Archive for August, 2008

So, What’s The Value of Your Trade Secrets and Proprietary Know How?

August 28th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, Business Applications. No Comments.

Michael D. Moberly   August 28, 2008

Valuation of intangible assets, ala trade secrets, proprietary information, and proprietary know how are, with all due respect to the business valuation profession, quite subjective.  Valuations typically provide business decision makers with estimates or ranges of value for those particular assets!

Let’s digress.  For intellectual property, the government issues the holder-owner a certificate that says ‘this is your patent, trademark, or copyright’.  Deservedly and proudly those certificates are frequently hung on c-suite walls and then, often serve as the conventional (tangible) starting point, subjective as it may be, to commence valuation of those assets. 

It’s important to recognize however, that, unlike patents, trademarks, and copyrights, there is no certificate issued by the government that says ‘these are your intangible assets, trade secrets, proprietary information, or proprietary know how’!

Thus, for decision makers, being informed of a subjective (or, range of) value for certain assets, standing alone, does not necessarily provide a sufficient horizonal outlook to make well grounded strategic decisions and ultimately can leave decision makers holding considerable uncertainty (risk).  In other words, seldom do asset valuations provide decision makers with the necessary unvarnished (business transaction) realities to adequately alleviate – mitigate uncertainties (risks, vulnerabilities) which have become so endemic to intangible assets today.  More specifically, valuations typically do not address – provide adequate insight and perspective regarding the

1. fragility, stability, and/or sustainability of the assets’ value, or

2. criteria to assess the attractivity, demand, intensity, and/or frequency in which those assets are literally targeted by a global army of aggressive, predatorial, and winner-take-all data mining, business-competitor intelligence, and/or economic espionage operations, which can instantenously and adversely affect asset value and, equally important,

3. ‘trade secrecy’ status, i.e., are the six requisites of trade secrecy consistently being met for those assets?  (First Restatement of Torts)

Collectively, or individually, each of the above affects the real value of a trade secret (as well as proprietary information and proprietary know how) and absent that special insight, a stand alone valuation may be almost irrelevant.  For most knowledge-based assets, value today is fragile, volatile, and can certainly fluctuate, somewhat analogous to an ‘internal asset stock market’.  For example, when a well meaning and experienced business valuation agent or accountant claims a particular trade secret (proprietary information, proprietary know, or bundle of like intangible assets) is worth ‘x’ dollars, while that may be true in an ‘economics 101’ context, it’s generally a snap-shot-in-time, and doesn’t provide decision makers with an objective, complete, or necessarily reliable strategic picture.

Still, the goal hasn’t changed, that is, to utilize – leverage those assets in the most efficient and effective manner possible and to maximize and extract as much value as possible while simultaneously sustaining (protecting, preserving) the assets’ control, use, ownership, and value!  Decision makers just need more insight-perspective to make decisions about the utilization (stewardship, oversight, management) of those assets that align with and truely reflect their fiduciary responsibilities.

Business Continuity – Contingency Planning Should Not Focus Solely On Containment!

August 27th, 2008. Published under Business Applications, intangible assets. No Comments.

Michael D. Moberly   August 27, 2008

In the pre-Internet – knowledge economy era, company value and sources of revenue evolved, in large part, from the utilization of tangible (physical) assets (i.e., machinery, equipment, buildings, vehicles, etc.).  Consequently and necessarily then, business continuity – contingency planning focused, almost exclusively, and rightfully so, on the recovery of those tangible assets and returning the company-institution to designated levels/states of operational normalcy.

Also, integrated throughout those (pre-Internet, knowledge economy era) continuity-contingency plans was the practice of ‘containment’ which essentially means having procedures and mechanisms in place to (a.)  ‘contain’ (mitigate) the extent (criticality) of the damage/loss, and (b.) avoid subsequent (internal, external) ‘adverse cascading affects’ following a disastrous event.

The practice of ‘containment’ is still relevant in certain circumstances and for particular types of disasters in which tangible assets – infrastructure are at risk, and/or, for example, IT systems are targeted/attacked in which sophisticated ‘firewalls’ are erected to prevent/mitigate damage and loss of data and information.

