Effectively Addressing Insider Threat To Proprietary Information, A Strategy!
August 28th, 2016. Published under Insider Theft of IP and Intangible Assets. No Comments.
Michael D. Moberly August 28, 2016 ‘A blog where intangible assets and IP meet business’!
Among information asset protection/safeguard specialists, there is an anecdotally rooted adage referred to as the ’20-60-20 rule’ which caught my attention 25+ years ago and still carries a timely relevance along with absolute (fiduciary) obligation to address it as effectively as possible.
Admittedly, there is nothing particularly scientific or legally defensible about the 20-60-20 rule, other than to note it evolved from experienced mixtures of anecdotal guesstimates that lead to plausible characterization of the persistent challenges posed by ‘insiders’ in a continuum fashion…
Group 1 – 20% of the people we work with…are inherently honest and trustworthy and possess consistently high levels of (personal, professional) integrity. It’s unlikely these individuals would be receptive to any circumstance that could influence them to engage in unethical or dishonest behaviors, acts, or violations of a company’s security or information asset safeguard policies or practices.
Research administrators, TTO’s, and security practitioners would have little or no concern regarding these individuals engaging in misappropriation – theft of proprietary information, trade secrets, or monetized elements of intellectual property (IP) and other forms of intangible assets (IA’s).
Group 2 – 20% of the people we work with…function at the opposite end of the honesty – integrity continuum. For these individual’s, their thin-shallow veneer of honesty-integrity is very permeable to reveal inherent dishonesty and/or unethical persona and little sense of personal loyalty to their employer or a project in terms of information assets. Even more so perhaps with respect to complying with company policies or government laws/regulations related to obligations to safeguard proprietary information and trade secrets embedded in valuable IP and other forms of intangible assets (IA’s).
Too, individuals functioning-operating at the adverse end of the honesty-integrity continuum will like be more receptive to, if not already possess propensities – proclivities when certain opportunities avail or influencers are present, to engage in unethical – illegal acts, i.e., theft or compromise of valuable, mission critical, and competitive advantage information (intangible) assets.
Group 3 – then there’s the 60% of the people we work with…who are essentially ’in the middle’, that is, they do not (overtly) demonstrate any particular receptivity or proclivity to engage in dishonest, unethical, or illegal acts or behaviors that would purposefully put their employer’s proprietary information, trade secrets, or IP at risk or in jeopardy.
There is a frustrating nuance to individuals (subjectively) designated to lie in Group 3 however, which is anecdotal evidence suggests individuals functioning at the adverse fringe, i.e., closest to Group 2 on the continuum, recognize and likely acknowledge opportunities, rationales, and persistent overtures from external entities in the form of solicitation-elicitation to misappropriate or publicly leak their employers’ proprietary information assets.
This reality makes the 20-60-20 notion particularly worrisome…to information asset safeguard-protection specialists on many levels. One of which is that individuals may possess proclivities – propensities unknown – undetectable at the time of hire using conventional pre-employment screening and interview processes. In current parlance, they may be unwitting sleeper’s whose adverse proclivities may be awakened and/or influenced at some future point relative to how they interpret-assess…
• their employer’s reactions and sanctions imposed on colleagues who violated company information asset
safeguard practices and policies,’
• the degree, level, and consistency of employer monitoring of proprietary information asset safeguard
policies.
• the presence-persistence of external advances to engage in proprietary information compromise and the
potential lucrative outcomes for doing so.
I attribute one, rather practical, approach to addressing insider challenges to the always forward looking Esther Dyson, when she remarked, ’it’s not about counting the number of copies anymore, rather, it’s about developing relationships with employees and users’ (who have – can access the proprietary – competitive advantage information that necessitates safeguarding).
There is practical reality embedded in Ms. Dyson’s remark, at least in terms of ‘people we work with’ and their propensity – receptivity, at some point in their career, not just their first week of employment, but, after undergoing various ‘snap-shots-in-time’ pre-employment screenings, to engage in adverse acts! Too, there certainly is relevance to the hyper-competitive, aggressive, predatorial, and winner-take-all global business transaction environment. In that regard,
While most of my operational familiarity with ‘insiders’ is rooted in personal experiences, I respectfully attribute some of my current thinking and approaches for addressing this persistent challenge to the excellent work-research consistently produced by PERSEREC (Personnel Security Research Center, DoD) and Carnegie Mellon’s CERT unit.
