Reputation Risk A C-Suite Perspective

July 29th, 2014. Published under Reputation risk.. No Comments.

Michael D. Moberly   July 29, 2014   ‘A long form blog where attention span really matters’. 

Companies with current reputation risk resilience…

Admittedly, I do not know, other than mere guesstimates, the number of companies which are current in their continuity, contingency, and resilience planning. I suspicion many may have such plans, but they’re merged into a proprietary web-based policy and procedure manual awaiting resurrection when a ‘reputation risk’ crocodile stalkingly emerges from its murky environs.

Role of intangible asset strategist and risk specialists…

Of course, as an intangible asset strategist and risk specialist, I strongly believe that continuity, contingency, and resilience planning should extend far beyond IT systems, supply chains, and other operations and/or functions to include the full spectrum of intangible assets a company produces, possesses and utilizes. The reason, put simply, is because it’s an economic fact that upwards of 80+% of most company’s value, sources of revenue and ‘building blocks’ for growth, profitability, and sustainability globally reside in – evolve directly from intangible assets!

Beneficial prelude…

A helpful prelude, in my judgment, to achieve the necessary (reputation risk) resilience that’s warranted in today’s competitively aggressive, increasingly predatorial and go fast, go hard, go global business environment is to acknowledge the questions that will be inevitably debated in c-suites, board rooms, and among management team members once a (reputation) risk materializes. Again, anticipating these questions can be both instructive and beneficial.

Inevitable questions…

So, while the questions below are neither company nor event specific and can be framed in various ways, experience suggests they do represent key (reputation risk) issues for which answers will be sought and demanded, once a (reputation) risk materializes, e.g.,

  • What is/are the origin(s) of this particular reputation risk?
  • How-when did the risk commence, and, if there are (human) initiators, are they known?
  • Is there a factual basis to this risk that will influence its’ perpetuation.
  • Is the risk tangible insofar as requiring the company to ethically make operational and/or design decisions to the targeted product or service?
  • Is the risk gaining in strength, and, if so, how rapidly?
  • Is the depth and breadth of the risk, among consumers, stakeholders, investors, etc., subject to measurement?
  • Is there a probability this particular risk will subside on its own volition without an official response or intervention?
  • Is a formal (company) response ethically and legally necessary?
  • If so, when and what tone will legitimately resonate with consumers, stakeholders, and supply-value chain partners and should it be defensive, offensive, conciliatory, etc.?
  • Can a response be effectively targeted to de-escalate further on-going (adverse) rhetoric that exacerbates the (reputation) risk?

No single best track…

I am hard pressed to suggest there is a single ‘best’ track that delivers answers to these (and other) questions to effectively treat reputation risk events. I do believe the best foundation to commence a recuperative path starts with having an objective, experienced, forward looking, and relatively rapid assessment of the circumstances. It is here that an intangible asset strategist and risk specialist should be close at hand. After all, effectively preventing or mitigating reputation risk cannot and should not be left exclusively to a public relations counter campaign.

Most company’s finding themselves embroiled in a reputation risk event will ultimately find a useful starting point to framing, achieving consensus, and embarking on a strategy to mitigate, and preferably resolve a reputation risk event must start with the unequivocal understanding that their company’s reputation is an intangible asset that’s embedded with multiple competitive advantages which also warrant safeguarding.

Not all reputation risks rise to a level of producing danger to consumers…

Just as importantly, it necessary to recognize, not all materialized reputation risks rise to a level in which life, death, or serious injury matters to consumers are imminent or that, for publicly traded firms, stock price and market share will irreversibly decline. Some risk events, emerge as verbal expressions which are socially offensive, something readers need not look further than the former owner of the NBA’s Los Angeles Clippers’ derogatory expressions as representing one example among many.

On the other hand, some reputation risk events may appear relatively uninteresting initially with no compelling reason to mount a defense, but which can resonate quickly when a compassionate audience is found, only to rapidly manifest to encompass broad blocks of consumers, stakeholders, and social media platforms in ways that indeed cast disfavor and suspicion on a company’s reputation.

Going inside the c-suite, Craig’s List example…

While I have absolutely no firsthand knowledge, I do believe it’s instructive never-the-less, to speculatively examine, in sort of a case study context, the decision in September, 2010 by Craig’s List to shut down its ‘adult services’ section.  Initially my thoughts were, this clearly falls into the proverbial ‘no-brainer’ category, or did it?

Again, I pretend to have no insider perspective on this matter, but I am rather confident there were numerous meetings over the previous months (well prior to September, 2010) when this reputation risk began emerging which among things, the company’s strategic decision making hierarchy, probably broadly debated ‘what should we do about our adult services section’ as the dominant question with its various components, i.e., do we…

  • retain the adult services section as is, and try to muscle through the backlash?
  • retain the adult services section but tone it down by imposing some less provocative parameters (rules), or
  • jettison the entire section now, which presumably would remove the accelerant from the rising reputation risk?

I am equally confident there were variations of the above being debated through a fair number of legal, public/media relations, reputation risk, and financial advisors on hand, each offering their perspectives and prognostications about the outcomes of various courses of action under consideration.

The fly on the wall…

Not being the proverbial ‘fly on the wall’ to hear those discussions first hand, I’m thinking it’s not rocket science to assume the consensus reached in most of those meetings, at least up to the September 4th decision to suspend the adult services section, had something to do with the economic fact – business reality that the adult service section was a consistent revenue generator to the tune, it’s been reported, of $37+ million per year.

I further suspect, during some of the initial discussions among Craig’s List managerial-strategic planning hierarchy, when the ’what should we do about the adult services section’ question was posed, there was, periodically at least, consensus to ‘ride this risk out’ for as long as possible.  If that were true, I would be inclined to interpret it as, unless and/or until the adverse public reaction rises to some, perhaps pre-determined level, e.g. 15+ state’s attorney general’s filing civil actions and going public with their admonitions, only then would the remaining option of closing down the adult services section be executed.

Reputation risk management 101 vs. graduate level…

Presumably, the strength, depth, and ‘width’ of the adverse reaction were being assessed.  Should my assumptions be close to correct, which I suspect they are, I would be inclined to characterize Craig’s List response in the context of ‘no decision is a decision’. Ultimately, the situation Craig’s List soon found themselves in, was, pure and simple, ‘company reputation risk management 101‘ versus a graduate or Ph.D level it could have been.

Reputation risk intelligent company culture…

Too, we must not overlook the reality that if such (adult) services were not in demand, particularly in a semi-anonymous web-based format, ala Craig’s List, it’s likely, from a business perspective, Craig’s List would have made the decision to discontinue that particular offering probably at the initial hint of problems (i.e., reputation risk) on the horizon. By doing so, it’s likely they could have leveraged that decision (to discontinue their adult services section) in a manner that they could reap strategic and perhaps well deserved accolades from their stakeholders and consumers versus being on the receiving end of civil actions from a growing list of detractors, special interest groups, and politicians which amounted to the proverbial ‘low hanging fruit’. Bad timing on the part of Craig’s List, perhaps, but, it’s a good business reason to invest in a ‘reputation risk intelligent company culture’!

