Archive for June, 2010

Measuring The Intangibles Of IT Security…

June 28th, 2010. Published under Intangible asset strategy, Measuring Performance. No Comments.

Michael D. Moberly   June 28, 2010

As Charles Kettering put it, ‘a problem well stated is a problem half solved’.  That’s surely the case for IT security!  Some things (like IT security) may appear, at least on the surface, easily measurable, because, in large part, management teams assume they know precisely what they mean by IT security, and, therefore, what elements/aspects should be measured.

Frequently I have found though, with respect to measuring the affects/outcomes of IT security, management teams, boards, CTO’s, and IT managers, etc., use terms/phrases like reducing uncertainty and risk interchangeably, as both a rationale for the (IT security) expenditures and as a basis for measuring the desired outcomes (of IT security).

Being a security practitioner for 25+ years, I recognize that security, conceptually speaking, remains somewhat vague and ambiguous, even in 2010, that is, unless or until management teams, boards, and CSO’s, etc., begin to describe precisely what they expect to observe, following deployment of ‘x’ security services and/or products.  Presumably, the expected observations would be measurable reductions in risk and less uncertainty about outcomes.

Security, in the sense of being personally secure, can mean different things to different people, sometimes dependant on time, location, circumstance, or venue, etc.  But, an often agreed upon perspective about security is, once ‘x’ security is in place, there will be some corresponding  and favorable change in risk and uncertainty. 

Ultimately, the key to measuring things, security, or otherwise, and the outcomes, really lies in one’s adeptness at articulating (bringing preciseness and clarity to) what one expects to observe following deployment of ‘x’, in this case, IT security products and services.  In other words, as Hubbard suggests many times in his book, if one is fuzzy about what he or she expects to observe as an outcome, (from an expenditure of IT security resources, etc.) it’s likely any subsequent (quantitative) measurements will be equally fuzzy. 

For starters, it may be beneficial to define the terms ‘risk’ and ‘uncertainty’.  Uncertainty is merely the lack of having complete certainty about, for example, business decisions  In other words, a particular business decision may have multiple possibilities that exist with the actual outcome remaining unknown (uncertain) because ‘extra’ possibilities exist.  

Risk, on the other hand, is a (one) state of uncertainty, in which multiple possibilities exist, but, should they materialize, will involve some type or degree of loss or other undesirable outcome to a companies assets. 

Measuring uncertainty then, (in the case of IT security) is measuring a set of probabilities that a CSO, CTO, and/or CIO perhaps has assigned to a set of possibilities.  For example, following deployment of certain IT security products and services, we expect to observe a 60% reduction in the possibility-probability that personal – proprietary data and information will be extracted illicitly.

Measurement of risk, on the other hand, is a set of possibilities, each with quantified probabilities for loss, e.g., after deployment of IT security services and products, there remains a 15% probability that the company will experience theft of proprietary data and information by insiders.

(This post was inspired by Douglas Hubbard’s fine book titled ‘How To Measure Anything: Finding The Value of Intangibles in Business’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

A Risk Intelligent Company Culture Is A Valuable Intangible Asset!

June 22nd, 2010. Published under Company culture and reputation., Enterprise risk management.. 1 Comment.

Michael D. Moberly   June 22, 2010

A first, and very important step toward developing a ‘risk intelligent company’ is recognizing that risk is not solely an external phenomena, i.e., all risk emanates from outside the company. 

A second, and equally important step in developing a risk intelligent company comes from recognizing that company value can be favorably affected by integrating – merging risk management and human resource management.  The rationale for doing this lies in the reality that a significant percentage of (company) risk actually evolves from – is inherently embedded in employee behavior and actions, which includes the management team and board.

In other words, according to Deloitte’s, The People Side Of Risk Intelligence: Aligning Talent And Risk Management, risk touches virtually every aspect of employee (HR) management, and employees touch virtually every aspect of risk management.  Is there no better reason to develop a risk intelligent company culture?

