Michael D. Moberly   March 16, 2010

While in London recently where I served as one of the keynote speakers for the European Information Asset Protection Conference, I secured a meeting with officials of the British Venture Capital Association (BVCA) which serves as UK’s public policy advocate for the private equity and venture capital industry.

A significant percentage of my discussion with BVCA officials evolved around comparing and contrasting UK’s VC industry with the US, and the so-called ’silicon valley’ model which my hosts did not advocate tyring to replicate in the UK.

Our discussion also explored possible differences between US and UK entrepreneurs.  One such difference expressed by BVCA was that some would be UK entrepreneurs may be more reluctant to start an entrepreneurial business compared to their US counterparts due to stronger personal concerns about the consequences of (business) failure.  It was said that a contributing factor to this perception lie in UK bankruptcy laws that are not considered particularly entrpreneur friendly.  That is, company and personal bankruptcies in the UK are generally considered indistinguishable, therefore a combination of business failure and bankruptcy may discourage, in a entry barrier context, more entrepreneurial activities because it elevates-carries a sense (probability) of personal failure.

While UK’s VC industry is generally considered to be the most advanced in the EU, BVCA officials suggested there are relatively few (UK-based) investors with the financial capability to fund promising (innovative) companies through each stage of their development.  If reality, this contributes to the perception that UK’s VC industry focuses more on later stage and more established companies vs. start-ups and early stage companies. 

In that regard, the BVCA concedes there may be structural problems (within UK’s VC industry) that need to be addressed to ease the flow of equity capital into early stage and innovation intensive companies particularly. With that, the BVCA is exploring-seeking ‘the most suitable type and/or correct mixture of interventions.

Michael D. Moberly   March 15, 2010

Generally, my consultancy focuses on identifying ways small and medium size businesses can profit from the intangible asset and intellectual property side of their business.  During initial meetings with management/leadership teams I address, among other things, the key objectives of an engagement, i.e., elevate asset performance, unlock and enhance their contributory value including revenue and sustainability, and the value proposition that will accrue through more effective and efficient oversight and use of intangibles.  

While the initial engagement meetings are with business management/leadership teams and/or board members, its routine, as well as very prudent, for them to pose skeptically oriented questions, especially if they perceive, and they often do, (a.) any subjectivity in the characterizations of deliverables, or (b.) intangibles being portrayed as a silver bullet and/or quick fix to create heretofore un-utilized sources of value, revenue, competitive advantage, and sustainability.

By far, the most common demands expressed by management/leadership teams during initial (pre) engagement meetings are, (1.) prove it to me with examples, and (2.) where’s the value proposition?  

These types of questions are warranted, should be expected, and the answers should not be overlooked because a consultant presumes the answers are self-evident.  Remember, all management/leadership teams and boards do not yet recognize or have yet to act on the economic fact that 65+% of most company’s value, sources of revenue, competitive advantages, sustainability, and building blocks for future growth evolve directly from intangible assets. 

Therefore, the consultant must have the experience to articulate a strong and compelling repertoire of relevant, but most importantly, real world, trustworthy, and value proposition-based responses to those important questions.  Absent that, an intangible asset management and protection consultant should not become optimistic about receiving a (second chance) follow-up meeting.

But, I often believe, respectfully so, the way management/leadership team members frame those questions:

1. are not so much oriented to intangible assets specifically as they evolve from one-size-fits-all templates for questioning vendors regardless of the product or service being pitched, and also, they

2. underly various levels of misunderstanding and operational un-familiarity with either the existance or utilization of the intangible asset side of a business.

I engage, on a daily basis, the real world of small-medium businesses, which include founders, owners, management teams, and boards who, in the midst of this recession, are personally skeptical about ‘quick fixes’ or ’silver bullets’ particularly when their credit lines have been marginalized, if not cut off, and lending sources are moot to their requests and even more likely to dismiss out-of-hand even the best articulated and structured proposals for (intangible) asset monetization or asset backed lending.

