Archive for May, 2012

Intangible Asset Due Diligence: Selecting The Absolute Best Individual or Firm Is Critical

May 31st, 2012. Published under Due Diligence and Risk Assessments, Intangible asset assessments/audits., Sustainability of intangible assets.. No Comments.

Michael D. Moberly   May 31, 2012

A requisite to conducting superior due diligence for today’s intangible asset dominated and driven businesses, is possessing a depth of experience, knowledge, and investigative skill sets.  These are unique differentiators and essential requisites which collectively serve as starting points for achieving the necessary and insightful (due diligence) product that allows management teams to make informed decisions, i.e., proceed, don’t proceed, buy, don’t buy, or invest, don’t invest!

Respecting the economic fact that 65+% of most company’s and transaction’s value, sources of revenue, and foundations for growth and sustainability evolve directly from intangible assets, selecting not just the right, but, the absolute best individual or firm to conduct due diligence is critical.

For starters, a well-designed and executed due diligence plan must fully examine each of the target’s intangible assets.  That’s because they will inevitably be in play in any transaction. Effective assessment and integration of intangibles serve increasingly significant role to a transaction’s success.  On the other hand, with untold frequency, when intangible assets are not addressed or dismissed during due diligence, transaction failure can be imminent and materialize in a long, slow, and costly fashion, i.e., ‘failure by a thousand cuts’.

To increase the probability that certain projected transaction objectives or outcomes be realized, it’s imperative that the individual or firm contracted to conduct the due diligence can articulate the findings in objective business contexts and certainly not through a one-size-fits-all, snap-shot-in-time guesstimate oriented lens.

Key elements to superior due diligence in today’s intangible asset dominated and driven businesses, starts by possessing the experience, knowledge base, and investigative insight to…

  1. unravel (identify) how, where, and by whom the key (intangible) assets originated.
  2. determine and assess how or whether control, use, and ownership of the assets is or can be sustained.
  3. determine the assets’ contributory value and complimentary role(s) relative to current and future projects and initiatives, i.e., as potential sources of revenue and foundations for (future) growth and sustainability.
  4. recognize and differentiate the origins, motives, and asymmetric nature of global risks and threats to (intangible) assets that have become embedded in all transactions.
  5. understand how materialized risks can adversely affect asset value, a company’s competitive advantages, reputation, brand, and/or stifle project momentum and best practices to prevent or mitigate those risks.
  6. ensure asset control, use, ownership, and value are monitored for sustainability, especially in post-business transaction contexts.
  7. build a risk intelligent culture that renders a company more aware and resilient to significant and catastrophic risks, natural disasters, and/or business interruptions.

Anything less can produce an array of unwelcome challenges or worse, spell almost certain doom to the projected and desired outcomes of a transaction!

Intangible Asset Sustainability? What’s Their Contributory Value and Longevity…

May 29th, 2012. Published under Intangible Asset Value, Sustainability of intangible assets.. 1 Comment.

Michael D. Moberly   May 29, 2012

Are company’s intangible assets, as producers (sources) of value, revenue, competitive advantages, and ‘building blocks’ for growth, sustainable?   Being an intangible asset strategist and advocate, I believe this is an important question, particularly now, as we’re in the midst of the knowledge (intangible) asset based global economy and the first time in corporate governance history in which over the past decade, conservatively speaking, 65+% of most company’s value and sources of revenue evolve directly from intangible (non-physical) assets, rather than tangible (physical) assets.

Based on my experience in the intangibles arena over the past 20+ years, I am inclined to say the most correct answer to the question is, a very big ‘it depends’!  As in most things intangible there are various points to consider, among them being…

  • the contributory value and sources of revenue intangible asset can deliver are seldom indeterminate, due in part to the fact that protections and risk mitigation afforded to intangible assets (aside from intellectual property, i.e., patents, trademarks, copyrights, and under very strict circumstances, trade secrets where enforcement assistance is available through federal and state authorities) are solely dependent on the holders’ own initiative.
  • today’s global business (transaction) environment is extraordinarily competitive, very predatorial, and laden with persistent, asymmetric, and sophisticated risks and threats wherein global adversary’s possess capabilities to execute strategies to misappropriate, diminish, and/or undermine an assets’ value and competitive advantage almost instantaneously.

