Archive for August, 2015
Michael D. Moberly August 19, 2015 ‘A blog where attention span really matters’.
Readers, there is absolutely no dispute to the globally universal economic fact that today 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, competitiveness, and sustainability lie in – directly evolve from intangible assets! So isn’t it quickly approaching the state of being a no-brainer to acquire an operational familiarity with an organization’s intangible assets, because, by doing so, better business decisions are all but sure to follow!
It’s just entirely insufficient now for management teams to (a.) merely know what intangible assets are or which one’s their company – employees have developed, (b.) utilize, or perhaps worse, (c.) succumb to conventional accountancy path of lumping all internally developed intangibles together (indistinguishably) as goodwill.
It’s now essential, if not a fiduciary responsibility to:
- sustain control, use, and ownership of IA’s.
- know precisely how the IA’s contribute to a company’s value and create sources of revenue.
- understand how to utilize, leverage, and position the assets to extract as much value and competitive advantage as possible.
- exercise effective stewardship, oversight, and management of the IA’s and consistently monitor their materiality and contributory value.
By achieving this level of operational and financial familiarity with IA’s, numerous enterprise wide multipliers can follow, for example
1. Add predictability to business transactions when intangible assets and IP are in play by being able to assess the stability, fragility, defensibility, and sustainability of the assets through an IA focused due diligence.
2. Elevate probabilities that projected returns will be achieved, competitive advantages will be sustained or enhanced, asset synergies and efficiencies will develop, and transaction exit strategies affirmed
3. Achieve effective convergence of IA accounting, reporting, and valuation by recognizing their linkages to:
- knowledge management initiatives.
- IP development and safeguards.
- the balanced scorecard.
4. Reduce probability of costly, time consuming, and momentum stifling legal challenges and disputes regarding IA’s by foreseeing circumstances that can ensnare and/or entangle IA’s that will impede a transaction, or erode or undermine its projected synergies, value, competitive advantages, or overall performance.
5. Build an IA focused organizational culture that contributes to
- recognizing, producing, and sustaining control, use, ownership, and value of IA’s.
- elevating organizational awareness to accelerate the pursuit of adverse IA issues, i.e., ownership, value, infringement, misappropriation, theft, etc.
6. Develop a comprehensive OR (organizational resilience – continuity-contingency) plan that encompasses an organization’s key ‘contributory value’ IA’s that will facilitate quicker and more complete recovery following a significant business disruption.
Michael D. Moberly August 18, 2015 ‘A blog where attention span really matters’.
Intangible assets, better explained will facilitate their integration in managerial – strategic lexicon…but, let there be no question, I am a strong and unapologetic advocate of intangible assets!
An occasionally frustrating aspect to my client work in the IA arena is sparked, in part to the murky and confusing language, sometimes perceived as contradictory, used to define (describe, distinguish) IA’s, e.g., they
- are the non-physical ‘things’ of value that a company owns.
- have no set monetary value and little or no objective (consistent) means of measurement.
- lack conventional sense of physical presence, i.e., they’re not subject to being seen or touched.
I am not suggesting this occasional frustrations can…consistently fit the increasing number of IA intensive and dependent firms regardless of the multiple realities above, e.g.,
- they lack a conventional sense of physicality.
- their performance and value is challenging to objectively monitor and measure.
I have encountered countless circumstances in which uninitiated management teams, boards, investors alike, struggle to make sense of IA’s, i.e., what the British often describe as the ‘invisibles’ which actually, is quite realistic and even understandable because, among other things, seldom, if ever, are IA’s singularly reported on company balance sheets or financial statements, that is, unless they have been acquired externally, or ‘lumped together’ as goodwill.
Decision makers and strategists are hard pressed…to deny the reality that rising percentages of organizations have far fewer tangible (physical) assets in their inventory. Instead, their ‘inventory’ is conceived and built using an array of IA’s. Forward looking-thinking organizational strategists are apt to say, and, quite correctly, the development and effective use of IA’s is essential to organization’s near and long term success and serve as cornerstones for (organization) viability, sustainability, profitability, and competitiveness.
