Archive for October, 2008
Michael D. Moberly October 24, 2008
Some decision makers in SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) find (a.) the phrase ‘knowledge-based economy’, and (b.) contemporary economists’ view that 75+% of most companies’ value, sources of revenue, sustainability, and future wealth lie in – are directly linked to intangible assets to be more cliche’ than reality and more relevant to Fortune 500 types of companies’ perceived to be rich in intellectual property, know how, and R&D.
Frankly, I don’t share that reality, but do advocate this reality; unless and until c-suites, D&O’s, shareholders, and investors in SME’s and SMM’s begin to practice (a.) more consistent management, stewardship, and oversight (to sustain control, use, ownership, and value) of their intangible assets, and (b.) recognize (give credence to) practical strategies to leverage and exploit the ‘veritable goldmines of un-acknowledged and unutilized intangible assets’, (Kenan Patrick Jarboe) such perceptions will likely persist. The result will be tremendous unrealized value being left ‘on the table’ untouched and available for others (competitors, adversaries, acquisitions) to capture and exploit!
In respectful defense of SME and SMM decision makers, many do not, as yet, have the means or perhaps inclination (internally) to turn (their) intangible assets into potentially revenue generating assets. In addition, business decision makers are generally realists, that is, they recognize that before embarking on an initiative such as this, three things, at minimum, must be in place (up front) before they take the time and devote the resources to identifying, unraveling, assessing, accounting for, and ultimately disclosing their intangible assets:
1. incentives, i.e., specific tax advantages and direct (immediate) financial inducements, etc., and/or
2. mandates by regulatory agencies (every company begins doing it), and
3. practical – relevant – useable training, i.e. having a strong internal familiarity with intangibles and how to identify, unravel, assess, leverage, and exploit (maximize and extract value from) them.
While the parameters of #1 and #2 would require (federal, state) legislative action, #3 is essentially independant. That is to say, forward looking – forward thinking c-suites should be obliged, on a fiduciary plain, by their boards, stakeholders, and business units, etc., to proceed now toward achieving a level of familiarity with intangible assets that enables them to regularly (at will) engage their companies’ intangibles through effective stewardship, oversight, management, and monitoring to maximize and extract as much value as possible.
October 23rd, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets. No Comments.
Michael D. Moberly October 22, 2008
In my view, this financial crisis is a perfect backdrop for kick starting more discussions about intangible assets, if for no better reason than the economic fact – business reality that increasing percentages, as much as 75+%, of the value, sources of revenue, sustainability, and future wealth of most company’s lie in – are directly linked today to intangible assets.
A good starting point to such discussions is recognizing that intangible assets are not the sole province of large, multi-national Fortune 500 types of companies, nor high-tech firms with intensive R&D programs and massive portfolios of intellectual property. Rather, intangible assets are integral to ‘main street’ companies, that is, the thousands of SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) that are frequently and proportionately rich in intangibles. Unfortunately, while intangibles play a very significant role – contribution to both SME’s and SMM’s, just like they do to larger corporations, they still routinely go un-acknowledged, and under-appreciated. Its time though that intangibles become part of today’s (financial crisis) discussion and considered part of ‘main streets’ solution.
There are many reasons why the financial crisis dialogue is not being more attentive to intangible assets. One is intangible assets are still not quite part of the everyday lexicon of c-suite’s, board room’s, D&O’s, and business unit management. Fully recognizing the range of intangible assets a company has developed or acquired and their contributions are still sometimes considered a little (too) esoteric and out of mainstream ‘mba precepts’.
Second, it seems to me, we’ve become overly focused on the 100,000 foot level cash infusions (bailouts) to the presumably ‘tipping point’ Wall Street – New York-based banks and insurance companies. The manner in which the bailouts (rescues) have been structured thus far anyway, seemingly overlook my reality that the markets are, in many respects, super-sized intangible assets. That is, ‘the markets’ have been, by far, the dominant theme of this financial crisis dialogue, exist, evolve, flourish, or fold largely on the basis of image, goodwill, reputation, and especially confidence, all of which are intangible assets!
Third, I have yet to hear any of the bailout decision makers mention intangibles in terms of constituting a link in the (financial crisis) solution chain, especially for those ‘main street SME’s and SMM’s that have virtually no expectation of receiving a ‘personalized’ bailout. I suspect the bailout decision makers pay far too much attention to devising relatively shallow, dumbed-down, focus grouped phrases and sound bites designed to simultaneously draw the ire of ‘joe the plumbers’ as well as quell the concerns of baby boomer parents, aunts, and uncles who remember, all to well, the Great Depression and consider making a ‘run on their bank’ both a rational decision and possibly necessary option.
Perhaps, instead, we should try injecting some useful and relevant dialogue about intangible assets which quite possibly may (a.) deliver more probable outcomes, and (b.) contribute to strategic structural changes to current barriers to intangible asset monetization.
Michael D. Moberly October 4, 2008
Intangible assets (intellectual property, proprietary know how, intellectual capital, etc.) can advance an organization economically and competitively, only so long as their control, use, ownership, and value are consistently monitored and sustained!
It’s important to recognize, once again, that percentages of company value, revenue sources, sustainability, and future wealth creation attributed directly to intangible assets is steadily rising in today’s largely knowledge-based – intangible asset economy. The relevance and value held within intangible assets, like other assets, can fluctuate. This requires projections (prognostications) about asset value and measures to monitor (assess) asset value be encompassing to fully reflect and capture the life and functionality cycles of the assets in play – part of a deal.
Similarly, a company’s portfolio of proprietary (sensitive) information and trade secrets changes – evolves over time as do definitions (of what information is considered sensitive or constitutes a trade secret) often become outdated and sometimes bear little or no relationship to the types of information a company produced yesterday or tomorrow. (Concept attributed to R. Mark Halligan) The real effectiveness of (information security, classification) policies and procedures diminishes rapidly if such changes, like those characterized above, go un-recognized, un-monitored, and un-reported.
Some information becomes obsolete and no longer has commercial value to an organization, while new information is constantly being produced (generated) and can rapidly become extremely valuable, but, again, if un-recognized as such, its vulnerability to compromise or entering the public domain rise, and, once there, value may quickly go to zero. Therefore, recognizing that the production of information assets is a dynamic, not a static process is an important and necessary first step toward ensuring business transactions, in which intangible assets and/or IP are in play – part of the deal, are as successful as the parties’ intended.
Today, business transaction environments are extraordinarily competitive, predatorial, globally intertwined, and ‘winner-take-all’ oriented, for which there is no single, stand alone platform that is adequate to fully address the intangibles and IP that are inevitably in play, absent a thorough appreciation that the ‘end game’ is to sustain control, use, ownership, and value of those assets in both pre and post transaction contexts.
In other words, when engaging in any type of transaction in which intangibles and IP are being bought, sold, transferred, or licensed, its essential to ensure that (1.) due diligence is as good on the front end (pre transaction) as it is on the back end (post transaction), (2.) due diligence does not succumb to faux sense of urgency, i.e., an entire deal must be fully vetted in 48 hours, and (3.) conventional templates for conducting due diligence are challenged, that is, when 75+% of a transactions’ value (success, profitability, etc.) lie in intangible assets and presumably the ability of the parties’ to have control, use, ownership, and value of those assets, thorough on-site interviews and assessments become critical necessities with little or no room for negotiation.