Small and medium-size businesses in the U.S. however, are 20+ million in number, deliver approximately 39% of the GDP, and reportedly produce two and one half times as much innovation per employee compared to larger firms according to various sources and studies including the Small Business Administration.  The bottom line is, small and medium sized business produce (possess) intangible assets that deliver value, revenue, sustainability, and serve as a foundations (viable building blocks) for growth and future wealth creation.  It’s time to believe it and act on it!

Michael D. Moberly   March 11, 2010

Within the university research community, there remain spirited and polarizing debates about the openness in which research is conducted, that is, the freedom and ability of researchers to disseminate, communicate, collaborate, and publish at will, which incidentally, have long been recognized as the hallmarks of university-based research.

On one side of that debate stand those who favor retaining those legitimate hallmarks of academic freedom, while on the other side of that debate stand those who encourage safeguards be put in place to limit, set parameters for, if not prohibit some of the at will - discretionary freedoms conveyed in the former view, particularly in instances in which the research will likely produce special insights, outcomes, and findings that potentially carry significant (business) competitive advantages that may extend not just to the primary corporate (research) sponsor, but eventually to other U.S. companies and organizations in that sector.

There’s nothing particularly new about these diametrically opposing views, as they have existed in essentially the same format since the 16th century.  Regardless, whichever side of this argument one may be inclined to embrace, my experience in this arena suggests there is little middle ground on which to frame - reach consensus, bar one.  That is, the opportunity to objectively and dispassionately factor into the university-corporate research equation the realities embedded in today’s intangible asset based, hyper-competitive, aggressive, increasingly predatorial, and winner-take-all global R&D environment. 

So, the question may be, do these (aforementioned) realities support the inclusion of specific safeguards to the university-corporate research equation beyond those that predominantly IT (security) oriented?  The objective is to prevent-reduce the vulnerability-probability that the sponsored research will be vulnerable to insider theft, infringement, or the ‘always on’ and incredibly sophisticated global business/competitor intelligence operations.  In other words, acts that, if even reasonably successful, will dilute and/or impair the research’ strategic value to its sponsor and/or allow, inadvertently or otherwise, competitors (globally) to gain advance insights that permit them to achieve economic, competitive, and market entry advantages.

Walk me through-a-day-in-the-life of university research…An analogy may be useful as a potential starting point to advance this principled tug-of-war.  For example, when company representatives go before a venture capital firm to seek funding, one of the series of questions (scenarios) a VC will invariably pose to obtain a better sense of the usefulness and viability of the product or service being pitched, is to ask a company representative to ’walk me through’ a-day-in-the-life of a (target market) company in which the product or service is absent.  And then ‘walk me through’ a-day-in-the-life of that same company after the product or service becomes operational.  The VC’s follow-up questions will then be framed as w I see a difference?, will the company be better off?, if so, what and how will those differences manifest?, and how will those differences be exploitable to benefit the company?, i.e., to become more profitable?, gain/retain customers?, create efficiences?, improve morale?, etc.

It’s not inconceivable that a comparable, but objective and dispassionate ’walk me through a day in the life’ approach would be useful to advance the time honored debate about university research.  Key (objective) questions that could be posed then to researchers/scientists are (1.) consider their ability to sustain unchallenged control, use, ownership, and value of their research throughout its value-life cycle,  and (2.) what do they, their university, and research sponsor consider to be minimum foundation(s) for retaining viable options for (future) licensing and/or technology transfer?

(In addition to being an information asset protection specialist, Mr. Moberly remains a consistent researcher and consultant on these matters which began while he was a member of the faculty at Southern Illinois University at Carbondale from 1982-2002.)

Michael D. Moberly   March 8, 2010

In Stone v. Ritter (but also, In Re Caremark and In Re Disney) Delaware courts drew attention to board/director oversight (management, stewardship) of compliance programs and company assets.

