Archive for March, 2014
Michael D. Moberly March 31, 2014 ‘A long form blog where attention span really matters’.
It’s all about sustaining control, use, ownership and monitoring the value, materiality, and risks to intangible assets, particularly intellectual and structural capital. And, when 80+% of most research evolves from intangible assets, i.e., intellectual and structural capital in particular, having an intangible asset strategist and risk specialist available can make the difference between exasperating ‘minimalization’ and exuberance!
Having served in academia for 20+ years myself, it’s certainly no secret that one distinguishing factor related to university-based (faculty) researchers (inventors) is that they generally have the opportunity to pursue – engage in research that reflects their academic interests which they have dedicated themselves. This generally involves multiple years of rigorously testing hypotheses which occasionally culminates in a patentable and/or licensable product with future commercialization potential.
Achieving this level of academic excellence, i.e., patentability is seldom a standalone activity. Instead, it entails developing and maintaining positive collaborative – working relationships between faculty researchers and TTO director and staff, both of which are essential components to achieving satisfying and optimistically lucrative (scientific) outcomes for all parties. So, faculty researcher (inventor) relationships with their universities’ Technology Transfer Office (TTO) can often be complicated and even contentious, but need not be so!
Competing in the global R&D environment…
Those familiar with R&D processes and what’s necessary to successfully move a scientific project along the continuum to reach patentability stage and perhaps commercialization in its market space recognize that most all R&D, be it university or private sector based, are competing in an increasingly intertwined, aggressive, and often times predatorial marketplace where boundaries have become blurred between domestic and international business allegiances, prompting, in many respects, well warranted risks and cautions which produce more challenges for institutions and investors insofar as distinguishing – assessing the most promising (patentability, commercialization) strategies within a particular field.
More specifically, and to be purposefully redundant, a fundamental concept that warrants more recognition by faculty researchers and university TTO managers alike, is that the broader research and development environment has truly become globalized, which in my niche of the world translates as being increasingly competitive, aggressive, predatorial, and often culminates in winner-take-all outcomes. Necessarily, the competition for researcher intellectual and structural capital competencies is quite intense, sometimes bordering on the fanatical.
Unfamiliarity, naiveté, or acting dismissively of the environment I have characterized here will (can) contribute to – exacerbate the growing array of problems and challenges insofar as securing and retaining strong defensive – offensive grounding in intellectual property, patents particularly. If, for example, a faculty researcher/inventor has the good fortune, skill, and necessary long term funding to develop a compound or device that ultimately can be readily circumvented and/or counterfeited. Herein lies unfortunately, an all too frequent problem in which one’s work ends up being exploited, not by its rightful owner, rather by predatorialy motivated economic and competitive advantage adversaries globally.
Needless to say, when such risks are dismissed or worse in my view, a feigning of unawareness or adopting a position which suggests it’s not their responsibility to elevate (risk) awareness within their respective (institutional) research community it’s disconcerting and demoralizing to faculty researchers – inventors. More so when they learn their work/research product will face challenges, legal and otherwise, which an institution may opt to not engage because the challenge is difficult, time consuming and very costly to effectively enforce or ‘win’. When such circumstances arise, as well as many others, one can be assured it will render a projects’ attractiveness to prospective licensees, investors, and/or commercialization opportunities to be less than might what otherwise be expected, in other words significantly minimized.
Strategic solution paths…
A universities’ technology transfer office is and should be the starting point for faculty researchers – inventors to disclose, or fully unravel, their invention and acquire the most current strategic counsel to ensure the most promising and worthy research, i.e., technologies are guided to their natural and hopefully lucrative and beneficial conclusions. A not infrequent personal – professional reality is that at some point during a projects’ disclosure, unraveling, and technology transfer process is the discouraging reality that that not all discoveries warrant patentability and commercialization.
A complicating factor, one which university technology transfer managers know all too well, is that a technology transfer process can take months, and in some instances years – to fully evolve and arrive at a point of final (university) recommendation or decision. For example, the issuance of a patent or consummation of a licensing agreement, are events which involve mergers’ of expertise, good fortune, good timing, and investor/funder interest.
But, it is not my intent to place the onus solely on TTO managers, rather, faculty researchers – inventors seeking a potential (public) break through or ‘turning point’ moment for their specific research, often times they are already acutely aware of the global competitiveness and predatorial nature associated with R&D environments in general. In other words, a faculty researcher will always find it in their interest to consistently engage in best practices insofar as effectively managing and safeguarding their research.
A university’s technology transfer office is typically where the expertise lies to convert inventions into commercially viable products if and when feasible. Faculty researchers and/or inventors need experienced and industry sector expertise to aid them in navigating, assessing, and offering recommendations on strategies that hopefully lead to patentability and/or commercialization which can come from intangible asset strategists and risk specialists.
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or firstname.lastname@example.org
Michael D. Moberly March 27, 2014 ‘A long form blog committed to elevating awareness about intangible assets and where attention span really matters’.
As readers know well, it is an economic fact that intangible assets collectively represent 80+% of most company’s value, sources of revenue, as well as serve as ‘building blocks’ for growth, profitability, and sustainability. It’s certainly not much of a leap in thinking then to recognize that key factors to effectively manage each of the above lies in company decision makers’ ability and commitment to…
- protect, preserve, (sustain), profitably utilize, and monitor any fluctuations in the assets’ ‘contributory value’ which is variously dependant on
- identify, prevent, and/or mitigate current and horizonal risks – threats which if – when they materialize, will, with little doubt, impair company growth, profitability, reputation, competitive advantage, and strategic planning.
