Archive for June, 2012

Company Culture: How Definable Is It?

June 28th, 2012. Published under Company culture and reputation., Intangible asset focused company culture.. 1 Comment.

 Michael D. Moberly   June 28, 2012

“Culture eats strategy for breakfast,” is a phrase widely attributed to Peter Drucker, which I understand was framed and hung on the wall of FMC’s so-called ‘war room’.

The phrase itself, was elevated in prominence in 2006 by Mark Fields, Ford Motor Company’s President of the America’s who has been credited with initiating a culture change at Ford.   

A dominant task Field engaged in at Ford was to replace a culture (work environment) that had come to be routinely characterized with terms such as bitterness, distrust, fear, and betrayal, etc., to a culture that came to be characterized with quite different terms such as creativity, innovation, and (employee) sense of responsibility.

Readers familiar with the American auto industry however, surely understand that the culture reversal that took place at Ford, under Field’s tutelage, or any U.S.-based automaker for that matter, is often fragile and linked to collective bargaining agreements. 

There is certainly no intent here to minimize Mr. Fields efforts as I’m confident his presence and advocacy served as both impetus and rallying point to achieve the culture change objective.  But perhaps it’s prudent to recognize that large scale (enterprise wide) culture changes are seldom the product of a single individual’s efforts, i.e.,

no matter how far reaching one’s vision or how brilliant one’s strategy, neither can be realized if they haven’t evolved from and are supported by a receptive and like-minded company culture.!

Realistically, Ford, like other U.S. carmakers at the time were approaching their own respective ‘fiscal cliffs’ which no doubt served to bring about a greater than usual sense of receptivity and urgency to accept change.  Recognizing that if substantial (cultural) change was not forthcoming and in fairly rapid order, those fiscal cliffs would be more than metaphors, they would, in many experts’ view, materialize as irreversible catastrophes to the U.S. auto industry as a whole.

Company culture defined…Like a former U.S. Supreme Court Justice remarked regarding a landmark pornography decision, which I now paraphrase, ‘I don’t know precisely how to define it, but I know it when I see it’.   That’s quite similar to the way that company culture is often characterized, e.g., as somewhat of an invisible (intangible) temperament and/or attitude that links companies, employees, and stakeholders together.

More importantly though I believe, is company culture being characterized as an ‘internal version of a company brand’ because it encompasses a company’s mission, vision, and values.

Grant McCracken is one, among several prominent ‘company culture advocates’ today who clearly understands how an effective (company) culture can impact a business, e.g., “culture is a company’s last mile” as McCracken is often quoted.  McCracken specializes, he says, in the intersection of commerce and culture where company culture sits at the intersection of anthropology and economics.

All in all, McCracken paints a very seductive picture about company cultures and makes a compelling case that culture may well be marketing’s next silver bullet.

But, myself, along with many of my intangible asset advocate colleagues, have long understood, presumably like McCracken, that a well designed, honed, and monitored (company) culture can produce – deliver what I refer to as ‘contributory value’ to many different aspects, venues, and transactions a company routinely engages.  In other words, culture can become an extraordinarily valuable (intangible) asset that can benefit a company in many ways, particularly in the marketplace.

We recognize that any initiative, sometimes regardless of the motivation, to develop – instill a sustainable (company) culture change will inevitably incur various challenges and hurdles, not the least of which are positively re-directing long embedded beliefs and back-channel habits

some of which will be of such significance and duration that the probability for failure will be substantially elevated. 

This is especially significant when company leadership lacks, for starters…

  • a clear understanding of their company’s intangible assets, of which company culture is one
  • a strategic appreciation for the implications that a culture change will, in most instances, bring to a business, i.e., employees, management teams, c-suites, boards, stakeholders, and a company’s overall perception in its market space, and
  • tested strategies at the ready to leverage, exploit, and/or market a culture change once it has been achieved, to benefit a company.
  • the ability to promote its own culture internally will likely experience a hard time promoting and defining its brand externally

Another unfortunate reality is that some of the skill sets expected of management teams, c-suites, and boards today related to company success, sustainability and profitability, are not necessarily skills that coincide with initiating, valuing, managing, and monitoring changes in company culture .

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects of interest.  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 Assets and Frugal Innovation…

June 27th, 2012. Published under Frugal Innovation, Intangibles as strategic assets, Intellectual capital management.. 1 Comment.

Michael D. Moberly    June 26, 2012

Frugal innovation is, according to Navi Radjou, Dr. Jaideep Prabhu, and Dr. Simone Ahuja, authors of ‘Jugaad Innovation: Reigniting Innovation in the U.S. and Beyond’…

much more than merely stripping out cost, it essentially prompts individuals to re-think the entire production process as constituting a reversal of most contemporary product design approaches and/or methodologies!

In their, many say, revolutionary book, the word ‘frugal’ is replaced with the Hindi term ‘Jugaad’ which means an innovation, i.e., an improvised solution born from ingenuity and resourcefulness when faced with scarce resources.

