Archive for July, 2012

Company Culture Is An Intangible Asset!

July 31st, 2012. Published under Company culture and reputation., Managing intangible assets. No Comments.

Michael D. Moberly   July 31, 2012

Let’s start by taking a look at some intriguing language the Securities and Exchange Commission obliged Omnimedia to state in its 2007 Annual Report regarding Martha Stewart…

Ms. Stewart’s efforts, personality, and leadership have been and continue to be critical to our success…the repeated diminution, or loss of her services, due to disability, death, or some other cause…could have a material adverse effect on our business…

Admittedly, I am one, among many, who acknowledge Stewart’s accumulation of presence and on-camera demeanor, etc., constitute an influential, valuable, and strategic package of intangible assets which, for the most part, have been effectively bundled and leveraged (managed) etc., before, during, and following her temporary change of address to Alderson, West Virginia.

But, interestingly, Grant McCracken of ‘chief culture officer’ fame, rather emphatically characterizes ‘Stewart’s gift of intangible assets (to Omnimedia) being neither mysterious, nor imponderable, or irreproducible. Even more hard hitting, McCracken states, the intangible assets that have emerged from Ms. Stewart and subsequently brought to the business table, are not even essential.  Respectfully, McCracken’s view on this particular aspect is where we depart, practically and philosophically. I’m not so sure Apple employees, board, stockholders, their brand loyal consumers, and the bevy of Apple analysts and pundits would agree with McCracken’s view on this, at least not for awhile anyway.  On the other hand, we must be reminded that GE continues to exist and function profitably following the departure of their version of Steve Jobs, i.e., the iconoclastic Jack Welch.

McCracken notes in his book ‘Chief Culture Officer: How To Create A Living, Breathing Corporation’ that probably the two most significant errors made in characterizing a company’s culture, are (a.) presuming the culture evolves from the presence of a single individual, or (b.) that an individuals’ personality is synonymous with an organization’s culture.

While I do not consider myself to be a ‘company culture’ expert, I have held numerous positions of leadership and here’s what (a.) I do know, and (b.) what I can recognize.  First, a company’s culture can be a useful and influential intangible asset that can garner – deliver a great deal of value and competitive advantages to an organization, large or small, in a variety of ways and in many different venues.  That is, providing of course, employees, as well as stakeholders believe it and the culture is understood and recognized as such!

Let me take this a step further by assuming some literary license from a comment attributed to a former USSC Justice regarding obscenity, i.e., I’m unsure, he said, how to define it, but I know it when I see it!   That’s largely how I, and I believe many of my colleagues, characterize company culture, that is, we’re quite sure that we can recognize a good one when we see (experience) it.

Even more intriguing to me is McCracken’s opinion that most intangible assets, which collectively converge as a companies’ culture, can be reverse engineered.  While I am certainly not denying reverse engineering of intangible assets can and does occur, it seldom does so overnight, rather over periods of time to the point ‘a culture changes’ fully manifests itself in competitors and/or economic – competitive advantage adversaries.  And, should such intangible asset reverse engineering occur, c-suites and boards in my view would have engaged in substantial fiduciary irresponsibility, especially if there were no initiatives (processes, procedures) in place to counter and/or mitigate such inevitabilities.

But, let’s examine company culture a bit further by drawing upon some perspectives found in reputation risk (management).  As has been noted in this blog previously, studies – surveys conducted by respected reputation risk experts routinely find in companies that experience a significant and cascading reputation risk, it may take 3-5 years for that company to recover (partially, fully)from  lost and/or diminished revenue, market space competitive advantages, and consumer-brand loyalty, etc.

In this context, I just don’t believe it’s a circumstance of comparing apples to oranges to suggest there are very plausible correlations between a companies’ reputation (risk) and its culture. More specifically, I believe a company’s reputation risk elevates when a substantial, resilient, and somewhat permanent culture exists.

That is to say, using the Martha Stewart example, I’m quite confident I would be hard pressed to find one reputation risk colleague who would disagree that Omnimedia took a major hit to its reputation before and throughout Ms. Stewart’s trial, including her acceptance of a plea and subsequent incarceration.  Rather obviously though, one of Stewart’s enduring legacies was the existence of a sustainable pipeline of intangible assets, i.e., brand, consumer loyalty, innovation, energy, etc., that did not evaporate either during the trial or her subsequent absence.  Instead, those intangibles rapidly re-emerged upon her return and as strong, profitable, and even perhaps a more sustainable culture.

Ideas Are Intangible Assets!

July 30th, 2012. Published under CFO's, Fiduciary Responsibility, Managing intangible assets, Uncategorized. No Comments.

Michael D. Moberly    July 30, 2012

As most of us recognize, Jack Welch (former Chairman of General Electric) made numerous contributions to the way companies are managed.  One of which was his ability to recognize the core elements of an issue and separating the proverbial fluff.   

