Michael D. Moberly July 21, 2014 ‘A blog where attention span really matters’!
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…
- 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.
- There is frequent and awkward ineptness demonstrated by company some c-suites when they endeavor to mitigate reputation risks which have become public.
- 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.
- 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.
- 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.
- 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.
- 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.
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.
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.
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 firstname.lastname@example.org
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 email@example.com.
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 firstname.lastname@example.org
Michael D. Moberly July 8, 2014 Pre-order a new book by Mike Moberly!
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…
- 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.
- Intangible assets are playing critical – essential roles in most company’s value, profitability, growth potential, competitive advantages, and long term sustainability.
- 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…
- treating the management of intangible assets as business decisions and fiduciary responsibilities, not solely as legal or accounting processes.
- 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.
- fostering a ‘company culture’ that recognizes and supports the contributory and collaborative value of intangibles…
- making companies more organizationally resilient to the materialization of risks, by including intangible assets in continuity and contingency planning.
- 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.
- elevating company reputation, image, and goodwill among stakeholders and gain the attention of prospective consumers beyond its traditional market space.
- 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.
- 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, email@example.com.
Pre-order a new book, ‘Safeguarding Intangible Assets’ by Mike Moberly!
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…
- 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?
- 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’.
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 firstname.lastname@example.org or 314-440-3593 (St. Louis)
Michael D. Moberly June 26, 2014 ‘A long form blog where attention span really matters’.
So, why are these intangible assets being targeted by economic – competitive advantage adversaries…?
Respectfully, let me re-draw readers’ attention to the various examples of intangible assets previously described (identified) and the fact that intellectual property are merely one type/category of intangible asset, albeit a prominent one.
So, why are intangible assets being targeted by global economic – competitive advantage adversaries?There are, in my judgment, multiple reasons why, which I’m confident experienced reader practitioners will find agreement, i.e.,
- to appropriate the words of the 1970’s bank robber Willie Sutton, it’s because intangible assets are where 80+% of most company’s value, competitive advantages, and profitability originate and are ‘deposited’.
- most intangible assets, once stolen, compromised, or infringed, can be used – applied in competing products and/or services as well as having the potential for being converted for use in unrelated products or services, in other words, they are often readily monetizable or comercializable, in the right hands.
- there is a consistent and often global demand for one or multiple intangible assets like those described above, a demand which is relatively barrier free insofar as having numerous market entry points globally where intangible assets can be sold, bartered, exchanged, or melded into competing or other products or services, etc.
Role of corporate security…
A professional acquaintance, Mr. Greg Acton, served as Director of Global Security for a major telecom – consumer electronics’ company in California. The company had invested heavily in R&D over a period of 12 to 18 months on new and perhaps ‘game changing’ technologies to be incorporated into its long time staple, globally branded, and primary consumer product.
Upon embarking on this initiative, the company’s stock price was experiencing a consistent downward spiral, which, in many respects was due largely to numerous new and well financed competitors entering the market space coupled with the sense that this company’s product had not kept pace with newer, multi-functional technologies which consumers were readily embracing in other brands.
Without over dramatizing the circumstance, there was indeed a demoralizing sense of product – technology stagnation regarding the company’s staple product and the overall brand.
As is prudent with many electronics – telecom firms, this company had timed its R&D and product launch to coincide with the annual consumer electronics show in Las Vegas. This company, as many before it, believed a key to the success of a product’s launch, financially as well as regaining consumer confidence in its product, and by extension its brand, lie in part, in retaining a consumer teasing level of secrecy shrouded around its new product, which as readers recognize is quite common in this sector and perhaps perfected by Steve Jobs and Apple.
The tactical and strategic intent of this shroud of secrecy would be to secure domination, albeit perhaps fleeting, of the electronics show’s dynamics, coupled with the immediate commencement of a strong marketing blitz designed to breathe new and sustainable life into the company, its brand, and its products.
In this, as in many other similar circumstances, this company’s, Mr. Acton played a very significant role insofar as assuming substantial responsibilities for ensuring the company’s new product, it’s planning, technology supply chain, and prototypes literally remained devoid of any leakage throughout the almost two years of R&D and testing phases up to the precisely scheduled time and date of its well hyped public offering at the consumer electronics show.