As the authors point out, ‘Jugaad innovators’ are most notable for possessing mindsets that encompass multiple (and simultaneously held) attitudes, practices, and abilities, each of which is conducive  to seeking and developing opportunities under adversity by…

  • doing more with less (resource constrained circumstances)
  • thinking and acting flexibly
  • keeping things simple
  • always including the margin, and
  • following one’s heart.

But, let’s be clear, ‘frugal innovation’ commences, like most innovative endeavors, with an idea. The difference is, frugal innovation is conducted under frugal, and, some would say, adverse circumstances with little or no seed capital.  My experience suggests, frugal innovation will produce a compliment of intangible assets.  Those intangible assets will usually take the form of intellectual, structural, and relationship capital, which in many instances are proportionately comparable to the output of corporate and/or university sponsored R&D initiatives in which there are generally, sufficient resources committed and innovation development conditions are anything but frugal.

As is frequently typical with many new initiatives, some espouse the view that frugal innovation is a ‘tricky skill set for western innovators to emulate’.  That’s because, that argument goes, a requisite to being a successful and frugal innovator, is having grown up in an environment where frugality is the primary, if not the only, option available to hopefully bring one’s innovative idea to fruition.

Needless to say, I don’t fully agree with that perspective.  Instead, I am very confident, in fact I know a substantial number of ‘western creatives’ who would find frugal innovation an especially attractive concept and strategy, perhaps even more so during this extended economic downturn in which funding and sources of capital are tight, to say the least.

Regardless, wherever a creative initiates/conducts their ‘frugal innovation’, success will be varyingly dependent on having access to an operational platform in which the tenants of ‘frugal innovation’ are already integrated and linked to processes and structures whereby they  can develop, test, and assess their idea (innovation) in not just a frugal, but a well managed environment coupled with the right amount of stewardship and oversight.

So, in my search to find an existing and preferably already operational U.S.-based company, that applied ‘frugal innovation’ principles, I became acquainted with a firm in Atlanta called Qwerkstation.com.

As it turns out, Qwerkstation was developed by Latanya Washington as a social workstation for entrepreneurially oriented individuals to explore and develop their ‘creative side’ by turning ideas into actual innovation.  Querkstation is a web-based platform in which individuals can truly observe and engage in ‘frugal innovation’ practices. During Qwerkstation’s development phase, Washington’s expertise in software allowed her to capitalize on the open source movement in software production from which she selected particular web application components and distinctively reconfigured them to literally create Qwerkstation.

As readers know, open source software development has been a boon to entrepreneurs for turning ideas into robust applications and digital products without the necessity of hiring software engineers which would all but negate the tenants of frugal innovation. The operational practices Washington adheres to, coupled with the digital functionalities she has embedded in Qwerkstation, collectively work in her favor by (a.) minimizing overhead costs, and (b.) better meet the needs of her target consumer, all-the-while operating in a genuinely frugal innovation manner.

Washington recognizes that frugal innovation has had a significant effect on her overall business processes and perhaps most importantly, outcomes, which I find to be valuable and sustainable competitive advantages, i.e., intangible assets.  Frugal innovators and creatives’ who engage Qwerkstation Washington believes, need to be highly focused and efficient, probably more so than in comparative companies with large capital reserves and ample resources.

It’s certainly my sense, at this point, that Qwerkstation is very much a global version of ‘frugal innovation’ which is not only an attractive, but very worthy first step to the innovation process.

(This post was inspired by the book ‘Jugaad Innovation’ authored by Navi Radjou, and Drs. Jaideep Prabhu and Simone Ahuja and the work of Latanya Wasington who founded Qwerkstation.com)

Intangible Asset Specialists: The New Business Transaction Analyst!

June 27th, 2012. Published under Business Transactions, Due Diligence and Risk Assessments, Intangible asset protection. No Comments.

Michael D. Moberly    June 27, 2012

Context…today, 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability directly evolve from intangible assets usually, intellectual property.  One must, and I might add, correctly conclude then, that proportionately, similarly increasing percentages of (global) business transactions will involve either the buying, selling, or trading of intangible assets and IP.

As intangible assets become more recognizable and play more integral roles in business transactions, their value and exposure (vulnerability) elevates.  So now, it’s not merely prudent, but rapidly being quite correctly characterized as a fiduciary responsibility for transaction management teams to:

  • include intangible asset specialists and strategists skilled in the art and science of conducting due diligence on intangible assets that are increasingl in play and/or part of a deal.
  • be alert to an ever increasing and sophisticated array of risks and threats when materialized, can rapidly undermine and/or erode asset value, competitive advantages, and projected synergies and efficiencies,  or, worst case, cause certain intangible asset values ‘to go to zero’.