As we know, court decisions carry the potential to serve as, if not broad precedents, at least as a basis for framing future tactical - strategic (litgation) arguments in similar cases.  The courts’ opinion in Stone v. Ritter, in my view, carries such potential particularly when board/director liability is at issue relative to the effectiveness, and even perhaps questioning how actually engaged boards’ were, in the oversight (stewardship, management) of a company’s compliance programs.

An inferrence I drew from reading the court’s decision (Stone v. Ritter) and Rebecca Walker’s fine paper titled ’Board Oversight of a Compliance Program: The Implications of Stone v. Ritter’, is that Stone will come to be viewed (applied) not so much for its specific focus on board oversight of compliance programs per se, as it will for bringing operational clarity to the definition of ‘board oversight’.  That is, describing the key elements - what constitutes (basic requisites of) oversight (e.g., stewardship, management) of a company’s assets, and by extension, its intangible assets.

And, when 65+% of most company’s sources of revenue, value, and building blocks for future growth and sustainability lie in - are directly related to intangible assets, bringing operational clarity to this increasingly critical arena is a good thing!  Particularly, that is, when the elements, as outlined below, will surely not be lost on, or overlooked by plaintiff’s counsel. 

Integral to this of course is enterprise risk management (ERM) and its perspective of being ’proactively defensive’.  Therefore, company management/leadership teams, legal counsel, and boards/directors in general, would be well served by becoming familiar with these elements to position themselves to more effectively address - meet boards’ (fiduciary) duties, i.e.,

 ’…ensuring the board is kept apprised of - receives accurate information in a timely manner that’s    sufficient to allow it and senior management to reach informed judgments about the company’s business performance and compliance with the laws…’  by

1. Expanding the type of information that boards receive.

2. Scheduling meetings with members of the management team to inquire about:

    a. how the company’s (internal, external) reporting system is structured

   b. the company’s investigation policies relative to suspected incidences of (internal, external) misconduct

  c. employee perceptions of the company’s reporting - compliance - audit programs, and sufficiency of employee training in this arena.

3. Structuring the company’s reporting (compliance) programs to include sufficient resources and authority for effective execution.

4. Examining the manner in which the company actually conducts risk assessments, prioritizes its risks, and actually addresses (prevents, mitigates) those risks. 

Michael D. Moberly  March 4, 2010

Stone v. Ritter, In Re Caremark, and In Re Disney are three cases that emphasize the importance of and provide practical context to board/director (fiduciary responsibilities) for the oversight, management, and stewardship of company assets, with specific implications to intangible assets and intellectual property. 

Yes, these are Delaware cases, and yes, they are 2006 and 1996 decisions respectively, but they present timely and relevant issues that warrant board, director, and management team attention.  Collectively, these cases go to the very heart of the increasing number of intangible-IP asset driven (knowledge-based) businesses. That is, today, 65+% of most company’s sources of revenue, value, and building blocks for future growth and sustainability lie in - are directly related to intangible assets.

Also, these cases, among other things, bring clarity and specificity to board’s-director’s being kept apprised of and/or knowing what’s going on inside their company.  That is, the extent and parameters in which boards/directors have a good faith duty, even perhaps duty of loyalty, to ensure (company) monitoring and reporting (compliance) systems are not merely in place (on paper), but they were specifically designed and now function to routinely and properly apprise senior management and boards:

a. with timely and accurate information, that is sufficient to allow them (within their respective scope) to

b. reach informed judgements concerning a company’s compliance with law, and business performance.

In other words, today, absent specific efforts (by boards’, directors’) to ensure each of the above occurs, they may well be, (in light of the aforementioned cases - decisions), failing to satisfy their duty to be reasonably informed about the company and therefore, be held personally liable for problems that arise.

While attempting to hold directors (personally) liable for the misconduct of (company) employees, may be one of the most difficult theories in corporation law which a plaintiff might hope to prevail, it is nevertheless, essential, in today’s extraordinarily competitive, aggressive, predatorial, and ‘winner-take-all’ (global) business and transaction environment, that boards, directors, and management teams assume (accept) a more ‘hands on’ view of their stewardship, oversight, and management responsibilities relative to their company’s assets, particularly, intangible assets.