In this instance, Mr. Acton, clearly a seasoned and well respected ‘silicon valley’ veteran understood the significance of his responsibilities to this product launch along with the extraordinary value of the numerous and contributing intangible assets, all of which would be in play, particularly, the company’s reputation, image, and consumer goodwill.
As I’m confident readers understand, the intangibles which Mr. Acton recognized and effectively oversaw and safeguarded throughout this 20+ month product development and testing period were conservatively worth multiple millions of dollars in potential sales to the company in addition to rejuvenating its reputation, market share, as well as favorably affecting the value of the company as a whole.
Had there been inadvertent or purposeful public leakage by an economic and/or competitive advantage adversary (internally, externally) about this product and its launch in advance of the consumer electronics show, it would have, among other things, allowed ample time for the ever present array of global technology critics and competing firms to mount consumer directed offensives against the product intended to minimize and/or undermine its improvements and consumer ‘likeability’, etc.
Much to the credit of Mr. Acton, there were absolutely no known advance (adverse) leakages. What’s more, the stock price of this publicly traded company shot up 312% by the close of business on the day of its highly public launch at the consumer electronics show. Another metric worth noting is that in addition to the aforementioned stock price gain, the company’s vice president of marketing informed Mr. Acton that the company had spent $1M on marketing the lead up and public announcement. In return for sustaining the product proprietary status, the company received an estimated fifty times that amount in product advertising, at no cost to the company, through the various and globally connected media portals in place at the consumer electronics show.
So what was the contributory value of this CSO’s commitment to ‘no leakage’…?
Perhaps first, and foremost, it laid the essential foundations for the company to fully capitalize and otherwise exploit its presence at the consumer electronics show which very rapidly converted to stock analysts and stock market share price favorables.
So, is this sufficient rationale for not only inviting, but ensuring CSO’s and other relevant security personnel are comfortably seated, with a voice, at the proverbial R&D table from the outset of an initiative, I believe it is!
CSO’s, in a new role as intangible asset strategist and risk specialist, working collaboratively and in unison with a company’s internal and/or external R&D unit and relevant and various supply chains, are uniquely positioned to recognize and differentiate the more valuable and competitive advantage driving elements of promising research. One way is by virtue of their proximity to and operational familiarity with the global expansion of economic and competitive advantage adversaries which are consistently motivated by nation state mandates or monetary remuneration to acquire other entities’ valuable intangible assets.
But what makes a CSO’s voice heard and duly considered…?
Again, first and probably foremost, are CSO’s receptivity to recognizing the relevance and importance of elevating their existing skill sets to acquiring an operational familiarity with their company’s intangible assets. In other words, acquire a level of operational proficiency with intangibles that provides CSO’s with the professional comfort associated with becoming an intangible asset strategist and risk specialist!
Straightforwardly, that would entail recognizing the strategic importance and necessity to develop and respectfully execute ‘under the radar’ practices and processes, all of which are designed to sustain control, use, ownership and monitor the value, materiality, and risk to select intangible assets, distinguished as having the most promising contributory value to a specific or multiple (on-going) proprietary (R&D) initiatives and/or projects along with the array of business transactions a company may regularly engage in which intangible are routinely in play.
This would include conducting (intangible asset) due diligence for such transactions as a merger, acquisition, strategic alliance, or other business activities in which intangible assets are routinely in play and integral to the favorable outcome of a deal.
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or email@example.com
Michael D. Moberly June 25, 2014 ‘A long form blog where attention span really matters’.
Mis-portraying what’s really being targeted…
Having been actively engaged in the intangibles’ arena since the early 1990’s, collectively as an academic investigative researcher and practitioner, I am hard pressed to understand why the administration, cabinet secretaries, and even corporate c-suites, etc., consistently portray the target(s) of global economic and/or cyber espionage as being some form of intellectual property?
My suspicions are that these mis-portrayals, while purposeful and two pronged, that is (a.) they are intended to create single phrase simplicity to elevate public awareness about the adverse affects of the losses to particular business sectors and labor force, and (b.) officials sense the public is unable to grasp the intricacies and distinctions of stolen/misappropriate information as constituting valuable and competitive advantage delivering assets in intangible form. So the officials elect to portray economic and cyber espionage and data/information mining with presumably the more understandable and common term of intellectual property.
Distinctions without a difference…?
