Archive for July, 2016
Michael D. Moberly July 28, 2016 ‘A blog that intersects intangible assets with business’!
As I have endeavored to convey since my initial post to this blog in mid-2006; the importance for business decision makers to recognize that, in each transaction they engage, correctly identifying, assessing, and mitigating risk to the IA’s (intangible assets) which play increasingly significant roles insofar as being consistently positioned to achieve the projected and sustainable outcomes!
The reason, steadily rising percentages (80+%) of most transactions’ value, projected sources of revenue, future wealth creation and competitiveness reside in – evolve from IA’s. That’s an objective and replicated economic fact, not business cliché or hyperbole. So, when business transaction management (M&A, due diligence) teams, etc., overlook, or elect to dismiss and relegate relevant IA’s, for whatever reason, i.e., IA’s not routinely reported – integrated in balance sheets or financial statement, it’s tantamount, in my judgment, to ignoring how/where value is created, revenue is generated, and sound strategic planning should originate.
In growing numbers of instances, engaging, identifying, assessing, valuing, and mitigating risks to IA’s most relevant to a transactions’ and/or operations’ projected and presumably lucrative outcome rises to a fiduciary responsibility ala Stone v. Ritter.
For decision makers, the implications are clear; an immediate charge to themselves and their transaction management team is to determine if IA’s are being correctly incorporated – addressed in the various tasks, i.e., due diligence, asset inventory, audit, and valuation, etc. Should decision makers find their transaction teams are doing neither, it’s fair to suggest achieving operational familiarity with business’s IA’s by sector and type of (reason for initiating a) transaction, would be a prudent undertaking and would produce revelatory insights that can be immediately applied to further transaction negotiations, i.e., mitigating risks by ensuring ownership, control, use, and value – competitive advantages of the relevant IA’s will be sustained.
As regular readers of this blog know, there is an abundance of business economic research (NYU’s Stearns School of Business, The Brookings Institute, and key UK universities) that consistently paint convincing and objective portraits about the that if and/or when a merger, acquisition, or other type of transaction ‘goes south’, evidence of impending problems and challenges will surface quite early and will likely stem from one or more intangible assets.
Each parties’ transaction management-oversight team is variously obliged to work collaboratively to reveal, unravel, and assess contributory relevance and value of IA’s. The reason, IA’s routinely and variously embedded and interact on multiple levels within an enterprise. In other words, IA’s (particularly intellectual, relationship, structural, and competitive capital) will very likely apply to multiple business – operational activities, initiatives, and projects. However, IA’s contributory role and value to routine business operations and/or a specific transaction can – will – may fluctuate, sometimes quite rapidly and not always for the better.
A technique I developed to determine and potentially remediate adverse (IA) fluctuations in a timely manner, relative to their dominant contributory role and value in transactions in a timely manner is to ensure an ‘IA transaction impact analysis’ is fully integrated into the (transaction) due diligence process in both pre and post contexts. As information derived from the (transaction impact) analysis is communicated to decision makers, a more definitive portrait of projected outcomes will arise, particularly materialization of risks which can adversely affect one or more of the IA’s in play.
The rationale for incorporating an IA transaction impact analysis for M&A’s and other types of business transactions is to better position decision makers to identify – become aware of risk circumstances – scenarios which, if they materialize, may impair or otherwise adversely affect the transaction via the IA’s in play.
I advocate IA ‘transaction impact analysis’ to focus primarily on what I find to be the three challenging IA’s to sustain – preserve their (projected, assessed) contributory role and value, particularly post-transaction, i.e., intellectual, relationship, and structural capital.
Transaction management team members undertaking – engaging in the ‘impact analysis’ are obliged to possess strong operational familiarity with (IA) risk mitigation and containment, i.e.,
• to recognize the inter-relatedness of IA’s insofar as their contributory role, value, and associated risks.
• how IA’s can become impaired, misappropriated, infringed and vulnerable to risk.