Perhaps it’s worth repeating, it’s no longer merely prudent, rather, it’s essential, if not a fiduciary responsibility for transaction initiators to recognize that in most, if not all deals, intangible assets, e.g., IP, competitive advantages, proprietary information and know how in the form of intellectual, structural, and relationship capital are critical to transaction value and achieving a positive and sustainable outcome.  It is in this context then, that I urge transaction management teams to include, at the outset, a high degree of specialization and expertise, particularly with respect to intangible assets, i.e., professionals who…

  • are additionally skilled in identifying, unraveling, and safeguarding those intangible assets identified as being integral to transaction success.
  • can identify transaction risks, which, if materialized, can stifle a deals’ momentum and/or undermine important assets’ projected value, competitive advantages, and synergies.
  • can articulate relevant-favorable (off-setting, mitigating) modifications to the terms of a transaction when risks are revealed that jeopardize asset value projected synergies, expected efficiencies, etc.
  • can readily put in place effective, yet unobtrusive measures that compliment re-negotiated transaction-contractual codicils to retain control, use, ownership, and monitor value and materiality of key assets in both pre and post transaction contexts.

One could make an effective argument then that intangible asset specialists and strategists today are comparable to industry sector (Wall Street) analysts who assess and monitor relevant-key variables, e.g., trends, events, cycles, and risks to  intellectual and structural capital, innovation pipelines, and the full range of intangibles relative to their near – long term stability, sustainability, fragility, and volatility.

The premise here, of course, is that intangible asset specialists and strategists should be early and consistent invitee’s to the ‘transaction management and decision table’. And, once ‘at the table’, their assessments and recommendations should be given due attention relative their contributions to facilitating more secure, stable, and profitable transactions as they were initially envisioned.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects of interest.  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

Social Networking Apps: Assurance of Privacy Is A Valuable Intangible Asset That Should Be Integrated Before Launch and Not Squandered

June 25th, 2012. Published under Intangible Asset Value, Intangibles as strategic assets, Personal Privacy. No Comments.

Michael D. Moberly   June 25, 2012

As an admitted intangible asset advocate and strategist, personal privacy, and, I mean real and consistent personal privacy, not just the sort conjured in legal ease as a ‘check the box’ prelude to joining a social networking platform, is an incalculably valuable intangible asset that unfortunately, some ‘app’ developers appear to be squandering in an effort to derive business models to achieve near term revenue streams.

Colleagues and readers of this blog may characterize what’s really being squandered are a company’s trust, reputation, and relationship capital.  Regardless, each is an intangible asset, each has significant value, and when erosion and/or undermining occurs, substantial financial losses and market space can materialize very rapidly.

Here’s just one example, probably among thousands, which I believe goes to the heart of the issue.  Parker Higgins highlighted a privacy problem in Electronic Frontier Foundations’ blog (March 8, 2012), i.e., how apps need to respect user privacy rights from the start.

In the post, Higgins’ describes a Texas born app that facilitates, ‘ambient social networking’.  Translated, that means the app runs in the background of one’s phone collecting and sharing location data, etc., and then notifies you when your friends and/or others with shared interests are in proximity, thus, enhancing serendipity!  

I am certainly not suggesting these types of apps are inherently wrong or necessarily violate the increasingly tenuous presumption of privacy.  After all, one must willingly purchase the app, therefore buyers presumably understand the apps features and its often requisite connection to other social networking sites. 

As Higgins quite correctly points out though, it certainly doesn’t require much imagination to foresee how sending a steady stream of data and information of all types to a third party, that may have not have a privacy or data retention policy in place, can, and inevitably will, give rise to a host of significant personal privacy issues.

At this point, let me respectfully refute any notion that this post constitutes an effort to advance some sort of conspiracy theory related to social networking media.  Should any reader of this post believe that to be the case, they are well off-the-mark!

So, I reiterate, personal privacy, presumed or not, is, in my view, an extremely valuable, yet very fragile form of intangible asset and should be treated as such. 

If I were a board member or shareholder of an app developing firm, I would make every effort to obligate management teams to consider ‘personal privacy’ as being integral, if not a fiduciary responsibility to app development and not ‘play fast and loose’ with the stewardship, oversight, and management of ‘privacy’ as a real (business) intangible asset!

The personal privacy issues Higgins claims are bringing to the forefront a larger problem in app development, which is, initially building and marketing a ‘minimum viable product’  only to see how it’s received by niche consumers, and then adding personal privacy features later.  But, cutting privacy corners that are likely to undermine the strategic value of personal privacy along with consumer trust and the reputation of app development firms are intangible assets that should not be taken lightly or squandered!

As aptly noted by Marissa Levin (Successful Culture blog) a lifetime that has become largely ‘app driven’, we also must consider safeguarding the humanity of our companies.

Valuation of Intangible Assets: Company Decision Makers Need Information That Extends Well Beyond What Comes After The Dollar Sign!

June 21st, 2012. Published under Intangible Asset Value, Intangibles as strategic assets. No Comments.

Michael D. Moberly   June 21, 2012

Let’s start by putting the much overused analogy regarding the guesstimated value and protection of the Coca-Cola formula aside insofar as this conversation is concerned.

When clients I serve, deem it necessary, either based on my recommendation or that of others, to have a valuation conducted, I emphasize the necessity that it address – reveal much more than merely an intangible assets’ standalone value.  Instead, I prefer valuations be framed (conducted) relative to intangibles’ ‘contributory’ value…

  • as individual or clusters of integrated (contributory) intangible assets
  • to a particular project, product, and/or business unit.