I think two good examples of this lie in the following statements, both attributed to Welch, i.e.,

  • an idea is not necessarily a biotech idea…that’s the wrong view of what an idea is…an idea is an error-free billing system…an idea is taking a process that used to require six days to do and getting it done in one day…we get 6 to 7 percent productivity increases routinely now, mostly because of ideas like that…everyone can contribute… 
  • an organization’s ability to learn and translate that learning into action rapidly, is the ultimate competitive advantage…

The desire to learn and development and execution of ideas generated from what one has learned of course, can manifest as intangible assets, or more specifically as intellectual and structural capital.

That’s why we recognize the importance of having mechanisms in place whereby ideas can be understood, assessed, and accordingly, rise to the surface in a ‘jack welch’ context.  Otherwise, potentially useful, valuable, and competitive advantage driving ideas can go unrecognized, under-valued, or even dismissed, and if there ‘good one’s’ all too often, competitors will exploit as their own.  That’s why I commence most engagements by laying the foundation for the parties to achieve a mutual understanding and respect for…

  • the economic fact that 65+% of most companies’ value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability evolve directly from numerous categories – types of intangible assets!

By doing so, paves the way for helping company’s identify their intangibles and producers, unravel the assets’ origins, and assess their contributory value and effective alignment with core business objectives and strategic planning.  This routine is designed to coincide with a second component, which is, putting in place what I refer to as ‘what fits best works best’ practices and procedures intended to sustain (protect, preserve monitor,) control, use, ownership, and the revenue – value producing elements of the intangible assets or, ideas.

This approach, which I advocate, does not overlook, nor does it under-estimate the reality that business operations and transactions now routinely have global elements and are often conducted under extraordinarily competitive, predatorial, and winner-take-all circumstances.  That said, this approach is, more frequently than it should at this point, confronted with an ‘obstacle course’ of hierarchical skepticism and reluctance which generally translates as…

  • a reluctance to acknowledge the intangible assets a firm produces and possesses,
  • an absence of confidence in ways to better utilize, exploit, and extract value from intangible assets, know how, and competitive advantages, etc.,
  • unfounded concerns or misconceptions about the resources, cost, time, and/or processes necessary to elevate intangible assets as routine agenda items in c-suites, boards, and management teams,
  • professional embarrassment about having not already done so!

When rising percentages of most company’s value, sources of revenue, and sustainability lie in intangible assets, it just shouldn’t be that difficult to cast such skepticisms and reluctance aside in order to get the message that a firm’s intangible assets absolutely must be on discussion agendas!

 Otherwise, if a company’s normally risk taking decision makers remain skeptical or unconvinced about these fiduciary necessities, they should be prepared to lose, forego, or more politely, inadvertently relinquish most, if not all of the prospective value, revenue, competitive advantages, and strategic benefits those assets may (could) have produced.

CFO’s and Intangible Assets!

July 27th, 2012. Published under CFO's, Managing intangible assets. No Comments.

Michael D. Moberly   July 27, 2012

We all know, or at least we should, the knowledge – intangible asset-based business (transaction) economy is for real, it’s irreversible, and, we’re probably only on the front edge of it.  I still find however, what some management teams are less familiar with is, the significance-importance of communicating internally, at least, information and data about the performance of their intangible assets, i.e., intellectual, structural, relationship capital, brand, goodwill, reputation, etc.

This post is not about offering the proverbial ‘sound bite, quick fix, or silver bullet’ for there is nothing particularly quick or easy about…

  • building and sustaining core attributes that can help put and keep a company on the leading (competitive and financial) edge of their industry and/or market space, or
  • developing practical and measurable ways to consistently improve the competitive, and thus financial, health of a company.  

What may be innovative for some management teams though, lies in the premise of a 2007 Deloitte survey which states (paraphrased) that…financial indicators coming from conventional balance sheets as well as financial statements alone, neither capture, nor characterize a company’s (competitive, financial) strengths and weaknesses internally or within its value-supply chain.  

There should be consensus by now that in an economy in which 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets, continued reliance on conventional balance sheets and financial statements that seldom, if ever address intangible assets other than possibly lumping them together as goodwill, does not constitute a complete picture, nor do they provide strategic perspectives necessary to sustain competiveness.

It is always my preference that my 65+%…phrase (above) serve as a prompt of sorts, for management teams – companies that are experiencing (a.) competitive – financial stagnation, and/or (b.) missed or lost (business, transaction) opportunities to recognize it may well be a consequence of relying on conventional financial statements as the primary source – guide for strategic planning and outlook.  Again, absent an articulation of the contributory role and value of intangible assets.  

To spark an internal dialogue within c-suites, management teams, boards, and business units to literally engage their respective intangible assets, I have developed and apply several, what I refer to as dialogue initiators, two of which are described below.  I seldom execute them in a specific sequence, instead I find it more appropriate to ‘mix and match’ them in a ‘what fits best will usually work best’ manner.

One such dialogue initiator is revisiting the adage attributed to Dr. Deming many years ago, i.e., ‘you can’t manage what you don’t measure’!  As we have come to know well, value and revenue constitute market drivers, and, by extension, lay the foundation for the destiny of many companies.  So, when 65+% of most company’s value and sources of revenue originate – flow from intangible assets, as they do today, c-suites, management teams, and boards alike, would be well served to devote time, resources, and energy to developing, for internal consumption at least, practical and defensible methods for measuring intangible asset performance, particularly, which ones, relative to competitors.