Reputation glitches, such as the one Craig’s List experienced, duly represent 21st century versions of ‘wake-up calls’ for management teams, c-suites, and boards to closely and objectively examine and monitor how or whether their company culture is…

  • attuned to and observant of reputational risk.
  • genuinely reflects the company’s public behavior, and
  • consistently meets the expectations of its customers, consumers, stakeholders, and clients?

This post was inspired by a paper produced by Deloitte titled ‘The People Side Of Risk Intelligence: Aligning Talent And Risk Management.

As always, reader comments and perspectives are welcome at m.moberly@kpstrat.com

Reputation Risk Intelligent Company Culture

July 27th, 2014. Published under Reputation risk.. No Comments.

Michael D. Moberly   July 27, 2014   ‘A long form blog where attention span really matters.’

Value of company reputation…

I suspect there is agreement that no reasonable executive or management team member would question today the value associated with – attached to their company’s reputation, i.e., its image, goodwill, and the relationship capital it has built. Consequently, as born out in numerous studies, surveys, and published papers that address various facets of reputation risk, conceptually, practically, and operationally, this is one intangible asset which has ratcheted up considerably on c-suites attention and ‘to do’ list.

Reputation is an intangible asset…

Of course, a company’s reputation is one of multiple intangible assets which consistently play increasingly critical roles in company’s ability to achieve their intended growth, profitability, and sustainability objectives.  After all, it is an economic fact that today, 80+% of most company’s value and sources of revenue lie in or evolve directly from intangible assets, which reputation is certainly one. Once a company’s reputation has become tarnished, undermined, or been the subject of warranted scrutiny, sometimes, regardless of the reason, whether it be successive managerial missteps, one-off process glitches, or patterns of unethical behavior and neglect, returning to some semblance of reputational normalcy will, in most instances, be costly, lengthy, and require a well purposed and enterprise wide effort.

Reputation risk intelligent company culture…

Well purposed initiatives which a company’s management team and board may undertake to return their company to itsprevious or perhaps a higher state of reputational normalcy following the materialization of a reputation risk, despite having thoroughly vetted contingency plans in place, may be for naught, if the groundwork and foundations for a viable ‘reputation risk intelligent company culture’ have been overlooked.

It’s certainly reasonable to assume that increases in respondents’ affirmative admissions in surveys regarding reputation risk have been variously influenced by the very public and often self-inflicted calamities experienced by BP, Massey Energy, Craig’s List, McDonalds’ China, General Motors, and numerous others that have been on the receiving end of stakeholder, consumer, and regulatory agency ire.

Of course we know in some instances, consumer ill-will can be relatively short-lived, that is, a materialized reputation risk simply does not resonate or come to be on broad numbers of consumers’ radar screens. That’s not to suggest a company’s reputation can quickly ‘bounce back’, instead, it’s probably a case where a ‘tipping point’, for whatever reason, has not materialized in the media and/or actions of consumers in sufficient numbers to render it an action item on c-suite agendas..   That said however, one need not look far to see evidence in which consumer ill-will is much longer lived, to the point it rises to irreversible permanence which appears particularly relevant in the consumer products and consumables arena.

Too, for publicly traded companies, materialized reputation risks frequently manifest as downward spikes in stock price which translates to overall losses in company value.

Reputation risk is not limited by industry sector…

The current state of (company) reputational risk is not entirely an expectation of companies that operate in what may classify as high or low risk sectors, i.e., baby foods, drilling in the Gulf of Mexico, or coal mining compared to say graphics arts firms, libraries, or flower shops for example.  Nor is it necessarily due to the reality that risk events can expand and exacerbate so rapidly today.

Some companies get what they deserve…

Let there be no doubt, some companies get precisely what they deserve in terms of being on the receiving end of a reputation risk event or act that implodes.  That is, if or when there is a clear incident or pattern of knowingly engaging in risky behaviors or giving only lip service to regulatory mandates and risk management oversight, be it on the high seas, a coal mine, a chicken processing plant, or a manufacturer of toothpaste, all reasonable and legal efforts should be mounted against them to make things whole, if that’s possible for the victims and/or complainants.

Reputation risk attributed to the absence of risk intelligent company culture…

Today, in my view, it’s essential to recognize that the materialization of some (types of) reputation risk can be attributed to the absence of a ‘company culture’ that understands…

  • the relevance and potential (enterprise wide) adverse and potentially long term impact to a company’s reputation when certain risks materialize, and
  • how such risks can reverberate through global media platforms and find resonance (tipping points) among large blocks of consumers and stakeholders.
  • this prompts a defense only response path.

Horizontal reputation risk monitoring and assessment…

A company’s reaction to a potential – probable reputation risk, relative to the speed which it can materialize, can be particularly acute for companies which have no advance ‘horizontal monitoring and assessment’ procedures in place to…

  • provide timely, regular, and objective insights and updates about where and how a risk emanated and commenced.
  • reach internal consensus for executing an effective and appropriately timed response of some type, which I believe is more frequently than not, warranted.

A ‘reputation risk intelligent company culture’ can be an effective and complimentary path that will deliver returns far greater than the alternative!

As always, I welcome readers’ comments and perspectives at m.moberly@kpstrat.com.

Predicting Reputation Risk

July 26th, 2014. Published under Reputation risk.. No Comments.

Michael D. Moberly     July 26, 2014   ‘A blog where attention span really matters’.

Most companies operate with numerous preludes to reputation risk…

First, let me respectfully suggest that I am hard pressed to identify any company or organization I have engaged on intangible asset matters in recent years, irrespective of industry sector, that I and numerous colleagues could not objectively identify (operationally, transactionally) as having numerous requisite preludes which could potentially manifest as a significant and adverse reputation risks if left unacknowledged and unmanaged through neglect rooted in unfamiliarity.

Speed which events, acts, and behaviors manifest to become reputation risk…

In most circumstances which I am familiar, the speed which an adverse event, behavior, or act can progress to a reputation risk stage is speculative at best. But, we can probably agree that most reputation risks are variously dependent on how quickly they are ‘outed’ and find a sympathetic and/or pre-disposed audience where ‘the issue’ resonates and achieves the requisite traction prompting its significance to rapidly escalate.

Again, the speed and trajectory which a particular risk may advance is seldom more than a ‘best guesstimate’. In other words, it is dependent on numerous variables and factors, some of which can be favorably mitigated or absorbed, so to speak, while others intensify independently, regardless of the best efforts of risk prevention, mitigation, and management. That said, there is no shortage of company c-suites who naïvely assume that the speed which particular risks evolve to adversely affect a company’s reputation is far longer than what it ultimately is. But, there is no conclusive evidence available yet to suggest there are term (time) limits in which some categories-types of reputation risk can materialize, just ask General Motors.