My rationale for advocating intangible asset valuations be conducted in this manner are threefold…

  • 65+% of most company’s value, sources of revenue and, what I call ‘building blocks’ for growth today, evolve directly from intangible assets.  So, in an increasingly knowledge-based global economy, companies are becoming more intangible asset intensive, not less.
  • this approach will provide a firms’ decision makers, strategists, and legal counsel with much needed, but often overlooked, perspectives, i.e., that intangible assets should be managed and safeguarded based on their contributory value and functionality cycles, not for the lifetime of a company, and
  • conventional intangible asset valuations involve, at least in my view, some level of speculation and subjectivity.  This ‘contributory value’ approach can mitigate those potential informational short-comings through better understanding and tracking of intangibles’ actual contributions.

When intangible asset valuations are applied specifically to intellectual property, i.e., patents,  I wonder, particularly as auctions of standalone patents are becoming a global fixture, whether, by applying the ‘contributory value’ approach, it may lessen or perhaps even alleviate the need for conventional IP-only valuations, other than to establish a minimum bid.  An example of a patent auction is the upcoming ICAP Patent Brokerage Auction to be held in San Francisco in late July.

Should this ‘contributory value’ approach be recognized as a useful methodology, it will provide business decision makers with more strategic insights about their company’s intangibles.

Ultimately, any credence that may or may not ever attach to this contributory value approach I am advocating here, admittedly, it has some drawbacks, but, all-in-all, I believe its worthy of more study and should not be summarily dismissed, particularly as management teams, c-suites, and boards find themselves increasingly subject to fiduciary responsibilities for the management, stewardship, and oversight of intangibles.

After all, it is my intent, and that of many of my colleagues, to not only elevate operational awareness of intangibles, but contribute to learning how to develop, utilize, and exploit intangibles in the most efficient and profitable manner as possible.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects of interest.  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

SHRM Survey Confirms: Company Culture and Culture Management Are Valuable Intangible Assets!

June 19th, 2012. Published under Company culture and reputation., Intangible asset focused company culture.. No Comments.

Michael D. Moberly   June 19, 2012

Society for Human Resource Management Survey…

Company culture and its management are obviously on the minds of HR managers as SHRM commissioned a survey in early 2012 that asked 770 HR leaders to identify significant workforce management and staffing challenges.  The challenges the survey respondents identified were:

  • employee engagement
  • employee retention
  • effective performance management
  • employee recruitment, and
  • company culture management

To the point of this post, a full ninety percent of the respondents stated that (company) culture management is either important or very important!  That finding is particularly instructive insofar as it should prompt management teams to further recognize that devoting time, energy, and resources to developing and sustaining a positive company culture will deliver impressive and measurable returns.

Most importantly in my view, it can now be stated, with considerable authority, that a well managed company culture, whereby employees, management teams, c-suites, and boards collectively recognize, respect, and are committed to sustaining a principled base of intellectual, structural, and relationship capital, and values (intangible assets) can elevate a company’s overall performance.

Supplementing this view of course, is the economic fact that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability today evolve directly from intangible assets one of which is a positive and principled company culture.  It’s certainly not a stretch then, to infer that a principled company culture can also serve as a catalyst for internalizing and enhancing other factors noted in SHRM’s survey, i.e., employee engagement, retention, performance, and certainly, recruitment of new employees.

What is a company culture…?

Based on the fine work of Dr. Edgar Schein, a company culture consists of progressive stages, and will emerge and become observable…

  • as employees (collectively) recognize and begin to act on a shared system of values, norms, beliefs, and attitudes that defines and clarifies what is important.
  • as employee’s at all levels recognize they learn as they’re solving problems and, if the problem solving methodologies work well enough, employees will consider them valid and worthy of being taught and passed along to new employees, because…
  • they represent the correct way to perceive, think, and feel in relation to addressing (internal, external) problems that their company routinely face, which, in turn, leads to efficiencies, competitive advantages, and reputational value, etc.  (Adapted by Michael D. Moberly from the work of Dr. Edgar Shein)

For most companies, the initial step in developing a principled company culture involves…

  • determining what attitudes and beliefs need to (should) be established, and
  • having a clear understanding how those attitudes and beliefs will be translated and ultimately operationalized, preferably as consistent and positive behaviors throughout a company.

But, as aptly pointed out by Dr. Kenan Jarboe in his Athena Alliance monograph appropriately titled ‘Intangible Asset Monetization: The Promise and the Reality’, there are six factors considered by financial markets (i.e., asset buyers, sellers, and investors) with respect to determining the ‘suitability’ of an (intangible) asset.  Of those six factors, one is an assets’ transferability.  In other words, is a ‘company’s culture transferrable?  Or is it so (company, business unit) specific that it cannot be replicated or sustained through a market change or significant economic downturn as we’re experiencing today?

Unfortunately, the contributory value of a principled company culture seldom, if ever, appears on management teams’ conventional mba oriented dashboards, in part, I believe, because those dashboards remain largely focused on tangible-physical assets vs. intangible (non-physical) assets such as a company culture.