In their fine Deloitte report titled, ’The Economic Role of Intellectual Property’, authors’ Noonan Haque and Greg Smith identify and describe the ’key issues’ knowledge-based company’s confront:

  • rapid R&D breakthroughs
  • diffusion of knowledge, information, and data, and
  • increasingly abbreviated asset life (value, functionality) cycles.

I have found the following very useful exercises for management teams, c-suites, and boards, i.e., identify, design, and assess…

  • strategies to exploit the assets that best fits the company, industry sector, culture, innovativeness, resources, and strategic business plan.
  • strategies for asset management, stewardship, oversight, contributory value, and risk monitoring to strengthen and lengthen the assets life, value, and functionality cycles.
  • strategies to ensure the production, acquisition, utilization, and exploitation of the company’s (intangible, IP) assets are aligned with the company’s core business mission.

Those engaged in business (IP, intangible asset) management but, remain unfamiliar with the above exercises or dismiss their relevance are certainly, in my view, leaving substantial potential value, sources of revenue, and growth opportunities ‘on the proverbial table’ and otherwise  doing a significant disservice to their company and/or client!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry or comment at  314-440-3593 or m.moberly@kpstrat.com  

Intangible Asset Monitoring During Due Diligence: A Necessary, But Often Overlooked Requisite!

May 24th, 2012. Published under Due Diligence and Risk Assessments, Intangible asset protection, Mergers and Acquisitions. No Comments.

Michael D. Moberly   May 24, 2012

It’s important for management teams, c-suites, and boards to recognize that merely because a deal or transaction has progressed to the due diligence stage, there is absolutely no guarantee the projected values, synergies, and competitive advantages the targeted assets are projected to bring, an increasing percentage of which will be intangible, will sustain those projections.

In today’s globally competitive, aggressive, and predatorial business transaction environment, it is quite naïve in my view, to assume the full control, use, ownership, value, and materiality, etc., of the targeted assets will remain fixed throughout the transaction period without close monitoring and risk mitigation in both pre and post transaction (due diligence) contexts.

In large part, that’s because a potential, but, I might add, an increasingly routine by-product of business transactions is that they produce uncertainty at all employee levels as well as among stakeholders and investors.  Uncertainty, individually or collectively can, influence individuals to assume demeanors, exhibit behaviors, or engage in acts that otherwise are considerably less likely if/when uncertainty is not present.

Put bluntly, uncertainty can manifest itself in many ways, some of which are adverse when change (i.e., a business transaction) is pending or eminent.  Too, in business transactions and the uncertainty it frequently sparks, can manifest as asset compromises, misappropriation, and/or undermining of competitive advantages.  Perhaps more so when due diligence teams are dismissive, unaware, or conclude the monitoring necessary to prevent or mitigate such circumstances is beyond (beneath) their mandate.  That’s irrespective of evidence that suggests asset vulnerability elevates during periods of (company, employee) uncertainty.  To be sure, commencement of due diligence is well-recognized as an indicator that change (and uncertainty) within a company and/or business unit are fully under consideration or eminent.

What’s more, uncertainty, and the various ways/contexts it manifests, can occur in rapid-fire order and cascade throughout a company.  Due diligence team ‘radar’ should surely recognize any adversity and modify the way due diligence will be structured and executed.  This is especially relevant if the transactions’ envisioned (projected – desired) economic and competitive advantage benefits decline.

Admittedly, I am not an advocate of using the uninitiated or inexperienced to conduct due diligence.  It is far too important.  Neither do I subscribe to the view that there is a one-size-fits-all template (for efficiency sake) to conduct due diligence.

So, for those, and other considerations, some of which are described below, I have identified various issues that should definitely be on the radar of every due diligence team.  Any one of the following for example can be a signal that a higher probability exists that a transaction will be successful, i.e., is there evidence of:

1. a broad company culture that genuinely recognizes the value of the core (revenue – value producing) intangible assets?