But, beginning in the mid-to-late 1980’s though, a significant and now, most would agree, permanent shift began to evolve relative to the sources – foundations – drivers of company value, revenue, and future wealth creation.  That is, tangible (physical) assets were no longer the dominant source of company value or revenue.  Instead, intangible assets, i.e., intellectual property, proprietary know how, competitive advantages, brand, goodwill, image, etc., became most company’s dominant source of value and revenue.  This phenomena ultimately – collectively formed what we now call the knowledge-based economy and today, 75+% of most company’s value, sources of revenue, and future wealth creation now lie in – are directly linked to intangible assets, not tangible assets!

The point to all of this is, the practice of ‘containment’ as constituting a foundation to business continuity-contingency planning, is no longer as relevant as it was previously.  Instead, business continuity-contingency planning should be more focused on ‘sustaining (protecting, preserving) control, use, ownership, and value’ of a company’s intangible assets during and following a disastrous event.  By focusing continuity-contingency planning more on sustaining intangible assets, it will facilitate a speedier, stronger, and more complete economic – competitive advantage – market share recovery.  Not to be dismissive, and to be sure, aside from any loss of life which is paramount, in most instances, a company’s tangible – physical assets can be re-purchased, rebuilt, and/or replaced, but intangible assets, ala brand loyalty, competitive advantages, and market share, to cite just a few, are fragile and volatile and not nearly as easily or readily recoverable, resuscitated, revived, or rebuilt.  Marketing studies clearly tell us that customers and clients will readily shift, if not abandon, brand loyalty in lieu of other products or services when one or the other is (temporarily) unavailable, or its quality becomes suspect following a disaster.  And, to be sure, most competitors, and we must think globally now, will surely take advantage of – exploit any such opportunity!

Trying to ‘contain’ a company’s intangible assets following a disaster, absent an effective continuity-contingency plan that fully addresses intangible assets is, for the uninitiated, comparable to the title of former U.S. Senator Trent Lott’s book ‘Herding Cats’.   Under those circumstances, achieving a speedy economic-competitive advantage recovery, following a disastrous event, will likely be decided more on the basis of ‘luck and good samaratanism’ versus the quality and execution of a continuity-contingency plan.

For example, for most intangible assets, once they’re compromised, including the intellectual – human capital underlying them, can literally be disseminated to economic – competitive adversaries and an army of other nefarious organizations globally.  And once the asset is out of a company’s span of operational control, protection, and preservation, regardless of any conventional intellectual property protections that may have been issued, i.e., a patent, a trademark, a copyright, etc., the practice of ‘containment’ becomes almost irrelevant.  So, what’s the consequence?, another company is lost to a city and its community!

Five Steps To Better Management and Stewardship Of Your Company’s Intangible Assets!

August 26th, 2008. Published under Business Applications, intangible assets. No Comments.

Michael D. Moberly   August 26, 2008

Managing, stewarding, and monitoring your company’s intangible assets are not passive ‘I’ll do it when I have the time’ functions, or tasks that should necessarily be delegated (relegated) to the uninitiated who lack the requisite ‘fire in the belly’ understanding that 75+% of your company’s value, sources of revenue, and future wealth creation do, in fact, lie in – are directly linked to intangible assets, i.e., intellectual property, proprietary know how, competitive advantages, brand, reputation, goodwill, image, etc. 

Rather, those functions – tasks are akin to, if not, wholly, fidiciary responsibilities, which need not be extradordinarily time consuming or costly endeavors.  What is required however, is objective, critical, business thinking to (a.) learn what intangible assets are, (b.) examine the company’s internals through a different lens, (c.) consider how the assets (intangibles) can be (better) utilized, collaborated, and leveraged, and (d.) identify strategies which additional value may be extracted (from those assets).

For starters, this includes five relatively straightforward steps:

1. Conduct an initial assessment to identify and unravel each intangibles’ status, stability, fragility, value, sustainability, and linkages to producing-delivering-enhancing revenue and competitive advantages for your company!