Company Culture Due Diligence As Prelude To Finalizing Business Transaction
August 24th, 2016. Published under Due Diligence and Risk Assessments, Intangible asset focused company culture., Mergers and Acquisitions. No Comments.
Michael D. Moberly August 24, 2016 ‘A blog intersecting intangible assets and business’.
A company initiating, or even contemplating, a M&A (merger or acquisition) would be well served today if a ‘company culture assessment’ was included in their due diligence strategy!
The primary reason of course, as consistently conveyed at this blog, is the economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in or directly evolve from IA’s (intangible assets), which company culture is a prime example. It’s correct to assume then, that a substantial factor in the rationale of the initiator evolves around acquiring and then merging specific IA’s which the target firm presumably has already developed, and exist in some specialized form of intellectual, structural, and/or relationship capital.
From an operational perspective, intellectual and structural capital constitutes the knowhow and processes which underlie – are embedded in the target company’s means for generating revenue, competitive advantages, and creating efficiencies, etc. So, in M&A transactions, acquiring full and unimpeded control and use of these contributory IA’s represents the critical step toward realizing-maximizing the projected (anticipated, desired) outcomes.
To the uninitiated, a target company’s operational culture may be overlooked, dismissed, or even deemed irrelevant to a transactions’ projected outcome. It’s unwise for due diligence teams to assume, that should a proposed M&A transaction or strategic alliance, etc., be executed, the relevant-targeted IA’s will be wholly transferable or remain fully operable. Hence the prudence for transaction – due diligent management teams to assess – determine whether the IA’s being sought can remain intact. In short, can embedded IA’s originating-developed in one company be transferrable and operationally replicable in another company.
More specifically, transaction management – due diligence teams would be well advised to objectively study-assess the targeted company’s operating culture in personnel and temperament contexts. An objective is to determine if those (company) culture factors can readily (and rapidly) integrate and bond with the initiating company, its employees, and stakeholders? Grant McCracken, a well-known and experienced personality in this arena suggests company cultures are internal versions of a company’s brand. That’s largely attributable to a broader recognition of the reality that company culture generally encompasses its mission, vision, and values.
Understanding in advance, how company culture can impact a business, e.g., “culture is a company’s last mile” (McCracken). If believed, and I do, it makes a very compelling case that a company’s culture is marketing’s proverbial – millennial ‘silver bullet’. Certainly, no disagreement here!
But, before embarking on a company culture assessment (Margaret Mehta) the target company should be distinguished on several cultural dimensions. In a perfect world, there should be no resistance to company culture assessment as an integral component to most any transaction’s due diligence. The key is that due diligence teams are operationally familiar with the characteristics and features of company’s culture as unique convergence of IA’s, i.e., intellectual, structural, and relationship capital.
The deep and necessary insight that a company culture assessment (due diligence) brings to transaction management and oversight, in essence, prescribes a strategic path how (culture) performance will be replicated. But, transaction management (due diligence) teams should also recognize that culture performance is also a measurement mechanism that drives employee behavior.
So, if there are particular aspects of a target company’s culture that appear undesirable, non-transferrable, or un-yielding to adaptation-replication and therefore impede a transactions projected milestones for success, this should be clarified. Obviously, I am a strong advocate of conducting company culture due diligence for most any business transaction while recognizing standing alone, culture alignment may not be the singular guarantee to a successful and profitable transaction outcome.
.This post was inspired and adapted by Michael D. Moberly from the fine work authored by Monica Mehta in a February 2009 piece in Profit and Profit Online.
Lodging/Hospitality Sector Measuring Security In Intangible Asset Outcomes
August 19th, 2016. Published under Intangible Asset Value, Measuring Performance. No Comments.
Michael D. Moberly August 19, 2016 ‘A blog intersecting intangible assets and business.’
Through my lens, it is quite clear, if security initiatives – systems are not designed to safeguard or advance an environment’s key – relevant IA’s (intangible assets), those with the fiduciary responsibility for their purchase, deployment, and support, are obliged to recognize substantial value – competitive advantage will go unnoticed.