2. consistent stewardship, oversight, and management of those assets?

3. consistency in the representation of those assets, ala Sarbanes-Oxley, FASB, etc., in which (asset) risk, value, materiality, and financial performance are measured and accounted for?

4. business continuity-contingency (organizational resilience) planning that includes the due diligence targets’ core intangible assets?

5. strategic – internal planning and execution that achieves recognition and utilization of  intangible assets as source of value, revenue, and ‘building blocks’ for growth and sustainability?

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry or comment at  314-440-3593 or m.moberly@kpstrat.com

 

Intangible Asset Due Diligence: Must be much more than a cursory or confirmatory review!

May 23rd, 2012. Published under Due Diligence and Risk Assessments, Intangible Asset Value, Intangibles as strategic assets. No Comments.

Michael D. Moberly   May 23, 2012

With such significant percentages of deal – transaction value now evolving from a targets’ intangible assets, due diligence must be much more than a cursory or confirmatory review of the assets’ presence, absence, or positioning.

Too, a due diligence report must provide decision makers with much more than a subjective, snap-shot-in-time estimate of asset value.  Instead, due diligence must provide unequivocal clarity to decision makers.  This includes, among other things, an assessment of the assets’ fragility, stability, defensibility, longevity, and perhaps most importantly, its collective contributory value throughout an enterprise.  Key, revenue producing (intangible) assets will also be a focal point relative to their ability to be strategically utilized as ‘building blocks’ for future growth and sustainability.

The strategic and contributory value of intangible assets must not be overlooked, but, cannot be accurately demonstrated either solely by calculating asset value in snap-shot-in-time contexts.  This of course is why it’s important to factor other asset characteristics such as fragility, stability, defensibility, risk, longevity, and contributory value.  Understanding how these characteristics can, and frequently do, adversely impact asset control, use, ownership, and materiality or serve as preludes to legal challenges is certainly information decision makers should have at the ready.

When these characteristics materialize, as they do with increasing frequency in today’s globally competitive and predatorial business transaction environment, asset value and usefulness can erode, be undermined, and become vulnerable to compromise and/or misappropriation very rapidly.

By the same token, it’s important for those structuring business transactions, when intangible assets are in play and/or part of a deal, as they inevitably are, to recognize that conventional forms of intellectual property enforcement (i.e., patents, copyrights, trademarks) are not applicable to safeguarding other forms of intangible assets, i.e., reputation, goodwill, structural, intellectual, and relationship capital, etc.  Thus, having due diligence – transaction management teams in place with expertise in intangible assets is a necessity which will produce much needed insights, clarity, and benefits.

Another reason why it’s important to fully factor these and other (intangible) asset characteristics in a due diligence strategy, is that the time frame when holders, buyers, and/or sellers of intangible assets can extract the most value (from them) is being continually compressed.  That’s due, in no small part, in my view, to the persistent, increasingly sophisticated, and globally predatorial business/competitor intelligence and data mining operations that can, when successful, ‘get out front’ of a transaction and a company’s competitive advantages to affect a transaction’s outcome, usually adversely, depending of course, whose side one is on.

Below are some additional, but, just as important areas which I encourage due diligence management teams to direct attention, e.g., is there evidence of…

  • a company culture that recognizes the value of the core revenue – value producing intangible assets?
  • consistent stewardship, oversight, and management of the targets’ intangible assets?
  • consistency in the representation of intangibles to reflect Sarbanes-Oxley, FASB, and even ISO mandates, etc., wherein risks, value, materiality, and financial performance are accounted for?
  • business continuity-contingency (organizational resilience) plans that ensure that specifically address intangible assets?
  • ell executed and monitored strategic planning designed to achieve the fullest utilization of the targets’ intangible assets?

Effectively conducted due diligence that finds affirmative evidence that each (many) of the above are being practiced by a target firm, should be smiling, as they say, all the way to the bank!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Safeguarding Knowledge-Based Assets In Businesses: Don’t Overlook These Issues!

May 22nd, 2012. Published under Analysis and commentary, Intangible asset protection. No Comments.