Reputation risks’ rear view mirror perspective…

Engaging in a quick scan of public domain articles published in business and academic journals, blogs, government agency oversight reports, and other open source media, one quickly sees there is no shortage of media that draws attention to the adverse affects associated with materialized reputation risks, albeit with the benefits of a rear view mirror (after the fact) context.

Identifying and assessing reputation risks from a rear view mirror perspective, is not particularly challenging, as readers know. What I often find missing in such ‘monday morning analysis’ however, are assessments of a company’s desire or ability to distinguish the myriad of acts, behaviors, verbal miscues, or process oversights, etc., which…

  • can achieve the requisite traction, external appeal, and media attention to become full blown reputation risks, and
  • produce quick near and long term adverse effects to the victim company’s economics, competitive advantages, image, goodwill, and of course, reputation.

But again, I find there is no challenge to engage in a reverse investigation that reveals reputation risk points of origin or why they intensified.

Really, are there any events, acts, or behaviors today which can’t plausibly manifest as reputation risk…?

In discussions with numerous senior executives across industry sectors regarding reputation risk, a routinely raised perspective is frequently framed with an air of rhetorical and perhaps contemptuous pessimism, i.e.,

  • ‘…it’s difficult to think of any event, act, or behavior, either intentional or inadvertent, discounting legitimate ‘whistleblowers, that exist in today’s increasingly competitive, predatorial, and gotcha business environment, which do not carry the potential to materialize as reputation risks so long as there are receptive and perhaps sympathetic and righteous mediums able to instantaneously disseminate and dramatize its significance’.
  • ‘…so, are there preconceived agendas or motives sometimes embedded in the public reporting of business risks which companies have knowingly elected to undertake and assume, but, once a risk materializes, so much so, that it can simultaneously and adversely affect a company’s economics’, competitive advantages, market share and overall market space presence?

With respect to either of the above I am hard pressed to recall any management team member or executive who almost uniformly respond affirmatively to either of the above perspectives.

We just didn’t see it coming, that won’t happen to us…

Two common refrains, but one thing is certain, anecdotally at least, there is ample evidence that numerous potential reputation risk events have been dismissed or overlooked by companies with the time honored, but rear view mirror declaration, ‘we just didn’t see it coming’.

Examining the phenomena of reputation risk through the lens of senior company executives, I sense, as an intangible asset strategist and risk specialist, there is substance to this perspective that’s worthy of objective study. Certainly, I am not advocating senior executives should adopt a passive or dismissive perspective toward reputation risks that merely meet some, as yet, subjective criteria for being a potential (reputation) risk.

With all of this in mind, I hold the view, that in numerous instances of materialized reputation risk, there is absolutely no surprise and frequently borders on self-evident, especially since effective and objective counsel on such matters is readily available.

Wisely though, reputation risk warrants much more objective study, because, among other things, it’s certainly no secret that the foundations for reputation risks to materialize and emerge into the public domain are often laid well in advance, perhaps even years of less than optimal stewardship, oversight, and management of that special intangible asset.

As always, your perspectives and comments are most welcome at m.moberly@kpstrat.com.

C-Suites’ Reputation Risk

July 21st, 2014. Published under Reputation risk.. No Comments.

Michael D. Moberly    July 21, 2014   ‘A blog where attention span really matters’!

Intent…

The intent of this post is certainly not to suggest there should be a greater sense of dismissiveness directed toward the various origins, motives, or consequences to materialized reputation risks, which companies and organizations with unfortunate and often times unnecessary frequency, encounter and ultimately are compelled to address.

What is reputation risk…

Responsibility for materialized reputation risk events is frequently and variously attributed to unfettered and barrier free entry to social media and/or blog platforms by agenda driven individuals or groups to communicate adverse views about what a company (a.) may have done, (b.) intends to do, or (c.) continues to do. This includes acts such as the use/application of products or services with known design or operational flaws or substandard contents in which there is public consumption, as well as litanies of other forms of neglect or indifference to potential adverse affects which any of the aforementioned can have on reputation.

An internationally respected colleague, Dr. Nir Kossovsky, characterizes (a company’s) reputation, and I agree, as equating with client and/or consumer expectation.

Logically, I would assume, corporate c-suites globally, have no argument with Dr. Kossovsky’s characterization because I routinely observe them stressing the importance which they and their company attach to accommodating and sustaining customer-consumer expectations and goodwill which leads me to draw several, albeit subjective, conclusions, i.e., there…

  1. There is a rather obvious disconnect between c-suites’ often robust and eloquent treatment of the necessity to meet or exceed customer expectations when those expectations and trust are sullied by a lack of consistent oversight.
  2. There is frequent and awkward ineptness demonstrated by company some c-suites when they endeavor to mitigate reputation risks which have become public.
  3. There are, what reasonable consumers would likely regard as genuine reputation breaches when a corporate c-suite is operating on either misplaced guidance or assumptions that the act or omission underlying the materialization of a reputation risk event must rise to some preconceived (ill-conceived) metric as a requisite to public and apologetically toned acknowledgment.
  4. If there is such a metric, aside from legal (liability) or insurance rationales, it may well be that the adverse event is resonating in a manner that leaves decision makers with no further ‘cover’ options.
  5. Presumably, some c-suites believe they have achieved a level of reputation risk awareness and countermeasure sophistication to effectively thwart prospective or even some materialized risks in that they can be localized or compartmentalized to sufficiently avoid or mitigate any far reaching adverse affects.
  6. So, should the above conclusions approach reality, which I believe they do, a final conclusion may well be that c-suites’ find safeguarding their company’s reputation to be a particularly troublesome category/type of risk to consistently sustain and effectively address, regardless of the origin or reason for a reputation risk to have materialized.
  7. Ultimately, I suspect that there are numerous c-suites have arrived at a point (in the context of business and economic globalization) in which manifestations of reputation risk appear indistinguishable insofar as those which can – will transcend a company’s headquarters to adversely affect their entire global presence?

Again, it may be little wonder then why reputation risk is often characterized as being the most difficult and challenging type/category of risk to manage!

As always, I welcome your comments.

Intangible Asset Damages

July 14th, 2014. Published under Intangible asset protection, Intangible asset training for management teams., Intellectual capital management.. No Comments.

Michael D. Moberly     July 14, 2014    ‘A long form blog where attention span really matters’.

A not-so-hypothetical circumstance…

The following represents a not-so-hypothetical circumstance which I’m confident many readers have encountered. For me, as an intangible asset strategist and risk specialist, it represents one of the more consistent and disconcerting challenges insofar as safeguarding intangible assets, for which I have no one-size-fits-all answer. The hypothetical begins this way. I have been invited by Company A’s management team to conduct intangible asset awareness training and assess their intangible assets.