Effective risk management (and a risk intelligent company) Deloitte suggests, executes at the point in which the following converge:

1. Risk Governance – how a company treats risk and assumes responsibility for risk oversight and strategic decision making…

2. Risk Infrastructure Management – how a company assumes responsibility for and understands how to design, implement, oversee, and sustain a risk management program…

3. Risk Ownership – employees knowing what their risk responsibilities are, i.e., they assume (some)  responsibility (ownership) for identifying, measuring, monitoring, and reporting risk…

In light of the economic fact that U.S. businesses lose an estimated 7% of their annual revenue to various forms of occupational fraud, a risk intelligent workforce can be a very valuable (intangible) asset for a company, because one does not have to look far to see the adverse strategic consequences – affects on companies when they rely primarily on ‘unwritten rules’ for how things get done and how, or if, risk is managed.

In a risk intelligent company (culture), management teams and boards assume an obligation to understand what those ‘unwritten company rules’ are and how they’re being interpreted-executed by employees.   A good starting point is (a.) to critically assess a company’s ‘unwritten rules’ by getting answers to the following  questions, and (b.) recognizing the questions’  relevance insofar as how they may serve to influence and perpetuate a company environment of unmanaged risk taking:

1. What (employee) behaviors are actually being rewarded?

2. Are company (employee) incentives (properly, effectively) aligned with the company’s risk management priorities?

3. Do all employees, including the management team and board, understand the companies risk management priorities, objectives, and the strategic reasons-rationales behind them?

Ultimately, becoming more intelligent (and objective) about company risk is an important and necessary prelude to creating a risk intelligent company culture wherein management teams and boards assume a responsibility for elevating and cultivating a company-wide awareness of risk that fosters risk intelligent behaviors at all levels.  It begins by:

1. Adopting a common definition of risk in accordance with national standards and best practices.

2. Clearly defining roles, responsibilities, and authority (for managing risk) with appropriate levels of transparency.

Lastly, it’s important to recognize, insofar as developing a ‘risk intelligent company culture’ that (a.) a change in (company) culture generally follows a (employee) behavior change, and (b.) culture and behavior changes are less a product of formal risk policies, controls, and pronouncements, than they are the result of effective incentives and rewards.

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

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

 

 

 

Risk Management In 2010…It’s About The Interdependancy Of Intangibles!

June 21st, 2010. Published under Enterprise risk management., Organizational resilience and business continuity/conti. No Comments.

Michael D. Moberly   June 21, 2010

In 2010, and for the foreseeable future, risk management must be about the interdependancy of companies intangible assets.  In the not too distant past, companies often had the twin luxuries of time and (geographical) space when dealing with risks-threats that materialized.  Time and space served as ‘buffers’ for companies that routinely provided leeway insofar as how a company may elect to react (adapt) to the risk-threat at hand.  To be sure, in 2010, such luxuries no longer exist! 

In previous years, it was not always essential, nor expected, broadly speaking, for risk managers to have specific and individualized contingency-action plans in place to deal with each potential risk-threat that could possibly materialize.  Of course, there were many reasons (rationales) for this, among them being, risks-threats, when they did materialize, were less interdependant.  In other words, risks-threats could often times be compartmentalized or segregated, thereby mitigating the probability that adverse affects/consequence could literally ripple through an entire organization. 

Also, conventional risk management tended to be focused on protecing a company’s tangible – physical assets through insurance, i.e., risk transfer, in which pieces of a companies tangible assets would be insured vs. adopting a holistic perspective that included recognizing the highly interdependant nature and contributory value of intangible assets. 

But today, with 65+% of most company’s value and revenue being directly tied to intangible assets, it’s the interdependancy of a company’s intangibles, and the potential for almost instantaneous cascading affects, i.e., economic and competitive advantage hemorrhaging and undermining of asset value, etc., that must form the managerial criteria (starting point) for genuinely managing the varied and assymetric nature of company risk.

(This post was inspired by ‘Surviving and Thriving in Uncertainty, Creating the Risk Intelligent Enterprise by F. Funston and S. Wagner)

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

 

Business Investments Include Intangible Assets: Make Sure Your Investment Strategy Fully Addresses Them…

June 14th, 2010. Published under Investing in intangible assets.. No Comments.

Michael D. Moberly   June 14, 2010

Because 65+% of most company’s value, sources of revenue, building blocks for growth, future wealth creation and sustainability today lie in – evolve directly from intangible assets, its increasingly likely that business investments will include intangibles. 