• to assess the probability that particular risks can-will materialize.
• how specific risks can adversely affect projected economics, competitive advantages, and/or synergies of a
• to assess the resiliency and sustainability of key IA’s.
Equally important, this ‘transaction impact analysis’ can reveal a range of risk circumstances/scenarios for decision maker consideration while retaining options to proceed with…
• viable plans for risk mitigation, as well as,
• aspects which re-negotiation may be warranted in light of the now known risk(s) and/or asset impairment(s).
The objective remains the same…to facilitate more secure, profitable, and sustainable transactions going forward, not impede them.
Michael D. Moberly July 27, 2016 ‘A blog about business and intangible assets’!
By now there should be no question among company management teams that the global business transaction environment is increasingly competitive, aggressive, predatorial, and generally, winner-take-all.
A contributing factor to these circumstances is that growing percentages (80+) of most company’s value, sources of revenue, and ‘building blocks’ for wealth creation and competitive advantage reside in – emanate from intangible (non-physical) assets, not tangible (physical) assets. It would make sense then, due diligence – audit activities that dismiss or omit IA’s (intangible assets) from their purview will not provide decision makers with insightful and essential information. Dismissiveness and prejudiced insight are the foundations of transaction grief, frustration, and disappointment in terms of IA performance.
IA’s will always be in play. So it is, business transactions involve the valuation, buying, selling, development, and commercialization of IA’s. It’s prudent then, for parties to business transactions, i.e., IA buyers primarily, recognize the importance of ‘getting out front’ by acknowledging and mitigating risks that will adversely influence how a transaction will be valued, structured, and ultimately executed.
Business persons who remain unconvinced and trivialize the contributory value and role IA’s play in transaction outcomes are encouraged to consider when risks materialize, i.e., acts of misappropriation, infringement, and/or compromise how long will it take the adversary to integrate those assets into their products and/or services? The answer of course is, a matter of days or weeks, seldom months or years. Again, dismissing these realities all-to-frequently manifest as devaluation of reputation and minimal, if any, gains. To do otherwise, decision makers would need to possess prognosticative psychic powers which I am reluctant to attach much, if any, validity.
Exacerbating these increasingly probable risk events is the rarity that transaction initiator’s due diligence plan-strategy will include IA value and competitive advantage monitoring components designed to alert, stop, or stabilize asset hemorrhaging, or recover compromised assets before substantial, and many times irrevocable asset value, loss, and/or reputation risk materialize.
Transactions in which key IA’s have already been compromised (in one form or another) actually constitute a ‘head start’ for the adversary, i.e., parties or party engaged in the illicit acquisition and use of another’s IA’s. While actual IA losses in these circumstances, i.e., value, competitive advantage, reputation, image, goodwill, structural capital, etc., may appear somewhat subjective, it’s pragmatic, in my view, to measure losses – compromises less in (conventional) dollar value contexts, and more in terms of the speed which such adverse acts occur and their irrevocability. So, is a well-constructed, thorough, and IA-specific due diligence warranted, you bet!
Unfortunately, there remain many IA buyers (business transaction, M&A’s, etc., which I characterize as engaging in ‘permissive neglect’ with respect to identifying, monitoring, and safeguarding about-to-be purchased IA’s. That is, they repeatedly and erroneously assume…
• any economic and/or competitive advantage a competitor or adversary may glean from compromised IA’s will be
short-lived and/or outpaced by the rapidity of changes in consumer and market demands which only the
legitimate (asset) originator will be able to deliver.
• IA’s are (readily) renewable resources.
Respecting the narrowness of (profit) margins today, in any business transaction, management teams, legal counsel, c-suites, and boards alike, would be prudent to re-consider both of the above assumptions.
Michael D. Moberly July 26, 2016 ‘A business blog where attention span really matters’!
It is an undisputable economic fact – business reality that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from IA’s (intangible assets)!