During the early stages of the engagement, it quickly becomes apparent that Company A has developed and utilizes company centric proprietary intellectual capital (know how) that delivers efficiencies and market – sector competitive advantages. However, as the engagement proceeds, it becomes even more apparent that the firms’ management team lacks sufficient operational familiarity with those and other particularly valuable intangible assets they have produced in terms of identifying, unraveling, assessing, distinguishing, utilizing, exploiting, and safeguarding, etc.

With respect to each of the latter, the company’s failure to recognize the contributory value, sources of revenue, and competitive advantages their specialized proprietary intellectual capital (intangible assets) are delivering represents an obvious breakdown in asset stewardship, oversight, and management. Fortunately, it is a breakdown that not only must, but usually can be remedied providing the value and functionality (life) cycle of the asset or assets remain relevant and durable.

In defense of management teams…

I should say in defense of management teams’ absence of operational familiarity with (their firms’) intangible assets, such circumstances, unfortunately, are relatively common. That is, countless companies globally have deeply embedded, in their routine business operations and processes, a myriad of intellectual, structural, and relationship capital and other forms of intangible assets which frequently, for lack of a better explanation, are taken for granted and therefore remain unacknowledged, undervalued, and thus, at risk.

So, the maximum contributory value, competitive advantages, and efficiencies these assets could deliver may remain un-exploited, if not idle, throughout their potential functionality – value cycle.  Importantly, under such circumstances, a company may never fully recognize the economic or competitive advantage benefits. An especially unfortunate element to this hypothetical is that a company management team may have no perspective for the importance or necessity to preserve (safeguard) the contributory value and competitive advantages the asset are delivering, and which the company has likely, but unknowingly, grown dependent.

Ex post facto trade secrecy requisites…

So, one important question is, can, or should this company’s proprietary intellectual capital as portrayed here, be cast (ex post facto) as trade secrets?  This of course, representing one strategy to help remedy the situation?  More specifically, can these intangibles meet the six requisites of trade secrecy (ex post facto) when in fact, the proprietary intellectual capital has not previously been recognized nor treated in a manner consistent with those criteria?  Nor are any procedures/practices in place to safeguard, i.e., preserve control, use, ownership, and monitor value, materiality and risk to those assets, i.e., infringement, theft, and/or compromise? Admittedly, I am doubtful.

A second, and equally important question is that if, not when, this particular proprietary intellectual capital is stolen, copied, or otherwise compromised, absent having any specific (trade secret requisites) safeguards in place, does Company A have grounds to mount a viable legal recourse in terms of seeking damages, assuming of course, the firm becomes sufficiently aware in a timely fashion that such adverse acts, i.e., the loss, theft, and/or compromise, have actually occurred?

The patent statute…

As articulated by Scott Hampton, Hampton IP and Economics, USC 35, 284, often referred to as the ‘patent statute’, states that patent infringement damages should be in an amount adequate to compensate the patent holder for the defendant’s infringement of the patent-at-issue.  But, in this hypothetical, Company A, the developer of the intangible assets, but previously unacknowledged user, has neither filed or been issued a patent, so this prospective remedy strategy seems, at best, very shaky, if not irrelevant.

Given my predilection that risks, i.e., theft, misappropriation, compromise, etc., to most intellectual capital assets will materialize with litigation promoted as the relevant strategy to try to regain control and use of the assets, plaintiffs will routinely endeavor to make a determination, usually early, as a element of the pre-litigation process, whether to seek lost profit – competitive advantage damages, or limit the remedies they are seeking to a reasonable royalty?  Again, its doubtful either are viable strategies for this particular hypothetical, but nevertheless, worth exploring.

Most companies do not go down the conventional intellectual property path…

It’s useful to recall at this point that today, globally speaking, it is an economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability either lie in – evolve directly from intangible assets of which conventional intellectual properties are merely one type or category of intangible asset.  However, a reasonably high, but realistically unknown percentage of companies with developed intellectual and structural capital assets presumably and purposefully opt out of the conventional intellectual property (patent) path due in large part no doubt to the expense.

So, the intent of this post is to bring clarity to the initial dilemma (question) in Company A’s hypothetical, that is, with its contributory value and efficiency – competitive advantage delivering intangible assets, can it be realistically be positioned (ex post facto) to legally seek monetary damages if key proprietary intellectual capital – structural were to be stolen or compromised when conventional intellectual properties, i.e., patents or trade secrets were not in place from the outset?

Panduit Corporation v. Stahlin Brothers Fibre Works, Inc.

Hampton points out, as we know, there is no single method for calculating lost (profit) damages, but the most common is a four-part test first recognized in 1978 in case of Panduit Corporation v. Stahlin Brothers Fibre Works, Inc.  According to the Panduit test, says Hampton, to obtain damages, the profit, in our  Company A hypothetical, a real patent owner must prove…

  • a demand exists for the (patented) product or presumably process, i.e., intellectual and structural capital.
  • there is an absence of acceptable (non-infringing) substitutes in the current market space.
  • there is sufficient manufacturing and marketing capacity to exploit that demand, and
  • with some reasonable precision, the amount of profit Company A would have made, had the adverse act not occurred.

Hampton also points out there are other means of proving lost profit damages in addition to the above Panduit test, such as measuring increases in the cost of product inputs.  Is it feasible then, for Company A to plausibly characterize the latter as costs related to the development (internally) or acquisition (externally) of other suitable (replacement) intellectual capital for that which had been misappropriated – comprised?

Please consider the following as a respectful call to action!  That is, for companies operating in the increasingly and irreversibly competitive and predatorial knowledge-based global economy where growing percentages of most company’s value, revenue, profitability, and sustainability are inextricably linked to the use and exploitation of their intangible assets, i.e., intellectual, relationship, and structural capital, most all of which are quite vulnerable when effective processes – procedures are not in place, i.e., (a.) to sustain – preserve asset control, use, ownership, value, and monitor their materiality and risk, and (b.) for asset stewardship, oversight, and management,

A special thanks to Scott Hampton, Hampton IP and Economics for the inspiration for this post at http://hamptonip.com

As always, reader comments are most welcome.

Economic Espionage Economic Consequences

July 12th, 2014. Published under Economic Espionage, Intangible asset protection. No Comments.

Michael D. Moberly    July 12, 2014     ‘A long form blog where attention span really matters’.

I have been consistently engaged in studying, conducting investigative research, publishing, and consulting on a variety of ‘open source’ matters related to economic espionage. This began many years before the passage of the Economic Espionage Act in 1996. Admittedly, while my interest in economic espionage issues is broad based, having served fulltime in academia for 20+ years, much of my interest has been directed toward the targeting and victimization of university-based research and corporate-university research alliances.