Why?, because in cases such as Stone v. Ritter, In re Caremark, and In re Disney, important and necessary information failed to reach the board because of ineffective internal (company) controls and regular monitoring of those controls.  So, what’s the significance and (potential) applicability of these cases to company boards, directors, and management/leadership teams in general?  

Most likely, its that each may/could be held (personally) liable for damages resulting from legal violations committed by employees, if there’s a failure to, (a.) implement reporting or information systems or controls, and/or (b.) regularly monitor such systems.

As noted numerous times in this blog; integral to - underlying board, director, and management team stewardship, oversight, and management (fiduciary) responsibilities is the ability to sustain (protect, preserve) control, use, ownership, and monitor the value and materiality of a company’s (intangible) assets.  If the latter does not occur, or fails, little else matters, because asset value may quick go to zero!

(Mr. Moberly adapted this blog post from the work of Rebecca Walker of Kaplan & Walker.)

Michael D. Moberly   March 2, 2010

All value proposition statements (pitches) should be framed, sequenced, and articulated so that a management/leadership team audience will likely interpret-assess the subject matter and objectives similarly in terms of relevance, importance, usefulness, and application, etc., to them and their companies!  Obviously, this represents a significant and relatively complex challenge to achieve in a time restricted ‘pitch’! 

In addition, a value proposition statement should include:

1. a clear, believable, and understandable statement of the tangible - quantifiable results that will be delivered, i.e., the added value a client will - can expect to experience and when. 

2. logical and evidence-based linkages - paths between the product and/or service being pitched and how it will favorably impact the audience’ business, i.e., benefits, returns, address unmet needs. etc.

Value proposition pitches that focus exclusively on intangible asset services must, in addition to the above, include statements to:

1. to influence management/leadership teams to acknowledge that a company’s intangible assets reach well beyond the conventional brand, reputation, image, goodwill, and IP.

2. to identify the mandated fiduciary responsibilities relative to managing, utilizing, protecting, and effectively exploiting a company’s intangible assets, i.e., Stone v Ritter, Delaware, 2006.

3. that give credence to the economic fact that 65+% of most company’s value, sources of revenue, building blocks for growth and sustainability lie in intangible assets, and are not merely ’sound byte’ cliches, rather they’re business (economic) realities.

4. bring clarity and understanability to the reality that intangibles ’lack physicality’ by providing examples that minimize managerial skepticim and dismissiveness about the contributory and exploitative value of a company’s intangible assets. 

A good ‘value proposition’ pitch for intangible asset services can also include insights reported in Accenture’s recent national study, i.e., ‘50% of companies today rely on intangible assets and intellectual capital as their primary drivers of value, but only 5% (of the reporting companies) have internal controls, procedures, and processes in place for the stewardship, oversight, and management of those assets at the board and c-suite levels respectively!

Michael D. Moberly   March 1, 2010

A ‘value proposition’ should, in as few words as possible, accompany every (new, existing) business initiative.  It’s essential that a value proposition include, at minimum:

1. a clear - understandable statement of the tangible - quantifiable results and benefits that will be delivered (can be expected), i.e., the added value a client will experience and can use.  

2. believable and logical (evidence-based) link(s) - path(s) between the product and/or service being pitched and how either will favorably impact a business, i.e., provide specific benefits and returns that meet a need.

Value propositions that are service (versus product) oriented though, may present particular challenges relative to how they’re framed, written, and presented.  In my view, this is especially important when the (value proposition) service being pitched is describing benefits - returns that will accrue to company’s that identify, utilize, and exploit their intangible assets more effectively.  

In these instances, it’s especially important ’to do the necessary homework’ which begins by not assuming the management/leadership team audience will be on the same page with respect to their orientation to intangible assets.  I have found on numerous occasions that management/leadership team familiarity with intangible assets tends to be focused on the intangible assets they believe are relevant to their particular company, industry sector, and/or professional domain. 