In my view, one, if not the very first thing company decision makers should recognize is that, unlike patents, trademarks, or copyrights, which are conventional forms of intellectual property enforcement, there is nothing comparable issued by the government, or otherwise that says, ‘these are your intangible assets’. Doing so, is entirely the (fiduciary) responsibility of company management teams, that is, to acquire that know how independently or secure the services of an intangible asset strategist and risk specialist for strategic counsel and training.
Position business decision making to include the following…
- shift knowledge-based (intangible) assets away from being conceived and engaged as predominantly legal functions and/or processes to business management – decision functions and processes.
- align intangibles with economic, financial, and risk management planning, core business strategies, specific transactions, and the assets’ value – life – functionality cycle
- avoid costly and time consuming challenges over control, use, and/or ownership of their intangibles including misappropriation, infringement, and counterfeiting and other vulnerabilities that can lead to asset compromise and/or undermining.
- counter the expanding global risks and threats which when materialized, impede business momentum, delay or undermine transactions, competitive advantages, and erode asset value and performance.
Objective: bring managerial, business, strategic, and economic clarity to under-the-radar intangibles, i.e.,
- find’em, unravel’em, protect’em, preserve’em, defend’em, monitor’em, and enhance’em…
- the stewardship, oversight, and management of intangible assets
- monitor their value, risks, threats, and materiality
Distinguish intangible asset value…
- objective vs subjective value
- what’s the difference, why it’s important, and how can it be applied
Valuation of intangibles must be much more than mere snap-shots-in-time…
- business worth model
- market approach
- income approach
- cost approach – substitutions
Recognize circumstances in which intangible asset value can/will fluctuate…
- developmental and/or operational stage (value)
- market value
- industry (consumer) cycles
Recognize intangible asset value can be instantly undermined by…
- premature disclosure, leakage, misappropriation, theft
- entanglements and challenges over origin, control, use, and/or ownership
- global business intelligence and data mining
- counterfeiting, economic espionage
Recognize ‘rules’ for sustaining profitability and defensibility of intangible assets…
- don’t assume no one is interested in the know how you’re producing
- do assume your know how will be consistently targeted beginning at the earliest stages of its development and throughout its life – value cycle
- do develop ‘best practices’ to protect, preserve, and monitor its value
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or email@example.com
Michael D. Moberly March 26, 2014 ‘A long form blog where attention span really matters’!
A 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
Society for Human Resource Management Survey…
Readers of this blog recognize that a company’s culture and its management, in a growing number of instances facilitated by a ‘culture officer’ can become a strategically significant and value contributing intangible asset. A 2012 survey commissioned by the Society for Human Resource Managers, i.e., SHRM asked 770 human resource leaders to identify significant workforce management and staffing challenges. The challenges the survey respondents identified were…
- company culture management
- employee engagement
- employee retention
- effective performance management, and
- employee recruitment.
Interestingly, full ninety percent of the survey respondents identified ‘company culture’ management as being (a.) important, or (b.) very important! Standing alone, I, and I am confident others, find this revelation instructive in many ways, one is, it should prompt management teams to recognize that devoting time, energy, and some resources to developing and sustaining an effective and positive company culture will, under most circumstances, deliver impressive, measurable, and beneficially strategic returns each of which can contribute to a company’s value, sources of revenue, and sustainability.
Equally important, in my view, the SHRM survey findings give persuasive and definitive weight to the view that a well managed and positive 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, with little doubt, elevate a company’s overall performance.
Integral to (1.) recognizing, and (2.) accepting this view lies the economic fact that 80+% of most company’s value, sources of revenue, and strategic ‘building blocks’ for growth, profitability, and sustainability today either lie in or evolve directly from intangible assets, one of which, of course, is a positive and principled company culture!
It’s certainly not a stretch to infer then, that a positive and principled company culture can, and in all likelihood will serve as a catalyst for internalizing and enhancing other findings – revelations in this survey commissioned by SHRM, i.e., employee engagement, retention, performance, and certainly, and recruitment of new employees, etc.
How do management teams know their company is exhibiting a positive and principles culture…?
Based on the excellent work of Dr. Edgar Schein, a company culture consists of progressive stages, and will emerge and start to become observable to management teams in the following contexts, i.e., evidence that…
- employees (collectively) recognize and begin to act on a shared system of values, norms, beliefs, and attitudes that defines and clarifies what is important to them and their employer.
- employee’s at all levels recognize they learn as they are solving (company) 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 faces, which, in turn, leads to greater efficiencies, competitive advantages, and reputational value, etc. (Adapted by Michael D. Moberly from the work of Dr. Edgar Shein)
But first, the initial step that most companies must undertake insofar as developing a positive and 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 by employees, preferably as consistent, positive, and principled behaviors that cascade 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/centric that it cannot be replicated or sustained through a market change, merger or acquisition, or significant economic downturn as is being experienced 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 intellectual – managerial dashboards have not fully transitioned to the intangible (non-physical) assets side of a business or company, 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.
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 intellectual, structural, and relationship capital.
But, building a positive and principled (semi-permanent) company culture is not something which evolves solely 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, http://www.softwareadvice.com ). Instead, a well-grounded and principled company culture provides permanence, depth, and confidence among employees and their abilities and capabilities!
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or firstname.lastname@example.org
Michael D. Moberly March 25, 2014 ‘A long form blog where attention span really matters’.
I found a 1999 paper authored by Merrill E. Whitney and James D. Gaisford (then) of the University of Calgary, titled ‘ Why spy? : An inquiry into the rationale for economic’ to be very intriguing, sufficiently so to write this post.
