From Wikipedia, the free encyclopedia

Value conversion is relevant to the managing of intangible assets or intellectual capital. Value conversion is the act of converting or transforming financial to non-financial value or an intangible asset into a financial asset. Intangible asset management has largely focused on valuation of intangible assets like trying to assign a financial value to an asset such as reputation. The theme of value conversion also runs through social exchange theory and more classical views of exchange value.

One approach to understanding value conversion is through value network analysis, which addresses the value dynamics of an internal or external value network. Based on the assumption that the core economic question really is, “how do we create value from intangibles?” value network analysis systematically analyzes how one type of value is converted into another, such as utilizing an intangible asset to generate a tangible or intangible deliverable. An example might be converting industry insights and experience into a tangible output such as a subscription newsletter.

Knowledge, an intangible asset, is one of the most interchangeable commodities. We can “trade” knowledge for more knowledge, we can trade it for another kind of intangible such as a favor or benefit, or we can package and sell it for profit as a tangible. When we create or realize one type of value from another type of value we have executed a value conversion.

The value conversion question runs two directions:

Value Inputs: How are we converting our inputs into value (financial and non-financial) for ourselves?

  How do our value inputs help us build our tangible and intangible assets? 
  How do our value inputs impact our financial picture?

Value Outputs: How we are we utilizing our tangible and intangible assets to create value for our customers and other participants in our internal or external value network?

  What kind of intangible value outputs can we create from our intangible assets? 
  What kind of tangible outputs can we create where we can generate direct revenue?

Looking at both tangible and intangible value exchanges helps us understand how intangible assets and inputs can contribute to our success in both financial and non-financial ways and help create greater value for ourselves and for our stakeholders.

Allee, Verna. The Future of Knowledge: Increasing Prosperity through Value Networks. Butterworth-Heinemann, 2003

1. [1] Impact Analysis by Verna Allee
2. [2] Value Creation Analysis by Verna Allee

• Open resource website for value network analysis
• Value Network Clusters