Another dialogue initiator involves the importance of elevating management teams’ operational familiarity and achieving (business) confidence in utilizing – exploiting intangible assets, with emphasis on…

  • what tangible assets are, what they aren’t, how to identify them, how they originate-evolve within a company, and how to assess their status and measure their contributory value.
  • strategies for utilizing and extracting value from intangibles. 
  • the tenants of effective intangible asset stewardship, oversight, and management.

In best case, these, and other dialogues render decision makers more inquisitive and receptive to…

  • asking the right questions and demanding more answers about the performance of their company’s intangible assets, and
  • drilling down far enough (companywide) to determine precisely what asset performance indicators their company should be measuring.

Admittedly, some of the existing intangible asset performance – measurement methods (tools) warrant refinement (be more company specific) to engender the confidence that they actually paint the sort of comprehensive portrait of a company’s financial and competitive advantage health that’s so needed today, e.g.,

  • the actual tools (techniques, formulas, measurement points, etc.) need more internal-external reliability and validity testing to become more defensible and mitigate skepticisms about their relevance and use.
  • overcoming the often repeated misperceptions that measuring intangibles is too time consuming and doesn’t deliver a timely return. 
  • addressing the very relevant concern that developing and then communicating intangible asset metrics could render a company more vulnerable – at risk to competitive advantage undermining and/or asset value erosion, among other potential negatives.

I believe it’s the CFO who, in most instances, should take the lead in stewarding, overseeing, and managing a company’s intangible assets.  But, that must be premised on, among other factors…

  • getting the correct information/data to the CFO.
  • the CFO being receptive to and confident in that information/data, and
  • the CFO recognizing how to effectively utilize and execute on that information/data in a timely manner to achieve the desired results.

 (This post was inspired by a 2007 survey/report produced by Deloitte titled ‘In The Dark II: What Many Boards and Executives Still Don’t Know About The Health Of Their Business’.)

Reputation Risk: An Unwanted Dimension Following Aurora Theater Shootings…

July 25th, 2012. Published under Board oversight, Fiduciary Responsibility, Goodwill, Reputation risk.. No Comments.

Michael D. Moberly    July 25, 2012

Let me be very clear at the outset.  In no way do I, through the language I use in this post, intend to convey any disrespect to the victims and families or otherwise trivialize the recent tragic and senseless shootings that took place at the Aurora, Colorado movie theater.

It would be equally disturbing if this post was misinterpreted as representing an out-of-touch perspective interested only in Warner Brothers reputation and box office economics related to ‘The Dark Knight Rises’.

With that, allow me to explain to the global readership of this blog what influenced me to decide it was important to write this post.

First, while the words risk and threat have become firmly embedded in citizens’ lexicon following September 11, 2001, the Aurora theater tragedy served as one more kick-in-the-gut reality that risks-threats, of the type posed by James Holmes, are not especially difficult to foresee, after-the-fact.  In most instances, and Holmes will likely be no exception, an abundance of cautionary warning signs will surely be found.  Missing however, from those inevitable pieces of the puzzle though, is the essential ingredient we have come to call, connecting-the-dots.  Dot connection after all, is necessary for substantiation and probable cause to act proactively.  Correctly and consistently foreseeing the who, what, when, where, and how this or similar tragedies (risks, threats) materialize remains challenging on many levels.

One such level is identifying the presumed mental-emotional triggers (motives) that set in motion inexplicable elements such as Holmes’ site selection, timing, acquisition of weapons and ammunition, and planting explosive devices in his apartment, etc.  I must admit, I am not a strong advocate of so-called profilers.

A second factor that influenced me to write this post, very much integral to the first, evolved from a corporate reputation risk seminar which, coincidentally I attended just prior to the Aurora shootings.

There is certainly no shortage of examples in which corporate – institutional reputation risk has manifested itself with disastrous human and economic outcomes.  At Penn State, for example, the on-going revelations of child molestation were suppressed for 15+ years, while, in the Virginia Tech, Columbine, Gabby Gifford, and Aurora theater tragedies, everything unfolded in a matter of minutes.

For pundits reporting on the tragedies at Penn State it did not take long to ask the question or perhaps worse, offer an opinion, about whether and/or to what degree that series of tragedies would adversely affect student enrollment, fund raising, town and gown relations, and university economics, etc.   And, within 12 to 18 hours following the Aurora theater shootings, pundits were asking whether box office economics of ‘The Dark Knight Rises’ would be adversely affected and/or whether Warner Brothers should withdraw the movie from theaters in deference to the shooting victims and their families.  To be sure, Warner Brothers executives were asking the same questions and soliciting opinions from a bevy of reputation risk and public relations specialists nearby.   WB has now announced it would make a substantial donation to the shooting victims, presumably from the films’ box office receipts.

As most individuals occupying the c-suites and comprising the boards of companies understand; a company’s reputation, while it can be an extremely valuable intangible asset, it can also being a very fragile asset, vulnerable to an almost infinite number of risks and threats.