Peculiarly, economic espionage has been a topic which I have had consistent interest for 25+ years when I began designing and conducting my own (investigative) research directed to universities, startups, and larger corporations and cultivating ‘trust based relationships’ who would point me in particular directions so I could examine this phenomena from an unclassified position that went well beyond the scope of others.
I am very hard pressed to even suggest, on the most basic level, there is a rationale, economic or otherwise, for engaging in economic espionage, particularly as we have come witness how it has morphed today. One reality that I should think requires no persuasion whatsoever, is that industrial (economic) espionage and its close cousin product piracy and/or counterfeiting are certainly not particularly new activities as each have been consistent challenges almost since ‘man’ began writing on the walls of caves.
Admittedly, I was and remain variously intrigued by the audacity of Whitney and Gaisford to have thoughtfully engaged in the study of economic espionage in this manner, something which most countries intuitively find repugnant.
Whitney and Gaisford however, consider how economic espionage can yield desirable strategic affects as well as cost savings to favor firms within the spying country. No argument here, that does happen, but one important question is ‘which firms benefit’?
The spying country, they suggest, will typically gain, even though counter-espionage (information asset protection) programs and s will almost certainly today be conducted (in place) by the targeted countries and companies. When technologically advantaged (targeted) countries spy on one another, it is possible, Whitney and Gaisford point out, that both may ultimately – eventually be better off. The ‘better off’ in this instance, translates as the ‘transfer of technology’ which has occurred. Generally then, Whitney and Gaisford suggest, consumers may become a beneficiaries to economic espionage.
Perspectives on economic espionage…
In a classic sense, economic espionage is activities initiated – conducted by government entities on behalf of their domestic-based firms. In other words, it may be a strategy of sorts, to obtain marginal-cost reducing production technologies. To take this perspective further, Whitney and Gaisford suggest economic espionage may constitute a form of strategic (competitive advantage) trade policy!
- if spying unearths the blueprints of a product or source code for software, for example, the fixed costs associated with the R&D can be reduced for the domestic firms, i.e., the recipients – end users of the spying.
- in such instances, there are direct benefits accruing to the domestic firms located in the spying country, but there may be few, if any, strategic benefits because the behavior of the (recipient) domestic firms in their respective global markets may remain unchanged.
- on the other hand, economic espionage that gleans information about contract bids, marketing plans or strategic planning in general, or costs of foreign competitors may give rise to (some) strategic benefits in specific global markets, even though there are no direct benefits.
- lastly, if proprietary intellectual and structural capital, i.e., information about production technologies and processes of foreign firms is obtained, (through economic espionage) there will be a…
- direct benefit in the form of lower total costs for the domestic firms, and
- strategic effect on global markets, due to lower marginal costs…
True enough, it is difficult to (objectively, factually) determine the level of economic espionage that actually occurs, in large part due to its stealthy, asymmetric, and often times long term elements. Too, determining whether or how much growth – expansion of economic espionage has occurred is challenging due to the clandestine nature of economic and reluctance by victim companies to ‘go public’. Collectively, these factors, unless duly accounted for, precludes systematic empirical verification. But, as readers know, anecdotal accounts abound.
Whitney and Gaisford suggest government (national) spying may have advantages over corporate (industrial) espionage, i.e.,
- national spy agencies may be able to reap economies of scale and/or scope…
- information that is obtained by means of national government spying is (may be) non-competitive in the sense that it can (conceivably, theoretically) be used by all domestic firms (located in the national spying agency’s country)…
- government conducted espionage may yield positive social benefits even if the private benefit of corporate espionage to an individual firm is negative…
- conceivably, the (national spying agency’s) government would be able to the favorable effects of national spying on domestic consumers into account whereas this externality would (may) be ignored in the case of corporate espionage.
- in some countries though, such as the U.S., the business culture arms-length relationships between private companies and government may (will) make economic espionage by governments more problematic.
A business model for economic espionage, spying often pays well…
- ‘…penetration rate is the probability that a country’s agents will successfully penetrate and acquire the (targeted) new technology
- ‘…the marginal cost of spying always increases as the probability of penetration is increased, the average variable cost of spying is always increasing in the probability of penetration
- ‘…the extent of County X’s spying is inversely related to the difficulty of espionage because an upward shift in the marginal cost of the espionage function would lead to a lower optimum penetration rate
- ‘…it could be that the temporary glut of spying resources in the aftermath of the Cold War has lead to increased economic espionage because of unusually low marginal costs
- ‘…the presence of domestic consumers would weaken the case for a strategic export subsidy, because such a subsidy would (likely) raise domestic prices (therefore) domestic consumers stand to gain from economic espionage
- ‘…if the optimum penetration rate is positive, then espionage must generate a favorable strategic effect as well as a direct cost saving
Introducing counterespionage to thwart economic espionage, some perspectives…
- …the probability that Country X’s spies will be able to successfully penetrate Company B that is located in Country Y is (now) considered relative to the probability that Company B will be able to thwart Country X’ spies.
- …need to factor/calculate Country X’s cost of (their) economic espionage operations and Company B’s governments’ costs associated with counter-espionage.
- …the optimum expenditure on espionage is (usually) positive unless the marginal cost of spying is at least as large as the marginal benefit when both the penetration and interceptions rates are equal to zero.
- …even when Company B’s governments’ counter espionage initiatives are possible, spying remains beneficial to the consuming (spying) countries and County X, but harmful to the country in which Company B is located
Merrill E. Whitney and James D. Gaisford University of Calgary International Economic Journal, Volume 13, Number 2, Summer, 1999.‘ Why spy? : An inquiry into the rationale for economic’ .
Michael D. Moberly March 24, 2014 ‘A long form blog where attention span really matters’.