2. Integrate knowledge – awareness programs about intangible assets throughout the company with linkages to training and evaluations!

3. Integrate ‘best practices’ to ensure the intangible assets that you identified as contributing to value and revenue are sustainable, that is, their value, control, use, and ownership are effectively protected and preserved!

4. Develop an ‘internal map’ of the company’s intangible assets, i.e., producers, location, value, linkages, contributions, status, and (a.) explore strategies (how) to better utilize, exploit, and leverage those assets through internal – external collaboration, and (b.) align those assets with the company’s strategic business plan!

5. Monitor (re-assess, re-evaluate, audit) processes related to (a.) sustaining (protecting, preserving) control, use, ownership, and value of the intangible assets, and (b.) identify gaps and/or lapses that should be addressed relative to extracting value!

(Adapted by Michael D. Moberly from ‘The Rising Star of the Chief Knowledge Officer’ by Nick Bontis, McMaster University, Ivey Business Journal, March/April, 2002)

 

The ‘Seven Deadly Diseases of Management’ and Intangible Assets

August 25th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets. 1 Comment.

Michael D. Moberly   August 25, 2008

There’s probably little argument among decision makers in the adage ‘you can’t manage what you don’t measure’.  In other words, unless you can measure something, you don’t know if there’s improvement or not and you’re unlikely to be able to manage for improvement if you’re unable to determine what’s getting better and what isn’t.  (Adapted by Michael D. Moberly from AboutManagement.com ‘You Can’t Manage What You Don’t Measure’ by F. John Reh)

The aforementioned quote (‘you can’t manage what you can’t measure) is often incorrectly attributed to Dr. W. Edward Deming.  In point of fact, what Dr. Demming did say was quite the opposite, i.e., ‘running a company on visible figures’ (alone) constitutes one of the (his) ‘seven deadly diseases of management’.  Deming realized that many important things that must be managed cannot be measured, or, at least, in my judgement, measured as easily and as readily as say, tangible-physical assets.  (Adapted by Michael D. Moberly from ‘Management Thoughts’ by John Hunter)

While the concept underlying the (‘you can’t manage what you can’t measure’) phrase, who ever it should be rightfully attributed, came to serve as one of the foundations for many a MBA program, it’s unclear, at least too me, just how inclusive Dr. Deming intended his ‘running a company (only) on visible figures constitutes a managerial deadly disease’, to be.  That is, was he referring only to tangible assets and data, which are certainly Deming hallmarks, or, did he intend to include intangible assets, which, at the time, were hardly on many business decision makers’ or management guru’s radar screens?

I suspect, and most respectfully so, that Dr. Deming may have had little idea, at the time anyway, just how relevant that particular ‘managerial deadly disease’ would come to be in the 21st century when the much acclaimed knowledge economy would spark a global paradigm shift, that is, most company’s value, sources of revenue, and future wealth creation (75+%) now lie in – are directly linked to intangible assets (i.e., intellectual property, proprietary know how, trade secrets, competitive advantages, brand, reputation, goodwill, etc.) rather than tangible (physical) assets. 

What matters is, there is no other time in company governance history when measuring, managing, and monitoring the value of assets, especially intangible assets, is more necessary, more integral, or more critical to a company’s stability, growth, profitability, and sustainability.  And, this rule applies to start-ups, small, medium, mature, and maturing companies, as well as, large corporations.

Today, as decision makers’ position their company’s to better (and more consistently) measure and monitor (through stewardship, oversight, and management best practices) the value of their company’s intangible assets, they’re also able to identify and assess fluctuations, losses, materiality changes, and equally important, obsolescence of assets.  Translated, the counsel I provide to companies is to avoid devoting time, money, and resources to maintaining – sustaining assets that have experienced significant compromise, obsolescence, and/or de-valuation.  That doesn’t necessarily mean the only remaining option is to summarily cast them aside for a zero return.  Rather, it means identifying ways those assets’ remaining value – use (potential) may still be leveraged, i.e., sell them, barter them, transfer them, license them, hold them, and/or explore ways to bundle them, perhaps with other assets, to extract value!

