50 best-managed companies
A winning partnership
Montreal, a major hub for companies in all sectors of the new economy, must adapt to the new reality created by the knowledge economy. For Pierre Laferrière, president of the Board of Trade, the contribution to management of Cracking the Value Code, the new business model developed by Arthur Andersen's consultants, is in keeping with the Board of Trade of Metropolitan Montreal's mission to make available to its members the most pertinent training tools and information activities. The partnership with Arthur Andersen is one such example.
Teaching tomorrow's leaders to keep pace with the new economy
According to Jean-Marie Toulouse, director of École des HEC, while numerous management manuals are published each year, Cracking the Value Code, to its credit, is accessible to both managers and future executives because it provides a host of instructive examples and is clearly written. The challenge of our business schools is, among others, to train managers, whose adaptability and innovative spirit will be essential. Creating value in intangibles calls for the development of new competencies, specifically, in the management of human capital.
The Board of Trade of Metropolitan Montreal has more than 7 000 members. Its mission is to be the leading group representing the interests of the Greater Montreal business community. The objectives are to maintain, at all times, relevance to its membership, credibility towards the public and influence towards government and decision-makers.