Michael D. Moberly   May 22, 2012

1.  Information asset safeguards must be designed for rapid maneuverability to reflect changes in asset value and/or risk!  Most information asset safeguards and risk mitigation initiatives are one dimensional.  That is they tend to remain constant or static throughout the life, value, and functionality cycle of the specific asset(s) being protected regardless of changes in those assets’ contributory value to current or future company projects or risk.

Exacerbating this, is today’s aggressively competitive and predatorial global business (transaction) environment, in which the value and relevance (useful life cycle) of information-based (intangible) assets are becoming increasingly compressed relative to their linkage and/or contribution to specific (company) tasks, processes, or operations.

It’s prudent then, for the design and implementation of business information (intangible) asset safeguards to incorporate the capability of being maneuverable, i.e., to increase or decrease the level of protection to reflect fluctuations in, not only an assets’ value and relevance, but asset risks, threats, and vulnerabilities.

2.  Avoid ‘pushing the future off the table’!  Each day companies are presented with an assortment of urgent, near term risks, threats, and challenges which are often translated as pressure to push the future off the table. One consequence of ‘pushing the future off the table’ is that if a company lacks a strong culture of strategic thinking and planning, disproportionate attention will likely be directed to the inevitable chorus of sources, both internal and external, who offer, in my view, largely speculative, worst-case scenario, and/or snap-shots-in-time assessments of risks and threats to business information assets and/or systems.

While the potentially devastating consequences of these pronouncements should never be dismissed, seldom should they serve as the primary rationale or driver for the design and execution of business information asset safeguards without additional and thorough research.  Instead, adopting capability and value-based strategies represents a more forward looking, efficient, and holistic approach for safeguarding ‘company critical’ information assets than narrowly focused, time-bound, and anecdotal assessments of risks and threats.

3.  Foster relationships!  Any initiative to safeguard a company’s information assets, in my view, must include capabilities to sustain control, use, ownership, and monitor value and materiality (of the assets). To achieve the desired level of success, any such initiative must also include fostering collaborative (internal and stakeholder) relationships.  This can occur by ensuring the assets’ originators, developers, users, and owners have been properly and effectively engaged at the outset as the impetus for assuming some level of ownership for the initiatives success.

Unfortunately however, one reason some company’s tend not to be this inclusive insofar as fostering collaborative relationships for safeguarding information assets, evolves from the misperception that computer/IT system security equates with, or worse, overshadows information asset security.  This is often rooted in the misconception that all valuable (company) information exists solely in electronic ‘bits and bytes’ and is safely stored in stationary servers, back-up sites, or ‘clouds’.

Make no mistake, computer/IT security is absolutely critical to every company, particularly as target specific and/or large scale cyber-attack risks are rapidly becoming a much dreaded and potentially devastating norm. But still, in my view, computer/IT security would be better understood as complimenting, rather than dominating, company strategies and initiatives to safeguard valuable and proprietary knowhow-based (intangible) assets.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Competitive Advantages: Recognizing What Your Company Has Developed…

May 21st, 2012. Published under Competitive advantages., Intangible asset strategy, Intangible Asset Value. No Comments.

Michael D. Moberly     May 21, 2012

First, it’s important to recognize that a company’s competitive advantages or business differentiators are embedded in its intangible assets, e.g., brand, image, goodwill, reputation, relationship capital, etc.

Second, in today’s globally predatorial and aggressive business (transaction) environment in which consumers have multiple, sometimes infinite and instantaneous choices that are literally a ‘mouse click’ away, competitive advantages must be durable, resilient, and always monitored.

To achieve these necessary (product – service) characteristics, the assets’ stability, fragility, defensibility, and universality must, not should, be regularly assessed with particular attention to:

  • vulnerability to replication, and
  • reputation risk.

Should either of the above materialize it can rapidly undermine and/or erode an assets’ value, competitive advantage and reputation which can persist for extended periods of time term, or worse, become irreversible, if not lethal to a company.