Business Continuity – Contingency Planning For Intangible Assets…

August 22nd, 2008. Published under Business Applications, intangible assets. 1 Comment.

Michael D. Moberly   August 22, 2008     (Part Two of a Two Part Post)

Terrorism, hurricanes, earthquakes, and cyber attacks have changed the landscape of business continuity and contingency planning forever!  Another, but often overlooked, reality that has prompted changes in continuity-contingency planning is the economic fact that today 75+% of most company’s value, sources of revenue, and future wealth creation lie in – are directly linked to intangible assets, e.g., intellectual property, proprietary know how and competitive advantages, relationship capital, etc., to cite just a few, which, as we’ve witness on numerous occasions, become dispersed, inaccessible, and virtually irretrievable. 

When those assets are not integral elements to continuity-contingency planning (e.g., sustain, protect, preserve control, use, ownership, and value) recovery becomes much more difficult, certainly less likely, and sometimes impossible.

An important point to recognize is that, for the most part, intangible assets cannot be purchased off-the-shelf, when a catastrophe or business calmity if over!  For today’s knowledge-driven firms continuity-contingency planning should then, pay special attention to those particular intangible assets that are essential to achieving a speedy, efficient, complete, and uncontested economic and competitive advantage recovery.

In this regard there are four basic planning considerations with respect to intangible assets, IP, proprietary know how, and competitive advantages:

1. accountants and auditors should be included to determine the status and stability of Sarbanes-Oxley, FASB, and other control mandates, e.g., will/did breaches, compromises, or materiality changes occur that adversely affect the assets…

2. collaboration with intellectual property counsel is warranted to, among other things, help conduct asset inventories, assess claims, re-establish control of the assets, and when necessary, commence investigations of misappropriation, breaches, compromises, infringement, and/or counterfeiting that are likely to occur during adverse events…

3. examine employee non-compete and non-disclosure (confidentiality) agreements relative to ensuring key employee know how and intellectual-relationship capital is retained (post disaster) necessary for a more prompt and fuller recovery…

4. describe how to sustain ‘trade secrecy – proprietary status’ of designated information assets in circumstances in which the adverse event required evacuation or dispersal of not only the knowledge holders, but, the knowledge-based assets that deliver value, revenue, and competitive advantages…

It’s worthy of mentioning again, 75+% of your company’s value and sources of revenue lie in intangible assets, don’t overlook or dismiss their relationship to a speedier, more complete, and uncontested recovery!

Business Continuity – Contingency Planning For Intangible Assets…

August 21st, 2008. Published under Business Applications, intangible assets. No Comments.

Michael D. Moberly     August 21, 2008       (Part One of a Two Part Post)

Terrorism, hurricanes, earthquakes, and cyber attacks have changed the landscape of continuity-contingency planning forever!  Another, but often overlooked economic factor that has also prompted changes in continuity-contingency planning is the fact that 75+% of most company’s value, sources of revenue, and future wealth creation lie in – are directly tied to intangible assets, e.g., intellectual property, proprietary competitive advantages and know , and relationship capital, etc., to cite just a few, can, as we’ve witnessed on numerous occasions, become dispersed, inaccessible, and virtually irretrievable.

When those assets are not integral elements of a continuity-contingency plan, e.g., sustain (protect, preserve) control, use, ownership, and value, recovery becomes much more difficult, significantly less likely, and sometimes impossible.

The objectives of continuity – contingency planning for a company’s intangible assets are fairly straightforward…

Ensure that during and after a catastrophic event or significant business misfortune the company is able to sustain control, use, ownership, and value of those assets’ necessary to achieve a speedy, efficient, more complete, and uncontested economic – competitive advantage recovery!

Today, there are four important – conceptual starting points that must be recognized and integrated in continuity-contingency planning for intangible assets:

1. the economic fact – business reality that, for a vast majority of companies, their overwhelming value and sources of revenue (and future wealth creation) no longer evolve from tangible – physical assets, i.e., buildings, equipment, property, etc., rather from intangible assets such as proprietary know how, competitive advantages, customer/client relationship capital, and intellectual property, etc.