An often overlooked, under-appreciated, and perhaps even wholly unrecognized, but, never-the-less, essential aspect to marketing, selling, and assessing outcomes of security (loss prevention, asset protection, monitoring) products and/or systems, is recognizing the economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible (non-physical) assets, i.e., know how, relationship, and structural capital, brand, and reputation, etc., not tangible (physical) assets, i.e., property, equipment, inventory, buildings, etc.
When security related products are effectively deployed and integrated into an environment and aligned with supportive policies, practices, and organizational – business unit culture, their contributory value and competitive advantage to an enterprise can be substantial, even more so when the party recognizes what and how to measure the deliverables, i.e. effects on users and outcomes. For example, when applied…
• to the lodging – hospitality sector, security products/systems can measurably enhance existing and/or produce new IA’s (intangible assets) in the form of users’ sense – feeling of being (more) safe, secure, and productive, which in turn favorably affects the hotel’s (company) reputation, image, and guest goodwill, etc., by
Perhaps this is self-evident. On the one hand, my experience clearly notes this example, among countless others…
• serves as an important starting point for framing promotional pitches related to security products because most buyers seek – desire these outcomes, i.e., represent what’s needed – necessary, however…
• are unfamiliar (un-schooled) in the measuring – assessing the contributory values and/or functionality of security products, systems, or services and mitigating risks with their own sector – environment.
It is essential, in my view, to incorporate the correct descriptor in ‘the pitch’, i.e.,
• elevate awareness of the assortment of IA’s that are commonly embedded in every environment and industry sector.
• ensure the functionality – deliverables of security products are distinguished relative to the environment they are deployed and how they enhance relevant IA’s.
For example, when users of a lodging/hospitality environment sense that environment respects their patronage or productivity by introducing sector specific security measures to make it as safe, secure, productive, and efficient as possible, they will be inclined to return that respect by
• being a repeat guest, as well as,
• elevate employee retention, loyalty, and productivity.
Security product developers, producers, and vendors would be well served by adapting and incorporating variants of this language, sector specific, of course, in their marketing/promotional materials and/or sales pitches. Again, the rationale for incorporating this language is that today’s business environment is global, increasingly competitive, predatorial, and aggressive, and dominated by knowledge-intangible asset intensive firms regardless of sector.
Professionally then, it seems obligatory for security products, i.e., how they are marketed, promoted, and ‘pitched’ reflect that irreversible and paradigm shifting economic fact – business-consumer reality, particularly as management teams, c-suites, and boards become more attuned to IA’s in fiduciary contexts and as fiduciary responsibilities.
Lodging sector management teams should be engaging their environment’s IA’s as integral to enterprise risk management practices. Real and sustainable value and competitive advantages can be embedded with lodging sector guests by training personnel to identify, unravel, and sustain control, use, ownership, and monitor (asset) value, materiality, and risks. This can be achieved by respectfully guiding them to recognize the IA’s relevance to a guests’ (lodging) experience.
On the other hand, most conventional security product presentations-pitches over dramatize the need for mitigating fear, uncertainty, and doubt (FUD) which a percentage of lodging guests will be inclined to dismiss as a matter of personal practice, the outcomes will likely be less than fully favorable.
However, when security product (system, service) vendors replace the conventional with a strong narrative (methodology) rooted in ‘forward looking’ focus of safeguarding the value and sources of revenue present in a prospective client’s lodging environment, i.e., their IA’s, the probability of experiencing a series of consistent successes increases substantially.
Sewing Intangibles of Fear, Uncertainty, and Doubt
August 8th, 2016. Published under Communicating Risk, Intangible asset strategy. No Comments.
Michael D. Moberly August 8, 2016 ‘A blog intersecting intangible assets and business’!
As noted in previous posts, fear, uncertainty, and doubt (FUD) are intangible assets (or liabilities) depending on who the recipient(s) may be, the content-context of what’s being conveyed, the motive – intent of the individual, movement, or organization conveying FUD, and how may influence and/or manifest as actions – reactions from/by those being targeted and receptive to the message.
It’s important to recognize, when an individual(s) achieves or assumes some type of leadership – spokesperson role that includes having a platform to exploit – intensify (current, future) fears, uncertainties, and doubts beyond the realities can influence – motivate the receptive to supportively band together.
A seemingly frequent outcome of purveyors of FUD is the listeners (observers, recipients, targets) to such pronouncements will acquire a sense of connection to those proselytizing. And, at some point will become regressively disillusioned to the point of wholly disregarding-dismissing alternative facts, reason, context, and reality in favor of the broad, over dramatized generalizations and half-truths being espoused.
