1. Workshop WinDays14 Mary Adams, Smarter-Companies Vedran Antoljak, Sense Consulting

2. Tangible Capital:0-5 Intangible Capital0-5 Inventory___ People___ Equipment___ Systems/Processes___ Buildings___ Relationships___ Land___ Strategy___ Total___Total___ Rank each of the following according to their importance to Fedex’s financial success Index Calculation: intangibles/(intangibles+tangibles) Index Exercise

3. Source: Corrado and Hulten (2010). Last point plotted is 2007. Intangible capital Computerized information –Software –Databases Innovative property –R&D, broadly defined –Copyrights and licenses –Designs Economic competencies –Marketing and branding –Strategic firm practices Intangible vs. tangible investment rate rises over time in the United States www.conference-board.org/data/intangibles/ Long-term investment shift

4. Smarter-Companies Inc. This investment created a post-industrial, intangible infrastructure with lasting value But accounting treats this investment as an expense not a capital investment And much of this infrastructure is not subject to economic laws of scarcity—intangibles are an abundant resource 

5. All this has created an info gap Source: Ocean Tomo Intangibles information gap Intangible book value Tangible book value

6. Smarter-Companies Inc. It happened economy-wide

7. For now, holding at +/- 80%

8. Smarter-Companies Inc. In M&A, intangibles are 70+%

9. Our answer? Open source ICounting tools Training programs Measurement platform Smarter-Companies Inc.

10. ICounting – Basic steps  Identify  Measure  Monetize Smarter-Companies Inc.

11. Identify Summarize Fedex’s Intangible Capital

12. Measure Inside-out measurement: –Financial –Quantitative Outside-in measurement –Qualitative (drives assumptions that drive projections and valuation discussions)

13. Monetize Growth (revenue) Innovation (revenue) Performance (profits) Valuation (asset/corporate value) Reputation (supports all of the above) Smarter-Companies Inc.

14. Qualitative Measurement – A Case Study

15. Software and Service Co. Smarter-Companies Inc.

16. Assessment – example: software and services firm

17. Peer comparison Peer Average

18. M&A transaction comparison Best: 14 x Likely: 8 x Worst: 3 x * Valuation range expressed as a multiple times corporate cash flow (EBITDA)

19. Company average Internal View

20. Smarter-Companies Inc. Client results Increased revenues by 27% over two years Created new co-innovation service with clients Won a new bank line Began conversations with prospective external partners and investors

21. Questions? www.smarter-companies.com Mary Adams 781-729-9650 adams@smarter-companies.com