An effective way for business investors to increase the probability that the desired – projected returns will be achieved is to ensure that investment planning and due diligence not be solely balance sheet oriented or focused on current assessments of the intangible assets’ value.  Rather, invest – don’t invest decisions should include the question, are the assets’ value and materiality sustainable? 

In other words, investment due diligence today must include an assessment of the assets’ fragility, their vulnerability, and the probability that value erosion or undermining will occur and/or assets will become impaired prior to, or immediately following, deal closure which, in either instance, will adversely affect projected returns.

A good starting point, in my view, is for investors to examine a survey produced by U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’ and consider integrating the findings into their overall investment strategies, i.e., to manage and maintain:

1. Relationships with key (internal, external) stakeholders.

2. Use of internal stakeholders’ knowledge, expertise, skills, and competencies which serve as  facilitators -enablers for company growth.  

3. Communication channels to bring clarity of purpose to internal stakeholders (employees of the business being invested in) relative to their role in – contribution to on-going company success. 

4. Continuation of (or building) a company culture that is prepared to adapt to – exploit new/changing market developments and opportunities.

5. Reputation with consumers, customers, clients, and/or suppliers. 

6.  The right (existing) processes and systems to build market position and competitive advantages.

Of course, a percentage of business investments do not produce the desired or projected returns.  The reasons are as varied as the investments themselves.  Often overlooked causes of an investments’ failure is not having effective strategies in place to manage and maintain the ‘intangible asset’ factors noted above.

(This post was inspired by a report – survey produced by U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

 

Organizational Resilience Planning and Management Must Include Intangible Assets!

June 11th, 2010. Published under Organizational resilience and business continuity/conti. 1 Comment.

Michael D. Moberly   June 11, 2010

The Standards and Guideliness Commission of the American Society for Industrial Security International,  produced a national standard for security titled ‘Organizational Resilience: Security, Preparedness, and Continuity Management Systems: Requirements with Guidance For Use’. (March, 2009)

This ‘standard’ was approved by the American National Standards Institude as a ‘comprehensive management systems approach for security, preparedness, response, mitigation, business/operational continuity, and recovery for distruptive incidents resulting in an emergency, crisis, or disaster’.

The ASIS/ANSI standard defines

1. Organizational resilience management as systematic and coordinated activities and practices through which an organization manages its operational risks, and the associated potential threats and impacts therein.

2. An organizational resilience management program as an ongoing management and governance process supported by top management; resourced to ensure that the necessary steps taken to identify the impactof potential losses; maintain viable recovery strategies and plans; and ensure continuity of functions, products, and/or services through exercising, rehearsal, testing, training, maintenance, and assurance.

While this standard remains voluntary at this point, when its applied to ‘events of the day’, wherein business risks, risk management, and now organizational (fiscal) resilience of a global company have become routine features in the business and mainstream (politics driven) media, its quite probable the standard will be ratcheted up on company board room agendas as action items? 

In other words, will there be business influences, a sense of prudency or perhaps urgency, to elevate these best practices for organizational resilience planning and program management (as conveyed in the ASIS/ANSI standard) beyond their current voluntary status to being a driver for assurance from companies to demonstrate they are accommodating the growing political, consumer, and stakeholder pressures to be legitimately proactive in forseeing and managing risks associated with their projects, initiatives, and diverse businesses. 

There’s an important point to be made however.  A 2010 version of an organizational resilience management program should not be a mere warmed over, updated, or templated version of a conventional (previously used) ‘business continuity and contingency’ plan that typically focused on company’s tangible (physical) assets. 

Rather, the economic facts and business realities associated with  global knowledge-based economies in which 65+% of most company’s value, sources of revenue, ‘building blocks’ for growth, future wealth creation, and sustainability lie in – directly evolve from intangible assets must be fully accommodated in company organizational resilience planning, and, not just as afterthoughts or incidentals to the program, rather as key and measurable action points that with consistent oversight and monitoring to reflect a company’s valuable intangibles as they are developed or acquired.

(Each ‘Business IP and Intangible Asset Blog’ post is researched and written by Mr. Moberly to provide respectful and useful insights for companies, their management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.)