Two points for context…
First, to the readers of this blog I suspect there is no need to elaborate on the reality that growing percentages of the content of today’s products and/or services consist of attractive technological inputs and features that provide consumer conveniences and elevate market space competitiveness. And agreed, most, if not all of such inputs – features are rooted in intangible assets, particularly intellectual and structural capital.
Second, it’s certainly no secret that there are few (company) business models that specifically reflect or encompass a desire to assume the costs and risks associated with incurring the levels of vertical – horizontal integration necessary to single-handedly achieve exclusive mastery and ownership of each technology and skill set required to develop, manufacture, market, and sell products and/or services to be housed under a single (corporate) roof.
This readers, sets the context for this post!
SME’s and SMM’s can be sources of complimentary intellectual and structural capital…
Rooted in my 20+ years in academia and many years of subsequent consultancy practice directed almost exclusively to serving small and midsize companies, ala SME’s and SMM’s, I believe, anecdotally of course, that corporations, universities, and their respective R&D and technology transfer offices, and (faculty) researchers themselves, are inclined to be receptive to pursuing (research) relationships, partnerships, and/or alliances within their respective tier, i.e., universities designated as a Carnegie I or II research institutions or conversely, with Fortune 1000 companies. For various reasons, SME’s and SMM’s, aside from technology exclusive companies, are seldom or certainly infrequently recognized as originators and/or contributors of useable (cutting edge) intellectual or structural capital sufficient to compliment or convert university’s basic research into the highly sought after path towards commercialization.
So, for readers who may still be thinking this is merely another piece about ‘startups’ and/or university-based spinoff’s, I have failed to bring clarity to my point. My position is this; many, if not most SME’s and SMM’s develop, own, and harbor a substantial amount of intellectual and structural capital which is not nearly as routinely or aggressively sought or tapped into as is warranted or at the level many of their Fortune 1000 ‘first cousin’ competitors experience.
Not so flatteringly, my years of experience in academia, there are varying levels of assumed self-importance and even superiority some universities express through their culture, key administrators, faculty, and technology transfer units which variously inhibits some from engaging the unacknowledged and untapped intangibles embedded in SME’s and SMM’s as collaborative supplements to emerging (university-based) research.
Yes, I am a strong advocate for university research leadership to moderate their culture and adjust and broaden their strategic research practices to encourage and allow monitoring the SME and SMM environment. One important product of which is identifying particularly effective SME’s and SMM’s whose success originates solely from their intangibles, i.e., intellectual and structural capital particularly, much of which in my experience, can be aligned with specific research interests and/or initiatives of a university.
Two way vs. one way transfer of intangibles…
What I am referring to is certainly not a mere one-way ticket of knowledge transfer from SME’s and SMM’s to academia, rather as open ended round-trip tickets for…
- knowledge (intellectual, structural capital) collaboration and transfer
- intended to forge strategic relationships to respectfully exploit and advance relevant intangibles and competitive advantages, and
- capture knowledge spillovers that otherwise would likely be lost.
University’s as stand alone ‘ivory towers’…
The time-honored vision of university’s being stand alone ‘ivory towers’ removed from worldly concerns and external influences is now much more myth than reality, at least in my view. That’s largely the result of legislation and other initiatives introduced during the late 1980’s and early 1990’s during which a significant shift in the academic research community began whereby researchers and scientists were now being encouraged to work more closely (collaborate) with private sector interests. One reason of course was to speed the transfer – commercialization of ideas from academia to the marketplace.. (The above was inspired by my extensive conversations with the Congressional Research Office researcher and author of ‘Is Science For Sale?: Transferring Technology From Universities To Foreign Corporations. Report by the Committee on Government Operations.October 16, 1992. House Report 102-1052)
One consequence of this heightened motivation and receptivity to negotiate external collaborations was that a growing number of colleges and universities, through their respective licensing and technology transfer units, realized and were provided with legitimate pathways and motivations to become more entrepreneurially oriented, and thus externally competitive.
In other words, university research administrators and faculty researchers were, with some rapidity, becoming more receptive to considering new and/or distinctive opportunities and platforms for collaboration with private sector entities. These were also recognized as additional means to seek and secure financial support for continuing (on-going) research and their related activities. There is little doubt such receptivity was prompted and/or at least influenced by a second realization, which is the potential commercial value and revenue generation (royalty) potential which could evolve from the commercialization of internally or collaboratively generated inventions or ‘breakthroughs’.
Broadly speaking, university inclinations to be more open and receptive to exploring – pursuing external (contractual) alliances or consortiums with private sector entities are now commonplace. In fact, for numerous institutions, a primary responsibility of the university technology transfer director’s is to do just that. Too, a rather obvious benefit to both parties is that such collaborative arrangements are acknowledged as a relatively quick, accepted, and legitimate (two-way) pipeline to access specific bases of knowledge and expertise, i.e., intellectual and structural capital to complement a company’s existing competencies related to the development of future products and services.
It would behoove university research administrators and technology transfer directors to keep a keen eye on (monitor) particular SME’s and SMM’s which are producing value laden intangible assets which in many instances, paths for application and commercialization have already been demonstrated. But, with collaboration and the infusion of additional research products, even greater mutually beneficial commercialization opportunities can emerge.
Michael D. Moberly March 20, 2014 ‘A long form blog where attention span matters.’
‘Houston, we’ve got a problem’! The problem is, in my view, that far too many decision, makers, c-suites, boards, and management teams are conceiving and seeking resolution to their public persona challenges through conventional public relations lens and not as they should, through a very nuanced and sector specific reputation risk lens.