So, the following represent two useful starting points or perspectives which I have found to resonate with management teams, c-suites, and boards insofar as characterizing competitive advantages, i.e., they can be…

  • embedded in unique and sometimes proprietary knowhow and/or blends of particular attributes, processes, assets, relationships, history, and even market conditions that a company exploits to differentiate itself, and thus create value. (adapted by Michael D. Moberly from the work of Michael Porter).
  • the special contributory value that flows from understanding how, when, and where to apply a company’s unique knowhow to provide a competitive edge. (adapted by Michael D. Moberly from the work of McKinsey)

Obviously, the word unique is, and should, in my view, serve as a framing point, particularly for management teams that are operationally unfamiliar with intangibles, or find them challenging to articulate in a ‘laundry list’ fashion, i.e., state precisely what differentiates their company’s products – services in their market space.

Successful and profitable companies already know this, but, sustaining product – service competitive advantages, in what I refer to as an ‘instantaneous global market space’, is an increasingly challenging proposition.  Unfortunately, such challenges are due, in part, to the reality that management teams, c-suites, and boards overlook, or through ‘permissive neglect’, fail, at least in a timely fashion, to recognize that a significant percentage of new products, services, improvements, efficiencies, and the contributory (proprietary) knowhow is consistently vulnerable, unless effective safeguards are in place.

However, the reality is, intangible and other assets are consistently at risk by ever expanding and diverse groups of global competitors and/or state sponsored entities!

Developing competitive advantages (intangible assets) is one thing, but nurturing, monitoring, and managing the attendant risks, isn’t nearly as straightforward and it’s an aspect notably absent from conventional ‘mba’ curricula.  In part, that’s attributable to competitive advantages are often ‘built into’ a product or service before launch and marketed accordingly.  By this time, asset recognition, assessment, nurturing, and risk management must be well in place.

This should be an extended (internal) process that indeed requires involvement (i.e., stewardship, oversight, collaboration) from management teams, c-suites, and boards.  The not-to-be-overlooked objectives are to create enterprise-wide circumstances in which it is more, not less difficult for adversaries to acquire and replicate valuable and competitive advantage driving assets, and certainly not as quickly.

Collectively, the persistent risks attendant to a company’s competitive advantage (intangible) assets represents another adverse business (risk) reality that makes it all-the-more-important for management teams, c-suites, and boards to consistently devote the time necessary to ‘drill down’ into the array of intangible assets their company produces to assess their contributory value and potential for effective (profitable) exploitation as a competitive advantage.

Regardless, when it became an economic fact – business reality more than a decade ago, that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability evolve directly from intangible assets, among them being competitive advantages, ensuring they are routine action items on management team, c-suite, and board agendas for oversight, stewardship, and management is an absolutely necessary requisite!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

 

 

Business Plans: Will They Remain Relevant In Intangible Asset Driven Companies?

May 18th, 2012. Published under Analysis and commentary, Business plans and mission statements., Managing intangible assets. 1 Comment.

Michael D. Moberly    May 18, 2012

We all know about the increasingly competitive business terrain in which intangible assets, e.g., intellectual, structural, and relationship capital have become the dominant drivers (producers) of most company’s value and sources of revenue.  This economic reality is influencing, as well it should in my view, entrepreneurially-minded management teams to re-examine the relevance and applicability of a conventionally structured business plan.

Let’s be clear, I am not suggesting business plans are irrelevant because they can serve as useful and descriptive (projective) roadmaps of what one wants a business to eventually look like and how to get there!

The issue, in my judgment, is that there is an inclination on the part of many management teams, c-suites, boards, and other stakeholders to symbolize a business plan in somewhat of a constitutional law context as if Justice Scalia was debating whether it is a living document that’s malleable and flexible as circumstances warrant or a more static (stationary) document that should only be interpreted relative to its original intent.

Personally, I am finding more management teams, at least those which I have the pleasure of engaging, exhibiting a greater sense of responsiveness, adaptivity, and preparedness to rapidly execute to accommodate the immediacy which business opportunities are, with more regularity, being framed.   Put simply, there appears to be less interest in – necessity for being bound to the rigidity associated with a conventional business plan.  In other words, there appears to be more emphasis on the tactical, while not overlooking or neglecting the strategic!