It used to take years of consistent mismanagement to destroy a company. Today, a company’s downward spiral, leading to an ultimate and premature demise can occur almost overnight.  But, it’s not just due to a broader range globally persistent and asymmetric risks, threats, and hazards that can impair a company’s reputation.  Rather, a company’s reputation demise is often linked to the speed which unchecked, dismissed, or overlooked reputational risks can materialize, escalate, and cascade throughout an enterprise and particularly to its stakeholders! (Adapted by Michael D. Moberly from remarks of Sir John Bond, Chairman of UK based HSBC)

Following the Aurora event, I’m quite confident that, in WB’s c-suites, someone posed the question whether the film should be pulled out of theaters altogether, not solely as a respectful gesture to the shooting victims and their families, but as part of a process to mitigate potential hemorrhaging of its reputation.  While I have no firsthand knowledge of such questions or conversations, I can apply Bob Woodward’s award winning narrative nonfiction style to suggest, with a high degree of confidence that such conversations did occur!

As minimal evidence of this, wisely, WB did pull trailers of its upcoming ‘Gangster Squad’ and it’s reported they opted to literally cut a ‘violent movie theater shooting’ scene from that film.  In my book, that’s a fairly clear example of reputation risk management at work!

I have frequently heard my colleagues say that once a company’s reputation has compromised through unforeseen events in which they are ill or unprepared to sensitively address or the company has not ‘banked’ a substantial amount of goodwill with its stakeholders in advance, reputation damage may well be inevitable.  Recouping lost economics, competitive advantages, and consumer loyalty will be a long, costly, and time consuming endeavor.

In the end, it appears WB’s respectful silence immediately following the Aurora shootings, may well have, in this instance anyway, served as an important contributor to mitigating reputation risk to itself, and to one of its products, i.e., the film, ‘The Dark Knight Rises’!

When innocent people die or are harmed in an incident such as Aurora, Columbine, Gabby Gifford, Penn State, or Virginia Tech, it is the epitome of corporate, institutional, and/or government insensitivity to suggest there is ever any good that follows.  In this instance however, it may well open eyes, minds, and doors to re-examining and re-calculating reputational risk by incorporating the variables noted here and not just to reduce the probability for its re-occurrence, but truly understand consumer reaction and resiliency, and the reputation of the victims!

ACTA’s Rejection By European Parliment…Not The Presumptive No-Brainer…

July 23rd, 2012. Published under Intellectual Property Rights, Personal Privacy, Product counterfeiting.. No Comments.

Michael D. Moberly   July 23, 2012

Admittedly, I took somewhat of a passive approach to the passage of the Anti-Counterfeiting Trade Agreement (ACTA) by the European Union’s Parliament, earlier in July, because I believed it to be a ‘no brainer’.   Was I ever wrong!  In hindsight, I did not give the groundswell opposition the attention or credence it deserved and ultimately misjudged the influence such sustained, diverse, and intensive lobbying efforts would come to have on the EU Parliament.

Today, the ‘nanosecond communication environment’ contributes to fewer and fewer legislative ‘no brainers’ whether it is proposed legislation in the US or EU.  Subsequently, less can, and probably should, be assumed or taken for granted.

Certainly, there’s no argument that global product counterfeiting poses substantial adverse economic impacts to every industry sector, not just the music side.  Aside from the largely subjective, but nevertheless, increasing guesstimates of economic losses attributed to infringement, counterfeiting, and product piracy, it’s quite correct to portray each as now being an entrenched and extraordinarily lucrative  global industry that comprises substantial (and rising) percentages of many countries GDP, sources of employment and personal income, and manufacturing base.

So, every business today, whether it’s based in the EU or the US, is well advised to conclude that IP infringement, counterfeiting, and product piracy have moved well beyond merely being annoying probabilities to increasingly costly inevitabilities if left unchecked by either practice or laws.  (For additional perspective please see July 8th blog post titled ‘Intangible Assets and Counterfeit High-End Apparel).

But, that doesn’t appear to be the primary rationale behind the opposition that ultimately led to the rejection of ACTA.  Instead, opposition to ACTA, according to Chris Brogan, Managing Director, Security International, who has an extraordinarily experienced track record in such matters, points out that ACTA’s demise was largely due to it being framed as both a privacy and human rights issue.

Brogan says, no one should get the opinion that the European Parliament is not supportive of international efforts to curb piracy.  However, in large part due to the vagueness and breadth of ACTA’s intended coverage, privacy and human rights lobbyists felt that individuals and small businesses, as well as large commercial concerns, would be laid open to draconian legal measures of enforcement.

The privacy – human rights based opposition, Brogan says, evolve around three key issues…

  1. respect for privacy, i.e., many individuals share their choice in music, but not for commercial gain.
  2. freedom of expression which has to be balanced against any harm to another individual/organization, and interestingly,
  3. the right to a fair trial which opponents argued ACTA provided too much legal power to organizations to enforce their proprietary rights.