There is no question each of these corporations have taken substantial ‘direct hits’ over the past few months, and there are not likely to diminish anytime soon given relevant Congressional Committees are now gearing up for hearings and investigations, all seeking answers to the proverbial questions, i.e., who knew what, when did they know it, and what, if anything, did they do about it upon knowing about it’.
I must ask readers…
- are these mere public relations issues which presumably can be managed or otherwise expected to dissipate over a period of time with no long term detrimental – adverse financial and/or competitive advantage affects?
- or, are they merely the inevitable outcome of internal process and/or procedural malfunctions that repeatedly failed and will manifest as substantial and long term risks to each company’s reputation?
But, let me make a personal point before we proceed much deeper in this conversation, which is, while the three companies (examples) noted above, each are clearly among the Fortune 500’s, much smaller firms succumb to precisely the same circumstances, but the latter seldom makes national and international media headlines.
So, I believe what Target, GM, and Toyota are experiencing, can and should only be conceived and addressed through the lens of reputation risk. Interestingly yesterday, Attorney General Holder pointed out that Toyota sought to handle their long running accelerator problems as a public relations problem. If that is the case, clearly someone received consistently bad counsel. So, public relations is clearly the wrong lens to address, what may ultimately be determined to be systemic – internal process, procedure (company, business unit cultural) breakdowns that produce obvious and substantial consequences financially and competitively.
When does a public relations problem become a reputation risk problem…?
Admittedly, having worked almost exclusively on the intangible side of businesses for many years, this is not necessarily an easy question to answer, nor perhaps, should it be. My experiences lead me to conclude however, that boards, c-suites, and many management teams, have yet to transition from characterizing – framing such events in public relations to reputation risk contexts, as inferred by AG Holders’ remark. Clearly, in my view, the problems experienced by Toyota, GM, and Target, to name just a few, reached well beyond a conventional public relations challenge months, if not years ago, and have moved into a much longer term reputation risk cycle.
So, perhaps, that was the distinction between a public relations problem and a reputation risk problem applied by these companies, i.e., the time frame in which the problem can and/or will fester with consumers to the point it materializes to adversely affect a company’s reputation, which as we know is often for extended or perhaps even, indeterminate periods of time.
But, using time as the primary metric for distinguishing adverse events as being public relations vs. reputation risk problems falls short of a critical aspect, that is rapidly and correctly assessing the gravity of the problem, through the eyes of (factors) consumers, investors, and other stakeholders. Ultimately, materialized reputation risks are often found to be a failure or breakdown in a company’s structural capital, i.e., processes.
Again, my familiarity with such circumstances is that frequently those responsible for making (business) decisions remain challenged insofar as their inclination to characterize many adverse events in quarter by quarter contexts which, as it so happens, is more aligned with public relations ‘fixes’, versus longer term and much more adverse reputation risks.
The intangible asset ‘risk of risks’ is a company’s reputation!
Company reputation is an intangible asset of the first order. So, perhaps it would be useful to say again it an economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, competitiveness, and sustainability lie in or evolve directly from intangible assets. Respectfully, I suspect this economic fact may have prompted The Economist’s Intelligence Unit (EIU) to produce a ‘global risk briefing’ paper titled Reputation: Risk of Risks.
Company reputation is defined (in the Economists’ report) as ‘how a business is perceived by stakeholders, including customers, investors, regulators, the media, and the wider public’. To be sure, it ‘declines when a company’s experiences fall short of expectations’. When not one, but multiple consumers – users die or incur serious physical injuries because their expectations were not met by a company’s product, then, ‘Houston, we do have a problem’ and its unlikely it can be readily fixed through conventional public relation strategies.
However, before this definition can be fully translated into effective (reputation risk) countermeasures, it’s important for company decision makers, not unlike, Toyota, Target, and GM to achieve crystal clear operational clarity regarding…
- whose experiences
- what experiences, and
- which expectations.
Company reputation is certainly a prized and increasingly valuable, yet vulnerable and fragile asset which the respondents to the EIU survey agreed by stating that sustaining a positive company reputation is a main concern for the majority of risk managers, ahead of, for example…
- regulatory risk
- human capital risk
- IT network risk
- market risk, and
- credit risk.
It’s fair to say now that company reputation risk has risen to the level of being a fiduciary responsibility (and concern) that extends well beyond senior risk managers to being permanent fixtures on company management team, c-suite, and board dashboards, i.e., Stone v Ritter.
What these companies needed was a deeper appreciation for the asymmetric nature (elements) of reputation risk today, which is, unsatisfactory (poor) company reputation can rapidly, and often times irreversibly and adversely affect a company economically and competitively, aside from the embarrassing and probing questions that will be inevitably posed by Congressional Committee members, especially, those who have constituent(s) who personally suffered due to a company’s obvious absence of understanding and correcting reputational risks in a timely manner that preferably exceeds regulatory agency oversight requirements and before unwitting consumers die or become injured.
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or email@example.com.
Michael D. Moberly March 17, 2014 ‘A long form blog where attention span matters’!
There is certainly both fact and legend to the premise that company success and profitability often lie in being first in the market place. However, management teams which are operationally unfamiliar with the intangible asset side of their business, particularly the inter-connectedness of intellectual, structural, and relationship capital that routinely pave the road for getting a company’s product(s) to the correct market place ahead of its competitors are now obliged to acquire such familiarity.
As readers know, for an ever expanding range of companies globally, 80+% of their value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – emerge directly from intangible assets.
So, to pave the most effective and efficient road maps, it’s essential to elevate clarity and bring choice to the stewardship, oversight, management of each company’s intangible assets that contribute value, competitive advantages, and other valuable virtues related to achieving business success, e.g., identifying, unraveling, developing, positioning intangibles to maximize and extract as much value and competitive advantage as possible.