The Knowledge-Based Economy, Intangible Assets, and Company Culture…

June 10th, 2010. Published under Company culture and reputation.. No Comments.

Michael D. Moberly   June 10, 2010

A company culture is a shared system of values and practices that become blended with other norms and beliefs that send very influential and strategic messages to employees and stakeholders about a company’s attitudes and behaviors, by defining what’s important.  

A company culture will emerge (be observed) as management teams, boards, and employees recognize the beneficial (economic, competitive advantage) outcomes that can accrue as they engage and solve problems through a ‘company culture’ platform consisting of shared norms, values, beliefs, attitudes, and practices about intangible assets.  These can accrue in the form of achieving efficiencies, advancing competitive advantages, and elevating a companies reputation value, etc. (Adapted by Michael D. Moberly from the work of Dr. Edgar Shein)

A mature, well oriented, and nurtured company culture lays permanency and depth to collectively (a.) identifying and distinguishing the various types of intangible assets within a company and how and where they’re produced, (b.) recognizing how intangible assets are present in most every company process, initiative, and/or transaction, and (c.) acquiring confidence to engage, manage, and oversee intangibles to benefit and enhance particular projects, business units, or the company as a whole.  This can occur by, among other things, building, strengthening, and sustaining competitive advantages and customer and supplier relationships.

A company’s (strategic) growth plans rely not just on the ability to scale up numbers, but on maintaining things like quality, responsiveness, and product-service quality.  If growth occurs by acquisition or if non-core opportunities are to be spun off, then all intangible asset areas require special attention-consideration by management teams, boards, and employees. 

This is why an intangible asset focused company culture is not merely important, its essential to success!

Each ‘Business IP and Intangible Asset Blog’ post is researched and written by Mr. Moberly to provide respectful and useful insights for companies, their management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

 

Measure The Correct Intangible Asset Value Streams

June 7th, 2010. Published under Intangible Asset Value, Measuring Performance. 1 Comment.

Michael D. Moberly   June 7, 2010

Unfortunately, there remain a significant number of company management teams and boards that believe ‘the right things to measure’ insofar as revenue and profitability are concerned, are only those things (assets) that get reported on balance sheets! 

While that conventional view is understandable, most companies today have nuanced mixes of processes, procedures, and intangible assets that actually create-deliver the majority of (company) value, sources of revenue, and influence new areas of business.  In fact, U.K.’s Department of Trade and Industry (DTI) Future and Innovation Unit cited in their study/survey, seven specific (intangible) value streams that their study/survey revealed that warranted investment and management to literally form the basis-foundation for unlocking a company’s true potential. 

These seven ‘intangible value streams’ were the product of DTI’s 2001 study/survey titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’. 

The DTI report puts for the view that the seven intangible value streams comprise ‘the intangible raw materials that employees use to (a.) collaborate with one another, in order to, (b.) achieve company goals, (c.) solve company problems, and (d.) exploit opportunities for profitability and growth’.  

The seven intangible value streams identified in DTI’s survey, which consisted of in-depth interviews of 50 successful organizations, are:

1. Building an effective strategy for managing and maintaining relationships with key stakeholders.  This entails (a.) understanding how to identify key (internal, external) stakeholders and develop, organize and sustain that network of relationships, and (b.) recognizing that the nexus of ideas and opportunities evolving from that network will play an important role towards achieving and sustaining a company’s competitive advantage.

2. The added value a company can achieve from the effective management and use of its largely internally held knowledge and expertise.  In the current globally competitive and predatorial business transaction environment, a companies survival (sustainability) is interwoven with the ability of management teams and boards to ensure the knowledge and expertise (developed and/or acquired) are effectively and consistently shared and used throughout an enterprise, particularly the tacit knowledge and expertise that’s literally held in the minds of individual employees.  Absent the impetus – a system for knowledge and expertise dissemination and sharing within a company, they will be less likely (receptive) to (a.) identify gaps in their knowledge/expertise base, and (b.) respond quickly enough to identify, assess, and act on potential opportunities, and (c.) will become more vulnerable to sudden losses of knowledge/expertise, e.g.,  a key employee leaving and/or the misappropriation of key proprietary (competitive advantage delivering) information, etc.