One can routinely observe FUD principles or carefully contrived variations exploitatively woven into media advertisements as underliers to introducing and selling a large percentage of (new) products and services in ways that appeal to – accommodate – address broad numbers of prospective buyer’s – client’s circumstances, needs, aspirations, or frustrations with the status quo. Numerous researchers attribute such receptivity to the notion that fear, uncertainty, and doubt are grammatically and visually easy to convey.
Too, in many contexts, well scripted presentations (advertisements) that incorporate timely, relevant, and specific elements of FUD can influence receptive parties to assume there are relatively quick and simple (single) fixes. In other words, if x is purchased and deployed (generalization) one’s problems and/or frustrations, at least how they are perceived, will be substantially reduced, if not go away altogether. Of course, that seldom happens in full.
Fear, Uncertainty, and Doubt Timeless Intangibles
August 4th, 2016. Published under Intangible asset training for management teams., Professional service firms.. No Comments.
Michael D. Moberly August 4, 2016 ‘A blog intersecting and navigating intangible assets for profitable business’!
Fear, uncertainty, and doubt (FUD) are intangible assets (or liabilities) depending on who the recipient(s) may be, what the motive – intent of the individual, movement, or organization utilizing FUD is, and how FUD influences people to act – react.
Several years ago, I was encouraged to take a meeting with a high end marketing firm regarding my consultancy. The firm’s CEO, in her opening remarks, adamantly expressed the key to effective marketing lie in generating FUD (fear, uncertainty, and doubt) among the businesses and clients I sought to engage. Unmistakably, her words translated as crafting and scripting marketing messages…
• to dramatize a consistent presence of risk, specific to prospective clients’ IA’s (intangible assets) and,
• if a company and/or its management team chose not to utilize my services they could expect to incur various
adverse economic – competitive advantage consequences in the near term.
Another obvious underlier to this marketing firm’s mantra is that company management teams, c-suites, boards, and stakeholders are seldom receptive – motivated to change, particularly during periods when conventional status quo markers provide satisfaction unless – until elements of imminent FUD can be articulately infused to ‘kick start’ relevant conversations in c-suites and boardrooms about maximizing value company’s IA’s. Should I choose to do otherwise, she emphatically said, my company would fail and she would be very reluctant to accept me as a client.
The marketing materials – pitches I had developed to date focused on two themes, i.e., respect, and uncertainty. By this I mean, the demeanor and language integrated throughout my marketing materials and pitch endeavored to be respectful to each party I would engage, that is, respecting their experience, status, and the possibility they may already hold perspectives – operational familiarity with IA’s which may or may not coincide with my own.
Similarly, during conversations with prospective clients, if I sensed uncertainty about what IA’s are, what they’re not, how to develop, position, and monetize them for their value and competitive advantages, etc., I would mitigate any uncertainties by identifying, unraveling, and applying IA’s held within their company as examples. I would do so in forward looking – thinking contexts for management teams to consider and draw attention to the economic fact their company’s value, competitiveness, wealth creation, and sustainability now resided in non-physical IA’s, not physical tangible assets.
My marketing materials and ‘pitches’ center on guiding client companies to achieve near and long term successes merely by learning how to recognize, develop, utilize, mitigate risk, and safeguard IA’s which they own, hold, have developed, or acquired.
The perspectives I hold about marketing my professional services are rooted in – evolve from the assumption that experienced and horizonal thinking companies and their management teams already recognized the economic fact that 80+% of most company’s value, sources of revenue, future wealth creation, competitiveness, and sustainability lie in intangible, not tangible assets. Therefore, there is no need to generate – rely on client companies FUD, instead, focus on how, why, and when company management teams are obliged to identify, distinguish, assess the contributory value, fragility, and sustainability of their IA’s. In other words, my marketing initiatives were not intended to generate dramatized uncertainty, rather to mitigate managerial uncertainties about how to utilize IA’s best.
Purposefully eliciting FUD among target audiences as an absolute prelude to attracting potential clients to engage my firm and purchase the product-services I offer remains a strategy which I am neither professionally nor personally comfortable or committed.