Let me be clear though, most of my engagements, by choice, are with small, mid-size, and early stage companies where assembling a structured and strategically focused business plan may be subordinate to merely trying to remain viable in this this extended economic downturn (recession).

Respectfully, business plan development and construction is still portrayed in many college (business) textbooks and curricula, as being the very first step one should take toward starting a business. Interestingly, in an MBA (business management) course I’ve taught numerous times, this somewhat alternative view about business plans was purposefully presented to classes in which there were numerous ‘entrepreneurial spirited’ students who aspired to start their own business, with some already in the early stages.

For many, my (alternative) view prompted numerous, but generally opposing reactions, particularly from individuals who had already toiled over writing a business plan and now felt wedded to it.  Such reactions are understandable and respected.  Some types of businesses, whether large, midsize, or small may require more structure than others, thus a strong and detailed business plan may be necessary.

But again, it’s simply not uncommon to find myself visiting companies which, at first blush, appear to be, for lack of a better term, somewhat ‘rudderless’ in that they are continually evolving, emerging, and even, what appears to some I’m sure, as being in a perpetual state of ’re-inventing themselves’. The reason or rationale for this still, rather un-conventional management style is that it works for some firms, pure and simple!  This translates to the necessity to retain sufficient flexibility and maneuverability internally to accommodate their particular transaction – business space as quickly and effectively as circumstances warrant.

Of course, I attribute much of this change to company management teams that have achieved confidence in identifying and using their intangible assets which don’t always mesh well, in my view, with conventional, highly structured, and inflexible ‘roadmap’ perspectives found in a business plan. Admittedly too, a substantial portion of the lending community finds little, if anything, to be enamored with this alternative view.  For them, a well-developed and practical business plan serves as the starting (focal) point for most any lending discussion.

All that said, this alternative view does require, in most instances, much more attention and oversight from a management team and board. That is, they need to literally epitomize (embrace) flexibility, intellectually and conceptually, by being prepared to adapt, change, and have the necessary information, at the ready, to make sound decisions as rapidly as a new deal, proposal, or circumstance warrants.

There should be little question now that intangible assets have become the key and irreversible underlier to the success and profitability of most companies, that is, if the intangible assets being produced are recognized, developed, and used (exploited) effectively.   An important marker for demonstrating the effective use of intangible assets, in my view, occurs when management teams…

  • recognize intangibles as being very maneuverable, flexible, adaptable, and ‘bundable’ to accommodate the development and execution of a new product, service, or transaction.
  • know when, where, and how to use them best to achieve particular objectives, i.e., the wisdom, timing, and sense of foreseeability.

In other words, there should be a ‘company culture’ in place that, among other things, includes consistent stewardship, oversight, and management of intangible assets!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Elevate Investor Confidence By Ensuring Your Intangible (IP) Asset House Is In Order!

May 17th, 2012. Published under Analysis and commentary, Due Diligence and Risk Assessments, Investing in intangible assets.. 1 Comment.

Michael D. Moberly    May 17, 2012

Want to elevate investor confidence?  Start by ensuring your intangible (IP) asset house is in order!  One consequence of management teams, c-suites, and boards of emerging growth firms not recognizing and exploiting the intangible assets their company produces and possesses is that it will have a bearing, usually adverse, relative to prospective investor’s ‘invest, don’t invest’ decision criteria.

The conventional assumption that investors are, by their nature, more accepting of risk is, in my view, much overplayed.  I have yet to meet an investor who does not have a fully developed internal ‘smell test’ to gauge a prospective transaction’s risk and return potential.  Too, I see increasing numbers of seasoned investors…

  • requiring a target’s intangible asset and IP house be in order as a requisite to investment consideration.
  • recognizing intangible assets are crucial contributors to a target’s profit potential, share price, market position, and competitive advantage.
  • assigning more weight to differentiating intangible assets from tangible (physical) assets.
  • recognizing that transaction due diligence must include pre and post components for monitoring any fluctuations in asset value, control, or ownership.

