Michael D. Moberly April 5, 2012
Generally speaking, intangible assets are unique and nuanced to fit a particular project and/or company operating needs and circumstances. First though, let’s agree that in many, if not most instances, economic and competitive advantage adversaries and competitors are seldom seeking intellectual property per se from targeted companies, because that ‘information’ is often already in open source. Instead, they want and need to acquire the relevant intellectual, structural, and relationship capital (intangible assets) that underlies the functionality of the IP.
Some of my concerns are, how or whether those (intellectual, structural, relationship) intangible assets can be readily replicated, copied, and/or converted to fit and function equally well in a competitor’s or adversary’s company and operating culture? While we can assume through observation considerable success is achieved particularly given the estimates of losses to victim companies and the volume of counterfeited goods being produced globally, few, if any studies specifically address the intangible asset angle addressed here.
My experience suggest, intangible assets seldom remain fixed or static as originally developed or produced. Instead, they may experience numerous and/or evolving renditions, updates, and ‘tweaks’ over time. Ideally, from a risk management perspective this should make their replication or copying more challenging for competitors and other global adversaries.
One strategy to combat or mitigate the inevitable adverse consequences of asset replication by competitors is for company management teams to:
- identify and unravel their intangibles to achieve a better understanding of the assets’ origins, composition, and contributory value, and
- assess their vulnerability to – ease of replication and/or copying
Such potential for product replication and loss, in my view, should figure rather prominently in the overall analysis and projected outcome of any transaction which today, will certainly involve intangible assets. Far too often though, intangibles fall outside conventional – main stream risk identification and management processes even though they now routinely comprise 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability.
Another question is, are intangible assets, when they exist in the form of efficiencies and competitive advantages produced through intellectual, structural, and/or relationship capital subject to conventional enforcements as intellectual property, i.e., theft, misappropriation, infringement, etc.?
The answer lies in part in the reality that in many instances, a buyer, investor, or holder of intangible assets is engaged in a certain level of (intangible) asset hedging. Still, management team confidence in achieving sufficient returns on their intangibles should begin by identifying and understanding the much coveted (and targeted) nuances, i.e., the intellectual, structual, and relationship capital that comprise intangible assets, beginning with:
- unraveling, assessing, and monitoring each assets’ stability, fragility, defensibility, transferability, and contributory value
- putting in place practices to sustain control, use, ownership, and monitoring the value, materiality, competitive advantages and efficiencies produced by the assets.
Consistently performing these tasks will help mitigate asset vulnerability to copying or replication, or more accurately stated, asset loss!