2. reliance on conventional IP protections as the primary means to recover intangible assets may be ineffective because, (a.) enforcement is costly and time consuming, and (b.) delays will complicate and even weaken a company’s legal position for trying to re-gain use and/or control of those assets.

3. stopping any (subsequent) economic – competitive advantage hemorrhaging initiated by predators, competitors, infringers, and assorted other global adversaries who will take advantage of such events and/or circumstances, is not merely a probability, rather an inevitability if not addressed.

4. the government does not issue your company a certificate that says these are your intangible assets, competitive advantages, trade secrets, and proprietary know how.  That responsibility is clearly a ‘fiduciary one’ for each company. 

It’s a wise and prudent practice then, for continuity – contingency planners to include – integrate an on-going ‘inventory of the company’s intangible assets’, because trying to (a.) prove their existance and value, and (b.) recover-retrieve them, after the fact, is not only costly and time consuming, but, will inevitably delay recovery, if there is to be a recovery!

Your Intangible Assets Can Be The ‘Prius’ In Your Market Space…

August 20th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets. No Comments.

Michael D. Moberly   August 20, 2008

Think about the time, not that many years ago, and the conversation that must have occurred in the R&D laboratories of Toyota when they were conceiving their Prius automobile.  GM and Ford were still thinking about what to name their newest and ever-the-more-larger SUV and churning out those SUV’s and pick-up trucks at record paces.  By the time GM and Ford woke up and began re-tooling, re-designing, and laying off thousands of workers, Toyota’s Prius brand was well established with commensurate image, goodwill, and loyalty and now, they literally own that market space!

Today is a great time for decision makers in other businesses to consider ‘taking a page’ from the Prius playbook and think about their equivalent to Toyota’s Prius; intangible assets!  After all, it’s an economic fact and business reality that 75+% of most company’s value, sources of revenue, and future wealth creation firmly lie in intangible assets, intellectul property, and proprietary know how. 

But still, business decision makers ask the right questions, like, (a.) does my company really have any intangible assets?, (b.) if so, what type of planning is necessary to identify and unravel my intangible assets?, (c.) how does my company make money – extract value from its intangible assets?, (d.) is it worth my time?, and (e.) how long will it take before my company see’s evidence of a return from its intangible assets?

For starters, business decision makers may want to think about it this way, the effective stewardship, oversight, and management of intangible assets can be the difference between (a.) looking out ahead, and (b.) looking through a rearview mirror.  Stewardship, oversight, and management of a company’s intangible assets is an investment that can produce revenue and competitive advantages, in other words, ‘the Prius effect’!

(This post evolved from a 8-17-08  ‘Smart City Radio’ program titled ‘Veolia Survey and The Vine’)

Handing Off More Secure, Valuable, and Defensible Trade Secrets…

August 18th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, Business Applications. No Comments.

Michael D. Moberly   August 18, 2008

Typically, a patent starts life as a trade secret, or so it should!  While this often cited adage makes for an interesting ‘reading bite’, it doesn’t always reflect reality.  And, even though 75+% of most company’s value, sources of revenue, and future wealth creation today lie in intangible assets, intellectual property, and proprietary know how, many still do not have the practices, procedures, or culture in place to regularly assess ‘in-house’ know how as (a.) it evolves from being initially recognized as proprietary, (b.) designated a trade secret, and ultimately (c.) deciding to proceed with the ‘patent election’ process to determine its patentability potential.

Respectfully, most companies do not have formal R&D units, but they do have-hold vast amounts of proprietary know how and institutional memory (often developed in-house) that genuinely produce – deliver competitive advantages and value by, among other things, facilitating – extending services that enhance customer/client goodwill and reputation, etc.  Unfortunately, for a variety of reasons (as described in several previous posts on this blog) these ‘assets’ are routinely overlooked, dismissed, or go unrecognized altogether with respect to their value or contribution to revenue.  Consequently, there’s seldom a straight line or timely evolution between the development of good, in-house ideas and recognizing – assessing their potential relevance and contribution to the company, or, more specifically, continuing to use them in a proprietary (trade secret) status or seek other forms of intellectual property protection such as a patent, trademark, or copyright.