Brogan adds, as an experienced participant in privacy legal issues for 25+ years, “I understand the difficulty that non-Europeans have with Europe’s strong advocacy for strengthening the privacy laws, and presumably any legislation, which on its face, appears to limit or otherwise modify expectations of privacy”.  Brogan also points out that Europe’s previous experience with Facist and Communist states that purposefully curtailed citizen freedoms through (draconian) legislation and law enforcement remains an impetus to oppose legislation that contains language that could be interpreted as curtailing human rights and personal privacy.

Similarly, an official of a European institution stated that ACTA had been rejected due to the presence of a strong movement of concerned citizens who feared that their civil rights were in jeopardy.  In addition, this source described unprecedented lobbying by thousands of EU citizens in the form of street demonstrations, e-mails and calls to MEP’s and a petition, signed by 2.8 million citizen’s worldwide, urging ACTA’s rejection.  Even some, the source said, characterized ACTA as a new form of dictatorship in which authorities and companies would have too much control over the Internet and the possible restriction of access to generic medicines, if it were to be passed.

The European institution source goes on to suggest there is a growing and influential anti-EU movement in Europe today, one claim of which is that ‘Brussels is ruling everything’.  Both the European institution source and Mr. Brogan agree that ACTA’s language appeared vague, and thus susceptible to being misinterpreted.

Thus, in an environment where such strong sentiments exist regarding privacy and human rights, and having been confronted with a strong and like-minded public lobby, the EU Parliament overwhelmingly voted against ACTA. Proponents of ACTA suggest the MP’s vote was not based on facts, rather one on sentiment.

Still, Mr. Brogan and the European institution source agree a strong need remains to find alternative ways to protect intellectual property. And, in today’s increasingly irreversible knowledge-based global economy in which 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability evolve directly from intangible (IP) assets, finding common ground whereby those assets are respected and accordingly safeguarded is critical!

Intangible Asset Practice Area for Law Firms: Opportunity To Solidify Client Relationships and Generate Returns and Competitive Advantages…

July 16th, 2012. Published under Law Firms, Managing intangible assets. No Comments.

Michael D. Moberly    July 16, 2012

Providing services that elevate client familiarity with their intangible assets and strategies to better exploit those assets, can legitimately endear clients to a (law firm) service provider by exceeding expectations and returns for both parties!

Intangible assets surpassed tangible (physical) assets as the dominant economic and competitive advantage driver for most companies beginning in the mid to early-1990’s. This trend continues today with conservative estimates being 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth evolve directly from intangible assets!  For a percentage of c-suites, management teams, and boards responsible for company governance, identifying, harnessing, and exploiting intangibles variously remains a challenge.

Many business leaders portray and/or assume intangible assets are synonymous with intellectual property, an assumption that is more incorrect than correct, i.e., IP is just one type/category of intangible asset, others include intellectual, structural, and relationship capital, brand, reputation, and goodwill to site a few.

One rather confounding aspect to the irreversible and global universality of  intangible assets comprising the primary economic and competitive advantage driver for most companies, is that more (business – legal) service providers have not effectively nor widely leveraged intangible asset management, stewardship, oversight, and safeguarding as a platform for ‘being the first on the block’ to deliver enduring and needed intangible asset related services to clients – companies. 

I am drawing attention to law firms and IP practice areas in particular, because most have the organizational and marketing structure, experiential disposition, supportive expertise, and client base already in place to develop a strong intangible asset practice could stand alone as well as compliment each of the other practice areas.  With minimal orientation and marketing adjustments, firms can respectfully exploit the expanding global market of intangible assets on behalf of their clients.  Unfortunately, there is little evidence that this has emerged nearly as broadly as it should.

Those familiar with intellectual, structural, and relationship capital and company culture, know that each contributes mightily to the (a.) development of intellectual property, and (b.) continuous production of ‘internal pipelines’ of valuable intangible assets. In both, effective management, stewardship, oversight, and safeguards are warranted, necessary, and fiduciary responsibilities.  Too, when a client company has a strong presence – pipeline of intellectual, structural, and relationship capital that co-exist in complimentary – collaborative ways, it’s quite correct to presume additional intellectual properties are on the horizon.

Again, providing services that elevate client familiarity with intangible assets and strategies to better exploit those assets, can legitimately endear clients to a (law firm) service provider by exceeding expectations and returns for both parties!

Valor Theft: The Most Personal Intangible Asset!

July 10th, 2012. Published under Intangible Asset Value, Stolen Valor. No Comments.

Michael D. Moberly   July 10, 2012 ‘A blog where attention span really matters’!

The Stolen Valor Act made it a crime for someone to falsely claim receipt of military decorations or medals.  Upon conviction, the Act imposed enhanced penalties, if the Congressional Medal of Honor was falsely claimed.  On February 22, 2012 a ‘stolen valor’ case (U.S. v. Alvarez) was argued before SCOTUS and decided on June 28, 2012.