As more business persons are coming to realize, there is no other time in business management history when larger percentages of a company’s value, sources of revenue, competitive positioning, earnings potential, and overall sustainability are more rooted in intangible assets.
Again, small company management teams are obliged to recognize the roadmap to securing the preferred and profitable outcome to any transaction, marketing program, and/or R&D project undertaken is routinely paved with…
- the significant and inevitable roles they play in achieving preferred outcomes, along with
- recognizing the necessity that intangibles be developed and positioned to accrue as much leverage as possible.
All too frequently however, the various contributions intangible assets make to a company, insofar as distinguishing their contributory value are overlooked, dismissed, undervalued, and unrecognized. A response I seem to hear most from company management teams for this evolve around intangibles’ lack of physicality. That is, intangibles are often ‘taken for granted’, not distinguished as value contributors, and otherwise become deeply embedded over time in routine (company, business) operations, processes and/or functions which tend to fall under the conventional business-minded radar this is often still fixated on tangible assets.
But, this is where small company management teams need to be, i.e., with respect to the intangible assets their companies produce and possesses…
- Michael Porter, Harvard Business School, has described intangible assets as distinctive and unique blends of business activities, processes, know how, and customer/client relationships, in other words, combinations of intellectual, structural, and relationship capital, which companies can and should exploit to differentiate them from competitors, and thus create contributory value.
- Similarly, Weston Anson of CONSOR, describes intangible assets as internally developed know how, i.e., intellectual capital primarily,…
- that supports specific proprietary methods, processes, and best practices, and
- the ways in which that information – those assets are used and applied.
- Ultimately, intangible assets, says Dr. Baruch Lev, NYU, Stearns School of Economics, typically come at…
– the beginning of a process as ideas,
– the middle of a process as patents, and
– at the end of a process as commercialization and distribution channels.
A particularly frustrating misnomer that still frequents intangibles’ characterization is that they only reflect a company’s goodwill, brand, or possibly trademarks? Readers of this blog of course, realize intangible assets reach far beyond such limitations, for example, the…
- American Institute of Certified Public Accountants defines ‘goodwill’ as all of the intangible assets and supporting assets that contribute to ‘advantage’ that an established business has over its competitors or comparable businesses about to be started which include image, customer base, reputation, and perceptions…
- British, on the other hand, broadly define ‘goodwill’ as the probability that a company’s customers would continue to do business with it and value its products and services above those available from competitors…
For every company, with respect to the various types of (business) transactions they typically engage, it’s advisable that business management teams and decision makers recognize the…
- various forms intangible assets manifest.
- various circumstances a company’s intangible assets will be in play.
- actions necessary to sustain control, ownership, and contributory value of those assets, for the duration of their respective life, value, and functionality cycle.
Below are various examples – contexts of intangible assets. For management teams, boards, and other business decision makers for which, most respectfully, this may be their initial foray into the intangible side of their business, they may find it useful to seek the expertise of an intangible asset strategist insofar as translating these intangibles into operational and/or transaction contexts.
Technology: internally developed (proprietary, unpatented) software, databases, source code, custom applications, and technology sharing agreements…
Marketing: advertising concepts, focus group findings, subscription lists, music, promotional characters/devices, newsletters, credit information files…
Engineering: designs, drawings, blueprints, schematics, diagrams…
Relationship – Organizational Capital: customer/client relationships, mailing lists/data bases, retrieval systems, distribution channels, 1-800 numbers…
Competitor Research: actionable business intelligence, i.e., competitors plans, intentions, and capabilities…
Real Estate: zoning, permits, water/mineral/development rights, easements, location visuals and proximities, options…
Human-Intellectual Capital: work force in place (experience, education, training), training manuals, operating processes, non-compete/disclosure agreements (if transferable), the sum total of employees’ specialties, skills, attitudes, abilities, competencies, and technical (proprietary) know how, insurance enrollment/expirations
Internet: domain names, website design, B2B/e-commerce capabilities, web links, accessibility, use, URL’s…
Company/Business Identity: image, goodwill, reputation, trade name, logos, brand…
Contracts/Agreements: most any contract that has a definable life and some form of exclusivity, i.e. employment, affiliation, advertising, sales, subscription, service, long term lease, non-compete covenants, joint ventures, value of future purchases due to special relationships with vendors, royalties, technology sharing/joint ventures…
Products/Services: warranties, production capability, order/production back log, operating permits, licenses, renewals, processes, expirations, retail shelf space, distribution rights/networks…
Intellectual Property: patents, copyrights, trademarks, trade secrets, trade dress, trade name, service marks, mastheads, logo design, brands…
R&D: (in-process) studies, formulas, processes, assembly data, regulatory agency approvals, collaborative alliances, formulas, outstanding RFP’s, specialized technical repositories, libraries…
Communications: methods, cable/transmission rights, FCC licenses, certification, bandwidth…
Structural Capital: structures and processes employees develop to increase productivity and performance (business process/method patents)
Adapted/modified by Michael D. Moberly from various sources including ‘The Intangible Assets Handbook’ – Maximizing Value From Intangible Assets. Weston Anson. American Bar Association 2007 and ‘Global Brand Integrity Management’. Richard S. Post and Penelope N. Post. McGraw Hill. 2007
Michael D. Moberly March 14, 2014 ‘A long form blog where attention span really matters’!
A starting point to achieving success! Whether you are part of a management team for a start-up, university-based research spin-off, or a young and still maturing firm built around a single invention, acknowledging and engaging the often multiple intangible assets embedded in that invention is an essential piece to the broader (strategic) puzzle for achieving commercialization success.