Too, for some management teams, c-suites, and boards, a principled company culture, remains somewhat of a managerial, financial, and competitive advantage mystery in terms of understanding how best to utilize – exploit this influential asset relative to enhancing and measuring employee engagement, retention, performance, and recruitment.

A much desired objective of course, is to build a resilient, self-perpetuating, and principled company culture that is readily scalable and supports development of structural and relationship capital to consistently deliver measurable performance and returns.

But, building a principled company culture is not something which evolves exclusively in a top-down fashion, nor is it a characteristic owned and executed solely by a management team or c-suite as aptly noted by Jennifer King (Software Advice Blog, June 12). Instead, a well-grounded and principled company culture provides permanence, depth, and confidence among employees and their abilities.

A risk intelligent company culture…

My professional preference would be that a company’s culture would also be a risk intelligent culture.  An important step toward developing a ’risk intelligent company culture’ is recognizing that risk is not solely an external phenomena, i.e., all risk does not emanate from outside a company.

An equally important step in developing a risk intelligent (company) culture is rooted in recognizing that company value can be favorably affected by integrating aspects of risk management with human resource management, e.g., a significant percentage of (company) risk evolves from various employee behaviors and actions, including management teams and boards.

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.

A risk intelligent company, Deloitte’s report points out, executes at the point in which there is convergence of…

  • risk governance – how a company treats (identifies, assesses) risk and assumes responsibility for risk oversight and strategic decision making.
  • risk infrastructure management – how a company assumes responsibility for and understands how to design, implement, oversee, and sustain an effective risk management program.
  • risk ownership – how and when employees assume some degree of ownership (responsibility) for identifying, assessing, monitoring, reporting, and mitigating 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 culture (workforce) can be a strong advantage.

In a risk intelligent company (culture), employees, management teams, c-suites, and boards collectively assume an obligation to…

  • understand the adverse consequences of unattended risks
  • how existing risk management policies are being interpreted and practiced internally by employees

Too, when management teams, boards, and employees collectively assume responsibility for cultivating company-wide awareness (culture) about risks is a prelude to creating a risk intelligent company culture.

Lastly, and perhaps most importantly, it’s important to recognize two realities insofar as developing a ‘risk intelligent company culture’…

  • any change in (company) culture generally precedes changes in employee behavior
  • cultural and behavioral changes are less a product of formal risk policies, controls, and pronouncements, than they are the result of effective (employee) incentives and rewards.

As pointed out by former Harvard researchers Matthew Bunn and Anthony Wier, a ‘good company culture is comprised of 20% equipment and 80% people’.  Certainly, no argument here!

(The inspiration for developing this post is attributed to a fine piece authored by Jennifer King at Software Advice) http://blog.softwareadvice.com/articles/hr/culture-chief-1061212/

Intangible Asset Curriculum Content: Integral to Business Management and Marketing

June 18th, 2012. Published under Intangible asset teaching and training., Intangible asset training for management teams.. No Comments.

Michael D. Moberly    June 18, 2012

Business management and marketing curriculum content in universities must address intangible asset identification, management, stewardship, oversight, and risks!  While preparing to teach a graduate (MBA) business management course for a mid-west university last year,  I purposefully framed and sequenced my teaching/course materials to reflect my determination and eagerness to introduce students to intangible assets and strategies related to their management, stewardship, oversight, and risk mitigation.

Being a long time proponent/advocate of intangible assets insofar as their contributory value to companies of all sizes and sectors, I believe intangibles must be an integral teaching-learning component in most every business management course taught today!  That’s  because steadily rising percentages (i.e., 65+%) of most companies’ value, sources of revenue, and ‘building blocks’ for growth and future wealth creation evolve directly from these non-physical assets, e.g., intellectual, structural, relationship capital, brand, reputation, goodwill, competitive advantages, and intellectual property, etc.  Not introducing students to the fundamentals of intangible asset identification, development, valuation, exploitation, management, and risk mitigation, especially in business management and marketing curricula, in my view, is tantamount to business school heresy.

Once my aforementioned class commenced and the subject of intangible assets was introduced as constituting an integral component of the course, it became apparent that, for even the most experienced and already employed (MBA) students, intangible assets were yet to be part of their lexicon and/or skill set repertoire other than in the context of individual and generally unrelated assets.  That is, a percentage of students possessed a fundamental, but sometimes limited familiarity for specific intangible assets, once they were identified, particularly intellectual property (patents), reputation, and brand.  Students generally portrayed intangibles in standalone (individual) contexts, not reliant on or connected to other company assets.

Teaching assessments coupled with student responses to essay questions related to intangible asset issues revealed remaining challenges relative to achieving a sufficient (operational) grasp of intangibles in several key areas, among them being how…

  • intangibles’ could be subject to a collective framework of management, stewardship, and oversight.
  • to recognize and assess intangibles’ contributory value (to a company, a particular product, service, or launch).
  • to related and distinguish particular intangibles’ as contributing to – driving specific  sources of revenue, and
  • the assets’ could be subject – vulnerable to persistent, various, and asymmetric risks that if materialized, could erode and/or undermine company value, the value of competitive advantages and (company, product) reputation, and new product launches, etc.