Economic Espionage Act of 1996…

What I believe is a distinctive aspect of my work is that I purposefully characterize my research and consulting by using the phrase ‘economic and competitive advantage adversaries’ to describe the broad range of domestic and international parties engaged in variants of economic espionage. Obviously, this more encompassing phrase reaches beyond the definitions (precise requisites) codified in the federal statute, i.e., the Economic Espionage Act of 1996 (18 U.S.C. § 1831-1839.

I believe this phrase better captures the diversity of global players in terms of targets, and motivations particularly as well as a glimpse into the ever more challenging to unravel methodologies and layers between those actually engaged in the acquisition initiative and the ultimate and/or primary (end) beneficiary. My intent is for business entities to recognize that the theft or acquisition of their proprietary information, ala trade secrets, has many more dimensions today compared to when the EEA became Federal law in October, 1996.

Ultra sophisticated data mining…

For example, the product capable of being delivered through the application of sophisticated, often ‘off the shelf’ data mining technologies today, by either highly organized state or corporate sponsored entities or independent operators which include a range information brokers represents a testament, in my judgment, that economic – competitive advantage adversaries regardless of sponsorship or motivation are routinely engaged in business – competitive intelligence. In other words, their targets are not exclusively national security and/or defense related.

Who is the ultimate end user or beneficiary…?

Of the countless global entities and individuals engaged in some manner of business, competitive intelligence, and/or information brokering today, I believe it is well beyond plausible to assume that a large but unknown percentage do not know precisely who the real end user (beneficiary) of their work product actually is. So, absent knowing who the real beneficiary of the misappropriated – stolen information assets are and how those assets will (can) be used or applied, once acquired and delivered, this makes it even more challenging to objectively quantify the adverse economic, including competitive advantage, reputation, market share, etc., consequences attributed to any single event or collective loss.

Economic and competitive advantage adversaries…

So yes, I do believe referring to these activities in the context of ‘economic and competitive advantage adversaries’, has substantial relevance in today’s increasingly competitive, aggressive, predatorial, and winner-take-all global business transaction, R&D, and new product launch environments.

And secondly, as the global economies’ become increasingly intertwined, yet overwhelmingly dominated by highly valuable intangible assets, i.e., intellectual, structural, and relationship capital in particular, achieving most any economic and/or competitive advantage are all but sure to outweigh the relatively minimal risk associated with most intelligence initiatives. In other words, it has become obvious to me and I’m sure others as well, that the significant potential benefits of securing an economic and/or competitive advantage in a specific market or industry sector exceed, intellectually at least, most costs and/or risks.

Again, for anyone paying more than passing attention to economic (cyber) espionage today, they should recognize those adverse activities as evolving from primarily targeting defense and national security projects to an unrelenting, costly, and almost inevitable risk for most any (public/private) commercial entity, regardless of size or industry sector, that produces or possesses valuable intangible assets. Again, it is the intellectual, structural, and relationship capital which has become globally universal forms of currency but often with company and/or country specific applications.

Extrapolating costs of economic espionage…

As for extrapolating the costs – losses of economic espionage to a single company or to a country’s economy as a whole, such analysis come with a host of challenges, not the least of which is the often subjective nature of the calculations which, it’s not unrealistic to assume are embedded with various government, policy, and even political agendas.

Interestingly, in the 25+ years that I, and numerous others, many of whom have become colleagues, have been examining and consulting in the economic espionage arena, there is little that I can readily point to insofar as objective methodologies to measure (a.) the specific damages and/or costs to a targeted/victim company, and (b.) how to specifically attribute –differentiate the source of those losses to acts of economic espionage, and then (c.) extrapolate that data to either the U.S. or other country’s economy as a whole.

Go fast, go hard, go global…

For example, the full range of economic – competitive advantage repercussions of a single incident/act of ‘economic espionage’ is challenging to fully grasp, in part due, I suggest, to the go fast, go hard, go global environment which most businesses now routinely function. For example, a company’s awareness of trade secret theft or compromise seldom, in my experience, emerges immediately. Thus, its adverse economic – competitive advantage consequences for the victim company can only be objectively calculated if the consequences can be specifically attributable to an economic – competitive advantage event and should be done so in both strategic (long term) and tactical (short term) contexts.

A rationale…

My rationale is that a single (stolen, misappropriated, compromised) trade secret and/or proprietary information will involve multiple combinations of embedded intellectual and structural capital which are applicable to variety of products and/or services in different industry sectors. It’s worth being reminded of the globally universal economic fact, that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, competitive advantage, and sustainability lie in – evolved directly from intangible assets.

I am not suggesting that the loss, theft, or compromise of a single trade secret or intangible asset is immeasurable. Rather, I am suggesting that measuring the real economic loss to a company must include objective near and long term calculations which can only come, in my view, from recognizing that trade secrets (proprietary know how) can readily become embedded with not just one, but numerous (proprietary) intangible assets.

As always, your comments are appreciated at m.moberly@kpstrat.com

Know What You Don’t Know About Intangible Assets!

July 11th, 2014. Published under Intangible asset training for management teams., Managing intangible assets. No Comments.

Michael D. Moberly    July 11, 2014    ‘A long form blog where attention span really matters’!

Know what you don’t know about intangible assets…

So, how is Michael Roberto’s book ‘Know What You Don’t Know, How Great Leaders Prevent Problems, Before They Happen’, relevant to intangible assets?  While, I dislike having to make such an admission, there is this lingering that still, a probably significant, but actually unknown percentage of business management teams and c-suites, etc., remain operationally and financially unfamiliar with their firms intangible assets.

As an intangible asset strategist and risk specialist, the obvious theme of Dr. Roberto’s book, i.e., its title, translates very well with one of my themes’ expressed consistently throughout this blog, that is, elevating intangible asset awareness among company c-suite’s and management teams and putting a company’s intangible assets to work as tools to elevate and sustain a company’s value, create new streams of revenue, and fortify competitive advantage. In other words, prevent problems before they occur.

The initial path to ‘preventing problems before they occur’ begins by encouraging business policy and decision makers to genuinely engage, and let’s be clear on this, the economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability today lie in or directly evolve from intangible assets!

From problem solving to problem finding…

In Chapter 1 of Roberto’s book for example, appropriately titled by the way, ‘from problem solving to problem finding’ the author commences with a very relevant quote from G.K. Chesterton which I take the liberty of paraphrasing somewhat, i.e., ‘it isn’t that management teams can’t see the solution, rather it’s that they often can’t see the problem’.  The problem not seen, in my view, resides in overlooking and/or dismissing intangible assets as comprising the real sources of most company value, revenue, and competitive advantage as noted above.

The author (Roberto) makes many other introspective points, which I genuinely believe translate as strikingly relevant paths for not merely elevating management team awareness and operational familiarity with intangible assets, but also, for intangibles to become routine discussion – action items on c-suite and management team meeting agendas.

To pursue this example further, I am confident that numerous company management teams would agree, there are benefits to occasionally reversing conventional thinking, i.e., from problem solving to problem finding! By this I mean, for a substantial percentage of companies globally, the intangible assets their businesses routinely produce, frequently become embedded in various operations and transactions, but remain unrecognized, undistinguished, and otherwise not exploited to the level possible.