To emphasize these realities, I refer to a previous ‘Howery Survey of Investor Attitudes on IP Protection’  in which a significant number of respondents reported that companies which lack an effective IP (intangible asset) strategy has a detrimental effect on company performance.  In fact, one in four of the Howery Survey respondents reported they had actually turned down investment opportunities due to the target company’s inadequate approach to IP and other intangible assets.

Fully 95% of the Howery survey respondents report that it is no longer sufficient, in the context of their investment decision, for a target company to merely own IP with no (aligned, integrated) protection, managerial, or competitive advantage peripherals.

So, in my view, the proverbial bottom line (in conjunction with the Howery Survey’s findings) is this:

companies that presume conventional IP issuances and enforcement protections are sufficient, standing alone, to attract investors are finding instead that an increasingly important requisite to attracting and satisfying the demands of serious investors relative to their invest – don’t invest decision criteria, is the existence of comprehensive plans, practices, and procedures which…

  • demonstrate the about-to-be-purchased/invested assets, have effectively safeguarded from their inception.
  • reflect today’s increasingly aggressive, predatorial, and winner-take-all business transaction environment.
  • are seamlessly aligned with – integrated into a viable and strategically competitive business strategy that encompasses (intangible) asset development, acquisition and utilization, and exploitation.

(Adapted by Michael D. Moberly from the work of Howery, Simon, Arnold & White’s Survey Of Investor Attitudes on IP Protection)

China’s IP Transition and Explosive Growth In Innovation…How Much Of It Has Really Been Indigenous…?

May 16th, 2012. Published under Analysis and commentary, Business Transactions, Economic Espionage, Intellectual Property Rights. 2 Comments.

Michael D. Moberly    May 16, 2012

I recently read a National Bureau of Asian Research report titled, ‘China’s IP Transition: Rethinking Intellectual Property Rights in a Rising China’ and found it to be an insightful strategic window into China’s national intellectual property (innovation agenda) policy.

The reports’ executive summary and main argument reads as follows…

China’s drive to promote indigenous innovation has given IP its creation, utilization, management, and protection a prominent position in the nation’s policy agenda.

In conjunction with its ambitious policies to support indigenous innovation, China launched a major IP strategy in 2008 to support the creation, utilization, management, and protection of IP.

While I do not wish to dispute the thoroughness of the research which the reports’ authors obviously conducted and articulated so well, I do find the word indigenous disconcerting in the context of applying it as a broad descriptor of how China has achieved and intends to sustain its innovation strategy – policy agenda.

I was in China (Shanghai) in 2008 when that policy ‘went public’.  It was the lead story on (English language) CCTV for several days with extended segments devoted to showcasing various, presumably government sponsored, gatherings to convey awareness for this ‘transition to intellectual property’.  Most of the events appeared to be held in Beijing.  Interesting to me, in several of the CCTV stories, large scale education initiatives about intellectual property were being planned.

As most anyone knows who has visited China in this decade, one does not have to walk far in a city to see evidence of entrepreneurism and entrepreneurial thinking which could understandably be characterized as – assumed to be indigenous. However, my work, research, and writing on information asset protection and economic espionage issues for 25+ years influences me to suggest that the term predatorial is also a relevant and objective descriptor of – contributor to China’s innovation policy agenda.

It is not my intent that the term predatorial, as I have chosen to apply it here, be interpreted as anti-China!  Rather, I am merely suggesting the term predatorial should also be applied because of its indigenously embedded nature over a 3000 – 5000 year span of developing a (business) culture.  At minimum, the word predatorial serves as, at least, a partial explanation for China’s phenomenal and rapid business – economic – innovation growth which some western researchers – writers describe as the world’s largest and most rapid transfer of wealth.

After all, we do live and work in an increasingly knowledge (intangible) asset based global economy wherein 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, wealth creation, and sustainability evolve directly from intangible assets, of which IP is just one.

I assume ‘indigenous innovation’ is a phrase Chinese policy makers carefully selected and cultivate.   But, I believe the term predatorial used to describe how countries supplant – achieve rapid growth in innovation is applicable to numerous global actors, not just China.