One thing is painfully clear however, if that know how (trade secret) has already been (inadvertently, intentionally) disclosed, compromised, or becomes in-defensible in terms of meeting the six requisites to trade secrecy, it cannot be ‘re-secreted’!  In other words, the ‘genie is out of the bottle’ and the probability of recovering much of its original (projected) value is, to say the least, slim, even following litigation.

This doesn’t necessarily mean that proceeding with patent election is a waste of company time, money, or resources.  What it does mean however, is that if a company wishes to proceed to the next level, that is, the patent election process, it should do so in an objective manner by first undertaking the necessary due diligence to identify and assess the extent and nature of any compromise, particularly in terms of its impact.  For example, (a.) can the trade secret be successfully (legally) defended should challenges and/or disputes arise, and (b.) can the projected value and revenue still be efficiently extracted?

If, on the other hand, the due diligence finds (a.) effective safeguards have been in place (since inception) to sustain (protect, preserve) control, use, ownership, and value of the know how (trade secret), and (b.) there are no indicators or evidence of asset compromise, value erosion, or competitive advantage undermining, then the patent election process could proceed.  

Patent election is, as eluded to above, a process to determine whether the subject matter (i.e., the original proprietary know how, trade secret) is potentially patentable, i.e., sufficiently (a.) novel, (b.) useful, and (c.) non-obvious.  Of course, if patent election is favorable, there are numerous additional business-financial decisions that must be made (many of which have been addressed in previous posts on this blog).

(Adapted for the Business IP & Intangible Asset Report and Blog by Michael D. Moberly using references and concepts from ‘Trade Secret Asset Management’ authored by R. Mark Halligan and Richard F. Weyand.  Aspatore Books, 2006  p. 131, 132)

Franchise Operations: Are They Driven By Intellectual Property or Intangible Assets…?

August 12th, 2008. Published under Business Applications, intangible assets. No Comments.

Michael D. Moberly   August 12, 2008

Whether franchise operations are driven by intellectual property (IP) or intangible assets probably represents, for some, a classic case of ‘a difference without a distinction’.  But, the reality is, franchising is frequently and broadly characterized as an industry driven (economically, competitively) by IP, i.e., patents, trademarks, service marks, copyrights, and trade secrets.

Its fair to generalize however, that franchisors’ are likely motivated to devote:

1. more time addressing near term challenges i.e., (a.) licensing of trade-service marks the franchisor owns, (b.) recruiting prospective franchisees, and (c.) collecting royalties and fees, and

2. less time to identifying, utilizing, leveraging, and extracting longer term and more sustainable value embedded in – flowing from their intangible assets.

Collectively, these absolute near tern necessities (‘a’ above) frequently overshadow the relevance – importance of the longer term (‘b’ above) but, equally important necessity to recognize valuable contributions – value flowing from a franchises’ other, and often times under-the-radar, intangible assets! 

Intellectual property of course consists of concepts, processes, and certifications most decision makers possess some familiarity which they can readily turn to legal counsel to address.  Intangible assets, on the other hand, are (a.) less straightforward, (b. still relatively new concepts in terms of business application, and (c.) there’s seldom an intangible asset specialist readily available, but, nevertheless much needed, epecially now, for decision makers to readily turn for counsel and execution.  After all, intangible assets have surpassed tangible (physical) assets as the primary source of value, revenue, and future wealth creation for most companies.  This is especially true for franchise systems!

The two broad questions – issues I’m presenting in this post are (1.) how much of a franchise operations’ revenue and royalties are attributed specifically to licensing its intellectual property, and (2.) could additional revenue be extracted and foundation laid for more sustainable strategic value and worth if ‘under-the-radar’ intangible assets being produced were consistently identified, managed, stewarded, and leveraged?