I urge readers not to dismiss this perspective as being akin to a distinction without a difference. It is indeed much more. That is to say, once again, the intellectual, structural, and relationship capital (intangible assets) which comprise the dominant sources of contributory value, attractivity, and potential sources of revenue to conventional (commercialized) intellectual properties are the real targets of economic – cyber espionage and data/information mining. The reason is because it those know how-based assets are precisely what the economic – competitive advantage adversaries’ globally need and want, and therefore will aggressively seek because being successful in acquiring those assets is the quickest route to global competitiveness and profitability.
Issued patents provide legal standing…
Yes, it is quite true an issued patent provides holders with (legal) standing to bring criminal and/or civil action against alleged infringers and/or misappropriators. And yes, one requisite for a countries’ WTO membership is enacting a comprehensive (legal, enforcement) intellectual property regime.
And, while I hold great respect for those who receive an issued patent particularly for what they have very deservedly achieved which warrants framing and hung on an office wall of prominence or above a home mantel for all to see and dutifully admire. But please, avoid assuming that an issued patent today constitutes an absolute and stand alone deterrent to would be infringers and thus the underlying – contributory know how is magically safeguarded for the patents’ duration or its life-value-functionality cycle, whichever comes first. The latter of course, is sometimes a business decision pure and simple, particularly in today’s globally aggressive, predatorial, and winner-take-all market place.
So respectfully, any assumption that the issuance of a patent serves, in any way, as a special – specific deterrent to economic – competitive advantage adversaries or even insiders inclined to misappropriate the contributory value or the underlying know how delivered by intangible assets, represent not just wishful thinking but also, quite naïve, misguided, and certainly out-of-date thinking.
Please consider this…
Why would an economic – competitive advantage adversary or data/information miner, and/or information broker engage in the risk of acquiring (stealing) the contents of a patent, i.e., its structural capital, when issued patents (essentially the same information) will be published and available online and posted in the public domain? The answer to that question lies in my view, in pure economic competitiveness which translates as getting and striving to stay ahead of any and all competitors.
Why am I purposefully belaboring this point and making these distinctions? It’s because after many years of investigatory business research along the entire spectrum of economic espionage, this issue goes directly to the heart of the all important question, that is, how and which knowledge-based assets originating with a company most warrant safeguarding? The answer in my view is quite clear, it is those intellectual, structural, and relationship capital assets that deliver the greatest contributory value underlying conventional intellectual properties and measurably delivering value, revenue, and competitive advantages.
But, perhaps most critical and troublesome to the holder – originator of those presumably valuable and competitive advantage driving ‘intangible’ assets, is the reality that that the knowhow, once gone, will likely be gone forever, because perhaps even more problematic is another business reality, which is, knowledge-based (intangible) assets are often…quickly convertible for adaptation and exploitation however and whenever the ultimate recipient or beneficiary (adversary) wishes!
So, let us assume, for discussion sake, the targets of preference for global economic and competitive advantage adversaries, data mining operations and information brokers really are some form, type, or category of intangible asset which can provide – fill some immediate or strategic need and/or serve as a key piece to a previously unsolvable puzzle, which in many instances they certainly are.
Respectfully then, I encourage readers to not dismiss this perspective as being irrelevant to any company’s circumstance. Instead, try ‘drilling down’ a bit, and examine each broad (intangible) asset category through a business competitive, value, and revenue lens, be it a company, university, or independent R&D environment. One outcome of this exercise is to recognize what type of safeguards are necessary to fully preserve each assets’ value and potential monetization – commercialization properties for the duration of the assets’ respective life, contributory value, and functionality cycle, because that’s precisely what matters most today and that’s what global adversaries are seeking to disrupt to their benefit.
Examples of intangible assets…
The following are examples of intangible assets which I have adapted from two well respected and current sources, (a.) ‘The Intangible Asset Handbook: Maximizing Value From Intangible Assets’. Weston Anson. 2007. American Bar Association, and (b.) ‘Untangling Intangibles’ Tamara Plakalo February, 2006. Managing Information Strategies. Australia.