Respectfully intangible assets (and their management) admittedly represent a variously challenging concept to grasp and apply in quantifiable (value-add, revenue generation, and exploitation) contexts.  I sensed then, and still do, that an important initial (intellectual, conceptual) hurdle with respect to the understanding intangible assets lies largely in the word ‘intangible’.  That is, intangible assets are just that, they’re intangible, they lack a conventional sense of physicality, unlike tangible (physical) assets which one can see, touch, and report on balance sheets and financial statement such a property, inventory, vehicles, buildings, machinery, etc.

Again, respectfully, this was, for most, if not all, of these high achieving MBA students, quite literally their initial (in-depth) introduction to intangible assets.  I sense their reactions and ability to grasp the management, stewardship, and oversight was not reflective of this university’s graduate programming or curriculum as it was, and remains, in my view, a reflection of the larger business community and its management teams, who themselves respectfully struggle with how to effectively and efficiently engage and utilize the intangible assets their company’s produces, acquires, and possesses.

As the nine week class progressed a significant percentage of the students appeared to concede the role, function, and contributory value of intangible assets.  However, it’s worth noting, one student with a solid career in financial services, consistently challenged and resisted the positive view I was espousing regarding the relevance and contributory value of intangible assets across sectors.

This particular student articulated his (resistive) position well by (privately) describing numerous multi-million dollar loan and acquisition deals which he personally oversaw, in which, as he stated, there was absolutely no mention, recognition, or accounting of intangible assets in either valuation, collateral (securitization) or due diligence contexts.

At the conclusion of the last class, this student said to me in a respectful, yet defiant tone, ‘I understand what you’re saying Mr. Moberly about intangible assets, but I just don’t see intangible assets ever becoming an issue in my bank as you are suggesting they should and will, at least while the current (bank) officers remain in place. In my bank, its solely about identifying and assessing the value of physical assets as collateral.

Of course, the point to all of this is, does the same attitude and perspective hold true for business management teams, c-suites, and boards, in general?  The answer, in my view, is yes, with of course, some very positive and very dynamic exceptions. But again, it is indeed an economic fact and a business reality that a steadily increasing majority of companies’ value, sources of revenue, and ‘building blocks’ for growth and future wealth creation do, in fact, evolve directly from or are generated by intangible (non-physical) assets, not tangible (physical) assets!

Introducing intelligent, seasoned, and already successful business decision-makers to intangible assets, and that the time they devote to learning about intangibles, their valuation, and strategies to effectively use and extract value from those assets, along with the necessity to protect, preserve, and monitor the assets’ value, are indeed worthy teaching – learning objectives, whether one is a promising MBA student or an already astute,  experienced, and successful business decision maker.  Unfortunately however, intangible assets remain somewhat of a hard sell!

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 Management ‘Blind Spots’: Intellectual, Relationship, and Structural Capital Walking Out The Door!

June 14th, 2012. Published under Intangibles as strategic assets, Managing intangible assets. No Comments.

Michael D. Moberly    June 14, 2012

The intent here is to present, what I believe is, an important, but often overlooked, or at least under-appreciated, perspective when companies elect to terminate (layoff) employees and shed entire departments generally rationalized by this extended economic downturn, aka recession, and now the looming (December) ‘fiscal cliff’ whereby companies in all sectors may be on the receiving end of another ‘haircut’.

I refer to this as a ‘management team blind spot’, that is when, not necessarily if, the above occur, the intangible assets these employees and departments have developed and amassed, will very likely walk out the front door with them.  Once those ‘assets have left the building’ (ala Elvis Presley) don’t count on them returning anytime soon regardless of non-disclosure and/or confidentiality (employment) agreements that may exist.

Any aspirations emanating from company management teams that the contributory value of the intangible assets, i.e., intellectual, structural, and relationship capital that’s now suddenly and conspicuously absent will continue unabated is likely mistaken. The absence of these assets can, and probably will produce inefficiencies along with an assortment of other adverse effects, most of which cannot be as quickly or as easily mitigated because the intellectual capital to do so is no longer present.

For those still unconvinced, one only has to recall the ‘y2k’ phenomena in 1999.  Many companies found themselves in the rather awkward position of having to literally ‘find’ former employees familiar with the company’s original IT systems and codes and pay them handily to return to work to help make the company ‘y2k’ compliant.

I want to acknowledge also, that I am a 20+ year proponent of identifying, unraveling, utilizing, and sustaining (protecting, preserving) control, use, ownership, and value of intangible assets. This is one reason I choose to frame the views being espoused here about intangible assets not so much through a Wall Street or Fortune 1000 lens, rather more through the lens of the 20+ million SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) which I find are routinely, but proportionately rich in intangible assets.

Unfortunately, not wholly unlike their NYSE, CBT, and NASDAQ cousins, intangible assets embedded in SME’s and SMM’s, are, in many instances, un-acknowledged, under-valued,  under-utilized, and certainly under-appreciated.  And, here lies in my judgment, the heart of the problem, as well as the challenge!

I seek not to start with broad recommendations that are usually accompanied by high (bureaucratic, legislative, and regulatory agency) hurdles that necessitate massive restructuring of long-standing business practices, government policies and regulations that would take years to achieve, if at all.