But first, as I often do here, let’s start with the unwavering economic fact that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in or evolve directly from intangible assets! And, that percentage is likely to be substantially higher for early stage endeavors.
To serve as a strategically viable path to best achieve that desired end, I have compiled a series of essential questions which of course are related to the intangible assets most every invention produces as potentially ‘commercializable’ by-products. Respectfully, I encourage readers (inventors) to avoid assuming these questions need only be asked or answered once and then pushed aside so presumably more important issues can be addressed related to make a start-up an on-going and viable concern.
Instead, the questions I have framed below should be periodically or even routinely re-visited. My rationale is, acknowledging and effectively utilizing intangible assets which inhabit most every firm and frame its culture from inception, particularly intellectual, structural, and relationship capital and reputation will rapidly manifest, with the proper stewardship, oversight, and management, to become the keys to not just the commercialization success of a single invention, rather serve as ‘building blocks’ for a firms’ growth, profitability, and overall sustainability.
So, here are questions which business management teams and decision makers should be repeatedly asking. For a list of intangible assets please see http://kpstrat.com/blog/?p=2594.
- Are intangible assets consistent discussion (action) items in management team meetings?
- Do inventors’ – management teams know what percentage of contributory value (of their invention) lies in or evolves directly from intangible assets?
- Can inventors site specific and/or additional intangible asset(s) emanating from their research (invention)?
- Can inventors describe specifically how that – those assets will contribute to the inventions’ value, projected sources of revenue, and competitive advantages, i.e., commercialization?
- Is an inventory and/or audit of the contributing intangible assets driving and/or emanating from the invention being maintained, regularly assessed, and updated?
- If so, does the inventory-audit include an objective assessment of how, whether, or which contributory intangible assets continue to hold value, materiality and relevance to the invention and its inevitable spin-off company’s core mission and strategic plan?
- How are the inventions’ contributing intangible assets being managed, i.e., sustain control, use, ownership and monitor their value, materiality, and risk?
- Can you objectively assess which (contributory) intangible assets hold the highest investor appeal – attractivity, or market value, etc., if bundled, sold, licensed, or used in a separate strategic alliance and/or joint venture?
- Can inventors objectively identify which invention-related intangible assets are most vulnerable to risk, i.e., infringement, misappropriation, premature leakage, counterfeiting, etc.?
- Is there an organizational resilience (continuity – contingency) plan in place that specifically includes contributory intangible asset risk/threat mitigation and rapid recovery from the adverse impact of materialized risk(s)?
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or firstname.lastname@example.org.
Michael D. Moberly March 13, 2014 ‘A long form blog where attention span really matters’!
Admittedly, the title of Michael Roberto’s book “Know What You Don’t Know, How Great Leaders Prevent Problems, Before They Happen”, may appear to some, at least initially, as having virtually nothing to do with intangible assets. I respectfully beg to differ!
There are numerous facets of Dr. Roberto’s book which, for me, merge well with any business – management team decision-making processes for putting a company’s intangible assets to work insofar developing and exploiting them to create new – additional sources of value, revenue, competitive advantage, etc.
But, before we get too far, let’s not overlook an important economic fact – business reality, which is, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability today lie in or directly evolve from intangible assets!
So, for example, Chapter 1 of Roberto’s book is relevantly titled “from problem solving to problem finding”. It commences with, what I believe, is a very apropos quote from G.K. Chesterton, and English author and theologian, which I slightly paraphrase here, i.e., “it isn’t that management teams can’t see the solution, rather it’s that they often can’t see the problem”. The problem not seen, in my view, resides in overlooking and/or dismissing intangible assets as comprising the real sources of most company’s value, revenue, and competitive advantage.
Roberto makes numerous other, equally introspective points throughout his book which I translate as being relevant to my, and other intangible asset strategists’ objective, which is for intangible assets to become routine discussion – action items on c-suite and management team agendas. Another example Roberto conveys, which is the effective theme of his book, lies in the necessity to move ‘from problem solving to problem finding’. That is, for a substantial percentage of companies globally, the intangible assets their employees and business practices routinely produce frequently come to be embedded in most every business function, operation, and transaction.
However, for various reasons, many of which have been addressed here previously, company’s intangibles remain unrecognized or, at least, not exploited to the level possible, even though most business processes and/or transactions are routinely and substantially underwritten by intangible assets. So, for companies in which intangibles remain unrecognized or under-utilized as contributors to value, sources of revenue, and profitability, this should constitute in any management teams’ thinking, significant ‘business problem’ that warrants management teams collective efforts to find and solve!
In the increasingly intangible asset rooted global economies and business transaction environments, recognizing how management teams can effectively and efficiently find and solve problems, merely by recognizing, developing, and exploiting (their) intangible assets, particularly those related to sustaining – enhancing profitability, market share, competitive advantages, value, revenue sources, reputation, brand, etc., is a strong example of moving ‘from problem solving to problem finding’.
Management teams that continue to disregard and dismiss the contributory value of their intangible assets, while it may not be ‘the’ problem, it is certainly ‘a’ problem’ And, its resolution does not require pouring over extraordinary amounts of information nor the extensive use of expensive resources or personnel time to effectively achieve.
Again, as readers know, one, time honored starting point for solving most any problem is by recognizing a problem exists, i.e., ‘finding the correct problem that warrants resolution’. From my experience, an example of finding the not a problem is seldom realized through a single seminar, conference presentation, or published article authored by a subject matter expert. Rather ‘problem finding’ is rooted, in my view, through introspection, which unfortunately, in the go fast, go hard, go global context which many executives and management teams have assumed, they argue leaves little time for.