To this day, I harbor no regrets about not accepting this CEO’s FUD dominated marketing strategy. Admittedly however, my consultancy has yet to achieve several key projections. Whether that has any connection to the absence of planting – inserting FUD in marketing materials and pitches I simply don’t know. In my defense, my company emerged from a 20+ year (fulltime) career in academia in which I was recognized for bringing logical, rational, horizonal, and experientially-based explanations to criminology and private security issues to undergraduate and graduate students. At no time did I incorporate content intended to sew elements of FUD. Admittedly, in academia, I was not seeking to sell products and/or services, rather to influence student’s critical thinking that moved beyond convention, i.e., let’s do the same, only more of it, and let it be rationalized through perceptions fueled by fear, uncertainty, and doubt.
Intangible Asset Due Diligence Transaction Pre-Post Monitoring
August 1st, 2016. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits., Sustainability of intangible assets.. No Comments.
Michael D. Moberly August 1, 2016 ‘A blog intersecting intangible assets and business!’
Intangible asset specific due diligence is a necessary, but often overlooked component in consummating business transactions, especially pre and post monitoring.
For management teams, c-suites, boards, and stakeholders, it’s important, more so today than perhaps ever before, to recognize that merely because a deal, transaction, or M&A has been proposed, appears promising and has progressed to its relevant due diligence stage, does not constitute assurance any of the projected-anticipated value, synergies, efficiencies, scalability, and competitive advantages will actually materialize or be sustainable.
The probability that any calculated – anticipated projections related to a business transaction outcome will materialize to benefit its initiator, preferably sooner than later, is increasingly dependent on the sophistication of due diligence management teams to recognize the economic fact that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, future wealth creation, and sustainability reside in – evolve directly from IA’s (intangible assets). To increase the probability that initial projections (to a transaction’s outcome) will materialize as intended, the scope of transaction due diligence must include identifying, unraveling, assessing asset fragility and transferability, mitigating risks, and otherwise safeguarding-preserving the key – contributory IA’s value and competitive advantages.
The key forms which the dominant, most valuable, and competitive advantage driving IA’s exist are intellectual, structural, relationship, and competitive capital and reputation/brand. In most instances, it is these IA’s and their scalability which likely drew attention around which the initial and underlying rationale for imagining and undertaking a particular transaction was framed
True, in many instances, valuable – competitive advantage driving IA’s can be variously fragile and vulnerable to various risks, including value – competitive advantage fluctuation, misappropriation and infringement. For good reason then, the ability to monitor control, use, ownership, and value of key IA’s to the transaction, in both pre and post contexts, will sustainable and lucrative projections be realized. The rationale; more companies today engage in domestic – international trade and business transactions as a matter of routine. Too, for a significant percentage of those transactions, the negotiations are aggressive, competitive, predatorial, and come with winner-take-all outcomes. Under these circumstances, dismissing and/or relegating these business – transaction realities and fiduciary responsibilities about IA’s to the un-initiated, unaware, or unfamiliar when IA’s will inevitably be dynamic contributors to lucrative outcomes of transactions.
In that regard, I have had the privilege, over the years, to engage countless business decision makers and strategists across industry sectors. In private conversation, few, if any of these executive dispute my characterizations and advocacy of IA’s. Assuming these conversations are representative, it would seem prudent then that IA’s would be applied to all relevant aspects of a business transaction process, especially pre-post (transaction) due diligence where sustaining – monitoring control, use, and ownership of IA’s contributory role, value, and competitive advantages are paramount to the outcome.
Intangible Asset Impact Analysis
July 29th, 2016. Published under 'Safeguarding Intangible Assets', Fiduciary Responsibility, Intangible Asset Value, Managing intangible assets. No Comments.
Michael D. Moberly July 28, 2016 ‘A blog that intersects intangible assets with business’!
As I have endeavored to convey since my initial post to this blog in mid-2006; the importance for business decision makers to recognize that, in each transaction they engage, correctly identifying, assessing, and mitigating risk to the IA’s (intangible assets) which play increasingly significant roles insofar as being consistently positioned to achieve the projected and sustainable outcomes!
The reason, steadily rising percentages (80+%) of most transactions’ value, projected sources of revenue, future wealth creation and competitiveness reside in – evolve from IA’s. That’s an objective and replicated economic fact, not business cliché or hyperbole. So, when business transaction management (M&A, due diligence) teams, etc., overlook, or elect to dismiss and relegate relevant IA’s, for whatever reason, i.e., IA’s not routinely reported – integrated in balance sheets or financial statement, it’s tantamount, in my judgment, to ignoring how/where value is created, revenue is generated, and sound strategic planning should originate.