In 2007, the court records show, Alvarez attended his first (public) meeting as a board member of the Three Valley Water District Board, a governmental entity headquartered in Claremont, California.  Alverez introduced himself as follows: “I’m a retired Marine of 25 years. I retired in the year 2001. Back in 1987, I was awarded the Congressional Medal of Honor. I got wounded many times by the same guy.”  (SCOTUS in its June 28th ruling, described this statement as ‘a pathetic attempt to gain respect’.)  Mr. Alvarez subsequently pleaded guilty to a charge of falsely claiming that he had received the Congressional Medal of Honor.

Court records stipulate that Alvarez’ deception did not seem to have been made to secure employment, financial benefits, or admission to privileges reserved for only those who had legitimately earned and been awarded the Medal.  

Lower court testimony revealed that lying had become a habit of Mr. Alvarez, as evidenced by his lying about playing hockey for the Detroit Red Wings and that he once married a starlet from Mexico. But when Alverez lied by announcing he held the Con­gressional Medal of Honor, he ventured onto new ground; because, that lie violates a federal criminal statute, the Stolen Valor Act of 2005, (8 USC. §§704 (b), (c).

Even though Alvarez admitted guilt, through his counsel, the right to appeal was reserved, claiming that the Stolen Valor Act is unconstitutional.  The Ninth Circuit Court of Appeals reversed the lower court decision ruling the Act invalid under the First Amendment which SCOTUS then affirmed on June 28th, i.e., the Act infringes upon speech protected by the First Amendment.

So, wherever one believes they reside on the lie, deception, white lie, truth continuum, Dr. Dan Ariely suggests there is a larger potential cost of (continued) deception which he and his colleagues research consistently demonstrate in his newly published book, ‘The Honest Truth About Dishonesty: How We Lie to Everyone, Especially Ourselves’. 

That is, when an individual engages in dishonest and/or deceptive acts, it frequently influences  them to assume (suspect) others are also engaged in similar acts of dishonesty and deception.  This is manifested as an absence of trust in one’s friends, colleagues, coworkers, and acquaintances and becomes a contributing factor in making our lives more stressful and difficult. 

Being a wounded airborne infantry combat veteran of Vietnam myself, serving with the 173d Airborne Brigade, and the recipient of commendations, but certainly not the CMH, my initial interpretation of the SCOTUS ruling was that wow!, the First Amendment is now sanctioning lying. 

Content-based restrictions on speech (as described in the Stolen Valor Act, i.e., a person’s false utterance of being awarded war – combat related commendations) have been permitted only for a few historic categories of speech in which the Government is granted power to prevent, e.g., incitement, obscenity, defamation, speech integral to criminal conduct, so-called “fighting words,” child pornography, fraud, true threats, and speech presenting some grave and imminent threat.  Noticeably absent, from these ‘historic categories’, is any exception for falsely stating one is the recipient of a war – combat related commendation, including the CMH. 

Fundamental constitutional principles, SCOTUS ruled, ‘require that laws enacted to honor war – military combat veterans must be consistent with the precepts of the Constitution for which they fought, even though its speech that can disparage, or attempts to steal honor that belongs to those who fought for this Nation in battle, falsity alone, SCOTUS said, may not suffice to bring the speech outside the First Amendment.

SCOTUS went on to rule, ‘should the Court have per­mitted the Government to decree Alvarez’ speech to be a criminal offense, it would have endorsed government’s authority to compile a list of subjects about which false statements are punishable and thereby allowing the government to have power with no clear limiting principle’.  Now that makes it difficult for me, and I presume other veterans, to rationally frame an opposing view.

I remain puzzled and even angry however, about the motives of people who engage in ‘valor theft’.  This prompted me to seek the expertise found in Dr. Dan Ariely’s newly published book ‘The Honest Truth About Dishonesty: How We Lie to Everyone, Especially Ourselves’.

Could it be, Ariely asks, that when people lie publicly (and repeatedly), their lie acts as an achievement marker, which in turn becomes a reminder of their false achievement. But, somewhat counter intuitively, it helps cement that fiction as part of their life.  In other words, repeated expressions of a false achievement can contribute to further internalizing one’s self-deception.  After all, many of us know people who actually believe their own exaggerated stories.

A reverse illustration of this is found in a Seinfeld episode in which Jerry has agreed to a polygraph examination to determine whether he is a regular viewer of a particular primetime TV program, which he had adamantly denied.  In preparation for the polygraph, George, known for his ability to misrepresent the truth, informed Jerry that ‘it’s not a lie if you believe it’!

So, as Dr. Ariely reveals in his research, wherever one senses they reside on the lie – truth continuum, there is a larger potential cost of (continued, persistent) deception.  That is, when one practices dishonesty and deception they start suspecting others of being dishonest and deceptive.  Without trust, Ariely says, relationships and interactions become more difficult and stressful.

That begs the question; are some of us more prone to believe our own fibs than others?  To that, I say sure, and we don’t have to look much further than last week as Barclay’s CEO engaged in, at least in my view, ex post facto rationalization for his banks’ alleged participation in manipulating the London Inter-Bank Exchange Rate.  Or, the previous weeks when Chases’ CEO, accepted responsibility, but in doing so, used the now infamous code words ‘we were using products so complicated only a few of our employees actually understood them’.  Or, we can look no further than MLB players who have admitted to steroid use, but some of whom now ask, with a straight face, was my exceptional ball playing experience due to the steroids, or would I have been an exceptional ball player anyway?