So, put another way, in a global business environment in which such substantial and irreversible percentages of business growth, competitive advantages, value, sources of revenue, and transactions, in general are essentially being underwritten with parties’ intangible assets, too me, this signals a significant ‘business problem’ if senior members of a company’s management team remain operationally and financially unfamiliar with the intangibles in play, and leave them unrecognized and undistinguished insofar as their contributory role and/or value are concerned.

Simply stated, this is no longer an arguable point and its resolution merely requires recognition of intangibles. For me, this constitutes a reasonable and certainly valid motivator for management teams and c-suites, whose companies may be experiencing challenges, to shift from problem solving to problem finding. Problem finding may well lie in the absence of or poorly executed practices for…

  • sustaining control, use, ownership, and monitoring intangible assets’ value, materiality, and risk
  • enhancing a company’s value, sources of revenue, market share, reputation, brand, and competitive advantages, and
  • mitigating risks intangible assets.

More specifically, exhibiting disregard of, or dismissiveness toward a company’s intangible assets, particularly those with most companies routinely produce can be and often is ‘the’ problem’ and its resolution is straightforward as described here in numerous posts under the category of ‘training’..

To continue though, as readers know, a time honored starting point for solving most problems is conventionally speaking, recognizing a problem exists and/or risk has materialized with ‘problem finding’ coming through management teams’ introspection that preferably follows.  So, ‘taking a page’ from Roberto’s book, one strategy for remedying high value problems companies experience, should commence by finding/identifying the intangible assets in play.

In the context of‘ ’knowing what you don’t know and how great leaders can prevent problems for they happen’ means adding personal characteristics of anthropology and ethnography to one’s managerial repertoire.

For example, in the context of this blog, being an ethnographer would encompass identifying and observing a firms’ producers – developers of intangible assets on the proverbial shop floor, i.e., in their natural settings, wherever that may be.  In other words, ‘finding the problem’ means avoiding simply asking employees how things are going, or relying on survey data or focus groups as the dominant or sole methods for acquiring insight, i.e., problem finding.  Instead, management teams should actually ‘watch what employees do, in the same manner as an anthropologist.  That is, engage and observe how employees, customers, clients, and suppliers, etc., actually behave and interact.

This leads not only to ‘problem finding’ but more importantly recognition and appreciation for the intellectual, structural, and relationship capital (intangible assets) that are woven into each.

By conducting such observations through an anthropological and ethnographic lens, management teams can become more effective and confident ‘problem identifiers’, in large part because they have become more adept at distinguishing – analyzing the contributory role and value of their firms’ intangible assets absent subjective, misleading, or over analyzed data that sometimes leads to biases and misconceptions.

Too, by making observations through these distinctive lens, management team members are better positioned to not just identify what and how intangible assets are being used, but, if they are being used effectively, and which, if any, intangible assets need to be developed or acquired and ultimately integrated to make those processes better.

This post was inspired by Michael A. Roberto’s book ‘Know What You Don’t Know…How Great Leaders Prevent Problems Before They Happen’, Wharton School Publishing, 2009.

I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Major League Baseballs’ Intangible Assets

July 9th, 2014. Published under Intangible asset focused company culture., Intangible asset training for management teams.. No Comments.

Michael D. Moberly   July 9, 2014   ‘A long form blog where attention really span matters’.

My experiences in numerous business conference rooms over the past 25+ years, among other things, is that consistently there is the proverbial 900 pound economic – competitive advantage ‘intangible asset’ elephant that is always present, but, in most instances, goes unnoticed, unattended, under-used, under-protected, under-valued, and unclearly defined.  Collectively, these challenges,  make it frustratingly difficult in many instances to persuade business/company management teams to acknowledge and endeavor to exploit their intangible assets insofar as elevating company value, creating sources of revenue and competitive advantages.

But, effectively reversing the above, not unlike my reference below to the film ‘Moneyball’ is often met with various levels of resistance, hesitancy, and reluctance to change past practice!

In an effort to draw further attention to this perspective, I have taken the liberty of citing a conversation which occurred between Oakland A’s General Manager Billy Beane and his player scouts and development staff from the 2011 film Moneyball, starring Brad Pitt (as GM Beane) and Jonah Hill (as Peter Brand) Mr. Beane’s advisor and confidant regarding the team’s player draft for the then upcoming 2002 season.

The scene I am describing occurs in a conference room at the Oakland A’s stadium following their highly successful 2001 season. But now, two of the star players, Jason Giambi and Johnny Damon have accepted employment with two rival teams as free agents.

Seated at the table are GM, Billy Beane, Peter Brand, and seven Oakland A’s scouts whose time honored responsibilities include  finding, assessing, and developing new (prospective) professional baseball players. Mr. Beane commences the meeting by expressing frustration, prompted in large part by counsel from his newly hired advisor, Peter Brand.  Beanes’ frustration focuses on the conventionally time honored methods scouts apply to finding and assessing new prospective professional baseball players.

Mr. Beane:  We’re trying to solve a problem here, but you (referring to the scouts and player development staff seated at the table) are trying to solve the problem as you still see it, which is the same way MLB (Major League Baseball) has approached it for the past 120 years, that is, by finding ballplayers to replace ballplayers!  You want to find players to replace star player Jason Giambi and Johnny Damon, but, both are gone, their history!

Head scout:  I think we all know what the problem is Billy.  There is a lot of experience in this room and you need to let us do our job of replacing two key players who have been hired by other teams, Jason Giambi and Johnny Damon.

Mr. Beane: But, you are not looking at the real problem!

Head scout: No, we are very aware of the problem!

Mr. Beane: OK, so what’s the problem?

Head scout:  We have to replace two star players.

Mr. Beane:  NO!  The problem we are trying to solve here is that you scouts are sitting around talking the same old ‘body’ non-sense, like you’re selling blue jeans and looking for another Fabio!  We’ve got to think differently about how we find and assess prospective ballplayers, assemble a team, and put a team on the field for 161 games each season.

Head scout:  This all sounds like fortune cookie wisdom to me.

Mr. Beane:  NO!  It’s just logic!

Mr. Beane:  There is epidemic failure in the game of professional baseball. Baseball is medieval. Baseball teams are asking the wrong questions because they don’t understand what must really happen on a baseball field to win. This misunderstanding leads the people who run MLB teams to misjudge their players. People who run ball clubs think in terms of buying players!

Mr. Beane:  Our goal here should not be to buy players, instead, our goal should be to buy wins, and in order to buy wins a team needs to buy runs! So, what I see here is an imperfect understanding of where runs come from or how runs are generated!