Instead, I seek to start, as I often do, by delving into what I believe are some key, yet under-developed issues about intangible assets. For purposes of analogy, I use a west coast company which I am familiar, that decided to permanently off employees and literally dismantle a long standing and globally embedded (internal) service unit.

Since I am familiar with this company, I can say without reservation, a very significant percentage of the terminated employees from this dismantled service and support unit, possessed company specific (culture, operational) skills sets, i.e., specialized intellectual and relationship capital.  A vast majority of those intangible assets were readily transferrable and could not be quickly, or readily for that matter, replicated at will when a management team recognizes it needs to re-establish those particular services.

While the global demand for this company’s primary product (and related support services) have continued, albeit at a slower pace, my question is, does the value of the company’s intangible assets decline proportionately when highly skilled employees are terminated along with their intellectual and relationship capital?  I pose this question in the context that, as most readers already know, significant and increasing percentages (perhaps 65+%) of most company’s overall value, sources of revenue, and ‘building blocks’ for growth and foundations for wealth creation evolve directly from intangible assets!  Of course, a portion of those intangible asset were in fact, developed, delivered, and now still possessed by a number of the employees in the discarded service unit.

For this particular company, and thousands of others like them, that have already executed or are facing similar challenges as a consequence of this extended economic downturn, I believe there is a substantial and underlying ‘intangible asset blind spot’.  That is, management teams who make admittedly hard decisions that the elimination of certain internal (service) units will make the company leaner and thus, more financially stable, at least for near term survivability are sometimes ill-advised.

But, as we have come to know, shedding employees often represents management teams’ initial, perhaps reaction to a financial crisis.  Obviously, a significant rationale for doing so lies in the view that fewer employees and departments can quickly translate as less payroll and overhead. In these instances, its’ likely management teams perceive employees as being more akin to tangible (fixed) assets, rather than not-easy-to-replace intangible assets.  In my view, there is sufficient reason for company management teams to fully assess, in an intangible asset, contributory value, and business impact analysis context, employees and units targeted for elimination before execution!

I don’t seek to over dramatize or otherwise offer unsubstantiated embellishments to this issue. However, when intellectual and relationship capital intensive employees and/or units are terminated as a seemingly quick, but usually not permanent ‘patch’  to a fiscal challenge, it’s important to also recognize (factor) that valuable and often times irreplaceable, or, at least not readily replaceable, intangible assets will be ‘walking out the door’ as well.

Intangible Assets: The ‘Prius Effect’ Of Your Company’s Market Space!

June 13th, 2012. Published under Intangibles as strategic assets, Investing in intangible assets.. No Comments.

Michael D. Moberly   June 13, 2012

On many occasions I certainly wish I could be the proverbial ‘fly on the boardroom and c-suite walls’, but not necessarily in the Bob Woodward (realistic fiction) sense.

I think about the countless conversations which generally I have only third or fourth hand or anecdotal knowledge, but never-the-less, I’m very confident occurred, like the ones that occurred not that many years ago in the boardrooms, c-suites, and R&D laboratories of Toyota, Hyundai, Nissan, Honda, and Kia when they were conceiving their respective ‘prius’ automobiles.

I’m equally confident that during these same approximate time periods, GM, Ford, and Chrysler were likely having discussions in their respective boardrooms, c-suites, and R&D labs, but little had to do with the development of their ‘prius’, rather it was likely those discussions dealt with focus group analysis about what to name their newest and ever-the-more-larger SUV or pick-up truck and development of promotional – marketing campaigns to influence buyers ‘bigger is better’ and churn them out at a pace to accommodate demand.

Of course, we all know now how this story ends.  In 2008, prompted by legislative and politically motivated inquiries along with some public rancor about flying into Reagan National on corporate ‘fuel guzzling jets’.  But, it all laid the groundwork for the massive bailout for GM and Chrysler. So, the ‘big three’ began re-tooling and re-designing vehicle power systems to quell the outcries and accommodate demands for higher MPG vehicles, but not before laying-off thousands of workers.

In the meantime, the ‘prius’ brand, was already becoming solidly entrenched with the car-buying public to the point that the Korean and Japanese ‘big five’  literally owned that market space!

So my point is this, today is the perfect time, as was last week, the week before, and even last year, for company management teams, boards, and c-suites in all sectors to consider ‘taking a page from the ‘prius’ playbook’ and think about their equivalent to the prius, which are, in my view, intangible assets!

After all, it is an economic fact that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth today evolve directly from intangible assets, i.e., intellectual, structural, and relationship capital, brand, reputation, etc.

But those management teams, c-suites, and boards must be inquisitive and frame the right questions.  For starters, they should be think about their intangible assets in this way…

  • the effective stewardship, oversight, and management of intangible assets can be the difference between looking ahead (real strategic planning) and looking through a rearview mirror!
  • stewardship, oversight, and management of a company’s intangible assets is truly an investment that will produce revenue, add value, elevate reputation, and be a strong source of competitive advantages, in other words, ‘the prius effect’!

