Value Creation Principles

5INTANGIBLE ASSETS, BRANDS, AND SHAREHOLDER RETURNS

The failure of the accounting system to reflect the value of these [intangible] assets in financial reports, to properly account for their impact on firms' operations, and to provide investors with information about the exposure of these assets to threats of infringement and disruption, is a major cause of accounting's relevance lost. How ironic (or sad) that largely irrelevant assets to companies' growth and competitive edge—like inventory, accounts receivable, or plant and machinery—remain prominently displayed on corporate balance sheets, whereas patents, brands, IT, or unique business processes are accounting MIAs.

—Baruch Lev and Feng Gu¹

Brands build resonance through a hierarchy of meaning that roughly parallels Maslow's hierarchy of needs: functional, emotional, social, and cultural. Unless a brand can ensure that it is conveying the lower levels of meaning, it will fail to achieve the higher levels.… If a brand is intended to create sustainable competitive advantage, then that brand had better be well differentiated.… Think about the brands that are typically cited by marketers as the ones they admire: Apple, Virgin, Facebook, Disney, Coke, Audi, Jack Daniel's. These brands are all well differentiated; they set the trends for their category or transcend it, and they act differently and stand out from the competition.

—Nigel Hollis²

This chapter extends the life-cycle framework to provide a logical and intuitive ...