After engaging numerous franchise operations and examining literally scores of UFOC’s (Uniform Franchise Operating Circulars) I hold the view that franchises’ are not so much driven by their intellectual property, as they are driven by their intangible assets!  IP tends to be singularly focused, i.e., a patent, a trademark, a service mark, a copyright, or a trade secret, whereas intangible assets are characterized as…

1.  unique blends (collections, combinations) of activities, assets, relationships, history, and market conditions that an organization exploits in order to differentiate itself from its competitors and thus create value.  (Michael Porter)

2.  economic benefits anchored in distintive features or processes that set a company apart from its competitors.  (Michael D. Moberly)

3.  evolving over time within an organization and may not always be the result of a planned action or the product of specific capital allocation decisions.  (Brookings Institution, Intangibles Project)

For franchisors, characterizing their franchises’ value and sources of revenue as stemming from – being rooted primarily in intangible assets, of which IP is one component, lays an important foundation:

   – for recognizing that issues – decisions related to intangible assets and IP are not exclusively legal issues or processes, rather they’re business decisions with fiduciary responsibilities.

   –  to put in place more efficient, effective, and less costly processes and procedures (that extend beyond conventional IP protections) to sustain (protect, preserve, monitor) control, use, ownership, and value of those assets.

Remember, its an economic fact – business reality that today, 75+% of most companies’ value, sources of revenue and future wealth creation lie in intangible assets!

 

Five Reasons Why Your Company Should Continue To Overlook, Neglect, and Dismiss It’s Intangible Assets!

August 11th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets. No Comments.

Michael D. Moberly   August 11, 2008

For some business decision makers, the phrase ‘knowledge-driven economy’ is considered an over-used and superflous cliche.  Similarly, the view that 75+% of most company’s value, sources of revenue, and future wealth creation today lie in intangible assets, may seemingly carry little, if any, relevance to your company!

Somewhat justifiably then, without a clearer picture of how intangible assets develop within a company and deliver the requisite ‘return on investment’, business decision makers are likely to continue to show a reluctance for devoting time to learning about, let alone, trying to harness, their company’s intangible assets. 

The reality though is quite different because intangible assets impact every type of business be it a small, medium size firm, a mature company, a large multi-national, or a start-up.  That is, positive outcomes such as profitability, brand integrity, customer loyalty, efficiencies,  and competitive advantages, etc., are now based less on physical – tangible assets and resources, and more on the production, development, management, and leveraging of intangible assets!

For those business decision makers who remain hesitant to engage their intangible assets, below are five reasons to continue to overlook, neglect, and dismiss their role and contribution:

1.  there is no good picture of how a company can obtain a ‘return on investment’ for investing (more) time in their intangible assets, proprietary know how, trade secrets, and competitive advantages…

2.  the money, resources, and time spent on identifying, developing, managing, and extracting value from intangible and other knowledge-based assets is an expense rather than an investment, which can literally walk out the front door and possibly go to a competitor…

3.  there’s no clear picture related to the money, resources, and time necessary for positioning (training) a company to improve the management (stewardship, oversight) of its internal processes to maximize, utilize, and extract as much value as possible from its intangible assets…

4.  it’s difficult to measure – leverage the performance of intangible assets to attract investors and capital because the existing data/information (necessary to achieve this) is often incomplete and the methodologies for measuring are varied and highly subjective…

5.  there are risks associated with being overly transparent about a company’s intangible assets, particularly with the possibility that competitors, raiders, taxing agencies, and trollers could use that information for adverse affects, in other words, why should my company ‘go on front street’ with its intangible assets unless and/or until my competitors do it…

Please remember though, if company’s don’t practice good and consistent stewardship, oversight, and management of their intangible assets now, i.e., sustain (protect, preserve, monitor) control, use, ownership, and value now, don’t expect them to be there when you do!

(Adapted by Michael D. Moberly from ‘Intangible Assets Observatory’, Policy Trends in Intangible Assets, Report of the European HLEG on the Intangible Economy)