Head Scout:  But baseball is not just about numbers, Billy. Google boy here (a disparaging reference to Peter Brand) just doesn’t know what we know.  He doesn’t have our experience, or our intuition.  These are ‘intangibles’ that only baseball people like us, who truly know the game understand.  You are simply discounting what baseball scouts and player development staff have done for the past 120 years.  So, we don’t care what you think Billy, because MLB thinks the way we think with our evaluative experience and our intuition.  This is not a game about statistics, it’s a game about people!

Mr. Beane:  We will find value in players which no one else sees!  Good players are routinely overlooked or dismissed for a variety of biased reasons, mostly because this is the way we’ve always done it! Are there really other players out there like Giambi and Damon?  NO!  So, what we can do is recreate Giambi and Damon in the aggregate!

Head scout:  Yes, but will they get on base?

Mr. Beane:  Do I really care how a ballplayer gets on base, whether it’s by a hit or a walk?  On-base percentage is what we’re looking for now!  This is the new direction of the Oakland A’s.  We are now card counters!

Mr. Beane:  The truth is, we can find 25 winning players because everyone else in baseball under values them.  So, if we approach the game the same way it’s been done for the past 120 years, then, we will lose on the field!  MLB teams must adapt or die!

Mr. Beane:  It’s a process…it’s a process…it’s a process!

Not unlike Billy Beane’s and Peter Brand’s desire to change the status quo, intangible asset strategists and risk specialists, like myself, are also committed to perhaps a more respectful, but never the less, substantial change in the way management teams operate their businesses and organizations and engage in transactions, which, far too often, is being done without regard for the intangible assets in play.

Just as it has become an irreversible economic fact that 80+% of most company’s globally, their value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets! (Brookings Institution, Intangibles Project) it’s simply no longer business as usual, regardless of management teams’ wishes or adherence to past practice.

This is what Oakland A’s manager Billy Beane, and his advisor Peter Brand, recognized well before any other MLB team did, be they MLB teams or companies, each must ‘adapt or die’!  For the former, this requires new skill sets, new visions, new metrics, and different criteria to be successful, profitable, and sustainable. In the present, and for the foreseeable future, those new skill sets, visions, and criteria all evolve around intangible assets!

As always, your comments are most welcome at m.moberly@kpstrat.com

 

 

 

‘Safeguarding Intangible Assets’

July 8th, 2014. Published under 'Safeguarding Intangible Assets'. No Comments.

Michael D. Moberly    July 8, 2014    Pre-order a new book by Mike Moberly!

http://www.amazon.com/Safeguarding-Intangible-Assets-Michael-Moberly/dp/0128005165

Knowledge is power…

“Knowledge is power”, a statement attributed to Sir Francis Bacon in the 17th century which translates well to the present 21st century where we find there is no other arena of economic and social relations, in which Bacon’s statement comes to fruition as intangible assets, i.e., intellectual, structural, and relationship capital dominate business economies globally with most company operations and transactions are dependent upon the creation, utilization, and conversion of intangible assets, which, not so coincidentally, serve as foundations for most company’s value and sources of revenue.

One challenge to the intangible asset dominated business environment however, is company’s ability to sustain control, use, ownership, and monitor the value, materiality, as well as mitigating risks to those intangible assets throughout their contributory value and functionality cycles. Thus, the management, oversight, and stewardship of intangibles is rapidly becoming a skill set requisites.

After all, unlike patents, trademarks, and copyrights, there is no certificate issued by any government that states these are your intangible assets. Instead, responsibility for identifying, unraveling, assessing, safeguarding, managing and exploiting a company’s intangible assets lie solely with company management teams.

Too, recognition and monetization of intangible (non-physical) assets has changed conventional business practices globally, which, for hundreds of years, evolved exclusively around the production and utilization of tangible or physical assets

There are three very clear features of 21st century global business transactions…

  1. We are only in the early stages of the irreversible economic fact that 80+%, of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability, either lie in or evolve directly from intangible assets.
  2. Intangible assets are playing critical – essential roles in most company’s value, profitability, growth potential, competitive advantages, and long term sustainability.
  3. In today’s globally intertwined business transaction environments dominated by intangible assets, it’s inevitable that intangible assets will be simultaneously in play and at risk.

My new book is particularly applicable to the time constrained reader…

For time constrained readers, to maximize my book’s benefits, I have designed each chapter to deliver numerous multipliers to respectfully bring graduated operational clarity to the stewardship, oversight, and management of intangible assets. For starters, this includes…

  1. treating the management of intangible assets as business decisions and fiduciary responsibilities, not solely as legal or accounting processes.
  2. structuring business transactions to mitigate the inevitable asset risks which, when materialized can (a.)  entangle intangible assets in costly and time consuming legal disputes and challenges, (b.) disrupt the momentum of company projects or new product or service launches, and/or (c.) undermine projected or anticipated synergies and competitive advantages.
  3. fostering a ‘company culture’ that recognizes and supports the contributory and collaborative value of intangibles…
  4. making companies more organizationally resilient to the materialization of risks, by including intangible assets in continuity and contingency planning.
  5. ensuring the production, contributory role, and value of intangible assets is aligned with a company’s core mission, strategic planning, and the various types of transactions it typically engages.
  6. elevating company reputation, image, and goodwill among stakeholders and gain the attention of prospective consumers beyond its traditional market space.
  7. reducing asset vulnerability to theft, misappropriation and other types of risks and threats, because when certain risks materialize unabated, they will undermine asset value, competitive advantages, market position, and otherwise adversely affect company reputation.
  8. using and exploiting intangible assets, commensurate with their respective life, value, and functionality cycles.

Collectively, the above serves as preludes for achieving more consistent business success and profitability, which now, more than ever before, each is inextricably linked to the effective development, management, and safeguarding of intangible assets.

As always, comments are welcome at Mike Moberly, m.moberly@kpstrat.com.

Pre-order a new book, ‘Safeguarding Intangible Assets’ by Mike Moberly!

http://www.amazon.com/Safeguarding-Intangible-Assets-Michael-Moberly/dp/0128005165

Economic – Cyber Espionage Calculating Consequences

July 1st, 2014. Published under Economic Espionage, Intangible Asset Value, Intellectual Property Rights, Reputation risk.. No Comments.

Michael D. Moberly   July 1, 2014   ‘A long form blog where attention span matters.

Calculating the cost of economic espionage, micro, macro…

Calculating the cost of economic – cyber espionage, either micro, i.e., to a specific victimized company, or macro, to a broader (local, regional) economy and a company’s competitive advantages and supply chain partners is, at best, is a challenging and often times, up to this point anyway, a subjective undertaking. Too, calculating the cost of economic – cyber espionage is indeed a matter of high level decision making that borders on being fiduciary responsibility or obligation, but, as already suggested, involves in my view, quite subjective calculations or ‘best guesstimates’.