3. Communicating (bringing) clarity of purpose to employees relative to their role in – contribution to company success.  Clarity of purpose also lends itself to building a ‘company culture’ in which employees are more inclined to recognize-understand the importance of achieving a balance between company goals and the daily (company) operational needs for building and sustaining intangible (asset) value streams, one of which is goodwill.

4. Building a sustainable company culture that encourages greater awareness of new and/or changing market developments that facilitates a quicker grasp and produces a more timely and effective response in terms of adapting to – exploiting those new developments and opportunities.

5. Regardless of the quality of product or service a company produces/delivers, they will likely count for little (in terms of value, etc.) if reputation with consumers, customers, clients, and/or suppliers is low, has been damaged, or is otherwise impaired.  A companies reputation and trust have literally become the foundations for building and sustaining competitive advantages and market position.  Company management teams and boards that are dismissive about or give little credence to those objective and essential components to success will likely be similarly dismissive about the rapidity which risks-threats to a company’s reputation (trust, image, goodwill, etc.) can materialize and create irrevocable damage and losses.

6. Maintaining the correct mix of employee competency, i.e., skills, knowledge, and expertise are key facilitators-enablers for companies to grow in both capacity and scope.  This requires, of course, management team and board committment to consistent investments in developing and maintaining employee talents’ that are essential to not merely support existing operations, processes, and programs, but also be effective contributors to future (company) initiatives and strategic planning.

7.  Maintaining market position and competitive advantages today involves, among other things, ensuring that management teams and boards have the right processes and systems in place, at the right time, and at the right location to support company activities and initiatives as needed.  It should be noted however, in today’s seemingly nanosecond time frames when markets, transactions, and the needs and demands of stakeholders can change and risks-threats rapidly materialize, those company processes and systems must be sufficiently flexible and adaptable to accommodate those changes and execute at an equally rapid pace. 

Financial reporting systems focus on historic balance sheets, profits, and cash flow, but management teams and boards don’t necessarily get the right perception of assets’ prospective value through such a historical lens only. 

Value is an uncertain and increasingly risk laden factor embedded in the global business environment with succcess being all-the-more dependant on objective assessments being conducted that address future options and opportunities and extrapolations of historic costs as well as current (asset) performance. 

(This post was inspired by a report – survey produced by U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written to provide insights for companies, their management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

 

‘What Does Your Company Have That Is Valuable But Not Reported On Balance Sheets’?

June 3rd, 2010. Published under Intangible asset strategy, Intangible Asset Value. No Comments.

Michael D. Moberly   June 3, 2010

The timeless management adage ‘you can’t manage what you don’t measure’ has relevance to the knowledge-based economy where intangible assets have become the overwhelmingly dominant source (65+%) of most company’s value and revenue.  But, as important and valuable as intangible assets are to most companies, regardless of size or industry sector, relatively few management teams and boards take a consistent role in managing or measuring them.

So, why is that?  One reason (rationale) frequently cited, is that intangible assets are ‘lumped together’ and appear on balance sheets only in the context of goodwill, thereby dismissing or relegating all other forms and categories of intangibles that a company produces and uses to subordinate, non-contributory roles. 

Thus, it begs the question, why devote time and resources to managing, measuring, and delineating things (intangible assets) that are not going to individually appear on a balance sheet?  The conventional accounting practice of not delineating/distinguishing intangibles on balance sheets, provides a stronger rationale then for management teams and boards, perhaps already so inclined, to be less receptive to learning how to identify, assess, value, manage, and, most importantly, extract value and exploit competitive advantages from their intangible assets.

Today however, as intangible asset rich/intensive companies become the norm globally, it’s seems prudent for management teams and boards to consider revisiting those aforementioned ‘why should we bother’ rationales by posing this single question, ‘what does my company possess or produce that is valuable and provides competitive advantages, but is not included on its balance sheet’? 

The answer to the question of course, is intangible assets.  (For a comprehensive list of intangible assets please go to http://kpstrat.com and click on brochure and scroll to ‘what are intangible assets’.)

