Welcome to the World of Intangible Economics

WHAT ARE INTANGIBLE ECONOMICS ABOUT?

Intangible Economics are about the elements that form value and that drive the success of businesses in today’s day and age.

In the world of Intangible Economics the factors that determine success are intangible. And often also the value that is being created - or what customers are willing pay for - and sold has become increasingly intangible.

NEW TYPES OF ASSETS

In the past, assets like access to hi-tech laboratories, manufacturing capabilities, equipment and R&D teams used to provide competitive advantages. Today these factors are still important. But they have become an enabler rather than a differentiator. Instead, intangible elements like customer relationships, audience reach and social media impact, brand positioning, innovation capabilities, design and network effects have taken the lead.

NEW VALUE CHAIN STRUCTURES

The structure of the value chain has evolved. Here we also can see intangibility all over the place.
Neither AirBnB, Uber, Instagram or TikTok are in the traditional businesses of taking a resource and moving it along a value chain to turn out a product or service. Here is what unites their business models: it’s third parties who provide the resource that the business offers to customers. These third parties either provide critical assets and services - as in the case of Uber and AirBnB - or they provide content - as in the case of TikTok and Instagram.
Also the products that are being offered have become increasingly intangible. Amazon’s product portfolio less and less consists of shipped products. Car companies not only offer cars, but mobility services and access to different modes of mobility.

NEW FORMS OF VALUE

Finally, what makes up the value that that customers pay for has become increasingly intangible. You don’t only pay for metal and glass when you purchase your new Paul Smith glasses. In the past, customers paid for the functioning of a product. Just think about today's advertising, and you will come to notice that we pay for meaning, for inspiration, motivation, signification, for a story that is being told, or just for peace of mind.

And the currency we pay with is not only money anymore. Today we also pay with the data that we provide, or the content we provide. “Give me your email address, and I give you a free pdf with three simple steps to solve all your problems.” Tech companies have launched free education offerings to get early access to the data of future customers. And of course, as we have realised, neither Facebook nor Twitter are really free. We pay with our attention, manifested in our eyeballs and clicks on ads and we pay with our content and engagement, manifested in likes, shares, that all-together fill the empty halls of social media platforms.

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WHAT DOES THAT MEAN? IMPLICATIONS.

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NAVIGATING NEW RULES

Consider what would happen if the rules of a sport would change. Teams would have to relearn their skills, and the league tables would be reshuffled. While businesses talk about digital transformation, most of them still operate by rules which have been developed in the Industrial Age. Instead we should reconsider what value is based on today, and how companies need to operate today. We need to understand which types of value propositions, business models, unit economics and business structures enable success today. And we should figure out how we can best apply them to our businesses.

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NAVIGATING NEW BUSINESS STRUCTURES

But it’s not only the rules of the game that have changed. The make up of teams have changed as well. Business structures have started to adapt to this new environment. Along the whole value chain many activities are now available as a service. Teams can choose to work leaner if they want to. One of the key challenges for businesses is balancing the operation of scalable businesses, while allowing room for innovation.

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NAVIGATING WIDER FIELDS

Today’s world is much more connected than it used to be. With more connections we have more influences and interactions. This means we need to broaden our understanding of what the business entails and what business functions entail. We need to look out for connections between disciplines, open our eyes to what is happening outside of our core fields. We can turn curiosity into our core fuel for understanding.

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SEEING THE INVISIBLE

Most important however, we need to rethink how we assess businesses.

Intangible success factors are not always visible in the financial statements of a business. Hard numbers provide us with less of a guiding line. With changing unit economics, profitability has become a lot more complex. Many of the new success factors will materialize into profit at later stages.

As a result, today businesses need to be assessed less based on how they have made money in the past, but instead by how they create value and how they are able to monetize that value. Eventually we need to get to the core of a company’s business model identify the what drives its economics. If we want to understand a hardware company like GoPro, then we also need to understand media economics. If they want to understand Amazon’s new home service, then they should get acquainted not only with retail but also with platform economics.