For example banker and investor orientations’ to intangible assets may logically be focused on lending and monetization issues, whereas the orientation of the management/leadership team of a knowledge (know how) intensive firm may be more focused on employees and intellectual capital matters, i.e., retention, etc. 

A value proposition that is overly broad and includes an exhaustive range of intangible assets may not be particularly well received because the (management/leadership team) audience is primarily interested in determing what specific intangible assets affect their company/organization, and perceive anything beyond that as constituting unncecessary ’clutter’.  

The challenge then, is to frame, write, and present a value proposition that respectfully allows management/leadership team audiences to recognize broader applications and more inclusive ranges of intangible assets (internally, externally) that (a.) have relevance to their company, and (b.) which their company can benefit and obtain returns.

Given the preferred brevity though, in terms of length and time to present a value proposition to an audience, the speed which that audience understands and recognizes the relevance, benefits, and returns (of intangible assets) are key!

Michael D. Moberly   February 23, 2010

Intangible assets are embedded in - integral to most every company, regardless of its size or industry sector!  And, presumably, readers of this blog believe the economic fact, like I do, that increasing percentages (65+%) of most company’s value, sources of revenue, ‘building blocks’ for future wealth creation, and sustainability evolve from - are embedded in internally produced and/or (externally) acquired intangible assets.  

But, why is it that significant numbers of SME, SMM, and early stage company management teams’ familiarity with, or even perhaps, interest in intangibles, i.e., (a.) what they are, how they’re produced, where they exist, and the different forms they take in their company, and (b.) how they can be effectively and profitably utilized, leveraged, and exploited, appears to be relatively low?  

What’s this attributable to?  Numerous studies, many referenced in this blog, consistently report senior executives in ‘fortune 1000′ types of companies, consider the management, utilization, and risks to intangibles a priority (top three) issue facing their company.  For various reasons though, again many discussed in this blog, there is little objective evidence and even fewer examples that these consistent, and seemingly convincing findings are (a.) reaching, (b.) resonating, or (c.) prompting SME, SMM, and early stage management - leadership teams and boards to action.

Perhaps, there lies the crux of the problem or challenge that intangible asset (management, monetization, risk, and protection) specialists should focus.   That is formulating a stronger and better articulated repertoire of business (plan) oriented messages directed to SMM, SME, and early stage management-leadership teams and boards, that (a.) bring clarity, (b.) stress universality, and (c.) describe efficient strategies to identify, manage, utilize, and exploit intangible assests, i.e., to actually enhance a company’s value, deliver new sources of revenue, and provide foundations (building blocks) for future wealth creation.  

Also, perhaps, part of the challenge lies in SME, SMM, and early stage management team attitudes toward intangibles.  That is, for many management teams in publicly traded companies, their initial exposure to intangibles was literally thrust upon them, sometimes in near ’crisis-mode’, to rapidly comply with Sarbanes-Oxley mandates, FASB statements, and/or ISO standards in relatively narrow time frames, which routinely required extraordinary staff time, new procedures, additional resources, and costs.

In most instances, compliance was burdensome and, most respectfully, left little time, inclination, or curiosity to look (explore) beyond the compliance mandates to strategize about the potential benefits and options to utilize and exploit those already identified intangibles to enhance a company’s value, revenue, competitive advantage, and sustainability, etc.

Other reasons that contributed to management team reticence to pursue intangibles beyond meeting SOX, FASB, and ISO compliance minimums, include:

1.  there was no (regulatory) obligation to disclose (share, be particularly transparent with) information about intangibles to shareholders or other external groups. 

2. many managers have limited experience with intangibles and thus retain a tendency to rely on (their) intuition versus seeking and applying objective tools to quantify their contributions, value, and otherwise devise projective (return-on-investment) business plans to justify devoting resources to their utilization and exploitation. 

Michael D. Moberly   February 22, 2010

In every business transaction today, whether its across the street or around the globe, but particularly acquisitions in knowledge-intellectual capital intensive sectors, growing percentages of the deal will inevitably consist of intangible assets. 