It’s prudent to assume then, for every business transaction, initiative, or operation a company and its management team elect to undertake – engage, there will always be IA’s in play. This makes it’s essential for parties to recognize, when contemplating, structuring, and executing a transaction, particularly the due diligence component, that sustaining control, use, and ownership of relevant IA’s, will play increasingly significant roles insofar as valuation, measuring asset performance and outcomes, and defining an exit strategy.
Too, respecting the ease which valuable-competitive IA’s (particularly intellectual, structural, and relationship capital) can be misappropriated, undermined, entangled, lost, or merely walk out the front door, the impulse to consummate a deal in a gratuitously hurried fashion, absent pre and post due diligence focused specifically on IA’s, it becomes probable that some manner-form of IA economic – competitive advantage hemorrhaging will occur. In other words, in today’s aggressive, interwoven, predatorial, and winner-take-all (global) business climate, the IA’s a party believes they are buying – acquiring ownership, may lose various percentages of their contributory value.
Having been actively engaged in safeguarding and mitigating risk to IA’s for many years, my counsel on the issue of IA (specific) due diligence is straightforward. Decision makers responsible for deal structuring have fiduciary responsibilities that include sustaining control, use, ownership, reputation, and monitoring value and materiality of the about-to-be-purchased (acquired) IA’s. The most effective way to mitigate risk to those assets is an effective pre and post due diligence, specific to the relevant IA’s. The key to this due diligence is knowing what IA’s are, how they evolve-develop within a company, and their contributory role and value.
For maximum benefit, the due diligence is best commenced at the point in which the deal/transaction is being contemplated so the locus of the relevant IA’s can be determined and due diligence planned accordingly. Again, it’s worth noting, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from IA’s!
IA hemorrhaging (in deals and transactions) is frequently facilitated when two frequently held attitudes of decision makers converge, i.e.,
• unnecessarily high or unjustified sense of urgency attached to deal execution. (Urgency and speed often
mutate to become a dominant driver of a transaction which in turn can constrict – impede a thorough due
diligence, especially with respect to unraveling the origins, stability, sustainability, value,
and ‘mergability – transferability’ of the IA’s in play.)
• assumption that deals-transactions can be consummated and revenue streams commence before relevant IA’s fall
prey to depreciation or loss.
Mitigating asset vulnerability and probability to value – competitive advantage – reputation hemorrhaging, well in advance of the ink drying on a transaction agreement, is an essential contributor to achieving the desired (successful, profitable, sustainable) outcome.
July 25th, 2016. Published under Intangibles as strategic assets, Managing intangible assets, Organizational resilience and business continuity/conti. No Comments.
Michael D. Moberly July 25, 2016 ‘A business blog where attention span really matters’!
The word ‘multiplier’, as I have observed its application, has been primarily in military – combat contexts as force multipliers. Observation and strike capable drones for example, are force multipliers because of the operational – observational advantages they provide to various military units needing real time intelligence and possibly offensive action.
However, on the business side, as an IA (intangible asset) strategist and risk specialist, I consider a company’s IA’s as representing a distinctive form/context of business multipliers. Throughout the private sector, IA’s, originate in – arise from valuable intellectual, structural, relationship, and competitive capital or, IA’s.
Preferably, business c-suites and their management teams recognize how IA’s translate, convert, or monetize as competitive tactics, processes, and/or commodities to (collectively – collaboratively) ‘multiply’ – contribute to the effectiveness, efficiency, output, revenue, and/or value of a particular operating group, project, or process.
Either way, when IA’s are acknowledged and effectively integrated in a particular initiative, project, or even organization-wide, they can, and frequently do, favorably impact efficiency, effectiveness, and productivity, which translates as value, sources of revenue, and competitiveness, that otherwise may not have been acknowledged. That’s particularly evident in business environments in which there is little or no receptivity to IA’s either in terms of their usefulness, accounting, internal development, external acquisition, or maturation – conversion often due to a misperception that doing so would disrupt the status quo or create new risk.