In growing numbers of instances, engaging, identifying, assessing, valuing, and mitigating risks to IA’s most relevant to a transactions’ and/or operations’ projected and presumably lucrative outcome rises to a fiduciary responsibility ala Stone v. Ritter.
For decision makers, the implications are clear; an immediate charge to themselves and their transaction management team is to determine if IA’s are being correctly incorporated – addressed in the various tasks, i.e., due diligence, asset inventory, audit, and valuation, etc. Should decision makers find their transaction teams are doing neither, it’s fair to suggest achieving operational familiarity with business’s IA’s by sector and type of (reason for initiating a) transaction, would be a prudent undertaking and would produce revelatory insights that can be immediately applied to further transaction negotiations, i.e., mitigating risks by ensuring ownership, control, use, and value – competitive advantages of the relevant IA’s will be sustained.
As regular readers of this blog know, there is an abundance of business economic research (NYU’s Stearns School of Business, The Brookings Institute, and key UK universities) that consistently paint convincing and objective portraits about the that if and/or when a merger, acquisition, or other type of transaction ‘goes south’, evidence of impending problems and challenges will surface quite early and will likely stem from one or more intangible assets.
Each parties’ transaction management-oversight team is variously obliged to work collaboratively to reveal, unravel, and assess contributory relevance and value of IA’s. The reason, IA’s routinely and variously embedded and interact on multiple levels within an enterprise. In other words, IA’s (particularly intellectual, relationship, structural, and competitive capital) will very likely apply to multiple business – operational activities, initiatives, and projects. However, IA’s contributory role and value to routine business operations and/or a specific transaction can – will – may fluctuate, sometimes quite rapidly and not always for the better.
A technique I developed to determine and potentially remediate adverse (IA) fluctuations in a timely manner, relative to their dominant contributory role and value in transactions in a timely manner is to ensure an ‘IA transaction impact analysis’ is fully integrated into the (transaction) due diligence process in both pre and post contexts. As information derived from the (transaction impact) analysis is communicated to decision makers, a more definitive portrait of projected outcomes will arise, particularly materialization of risks which can adversely affect one or more of the IA’s in play.
The rationale for incorporating an IA transaction impact analysis for M&A’s and other types of business transactions is to better position decision makers to identify – become aware of risk circumstances – scenarios which, if they materialize, may impair or otherwise adversely affect the transaction via the IA’s in play.
I advocate IA ‘transaction impact analysis’ to focus primarily on what I find to be the three challenging IA’s to sustain – preserve their (projected, assessed) contributory role and value, particularly post-transaction, i.e., intellectual, relationship, and structural capital.
Transaction management team members undertaking – engaging in the ‘impact analysis’ are obliged to possess strong operational familiarity with (IA) risk mitigation and containment, i.e.,
• to recognize the inter-relatedness of IA’s insofar as their contributory role, value, and associated risks.
• how IA’s can become impaired, misappropriated, infringed and vulnerable to risk.
• to assess the probability that particular risks can-will materialize.
• how specific risks can adversely affect projected economics, competitive advantages, and/or synergies of a
transaction.
• to assess the resiliency and sustainability of key IA’s.
Equally important, this ‘transaction impact analysis’ can reveal a range of risk circumstances/scenarios for decision maker consideration while retaining options to proceed with…
• viable plans for risk mitigation, as well as,
• aspects which re-negotiation may be warranted in light of the now known risk(s) and/or asset impairment(s).
The objective remains the same…to facilitate more secure, profitable, and sustainable transactions going forward, not impede them.
Transaction Risk to Intangible Assets
July 26th, 2016. Published under Business Transactions, Due Diligence and Risk Assessments. No Comments.
Michael D. Moberly July 27, 2016 ‘A blog about business and intangible assets’!
By now there should be no question among company management teams that the global business transaction environment is increasingly competitive, aggressive, predatorial, and generally, winner-take-all.
A contributing factor to these circumstances is that growing percentages (80+) of most company’s value, sources of revenue, and ‘building blocks’ for wealth creation and competitive advantage reside in – emanate from intangible (non-physical) assets, not tangible (physical) assets. It would make sense then, due diligence – audit activities that dismiss or omit IA’s (intangible assets) from their purview will not provide decision makers with insightful and essential information. Dismissiveness and prejudiced insight are the foundations of transaction grief, frustration, and disappointment in terms of IA performance.
