In today’s knowledge economy, companies create value primarily on the basis of knowledge, data and innovation. Intangible assets, such as the expertise and experience of employees, have become a decisive factor for organisational performance and competitiveness. 

‘The transition to a knowledge economy began in the 1980s, driven by the rise of computers, the internet and digitalisation,’ says Tomislav Ladika. ‘The Netherlands today can certainly be seen as a high knowledge economy. In many respects, organisations are dependent on intangible assets such as data. Even sectors built on physical assets, like machinery and factories, are being reshaped by changes in data and information technology.’

Value without a tangible product  

Ladika earned his PhD in Economics at Brown University, one of the top universities in the United States. Since 2012 he has worked at the UvA’s Faculty of Economics and Business. His research focuses on the ways in which our economy is increasingly dependent on intangible assets. 

‘What’s distinctive about intangible assets is that they enable an organisation to create value for many years without a physical product,’ Ladika explains. ‘We often think first of the ideas and insights a firm uses to market a service. But it is also about organisational structure. How is logistics organised? What happens online? Which data analyses are needed?’ 

Growing faster than ever  

What are the consequences of the growing importance of intangible assets for organisations? Ladika: ‘The knowledge economy enables organisations to scale faster than ever, and therefore to grow faster. If you ran a factory in the 1950s, it took a lot of time and money to expand operations and increase profits. You had to build extra space and install machines. Now you can take an idea, develop a digital prototype, gather feedback online, and have the design iterated by manufacturers around the world. Thanks to online channels, sales and marketing can also be set up rapidly.’ 

Because ideas are so central to how organisations function in the knowledge economy, human capital becomes a critical asset, Ladika adds. ‘In the traditional economic framework, staff are seen as easily replaceable. And machines and buildings that you have already purchased do not simply disappear. Today, the value of an organisation depends to a great extent on the knowledge and experience of its employees.’ 

Challenges for finance managers  

Ladika emphasises that the modern knowledge economy brings not only unprecedented business opportunities but also several challenges. ‘Your organisation must remain agile. If you don’t move faster, your competitor will. You also need a considered strategy for retaining talent. Employees are free to leave for another employer and take valuable ideas with them. A good salary is not enough to ensure someone stays for a longer period. You need to bind people to you with the prospect of a reward they receive after several years of service. Think of a promotion, a management position or an equity stake.’ 

For finance teams, the rise of intangible assets raises a number of complex questions. ‘The war for talent means an organisation needs a sharp eye for the profiles and motivation of future employees. Which skills and expertise do you expect precisely? What motivates someone to choose your organisation? Which rewards and incentives will persuade talent to commit to your organisation for multiple years?’ 

The expertise of finance professionals helps organisations find the right contract structure to support an attractive offer for new hires. ‘First and foremost, the employee needs to see that conditions apply to the reward. For example: a bonus is paid only if the employee remains in post, and performs well, until a long-running project has been completed.’ 

‘The organisation must also be able to deliver on the promise,’ Ladika continues. ‘How will you fund a bonus or a salary increase? Are cash flows sufficiently stable? What are the options to finance this from equity or via shares? Communication is crucial here. You want to convey that employees can trust your organisation to honour a promised reward.’ 

Another challenge for finance concerns the valuation of intangible assets. ‘From the perspective of traditional spreadsheets, which revolve around monthly costs and revenues, the benefits of intangible assets are hard to quantify. What are the measurable outcomes of investments in organisational culture? How do you forecast the impact of additional marketing on income? If you can’t define and calculate the ROI convincingly, it becomes difficult to secure the required investment in intangible assets.’ 

Ladika also sees that start-ups which place intangible assets centre stage sometimes underestimate the risks of investing in tangible assets. ‘Traditional companies generally have experience financing physical assets. The AI sector is now investing enormous sums in data centres, among other things. That can go seriously wrong, for example if cash flows are unstable or leverage is excessive.’ 

Societal trends  

The MBA in Finance at Amsterdam Business School can be taken as a one-year full-time programme or a two-year part-time programme. The MBA is designed for finance professionals who want to take the lead in decision-making and change within their organisation. As a participant, you develop practical skills and strategic insight in both finance and business. The lecturers bring you up to speed on the latest developments in the financial sector, from fintech and AI to ethics and sustainability. 

‘The knowledge economy has consequences for social dynamics,’ says Ladika about one of the societal trends he highlights in his modules. ‘In the past, many companies moved quickly towards a stock market flotation to raise money for investment in assets. Now companies often grow without very large investments. They generate significant profits before they go public. The initial profits accrue to private investors and venture capitalists. A relatively small group of people, who are often already very wealthy, become wealthier, while a large part of society has access only to the stock exchange.’ 

Artificial intelligence versus the human touch 

In the knowledge economy, human expertise remains essential, even if AI may take over more tasks, says Ladika. ‘AI does not fundamentally change the transition to a knowledge economy. But there is a risk that organisations think they can easily replace employees with AI. You can already see organisations cutting jobs, for example through outsourcing. The result is knowledge gaps.’ Ladika cites the example of Boeing, which over recent decades outsourced around 70% of production to overseas manufacturers. Last year the aircraft maker announced that it would reverse this structural outsourcing to regain control over the quality and safety of its production processes. 

Attention is a crucial factor in the knowledge economy, and the human touch comes first, Ladika stresses. ‘AI unlocks so much information. But how do you make good use of it? You need people who know which information is relevant to your organisation. For a fully data-driven organisation, it may be possible to train an AI system to gather and process the right information. But until that is achieved, an employee with ten years’ experience, and deep knowledge of your organisational culture, your products and your customers’ needs, is an indispensable asset.’