I respectfully repeat, whether its stolen valor, stolen trust, or new MLB records likely aided by steroid use, each is, in its own right, a powerful, influential, and valuable intangible asset!  Once that assets’ value has been stolen, eroded, or undermined, not once, but consistently and repeatedly, it becomes increasingly difficult to retrieve…

Intangible Assets and Counterfeit High-End Apparel

July 9th, 2012. Published under Intangible Asset Value, Product counterfeiting.. No Comments.

Michael D. Moberly    July 8, 2012

This post represents a pessimistic, but, what I believe is a very relevant analogy contrasting the global preference for – expectation of authenticity in sporting contests to consumer receptivity to buying and wearing counterfeit high-end apparel and accessories.  This post was inspired by a Frank DeFord commentary on NPR and Dan Ariely’s newly published book, ‘The Honest Truth About Dishonesty: How We Lie To Everyone, Especially Ourselves’.

Presumably, DeFord says, most sports fans (consumers) care about player – contest authenticity. I believe though, there is one notable exception, the followers of so-called ‘professional wrestling’.  DeFord believes, and I certainly agree, sports fans prefer, presume, and expect contest authenticity.  That is, fans want sporting contests to be genuine battles’ of player – coach tactics, wit, skills, preparation, training, and physical and mental ability and stamina, which not-so-incidentally I say, are incalculably valuable, influential intangible assets embedded in our psyche.   

On the other hand, growing percentages of consumers, a percentage of which no doubt, are sports fans, who do not consistently convey the comparable sense of concern for legitimacy and authenticity with respect to buying – wearing counterfeit high-end apparel and accessories.  Evidence points to growing numbers of consumers who willingly and knowingly seek, purchase, and wear counterfeit products, referred to in previous posts as ‘indifference’.

Interestingly, Ariely’s book/research describes multiple social-psychological principles (theories) that influence consumer receptivity and/or inclination to use high-end apparel and accessories which they know to be counterfeit.

The implication is that for otherwise law abiding citizens, growing numbers are variously receptive to purchasing (high end) counterfeit apparel which Airely brings-to-life through various and carefully conducted (human) experiments that focus on two sociological – psychological forces that are at work, i.e.,

  • External signaling – the way we broadcast to others who we are by what we wear.
  • Self-signaling – despite what we tend to think, we don’t have a clear notion of who we are but, generally hold a privileged view of our preferences and character.

The reality, Ariely suggests, is that we don’t know ourselves nearly as well as we think we do. The inference is that when we knowingly purchase and wear counterfeit high-end apparel and accessories, most of us feel less legitimate and will act differently than consumers who pay full retail for the opportunity to wear authentic products.  

In other words, wearing fake apparel influences us to hold a less honorable self image which manifests as tainted self-concept which in turn, influences the way that we observe and judge the actions of others.  This begs the question, which is more powerful – influential, the negative self-signaling emanating from wearing counterfeit apparel, or the positive self-signaling that comes with wearing genuine – authentic apparel? 

Not surprisingly, Ariely’s findings indicate that wearing authentic (non-counterfeit) apparel and/or accessories may not necessarily increase our honesty.  However, our conventional moral constraints are likely to loosen a bit in circumstances in which we knowingly purchase and wear and/or accessorize with counterfeit goods.  And, once our moral constraints loosen, Ariely’s research indicates, it becomes easier, that is, we become more receptive to taking further steps down a path of dishonesty which is what Ariely appropriately describes as the ‘oh, what the hell’ effect!

Such receptivity also breeds various rationalizations for consumers. One such, often touted rationalization is that the purchase of counterfeit high-end apparel and accessories does not produce any adverse (economic, competitive advantage) consequences to the high-end fashion designing – manufacturing industry because only the wealthy would pay full retail value anyway, therefore there are no lost sales!  Of course, what is noticeably and perhaps conveniently left out this particular ‘rationalization equation’ are weighing both the positive and negative economic sides to external signaling.

Also revealed in Ariely’s research, is that the potency and value of external signaling is diluted and diminishes in a similar manner described in previous posts regarding the ‘pollution of legitimate supply chains’. Too, my experience – research indicates the value of external signaling, as an intangible assets, becomes even more diluted and diminished as the ‘quality’ of counterfeit apparel and accessories elevates to the point, as it already has in many instances, counterfeits are increasingly difficult to distinguish from authentic branded products.

Again, self-signaling and external signaling are pretty clear examples, in my view, of  intangible assets whose value is connected to consumer preference via the proprietary intellectual capital and trademarked logos, etc., embedded in high-end apparel.  I believe, unfortunately, there are irreversible economic – competitive advantage consequences to all of this.  Presumed consumer preference for authenticity which delivers positive (intangible asset) economics to high-end apparel designers and manufacturers through self-signaling and external signaling are evaporating to the point that concern (care) whether apparel or accessories are ‘fake’ is secondary to their cost.  Of course, readers recognize there are other factors in play here, but these are particularly evident and troublesome. 