This post was inspired by a 8-17-08  ’Smart City Radio’ program titled ‘Veolia Survey and The Vine’

Intangible Assets and New Product Launches: Keeping Your Genie’s In Their Bottle!

June 12th, 2012. Published under Intangibles as strategic assets, Intellectual capital management., Sustainability of intangible assets.. No Comments.

Michael D. Moberly   June 12, 2012

Achieving successful and sustainable new product and innovation launches is increasingly dependent on management teams recognizing…

  1. 65+% of most innovation’s value, projected sources of revenue, and potential ‘building blocks’ for growth and expansion evolve directly from the contributory nature and value of intangible assets, i.e., the intertwined combinations and collaborations of specialized and/or proprietary know how and intellectual capital associated with the innovation’s development.
  2. the absolute importance that must be attached to ensuring the’ innovation genie’ remains in its respective bottle through its respective life – value cycle, i.e., effectively protecting, preserving (sustaining) control, use, ownership, and defensibility of the innovation’s key elements.

Obviously, ‘keeping the innovation genie in its bottle’ is a metaphor, albeit a very important one, whereby innovation management teams are obligated to identify and monitor the role, contribution, and value which the intangible assets make to the innovation’s launch, their exposure to risks and threats, and again, throughout the innovation’s life-value cycle.

In other words, continuous monitoring of key aspects of the innovation genie’s status is critical. A key reason is that there are an ever growing number of sophisticated strategies that economic and competitive advantage adversaries use to extract innovation genie’s from their proverbial bottle.  The absence of effective innovation asset management and oversight can and frequently does lead to misappropriation, theft, product counterfeiting and/or piracy.

Any one of those risks-threats materialized, will undermine product launch success and adversely affect the innovation’s value, competitive advantages, and relevance within its market space.  The probability that risks-threats to innovation assets will materialize, while dependent on several factors, it would be quite correct to assume they will continue to rise globally.

An essential requisite for any innovation management team who aspires to achieve even partial recovery of their compromised innovation (intangible) assets is having effective asset monitoring practices in place to not just prevent or mitigate any adverse effects from materialized risks, but also to know precisely when a compromise occurred and the precipitating factors.

Too, a thorough intangible asset – competitive advantage assessment should commence immediately following a compromise to determine precisely what aspects of the innovation were actually compromised – acquired and how it will impact the products’ launch and the business as a whole. This assessment and business impact analysis are, of course, essential to achieving any semblance of hope of recovering any of the innovation’s assets, if there is to be any.

These assessments and analysis can aid innovation management teams to be better positioned to deliberate on two important points:

1. the circumstances, priorities, and options relative to trying to (re-) establish ownership and/or (re-) obtain control and use of the, by now, economically and value hemorrhaged assets.

2. strategies to try to stop and/or mitigage further economic -competitive advantage hemorrhaging (of the assets), i.e., devaluation, undermining, infringement, misappropriation, etc.

And, of course, any delays in discovering a compromise and seeking experienced guidance about what actions to take, and when, can complicate and even weaken a company’s (legal) position for achieving even partial recovery from the multiple adversaries that are likely to be involved.

Realistically, returning an innovation asset genie to its rightful owners, i.e., bottle, in a manner in which some, or more preferably, most of its market space attractivity and competitive advantages remain reasonably intact, is not particularly high in today’s increasingly predatorial business environment.

Risk-threats to a companies’ innovation (intangible) assets should not be dismissed lightly or characterized as merely ‘just another risk of doing business’ particularly in today’s increasingly competitive, predatorial, and winner-take-all (global) business transaction – new product launch environment.

Far too many companies though lose, inadvertently relinquish, and/or their innovation assets become entangled or ensnared in costly, time consuming, and momentum stifling legal disputes and challenges, primarily over aspects of ownership, control, use, and value.

There are many different views about what it takes to sustain a successful (new) product – idea launch and its eventual commercialization.  Obviously, having a very attractive and commercializable product along with sufficient capital to execute a well-researched business plan and marketing strategy represent a few of the traditional and necessary ingredients.

But, an often overlooked and underestimated ingredient to sustaining a successful business-idea launch is recognizing that unlike patents, trademarks, and/or copyrights, the USPTO does not issue, to the launching company, a certificate that says, these are your valuable innovation (intangible) assets, proprietary know how, intellectual capital, and competitive advantages, protect them!

Instead, the responsibility for recognizing that those assets exist and unraveling how they individually and collectively contribute to an innovation and then converted into value, sources of revenue, is solely the responsibility and discretion of the innovation’s management team and board.

Admittedly, today’s hyper-competitive go fast, go hard, go global business transaction and new product launch environment may not always allow sufficient time for innovation management teams to reflect on, address, and budget for the persistent and asymmetric nature of risks and threats to companies intangible (innovation) assets..

Continuing to hedge (neglect) these assets essential maintenance, i.e., protect, preserve, monitor their use, ownership, and value, can cause risk-threat probabilities to become inevitabilities in which complete or partial (asset) value erosion-dilution is likely to occur, which in turn, creates parameters-boundaries to a companies’ economic-competitive position capabilities and potential.