1. Technology – software
- Internally developed (proprietary) software and software copyrights, automated databases, source code, enterprise solutions and custom applications…
- Lyrics, jingles (music), promotional characters and devices, photographs and video, newsletters, advertising/marketing concepts, results of focus groups…
- Industrial (new plant, equipment) designs, engineering drawings (blueprints) and technical knowhow…
4. Customers – clients
- Communication-mailing lists, relationships, customer data bases and retrieval systems, special distribution channels, 1-800 numbers, relationships
5. Competitor research
- Actionable business intelligence, i.e., plans, intentions, capabilities…
6. Real estate
- Zoning – construction permits, air, water, and mineral drilling-exploitation rights, right-of-way, easements, and building (expansion) plans/rights…location visual scenery – proximity to
7. Personnel training
- Proprietary manuals, operations processes and/or procedure. Internet
- Domain names, website design, B2B and e-commerce capabilities, web links, customer/client accessibility and use
8. Corporate identity, reputation, image, goodwill
- Names, trademarks, logos
9. Products and services
- Trade dress, i.e., product shapes, color schemes, and packaging design/graphics…
- Open purchase orders, order and/or product back log,
10. Contracts – agreements
- Any contract that has a definable life and some form of exclusivity, e.g., supply, media, performance and pricing agreements, license and/or royalty agreements, advertising, construction, management, and/or service contracts, leases, operating and broadcast rights and licenses, route utilization, franchise agreements, subscription rights, futures contracts, co-branding agreements, endorsements, spokesperson contracts, venue naming rights…
11. Intellectual property
- Patents, copyrights, trademarks, trade secrets, trade dress, trade name, service marks, mastheads, application, logo design
- Prior art search, flanker patents; patent applications, foreign patents
- Reprints, use/performance rights
- Product research studies, formulas, process and assembly data
- Regulatory agency approval process-status
- Cable rights and/or transmission rights, FCC licenses and/or certification, bandwidth
- Wage rates, union contracts, non-compete and non-disclosure agreements (if transferable)…
15. Structural capital
- The structures and processes employees develop and deploy to increase productivity and performance (business process/method patents)
16. Human capital
- Sum total of employees’ specialties, skills, attitudes, abilities, competencies
- Technical ‘know how’ documentation, i.e., lab notebooks, manuals, formulas, processes, and recipes (food, chemical formulas)
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or firstname.lastname@example.org
Michael D. Moberly June 24, 2014 ‘A long form blog where attention span really matters’.
The knowledge – intangible asset era… Growing numbers of companies and organizations are seeing steadily rising percentages of their value, sources of revenue, and ‘building blocks’ for profitability and sustainability evolve directly from intangible assets. To date, that percentage consistently hovers around 80+%. As most realize, there are numerous consequences to this global economic paradigm shift. One is today, companies/organizations are largely driven by the development, application, and exploitation of their knowledge or know how, often in the form of intellectual, structural, and relationship capital which have surpassed tangible – physical assets, i.e., buildings, equipment, inventory, etc., as companies’ primary sources of value and revenue commencing in the early 1980’s. I was fortunate enough to become one of numerous early thought leaders actively engaged in the intangible asset arena, initially as an investigative academic researcher and author, and now as a practitioner and author.
Still numerous naysayers and reluctants’ among company management teams… Unfortunately, there remain numerous naysayers to the whole ‘intangible asset thing’. The naysayer positions are routinely driven by standards adopted long ago by a professional discipline oversight entity which manifests more as ‘turf protection’ ideologies which makes it uniquely challenging to rationally refute. However odd it may seem, analogously speaking, there are commonalities between today’s interest in intangible assets to that of ‘global warming’. In the latter, despite overwhelming scientific and visual evidence of its existence and consequences, there remain sufficient numbers of doubters and deniers to spread dispiriting messages to business decision makers globally. Realistically, based on my own experiences, those business leaders and the supporting service disciplines, i.e., accounting and law specifically who are most consistent in expressing adverse views about the management, utilization, and exploitation of intangible assets, I don’t believe are really denying the existence of intangible assets, aside from conventional intellectual properties, are in most instances, grappling with the challenges associated with their valuation and how or whether they are to be reported on company financial statements and balance sheets. And, to be sure, their perspectives on intangible asset valuation are as varied as the professional disciplines from which they originate. True, numerous company management teams and boards, as a whole, remain attitudinally hesitant (resistant) to making the necessary transition to fully engage their intangible (non-physical) assets.
