What constitutes the world’s oldest profession?…no debate here. From where I sit, albeit slightly biased, it’s certainly not prostitution as many seem to enjoy comedically suggesting.
Of course, the word ‘poaching’ I am applying here…has absolutely nothing to do with poaching in a medieval European context, wherein a ‘poacher’ was one who intentionally trespassed, with stealth, i.e., at dawn or dusk, on another’s property to trap and hunt game.
The word poaching today, for me, manifests in a slightly context…it’s about poaching of (accessing – acquiring the intangible assets belonging to another business and/or competitor, i.e., intellectual, structural, and/or relationship capital specifics. Why intangible assets? Because today, 80+% of most company’s value, sources of revenue, and sustainability either lie in or emerge directly from valuable and competitive advantage intangible assets.
So, the type of poaching I am referring to here may occur during-the-course of a (faux) business (meeting or transaction)…wherein an economic – competitive advantage adversary purposefully sets out to seek, usually proprietary, insight, knowledge, perspective, and experiential know how, etc., (intellectual, structural, relationship and operational capital) at virtually no cost, other than the various risks that may materialize should their rouse be exposed. Be assured, poaching as I am characterizing it here, can occur in myriad of ways aside from the scenario posed here.
Business (competitive) information poaching today…is indeed a global enterprise with no sector boundaries. Another objective for ‘poaching’ is to acquire relevant competitive advantages from legitimate holders-owners, which can be relatively quickly applied, absent the conventional and expensive ‘trial and error’ method and apply same for rapid return and benefit.
On the legitimate side…in most business transactions today, intangible assets and the intellectual (structural, relationship) capital embodied – embedded in those assets will, most assuredly, be in play, i.e., an integral part of the transaction and its projected viability and benefits. Therefore, valuable – competitive advantage intangible assets (in play – part of the deal) will be shared and/or transferred within the parameters of a prospective buyers’ rationale for initiating the transaction. True, in some instances, particular-intangibles will morph, be tweaked, and/or otherwise come to be applied operationally, in new – different ways compared to how they originally existed or were previously used.
As most experienced business persons know, some all too well…there is risk in commencing – engaging in any transaction, i.e., negotiation – relationship. In part, it’s because proprietary and/or competitive advantage information (intangible assets) will inevitably be shared, sometimes inadvertently, sometimes based on enthusiastic pride by the holder regarding their development, and not-infrequently absent a relevant and timely NDA (non-disclosure agreement) executed at the very earliest stages of exhibiting transaction interest and certainly negotiation.
Too, risk exposure for the owner – seller of the intangible assets in play…may materialize when the (proprietary) intangibles come to be used by the receiving party for purposes outside or beyond the terms of the contractual (transaction – contractual) relationship. In other words, the information will be used by the receiving party (possibly a poacher) to benefit them economically or competitively to the detriment of the other party.
Unfortunately, some company management teams will dismiss or relegate ‘intangible asset poaching’ as constituting just another inevitable cost of doing business…i.e., a new (additional) transaction cost of conducting business in an increasingly competitive, global, aggressive, and predatorial business transaction environment wherein increasing percentages of transaction value and projected sources of revenue evolve directly from valuable, revenue producing, and competitive advantage laden intangible assets.
I am reminded of a well-known (still operating) computer manufacturer…several years ago, whose vice-president of operations announced, upon building multiple new assembly sites in a southeast Asian country, that he estimated, quite correctly as it turned out, that 25+% of the company’s proprietary information and intellectual property (proprietary intangible assets) associated with – necessary for manufacturing at these specific sites would likely be irrevocably lost (infringed, misappropriated) during this venture’s projected life cycle.
Under these circumstances and in this locale…this company’s VP Operations had inadvertently relegated the probability that proprietary – competitive advantage intangible assets would be ‘poached’ to a necessary, perhaps obligatory, cost of doing business for this company which is clearly ‘intangible asset intensive and dependent’ for its sustainability.
The consequences (criticality) attendant to business intangible asset poaching…i.e., risk materialization, can obviously be significant and long lasting, if not irrevocable and terminal. Insofar as remedies or risk mitigation are concerned, the option of a business today pursuing isolationist strategies, i.e., not sharing or transferring business information outside the U.S., is likely neither feasible nor practical, especially in the present go fast, go hard, go global, go black business environment.
On the other hand, when entrepreneurs, management teams, and boards…representing intangible asset intensive – dependent firms exercise prudence with respect to distinguishing which intangibles are the real drivers, and what-which assets will – will not be shared or transferred, etc., in most instances, is an increasingly essential task – fiduciary responsibility. The goal of course, is, at the end of the day, control, use, ownership, value, and materiality of key intangible assets before, during, and after transaction negotiations are concluded, the assets remain intact for the rightful originator and owner.
(This paper was inspired by the work of Clemons and Hitt in their paper titled ‘Poaching and Misappropriation of Information: Transaction Risks of Information Exchange.)
Michael D. Moberly March 7, 2018 St. Louis firstname.lastname@example.org ‘Business Intangible Asset Blog’ where attention span really matters!