Still, to the uninitiated…i.e., those operationally unfamiliar with intangibles, including those who are suspect and/or dismissive about IA’s contributory role and value coupled with their ambiguous definitions, contribute little to achieving the much needed ‘eureka’ moments, i.e., I get it, which is critical to these irreversibly permanent fixtures to the knowledge (IA) based global economy which most would agree, we’re only in the initial stage.
An often overlooked and misunderstood reality about IA’s is that most every organization, not just the new, IA intensive-dependent ones, through their management teams and employees, routinely create, use, and ‘bank’ a substantial amount of IA’s in the form of intellectual, relationship, structural, and competitive capital. But, unfortunately, in conventionally led enterprises, these IA’s are less apt to be recognized or efficiently utilized, because in large part I find, a not insignificant number of leaders – decision makers still perceive their organizations functioning in traditional ‘brick and mortar’ contexts, dominated by physical – tangible assets, which are presumed to be their primary means for creating value and/or serving as sources revenue.
Through my lens, there are infinite types – categories of IA’s…i.e.,
- knowledge-based, or are born out of the intellectual capital held between our ears,
- issued to our company as intellectual property, i.e., patents primarily, or
- merely the accumulation of relationships, experience, and specialized (operational) know how that creates efficiencies and adds value.
When IA’s are prudently and optimally linked to understanding how and when to effectively, efficiently, and profitably use-apply them, it’s all but sure they will produce desirable and profitable outcomes and competitive advantages.
So, whether one is operating an already successful business or overseeing an SUBUR (start-up based in university research), I find most leaders – decision makers – strategists gravitate to their respective comfort zones often comprised of facts, figures, formulas, and ratios, etc., which their operational familiarity is firmly ensconced. In other words, quantitatively tangible components unfortunately with far too much regularity remain the framework for business decisions and strategic planning.
Organization decision makers’ find these comfort zones are easy to sustain because the measurement and accounting tools they are accustom to using and relying upon remain conventionally framed through a very conventional tangible assets lens, and less acquiring confidence in IA’s!
Today, those conventional comfort zones…packed with tangible numbers which still fit neatly on balance sheets and financial statements are being, quite necessarily challenged in favor of embracing and engaging the intangible sides of organizations. Management teams are obliged to push their conventional thinking and practices beyond the tangible to the intangible relative to the contributory value IA’s consistently deliver.
So, welcome to the specialized, but ever expanding arena of the information age and its outgrowth, the knowledge (IA) based economies, wherein IA’s now routinely play increasingly significant roles as contributors – facilitators to most organization’s value, sources of revenue, competitive advantages, sustainability, and ‘building blocks’ for growth and profitability.
But, despite the rising importance of IA’s and the contributions they consistently deliver to organizations in all (industry) sectors, they unfortunately remain, for some management teams and boards, challenging to define, recognize, distinguish, and measure. Hey, you have to work at it! (Adapted by Michael D. Moberly from the work of Thomas A Stewart, ‘Trying To Grasp The Intangible’.)
Michael D. Moberly August 17, 2015 ‘A blog where attention span really matters’.
An important initial step to…achieving a more IA conscious business community, lies in bringing more operational clarity to what IA’s are, what they’re not, and how to consistently identify and how to assess and utilize them effectively. Unfortunately, there remain some challenges in the business community insofar as defining and explaining precisely what intangible assets are, how, by whom, and when they are produced, and perhaps most importantly how they contribute to an organization’s value, sources of revenue, competitiveness, and sustainability. After many years of work, research, and client engagements in the IA arena, even with more experienced, astute, and successful management teams, the words ‘intangible assets’ are seldom part of their routine discourse, integrated in their lexicon. The reasons respectfully vary, along a continuum of…
- not fully understanding or appreciating what intangible assets actually are.
- being unaccustomed – uninitiated to identifying, assessing, or exploiting IA’s compared to tangible assets.
- erroneously assuming IA’s are the (exclusive) domain of accountancy and/or intellectual property (legal) counsel.