Decision options for the victimized company …

Very simplistically, the options for a company victimized by economic – cyber espionage typically evolve around challenges associated with two broad decision paths, each presenting the potential for incurring substantial reputation risk in addition to the stolen or otherwise compromised  (intangible) assets…

  1. An initial decision to be made by the victimized company is whether or not to ‘go public’ with the event and the usually uncomplimentary circumstances that gave rise to the acts. In a growing number of instances, prudence dictates doing so, and doing so relatively quickly. That said, I know of no company c-suite that is not cognizant of the inevitable questions, and rightfully so, that will most assuredly follow, e.g., how did it happen, why did it happen, was the company sufficiently prepared to thwart – defend against such attacks, what activities was the company engaged in to make it an attractive target for economic – cyber espionage, and when did the company first realize they were victimized (usually framed as why not sooner) and, who are the culprits, etc?
  2. Another decision, closely followed by and related to #1 above, is what is the best methodology for quantifying the near and/or long term (presumably) adverse effects to the company, its supply chain partners, some components of the larger or regional economy, particularly jobs, and the ability of the victimized company to remain a viable, profitable, and on-going concern?

To be sure, at least one underlying factor weighing heavily on either decision is not knowing precisely how stockholders, stakeholders, consumers, and media will react to economic – cyber espionage events. There can be no argument that economic – cyber espionage represents a serious, on-going, and asymmetric risk/threat to most companies, and now as globalized business becomes a routine fixture, multiple country’s economies’ as well. To my knowledge, this perspective emerged and was initially conveyed during Judge Sessions’ tenure as FBI Director during a speech to the Cleveland Economics Club in which he very appropriately uttered the forward looking – forward thinking and now often repeated statement ‘our economic security and national security are synonymous’. Of course, the realities embodied in that statement are much more more relevant today, particularly given the economic fact that consistently rising percentages of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability’ lie in – evolve directly from intangible assets which now routinely reach or exceed the 80+% mark which translates as the attractivity of certain companies as being prospective targets of economic – cyber espionage are specific intangible assets a company has developed, acquired, and assembled in the form of intellectual, structural, and relationship capital or, more simply stated, ‘know how’.

Damages…

Economic – competitive advantage damages attributed to incidents of economic – cyber espionage to companies’ or to economy’s in general, are actually quite difficult to measure and often are subjective and prone to be aligned debunking or advancing a particular ‘political’ agenda. In fact, the full extent of any adverse repercussions related to a successfully executed incident of economic espionage is seldom recognizable as being solely attributable to as specific originator. For example, if a company experiences a theft of specific proprietary information, i.e., intellectual, structural capital, or trade secret, those assets may be distributed and/or applied to multiple recipient companies, i.e., beneficiaries, each producing different products in different industry sectors which makes ‘traceability’ all the more difficult, unless and/or until a comparable product appears for sale at a west coast ‘flea market’ on any given Sunday morning. I am not suggesting such losses of a company’s intangible assets are absolutely immeasurable, just fraught with challenges insofar as ensuring the findings are as objective as possible.

Understanding intangible asset value…

In my judgment, a very important key to understanding, and ultimately estimating the value of a company’s intangibles assets that have been illicitly acquired or stolen through an act(s) of economic – cyber espionage, lie in understanding the processes, procedures, and resources necessary to sustain control, use, ownership, and monitor the value, materiality, and risk to a company’s intangible assets. In today’s hyper-aggressive, predatorial, and go fast, go hard, go global business transaction environments which many companies, regardless of size or sector, routinely operate, any company’s intangible asset safeguards should be constructed to withstand the inevitable consequences of ‘category five hurricanes, cyclones, or Richter scale 5+ earthquakes’ or even the occasional Tsunami. The reason is, there are an abundance of global players working 24/7 in this arena.

Legacy free players…

A proper starting point for achieving today’s much warranted level of asset (value, competitive advantage) sustainability, should include (a.) measures to monitor of asset value, materiality, and risk, and (b.) being alert to anecdotal reports that provide important glimpses into economic – cyber espionage techniques and methodologies, and (c.) knowing who the global players are, particularly the origins of the increasing number of ‘legacy free players’ (Thomas Friedman, ‘The Flat World). My definition of ‘legacy free players’ is quite similar to that of Mr. Friedman’s, that is, they may not be necessarily aligned with or employees of nation state sponsors which are frequently technology dependant and sophisticated, or otherwise highly organized units/cadres of economic spies. Instead, ‘legacy free players’ may be independent operators or groups of individuals whose country of origin, and consequently the cultural perspective about honoring the intangible properties of others is in the early stages or relative infancy insofar respecting the concept of personal, let alone intellectual property rights. In other words, there is an absence of legal, social, or cultural legacy to others’ properties of the mind, i.e., intellectual – human capital..

No over dramatizations here…

Readers’ who elect to construe these characterizations as over dramatizations, would not only be mistaken, but it likely suggests they’re simply not current about the risks and threats posed by increasingly (ultra) sophisticated and organized groups of state sponsored, independent actors, and a host of legacy free global (economic – competitive advantage) adversaries, each functioning quite effectively, efficiently, and profitably in the increasingly predatorial and winner–take-all global business transaction environments. It’s worthy of re-emphasizing that integral to assessing the value of a successfully targeted and acquired company asset resides in fully recognizing that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, future wealth creation, and overall sustainability lie in – evolve directly from intangible assets, many of which are outgrowths of internally developed intellectual, structural, and relationship capital which collectively then serve as foundations for intellectual properties, i.e., patents in particular. So, in my view, any loss assessment that does not include this economic fact in its equation, will not convey the full extent/consequence of economic – cyber espionage. In far too many instances, however, I observe information asset protection practitioners and programs that appear to have been constructed using quite conventional ‘infosec’ frameworks…

  • designed to address subjective, anecdotal, or one-off types of (information asset) threats, risks, or events, or are
  • based on pre-conceived and outmoded notions of who the adversaries’ are, their origins, motives, and methods, or
  • that are country (adversary) specific based on presumptions of who the beneficiaries are.

So, in many instances, what such initiatives don’t do, or, do poorly, is to focus intangible asset safeguard resources on specific and/or bundles of ‘contributory value’ intangible assets which…

  • elevate company or project value by delivering sources of revenue, competitive advantage, market position, reputation, and
  • serve as ‘building blocks’ for (company) growth, future wealth creation, and sustainability.

So, for the remainder of 2014, and for the foreseeable future, intangible assets will, I am confident, be the real targets of global economic – competitive advantage adversaries and economic – cyber espionage.. Why? Because, it’s the intellectual, relationship, and structural capital (know how) adversaries are seeking, not conventional intellectual properties. Companies and their decision makers are doing themselves and their companies a significant and likely irreversible disservice by continuing assuming adversaries are seeking conventional intellectual properties. Instead, it’s the intellectual and structural capital embedded in and serving as a foundation to the IP that’s being sought and that requires different mindsets and expertise to assign value.

I welcome your comments at m.moberly@kpstrat.com or 314-440-3593 (St. Louis)