For acquisition management teams, the prospect of acquiring (intangible) assets that are (a.) complimentary, readily transferable and exploitable, and (b.) quickly facilitate/enable execution of strategy, should be key drivers for acqusition proposals.  This is especially relevant given the economic fact that 65+% of most company’s value, sources of revenue, building blocks for future wealth creation, and sustainability lie in and/or are directly related to intangible assets!  In other words, intangible assets will be integral to the deal’s value and outcomes, e.g., achieving the near term and strategic objectives which the acquisition team presumably foresaw.  

For the acquiring firm, not-to-be-overlooked factors that underly - add to the probability that the acquisition will be as successful, contributory, and profitable as intended, requires the acquisition team:

1. to recognize that its not solely about asset acquisition, rather it’s about their effective integration and utilization which is an exercise quite different from the acquisition of purely physical/tangible assets, because intangibles (a.) lack physicaliy, and (b.) evolve from - are embedded in intellectual,  relational, and structural capital, therefore,

2. acquisition due diligence and management should be designed and conducted to include pre and post contexts (components), e.g.,

     a. to unravel and assess the assets’ status, stability (fragility), (legal) defensibility, and transferability - integratability factors, and

   b. ensure the assets’ control, use, ownership, value, and materiality are sustainable and monitorable, particulary in post acquisition contexts.

Any acquisition today, or business transaction for that matter, in which the pre and post perspective is not considered or poorly executed, the probability that costly and morale deteriating post-deal challenges will evolve that adversely affect shareholder-stakeholder attitudes and undermine the deals’ success, are almost inevitable!

in today’s extraordinarily predatorial and winner-take-all transaction environment, these (pre-post) perspectives cannot be overstated insofar as the role and contribution of the acquisition management/due diligence team.  Why?, because (intangible) asset contributions and value are sometimes quite fragile, that is, they can rapidly erode, be undermined, and/or their potential benefits literally unravel in hours, not days or weeks. 

Michael D. Moberly   February 19, 2010

Intuitively, the speed which a start-up company can actually deliver its innovation is a critical factor to it’s sustainability and attractivity for (continued, future) investment.   The question presented here is, can consistent stewardship, oversight, and management of the ancillary-complimentary intangible assets the start-ups’ innovation produces make the process even more speedy?  

A quick, but obviously biased, answer by a person who writes a ‘business IP and intangible asset blog’ is an unequivocal yes!

More convincingly though, in a still relevant study produced by Ans Heirman and Bart Clarysse formerly of Ghent University and now with ScientificCommons, put forth the notion in their paper titled ‘Do Intangible Assets at Start-Up Matter for Innovation Speed?’, that intangible assets such as:

1. start-up management team and founder experience, tenure, routines, and their cross-functionality, and

2. alliance and/or collaboration agreements with other relevant parties and organizations

     …combine to serve as important and contributing factors to innovation speed! 

As successful entrepreneurs realize, innovation speed (i.e., product launches and time to market) are important for many reasons, key among them are to:

1. gain early investment to achieve more (greater) financial independence,

2. gain broader external visibility and legitimacy as quickly as possible,

3. gain early competitive advantages, i.e., market position and possibly market share, which collectively, 

4. elevates the probability that the company will survive , in other words, be sustainable.

The study’s researchers state however, and I agree, new product innovation/development cycles vary.  For one, they may not consistently or immediately commence at the start-ups founding, and two, the speed of innovation development will vary relative to product development tasks and phases, and technologies required, among other variables. 

Again, no surprise here, other than making the argument once again, that identifying individual and/or inter-connected clusters of intangible assets that frequently emerge as ancillary and complimentary by-products of innovation should not be dismissed, overlooked, or neglected as potential (and additional) sources of value, revenue, and building blocks for complimentary (future) innovation.  And, their stewardship, oversight, management, and protection, like the primary innovation itself, should be routine considerations by management/leaderships teams, in board rooms, and among investors.