So, as this sociological, psychological, and intangible asset phenomenon continues, and I see nothing specific on the horizon that suggests otherwise, it will adversely affect company’s value and sustainability.  But, the cause won’t necessarily be attributable to conventional risks or threats.  Instead it will be a reflection (consequence) of changes in consumer attitudes about external signaling and self-signaling. 

Having devoted a significant percentage of my professional career to safeguarding intangible assets, I fully expect that the increasingly efficient global product counterfeiting industry has already ‘geared up’ to accommodate consumers whose inclinations change for the worse.

Ultimately, high-end apparel designers and manufacturers must come to fully recognize that the positive effects derived from external and self-signaling effects represent the  ‘intangible asset glue’  that holds company value, revenue, and its ‘building blocks’ for growth together!

Company Culture Can Be A Powerful and Valuable Intangible Asset, If…

July 2nd, 2012. Published under Company culture and reputation., Intangible Asset Value. No Comments.

Michael D. Moberly   July 3, 2012

Throughout the past decade, especially following the 2001 publication by the Brookings Institution of two seminal books; (1.) Intangibles: Management, Measurement, and Reporting authored by Baruch Lev, and (2.) Unseen Wealth authored by Margaret Blair and Steven Wallman, there has been a relatively steady stream of well intended and thought provoking articles, studies, position papers, and books written about the role and potential value of the intangible asset ‘company culture’.

Still for some, and one must respectfully include management teams, c-suites, and boards when I say this, ‘company culture’ appears to remain elusive, nebulous, perhaps even mystical insofar as its relevance, and not just its (singular) dollar value, if any, but, its ‘contributory value’ to a company, its stakeholders, and market position.

It’s clear, that the unfortunate passing of Steve Jobs has rejuvenated interest in examining and studying ‘company culture’ which numerous accounts have drawn attention to Jobs’ self-characterized maniacal interest, i.e., embedding and sustaining Apple’s culture.

With all due respect to Steve Jobs and the extraordinarily capabilities of Apple employees, and I do mean respect, having visited the Apple campus, I’m confident countless academics, technology management observers and analysts are devoting time to articulating a ‘before and after’ picture of Apple’s culture. 

In other words, I expect there will be much needed and well intentioned research devoted to offering various perspectives whether Apple’s culture has permanence?  If so, how much can be attributed to personal (Steve Jobs, Apple’s) goodwill, which according to some analysts, may have little or no actual commercial value?   

More specifically, we can anticipate numerous research initiatives, representing a broad spectrum of disciplines, will be examining Apple’s culture to determine if, among other things, it can be replicated, for good or bad, in other companies, and again, if so, what is an objective means to assess and measure its relevance and contributory value to a company?  But, let’s not forget, ‘company culture’ is an intangible asset!

In an article titled “Apple Without a Core,” (Report on Business, January 2012) author Timothy Taylor asked how valuable ‘taste’ is, as an asset, which readers know was a consistent refrain of  Steve Jobs, and also is an intangible (asset).  To support his perspective, Taylor identifies three attributes of Apple’s brand, i.e., (1.) Jobs’ own sense of taste, (2.) Jobs’ personal energy, and (3.) Jobs’ himself, as constituting a unifying symbol to and for the company.  Personally, having visited the Apple campus, I find myself in general agreement with the importance Taylor attaches to these attributes.

Without Jobs, Taylor suggests, Apple’s brand (and, presumably its culture) will be vulnerable to competitors that is, if one fully buys into the three attributes of brand noted above.  To further support his view, Taylor applies one of countless quotes from Jobs himself, i.e., “The only problem with Microsoft is they just have no taste. People like symbols. So I’m the symbol for certain things.”

In America, we sure seem to be receptive, in certain circumstances, to what I refer to as a ‘john wayne’ persona.  That is, the oft repeated statement ‘there is no I in team’ is not consistently practiced. Instead, we appear quite willing to grant credit for a range of achievements, and in some instances rightfully so, to the deeds and efforts of a single individual.  I certainly grant you that one person through behaviour or expression, in particular circumstances, can indeed serve as an impetus, foundation, and rallying point, through persistence and sustained focus, for long-lived change, i.e., culture.  No argument here!  Still, it appears, we’re occasionally too quick to suggest there is ‘an I in team’.  

On the other hand, we need look no further than the top floor of Houston’s former Enron headquarters’ building or to the much ‘globalized wall street’ to see how the embodiment of a culture, albeit generally adverse, can actually and repeatedly, play out.  Now that’s where, in my view, much research is warranted in terms of assessing and measuring the impact of a culture that went far beyond the doors of Enron or investment banking firms.  I believe one would be hard pressed to attribute ‘those cultures’ necessarily to a single individual, whether they were imprisoned or never actually charged with a criminal act.

(This post was inspired by articles respectively titled ‘Defining the Value of Culture Within An Organization’ authored by Bill Bliss and ‘Apple Without A Core’, authored by Timothy Taylor.)