China, in my view, is now immersed in what I respectfully call the ‘third quarter of a generation that recognizes]/ private property, let alone intellectual property’.  But, in China, as in numerous other countries with communist – socialist legacies, there is virtually no intellectual property legacy to follow.  And, China, like many other countries, has countless ‘legacy free players’, a phrase I first saw applied in Thomas Friedman’s books.  While I am certainly not positioning myself to be an arbiter of Friedman’s work, I have consistently used this phrase in a context of describing various countries’ and actors who have yet to fully embrace and consistently practice what I  refer to as an ‘intellectual property rights protection and respect ethic’.

China is no doubt, moving in the right direction, with respect to intellectual property rights. But, it has a ways to go yet for me to broadly use the term indigenous to describe the paths and strategies they have taken to achieve the intent and spirit of the language found in their national innovation agenda.

I encourage all those interested to read the report and draw their own conclusions at…

www.nbr.org/publications/element.aspx?id=520.

Familiarity With A Company’s Intangible Assets Produce Multipliers and Risk Mitigators

May 14th, 2012. Published under Managing intangible assets, Training, Value Propositions. No Comments.

Michael D. Moberly    May 14, 2012

All too frequently the contributions’ intangible assets make to a company’s value and serve as sources of revenue are overlooked, neglected, or outright dismissed.  Equally unfortunately, those attributes are often obscured by intangible assets’ (a.) lack of physicality, and (b.) not knowing precisely where and how intangibles ‘fit’ on balance sheets and financial statements, or even reported at all.  Too, with equal frequency, the assets’ proprietary and competitive advantage features go unrecognized, un-protected, undervalued, or not valued at all.

I often characterize intangible assets to company management teams as being akin to the proverbial ‘hand in front of our face in a pitch dark room’. That is, they’re often developed internally, sometimes over time and embedded in a company’s routine operations, processes, and functions that, in many instances, fall under a management teams’ mba – tangible (physical) asset oriented radar.  Just as frequently, company’s engage in HR functions and other types of business transactions in which the intangible asset components of either go unnoticed, unused, and seldom effectively exploited.

So, why, or how is it beneficial and necessary for company management teams, c-suites, and boards to acquire a familiarity with intangible assets now?  And, how will such familiarity produce (translate as) multiplier effects and risk mitigators as the title of this post claims?

The key objectives are, of course, to position and exploit a company’s intangible assets in order to extract as much value and competitive advantage as possible throughout the assets’ value – functionality (life) cycle.

In my view, this occurs when management teams achieve two things:

  • begin exercising consistent, effective, and sufficient stewardship, oversight, and management of their company’s intangible assets, as the basis for
  • sustaining control, use, ownership, and monitoring the value and materiality of the assets

Other useful outcomes, i.e., risk mitigators and multipliers of effective and consistent (intangible) asset management include…

  • Elevating transaction due diligence quality by (a.) recognizing how to rapidly identify, unravel, and safeguard valuable – revenue producing assets in (b.) both pre and post (transaction) contexts.
  • Adding predictability to transaction outcomes by being able to recognize and assess asset (a.) stability, fragility, sustainability, and defensibility, and preferably mitigate risks, and (b.) relevance to achieving projected returns. competitive market position, anticipated synergies and efficiencies, and exit strategies.
  • Reducing the probability intangible assets (and IP) will incur unnecessary risk, i.e., (a.) become entangled and/or ensnared in costly, time consuming, and momentum stifling legal challenges, (b.) that can erode and/or undermine asset value, performance, or competitive advantages.
  • Providing a stronger foundation for aligning the utilization and exploitation of a company’s intangible assets with (a.) continuity-contingency plans, (b.) organizational resilience – risk management planning, and (c.) strategic business objectives.
  • Contributing to building a ‘company culture that’is (a.) attuned to intangible assets, their value, and contributions to (company) sustainability and profitability, and (b.) treats intangible assets as business decisions, rather than solely legal or accounting processes.
  • Strengthening the convergence of computer/IT security and intellectual property and intangible asset safeguards to achieve timelier awareness and pursuit of (IP) rights- ownership violations.
  • Providing a foundation for more effective application of (a.) knowledge management initiatives, and (b.) balanced scorecard approaches.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com