General management

Assets are liabilities

Photo by Robert HruzekLast week I caught up with Tom Gilb at his annual get-together. One of the many things I heard there, from the many very smart people present, was from David Stoughton of Axiomode: Assets are liabilities.

He was talking about how to understand and maximise the value from a long term organisational activity, such as a change programme. Along the way he mentioned that “assets are liabilities” as an important principle to bear in mind. The assets he had in mind might be training material, IT systems, or anything else that’s generated from such a programme. His reason for this principle comes from two angles.

First, such assets do not have intrinsic value. The exception is in the extreme case where they are being sold off in an acquisition. And in fact this is where the term “asset” has usually come from in such conversations—from the accounting world, where we are trying to apportion value in a single-moment financially-oriented snapshot. But most for most organisations an acquisition is a very tiny part of their total corporate life, if they even experience it at all.

Second, these assets tend to generate non-value-add work. Training material requires updating, IT systems require maintenance. (Even inventory to be sold off requires storage.)

I think it’s good to remember that often the term “assets” may be in use in the specific accountancy sense of the word, and that’s not the same as how it’s interpreted more generally. It would usually be better if we could achieve the same value by generating fewer assets—simpler (or less) technology, for instance. Achieving the same with less makes our organisation even more valuable.

Photo by Robert Hruzek

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