Intangible asset specialists readily concur that when management teams and boards avoid managing and measuring intangible assets, it’s akin, particularly in this knowledge-based economy, to ‘sticking a company’s entire head in the sand’.  It puts companies at risk by not focusing on those factors (intangible assets) that have proven to be so essential and integral to profitability, growth, and sustainability. 

Strict adherance to the ‘you can’t manage what you don’t measure’ adage, often gets translated as managing and measuring things that present the fewest challenges, thus the right things, or perhaps the more complicated things, or things which management teams and boards are less familiar and comfortable, are less likely to be managed or measured.  And, in a knowledge-based economy, that usually means intangible assets! 

So, what are the right things management teams and boards should be measuring?  The answer again, are the intangible assets (performance indicators) that consistently produce benefits, i.e., add value to a company, facilitate revenue streams, create competitive advantages and foundations (building blocks) for growth, future wealth creation, and sustainability, etc.

When management teams and boards frame the question as noted above, a frequent result is that  intangibles are much less likely to be dismissed, overlooked, or neglected.  Instead, the assets’ contributory value will be recognized and exploited.

 (This post was inspired by U.K.’s Department of Trade and Industry report titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written to provide insights for companies, their management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  It is in this context that I welcome and respect your comments and perspectives on these increasinly important matters at m.moberly@kpstrat.com.

 

Measuring Management Team and Board Effectiveness: Their Ability To Create Value From Intangible Assets!

June 1st, 2010. Published under Board oversight, Measuring Performance. No Comments.

Michael D. Moberly   June 1, 2010

At the nexus of the knowledge-based economy, in my view, lie three variously interwoven factors, (a.) global competitiveness, (b.) continually changing  technologies, and (c.) the ability to create, sustain, and extract value from intangible assets!  The latter factor, is increasingly relevant metric for assessing management team and board effectiveness on two levels:

1. Recognizing and grasping future opportunities will depend on identifying, managing, and developing a companies full spectrum of intangibles…

2.  The consistency of company preparedness to engage and correctly execute initiatives focused on building and extracting value from intangibles…

This requires, of course, management teams and boards to recognize that strategic planning, irrespective of industry sector or company size, must embody the economic fact (business reality) that growing percentages (65+% ) of company value, sources of revenue, sustainability, and building blocks for growth and expansion lie in intangible assets.  When taken as a whole, this economic fact challenges management teams and boards to…

1. Look beyond conventional balance sheet approaches that are essentially rear view mirror descriptors of what happened last week, last month, or last year and often focus on tangible (physical) assets, not intangible assets.

2. Engage the ‘intangible value’ of their company which is the difference between its market value (share price multiplied by the number of shares issued) and its net book value (recorded value of all tangible assets).  

So, what I am encouraging management teams and boards to do is fully integrate the ability to create, sustain, and extract value from their intangible assets into their (asset) management and oversight  responsibilities and that their overall performance should include, at least in part, just how well they achieve this!  Why, because, again, the economic fact that 65+% of most company’s value, revenue, and future wealth creation lie in intangibles should not be overlooked, dismissed, or neglected. 

A useful starting point for commencing (achieving) this worthy and necessary strategy, in my view, is through the inclusion of seven key intangible assets described in a survey (report published by) U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’. 

Collectively, the report states, these intangibles form the essential ingredients upon which a company’s future success can be built, i.e., (1.) relationships, (2.) tacit knowledge, (3.) leadership and communication, (4.) company culture, (5.) reputation, and trust, (6.) skills and competencies, and (7.) processes and systems.  The report characterises these ‘ingredients as the intangible raw materials that talented employees use to engage-collaborate with one another to (a.) achieve goals, (b.) solve problems, (c.) identify opportunities, and (d.) maximize their potential’.

To achieve the returns which these assets are potentially capable, management teams and boards should (a.) invest in them, (b.) do what’s necessary to sustain them. and (c.) genuinely manage them as the strategic assets they are.

(This post was inspired by U.K.’s Department of Trade and Industry report titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written to provide insights for companies, their management teams, boards, and employees to identify, assess, value, protect, and profit from their intangible assets.  It is in this context that I welcome and respect your comments and perspectives on these increasinly important matters at m.moberly@kpstrat.com.