No global precedent… Admittedly, there is no precedent for what’s occurring today, i.e., international business and country economies are overwhelmingly dominated, economically and competitively, by intangible assets which require consistent stewardship, oversight, management, and monitoring of asset value and competitive advantage fluctuations and risks.
Risk… There are various types of acts, behaviors, and/or events, many of which are asymmetric in their application, create fertile ground for risks and threats to materialize and cause a company’s (intangible) assets to decline in value or as sources of revenue or become competitively undermined which involves company reputation and goodwill. True, in many instances such adversities are attributable to the surreptitious but purposeful activities of global economic and competitive advantage adversaries. In large part, because increasingly higher percentages of company value and revenue evolve from intangible assets, economic – cyber espionage has emerged in ways that is more calculating and stealthy, and can potentially cause far more immediate and irreversible damage-harm (economically, competitively) to a company than their tangible – physical asset driven predecessors.
It should be to no one’s surprise then, that our economic and competitive advantage adversaries are really targeting intangible assets… Willie Sutton, a notorious bank robber during the 1970’s is alleged to have responded to the question ‘why do you rob banks’?, saying, ‘because that’s where the money is’! Similarly, I urge companies, particularly those with intensive portfolio’s of valuable proprietary information, trade secrets, and other forms of intangible assets to recognize, as they engage in business transactions, strategic alliances, and technology transfers, etc., it is all but certain those intangibles assets will be in play. Experience rather clearly suggests that when certain, particularly proprietary and lucrative intangible assets are in play, they will targeted by adversaries. Realistic examples of this are university-based research departments and corporate R&D units, which in most instances are repositories of intangible assets, i.e., specific types of ‘know how’ usually in the form of intellectual and structural capital which global adversaries, whomever they may be on a given day or future time span, want and need and are quite willing to assume risk to achieve their acquisition using various methodologies and/or tradecraft. So, it should be to no one’s surprise that the most frequently targeted asset for acquisition by adversaries are intangible assets which predominately originates from the growing global array of economic – cyber espionage players, be they nation state sponsored or individual (information asset) brokers.
Admittedly, evidence to support my contention are largely anecdotal, but it stands to reason, not unlike Willie Sutton’s remark ‘I rob banks because that’s where the money is’ that similarly, the economic fact that 80+% of most companies value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability globally lie in – evolve directly from intangible assets, they indeed are adversaries’ targets because embedded within a company’s intangibles is precisely where the near (tactical) and long term (strategic) economic and competitive advantages actually lie. Thus, it is the content of select intangibles, i.e., the intellectual and structural capital and know how are precisely what’s being sought (targeted). I can think of few better ways to portray this more succinctly than to refer to a conversation I had several years ago with a senior government official representing a county’s interior ministry, that was in genuine need of agricultural – crop yield know how to render heretofore very low crop yield land into higher yield crop producing land. This gentleman, in a very matter of fact manner said to me, broadly referring to U.S. superiority in agricultural science, ‘you have something I need and want to properly feed my people now, and I shall endeavor to obtain it through whatever means are at my disposal’.
My interpretation of this official’s statement left no doubt that (a.) he understood the quickest and least expensive path to achieve this utilitarian objective was not by her government taking time to gear up and fund the necessary R&D internally, or (b.) engage in a covenant filled and potentially risky and intrusive strategic alliance with a private corporation based outside her country, both of which would be a long term, i.e., 2-3 years out, undertakings before progress, of a sufficient scale, may be realized. Instead, this individual, and many others sharing similar views were intent on acquiring the necessary know how by utilizing other means.
I respectfully ask readers to not interpret this specific example, as real as it is, as being broadly representative of the global economic – cyber espionage arena other than recognizing this critical reality of the knowledge – intangible asset based global economies, i.e., ‘you have something I want and need and I shall attempt to appropriate it or copy it without incurring the time and expense of independent origination’. Again, it is my contention that seldom are economic – competitive advantage adversaries actually seeking/stealing conventional intellectual properties, i.e., patents particularly. Instead, it’s the intellectual, structural, and relationship capital (intangible assets) embedded in and otherwise underlying the valuable proprietary information and trade secrets which are the real targets. In other words, it is simply a misnomer to state intellectual properties are being targeted, stolen, or otherwise misappropriated.