Extracting ideas from a respectfully non-descript book which Roberto has authored versus the airport bookstore business books which are consistently framed in a ‘ten easy and quick steps to…’, represents a real and viable strategy for remedying this particular problem, that is management teams ‘finding and solving the problem’ through unlocking their intangible assets by adding, if you like, an anthropological and ethnographical approach to one’s repertoire of managerial expertise.
For example, an ethnographer would observe and identify a firms’ producers – developers of intangible assets from a ‘shop floor’ perspective, i.e., in their natural settings, wherever that may be. In other words, ‘finding the problem’ means avoiding merely asking employees how things are going, or relying on survey data or focus groups as the dominant sources of insight (problem finding). Instead, management teams should be obliged to actually observe what employees do, i.e., their tasks, processes performed, and internal – external interactions, etc., in a manner comparable to an anthropologist. That is, engage and observe how employees, customers, clients, and suppliers, etc., actually behave and interact.
Doing so, leads not only to ‘problem finding’ through recognition and appreciation for the intellectual, structural, and relationship capital (intangible assets) that are woven into each.
Conducting this level of observation through the lens of an anthropologist and/or ethnographer, management teams can become more effective ‘problem identifiers’ with a particular adeptness at distinguishing – analyzing the contributory value of intangibles without the interference of potentially misleading or over analyzed data that, in turn, can produce biases and preconceptions that may serve to taint what it is to be achieved.
Too, making these observations through an intangible asset lens, management team members are (a.) better positioned to not just identify what and how intangible assets are being used, (b.) if they are being used effectively, and (c.) which, if any, intangible assets need to be developed further or acquired and ultimately integrated to make a company’s processes more effective, efficient, and profitable.
This post was inspired by Michael A. Roberto’s book ‘Know What You Don’t Know…How Great Leaders Prevent Problems Before They Happen’, Wharton School Publishing, 2009.
Reader comments and inquires are always welcome at 314-440-3593 (St. Louis) or email@example.com.
Michael D. Moberly March 12, 2014 ‘A blog where attention span matters’.
Management team’s fiduciary responsibilities now include taking consistent and affirmative steps to sustain control, use, ownership, value, defensibility, and potential monetization – commercialization of intangible assets.
Too, it’s becoming somewhat common, that at least one aspect of assessing the effectiveness of senior management team members is by how well they engage in the stewardship, oversight, and management (S.O.M.) of company intangible assets. When such, usually board level, assessments occur, areas assessed (examined) include effectiveness in…
- capturing, exploiting, and converting intangibles to enhance company value, create sources of revenue and strategies to sustain future growth.
- strengthening and building competitive advantages by creating environments in which employees (peoples) relationship, intellectual, and structural capital are being maximized and effectively utilized.
In my view, there’s solid rationale for incorporating the S.O.M. of intangible assets in personnel performance assessments. For one, intangibles are the undisputable dominant driver of most company’s economic and competitive advantage health and value. If (when) they are dismissed or neglected by company management teams, there is a substantial probability that such initiatives as new project launches, competitive advantages, marketing programs, and strategic planning will be stifled, undermined, or certainly less than their potential, with asset value eroding quickly or ‘going to zero’!
Conventional financial statements and balance sheets do not provide management teams, c-suites, and boards with a complete or necessarily clear picture of a company’s fiscal soundness. This is especially relevant in today’s increasingly knowledge (intangible asset) dominant business (transaction) global economy in which it’s an economic fact that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability, and profitability lie in – evolve directly from intangible assets.
So, management teams continued (perhaps sole) reliance on conventionally framed financial statements that are absent direct reference to intangibles. This circumstance unfortunately contributes to minimizing the importance of intangibles and further contributes to a sense, among some management teams, of skepticism and dismissiveness about the necessity to acquire operational familiarity with intangible assets well beyond merely goodwill!
True enough, conventional financial statements describe whether or not financial targets are being achieved, etc. In that context, they remain relevant, but they simply don’t convey the whole story (picture) about a company’s status or its’ potential with respect to the production and exploitation of intangible assets.
Too, in fairness, conventional financial reports were not designed to capture qualitative aspects and/or what we now know more specifically today as vital signs – indicators related to businesses success and sustainability, particularly those found in – emanating from company’s intangible assets.
Today however, monitoring – measuring the performance of a company’s intangible assets is neither a time – resource luxury applicable only to Fortune ranked companies. Rather, those activities are a necessity and fiduciary imperative for most all firms, including SMM’s (small, medium multinationals) SME’s, (small, medium enterprises), start-up’s, early stage companies, and university-based spin-off’s.
The prudence of striking a better balance between the stewardship, oversight, and management, of tangible vs. intangible assets can produce positive benefits and multipliers that can favorably cascade throughout an enterprise.
There are numerous factors in play today that should be influencing management teams to pay more attention to (intangible) asset monitoring as indicators of performance and contributory value irrespective of company size, maturity, or industry sector. These factors include, among others…
- increasingly aggressive, competitive, and predatorial global competition.
- the growing connection between a company’s intangible assets, stakeholders, value-supply chain, profitability, and sustainability.
- a heightened respect for the risks to and value of a company’s reputation (image, goodwill).
- accelerated innovation, product development, and launch times.
- the geographically boundary-less speed which information (intangible assets) can be developed, acquired, and disseminated.
- increasing government regulatory emphasis (globally) on reporting and measuring (accounting for) the value, performance, and materiality changes of intangible assets.
Each blog post is researched and written by me with the genuine intent they serve as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.
Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk. As such, my blog posts are not intended to be quick bites of information piggy-backed to other sources, or unsubstantiated commentary.
Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of any of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction. I always welcome your inquiry at 314-440-3593 or firstname.lastname@example.org