IA’s will always be in play. So it is, business transactions involve the valuation, buying, selling, development, and commercialization of IA’s. It’s prudent then, for parties to business transactions, i.e., IA buyers primarily, recognize the importance of ‘getting out front’ by acknowledging and mitigating risks that will adversely influence how a transaction will be valued, structured, and ultimately executed.
Business persons who remain unconvinced and trivialize the contributory value and role IA’s play in transaction outcomes are encouraged to consider when risks materialize, i.e., acts of misappropriation, infringement, and/or compromise how long will it take the adversary to integrate those assets into their products and/or services? The answer of course is, a matter of days or weeks, seldom months or years. Again, dismissing these realities all-to-frequently manifest as devaluation of reputation and minimal, if any, gains. To do otherwise, decision makers would need to possess prognosticative psychic powers which I am reluctant to attach much, if any, validity.
Exacerbating these increasingly probable risk events is the rarity that transaction initiator’s due diligence plan-strategy will include IA value and competitive advantage monitoring components designed to alert, stop, or stabilize asset hemorrhaging, or recover compromised assets before substantial, and many times irrevocable asset value, loss, and/or reputation risk materialize.
Transactions in which key IA’s have already been compromised (in one form or another) actually constitute a ‘head start’ for the adversary, i.e., parties or party engaged in the illicit acquisition and use of another’s IA’s. While actual IA losses in these circumstances, i.e., value, competitive advantage, reputation, image, goodwill, structural capital, etc., may appear somewhat subjective, it’s pragmatic, in my view, to measure losses – compromises less in (conventional) dollar value contexts, and more in terms of the speed which such adverse acts occur and their irrevocability. So, is a well-constructed, thorough, and IA-specific due diligence warranted, you bet!
Unfortunately, there remain many IA buyers (business transaction, M&A’s, etc., which I characterize as engaging in ‘permissive neglect’ with respect to identifying, monitoring, and safeguarding about-to-be purchased IA’s. That is, they repeatedly and erroneously assume…
• any economic and/or competitive advantage a competitor or adversary may glean from compromised IA’s will be
short-lived and/or outpaced by the rapidity of changes in consumer and market demands which only the
legitimate (asset) originator will be able to deliver.
• IA’s are (readily) renewable resources.
Respecting the narrowness of (profit) margins today, in any business transaction, management teams, legal counsel, c-suites, and boards alike, would be prudent to re-consider both of the above assumptions.
Transaction Due Diligence and Intangible Assets
July 26th, 2016. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits.. No Comments.
Michael D. Moberly July 26, 2016 ‘A business blog where attention span really matters’!
It is an undisputable economic fact – business reality that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from IA’s (intangible assets)!
It’s prudent to assume then, for every business transaction, initiative, or operation a company and its management team elect to undertake – engage, there will always be IA’s in play. This makes it’s essential for parties to recognize, when contemplating, structuring, and executing a transaction, particularly the due diligence component, that sustaining control, use, and ownership of relevant IA’s, will play increasingly significant roles insofar as valuation, measuring asset performance and outcomes, and defining an exit strategy.
Too, respecting the ease which valuable-competitive IA’s (particularly intellectual, structural, and relationship capital) can be misappropriated, undermined, entangled, lost, or merely walk out the front door, the impulse to consummate a deal in a gratuitously hurried fashion, absent pre and post due diligence focused specifically on IA’s, it becomes probable that some manner-form of IA economic – competitive advantage hemorrhaging will occur. In other words, in today’s aggressive, interwoven, predatorial, and winner-take-all (global) business climate, the IA’s a party believes they are buying – acquiring ownership, may lose various percentages of their contributory value.
Having been actively engaged in safeguarding and mitigating risk to IA’s for many years, my counsel on the issue of IA (specific) due diligence is straightforward. Decision makers responsible for deal structuring have fiduciary responsibilities that include sustaining control, use, ownership, reputation, and monitoring value and materiality of the about-to-be-purchased (acquired) IA’s. The most effective way to mitigate risk to those assets is an effective pre and post due diligence, specific to the relevant IA’s. The key to this due diligence is knowing what IA’s are, how they evolve-develop within a company, and their contributory role and value.