- wholly dismissing IA’s because they’re not sensed as constituting standalone assets or commodities because they are not routinely reported on company balance sheets or financial statements, unless ‘lumped together’ as goodwill.
Thus, recognizing the necessity to engage and exploit an organization’s IA’s or determine – measure their contributory value or performance which unfortunately, but frequently perceived as being neither necessary or justifiable, even though today 80+% of most organization’s value, sources of revenue and ‘building blocks’ for growth, sustainability, and profitability lie in – evolve directly from IA’s. These are economic facts – business realities that absolutely should not be dismissed, overlooked, or disregarded as somehow being irrelevant to leaders – decision makers professionally or the organization they may own and/or oversee. As noted above, even the most astute and experienced organization leaders often mistakenly characterize IA’s as being…
- more aligned with – the exclusive domains of accountancy or legal.
- mere theories best espoused in university lecture halls than actionable agenda items in boardrooms, c-suites, and among strategists.
Another critical hurdle to explaining the relevance and importance of IA’s…to organization decision makers evolves from the reality that IA’s are just that, they’re intangible. But, intuitively their presence, absence, or changes can be sensed (measured) as declines in and/or erosion of an organization’s reputation, image, goodwill, intellectual – competitive capital, etc. So, regardless whether these assets are intangible or not, it often boils down to management teams’ inclination and curiosity to identify, unravel the origins, assess, manage, monitor, and measure these increasingly critical, valuable, and certainly strategic assets. Years of conversations with organization owners and management teams…I find all know their sector competitors, particularly those which have effectively and profitably exploited their IA’s compared to those who haven’t, can’t, or won’t. But, when expressing same, seldom will there be any reference to the term ‘intangible asset’. Instead, actual IA products, i.e., reputation, brand, and goodwill will be uttered, the reason, I suspect, is they are not aware the former are actually types/categories of IA’s. For these and other reasons, IA specialists-strategists like myself…who regularly conduct briefings, awareness training, seminars, and/or consult with organization leaders about their IA’s, should always be prepared to field an array of skeptical, even dismissive, but necessary questions, particularly regarding IA valuation, reporting, and (assets) contributory value. IA specialists-strategists must also assume responsibility…for bringing as much clarity as possible to IA’s, e.g., articulating and demonstrating smarter rationales and more effective techniques for organizations to engage their IA’s, i.e., capture, utilize, manage, monitor, and monetize, and/or commoditize their intangible assets. This includes, as noted previously, clearly distinguishing…
- what intangible assets are and what they’re not.
- the various forms – categories of IA’s.
- how IA’s originate and develop, and equally important,
- how and when IA’s can be effectively and profitably applied as ‘building blocks’ to enhance an organization’s value and create (new) sources of revenue and competitive advantages.
In today’s 24/7 globally predatorial and competitive business environment…it would be expressions of wisdom should organization management teams and their boards aggressively seek – be receptive to strategies – techniques to specifically engage and exploit IA’s to the fullest extent possible. One bottom line though is, some organizations find it challenging to step outside their conventional comfort zones to engage concepts and strategies which…
- they have no formal or current awareness training.
- depart rather significantly from past practice and conventional asset reporting and accounting practices, and
- remain well under mba – business school radar.
Successful companies are typically operated by successful management teams, or so the adage goes. For the most part, successful management teams are realists and pragmatists, but still, forward looking-thinking risk takers. Understandably, their brethren, who may not be quite as successful and reluctant to knowingly engage risk, may be quite satisfied with past-current practice and therefore be skeptical and reluctant to ‘take their IA’s out for a ride’! When such skepticism translates into organizations and management teams becoming restrictively tied to practices and strategies of a tangible (physical) asset era versus the current, and for the foreseeable future, global business economy who’s future is solidly pegged to IA’s which are irreversibly embedded and climbing rapidly in all aspects of transactions, trade, and competitiveness. The former are just not likely to experience the growth, profitability, value, and revenues which most are still capable should they elect to shuffle away from practices thought to still be reliant – dependent on tangible (physical) assets.