For maximum benefit, the due diligence is best commenced at the point in which the deal/transaction is being contemplated so the locus of the relevant IA’s can be determined and due diligence planned accordingly. Again, it’s worth noting, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from IA’s!
IA hemorrhaging (in deals and transactions) is frequently facilitated when two frequently held attitudes of decision makers converge, i.e.,
• unnecessarily high or unjustified sense of urgency attached to deal execution. (Urgency and speed often
mutate to become a dominant driver of a transaction which in turn can constrict – impede a thorough due
diligence, especially with respect to unraveling the origins, stability, sustainability, value,
and ‘mergability – transferability’ of the IA’s in play.)
• assumption that deals-transactions can be consummated and revenue streams commence before relevant IA’s fall
prey to depreciation or loss.
Mitigating asset vulnerability and probability to value – competitive advantage – reputation hemorrhaging, well in advance of the ink drying on a transaction agreement, is an essential contributor to achieving the desired (successful, profitable, sustainable) outcome.
Intangible Assets As Business Multipliers
July 25th, 2016. Published under Intangibles as strategic assets, Managing intangible assets, Organizational resilience and business continuity/conti. No Comments.
Michael D. Moberly July 25, 2016 ‘A business blog where attention span really matters’!
The word ‘multiplier’, as I have observed its application, has been primarily in military – combat contexts as force multipliers. Observation and strike capable drones for example, are force multipliers because of the operational – observational advantages they provide to various military units needing real time intelligence and possibly offensive action.
However, on the business side, as an IA (intangible asset) strategist and risk specialist, I consider a company’s IA’s as representing a distinctive form/context of business multipliers. Throughout the private sector, IA’s, originate in – arise from valuable intellectual, structural, relationship, and competitive capital or, IA’s.
Preferably, business c-suites and their management teams recognize how IA’s translate, convert, or monetize as competitive tactics, processes, and/or commodities to (collectively – collaboratively) ‘multiply’ – contribute to the effectiveness, efficiency, output, revenue, and/or value of a particular operating group, project, or process.
Either way, when IA’s are acknowledged and effectively integrated in a particular initiative, project, or even organization-wide, they can, and frequently do, favorably impact efficiency, effectiveness, and productivity, which translates as value, sources of revenue, and competitiveness, that otherwise may not have been acknowledged. That’s particularly evident in business environments in which there is little or no receptivity to IA’s either in terms of their usefulness, accounting, internal development, external acquisition, or maturation – conversion often due to a misperception that doing so would disrupt the status quo or create new risk.
IA-based multipliers, also refer to attributes or combinations of competitive inputs which again, often manifest most favorably when collectively-collaboratively drawn from existing intellectual, structural, relationship, and competitive capital. A general example where this has occurred is the package delivery sector as most firms recognized the obvious efficiencies which could accrue by integrating – coordinating both GPS (global positioning) and RFID (radio frequency identification) technologies which converted to growth in value, competitive advantage, and revenue generation capability. Standing alone, both GPS and RFID are tangible-physical assets (technologies), but the intellectual, relationship, structural, and competitive capital which together recognized – linked their application to the global package delivery sector should not be dismissed.
In this instance, GPS and RFID deliverables largely manifest as contributory and competitive IA’s that facilitate-enable the package delivery sector to receive, process, sort, and deliver substantially more orders and packages more efficiently compared to competitors that have yet to incorporate those multipliers.
For those operationally familiar with IA’s, i.e., their origins, development, and integration, in most instances, can (and should) also be leveraged – exploited as, among other things, value proposition multipliers, which in turn, confer credibility and rationale to capital outlays to pursue, purchase, and integrate the multipliers, ala GPS and RFID systems, while recognizing the various IA’s such multipliers produce and strengthen.
So, as more operational clarity is brought to IA’s contributory role and value as multipliers, organization c-suites, boards, and management teams will recognize – materialize as…
• expansions of operational prerogatives and boundaries that correlate with IA development, utilization, and
exploitation.
• decision – transaction outcomes becoming more predictable and lucrative whenever, however, and wherever,
IA’s are in play.
• the necessity for OR (organizational resilience) planning to facilitate quicker and more complete economic-
competitive advantage recovery following a significant business disruption or materialization of reputation
risk, etc.