IA-based multipliers, also refer to attributes or combinations of competitive inputs which again, often manifest most favorably when collectively-collaboratively drawn from existing intellectual, structural, relationship, and competitive capital. A general example where this has occurred is the package delivery sector as most firms recognized the obvious efficiencies which could accrue by integrating – coordinating both GPS (global positioning) and RFID (radio frequency identification) technologies which converted to growth in value, competitive advantage, and revenue generation capability. Standing alone, both GPS and RFID are tangible-physical assets (technologies), but the intellectual, relationship, structural, and competitive capital which together recognized – linked their application to the global package delivery sector should not be dismissed.
In this instance, GPS and RFID deliverables largely manifest as contributory and competitive IA’s that facilitate-enable the package delivery sector to receive, process, sort, and deliver substantially more orders and packages more efficiently compared to competitors that have yet to incorporate those multipliers.
For those operationally familiar with IA’s, i.e., their origins, development, and integration, in most instances, can (and should) also be leveraged – exploited as, among other things, value proposition multipliers, which in turn, confer credibility and rationale to capital outlays to pursue, purchase, and integrate the multipliers, ala GPS and RFID systems, while recognizing the various IA’s such multipliers produce and strengthen.
So, as more operational clarity is brought to IA’s contributory role and value as multipliers, organization c-suites, boards, and management teams will recognize – materialize as…
• expansions of operational prerogatives and boundaries that correlate with IA development, utilization, and
• decision – transaction outcomes becoming more predictable and lucrative whenever, however, and wherever,
IA’s are in play.
• the necessity for OR (organizational resilience) planning to facilitate quicker and more complete economic-
competitive advantage recovery following a significant business disruption or materialization of reputation
Michael D. Moberly July 19, 2016 ‘A blog where attention span really matters’!
At what point do well orchestrated and choreographed vignettes at national political conventions manifest as assurances of voter perceptions?
Both political conventions, Republican this week, Democrat the following week, will, through focused grouped and timely social engineering techniques seek to deliver attractive intangible caricatures of their respective party’s presidential candidate.
It is fascinating to observe another national political convention dominated by technically enhanced-choreographed visuals and adulterated words that collectively, could correctly be characterized as an enormous 4-day long intangible. Whereby, a national political conventions’ primary objective is to affirm candidates’ presumptive (so-called) brand, image, persona, and bona fides for office. And, execute it in such a way to implant appealing perceptions (intangibles) intended to attract undecideds, appeal to opponents’ supporters, and perhaps, bring clarity to candidates’ positions on matters they and their advisors deem are of import to the American people, all-the-while endeavoring to further distinguish themselves from their opponent.
If this sounds eerily like an infinitely looped version of a ‘super bowl’ halftime commercial, you may be right.
In politics, intangibles can be personal achievements, character, and oratory, etc., that translate as understandable and distinguishable assets which candidates and/or PAC’s can exploit at will, ala affixing (licensing) the name ‘Trump’ as an intangible to the very tangible steak, wine, golf resort, hotel, or building.
Michael D. Moberly July 18, 2016 ‘A blog where attention span really matters!”
Among other things, I am most hopeful this piece prompts millennials educated – trained in IP (intellectual property) law to consider having engagements with companies and business persons operating in the conventions of Islamic (Sharia) law is an inevitability, not a distant or worrisome probability.
It’s easy to find law firms with current operational familiarity with G8 IP (intellectual property) laws. On the other hand, it is challenging to find firms’, particularly in the U.S., with IP practices that sense urgency to acquire comparable levels of (in-house) expertise with respect to Islamic (and Sharia) IP law. The rationales are obvious, but, to be sure, there are geo-strategic economic indicators aplenty that suggest acquiring even rudimentary familiarity how Islamic law treats intellectual capital, i.e., ownership – value of products of the mind in B to B (business) contexts. Through my lens, that’s precisely what horizonal thinking-looking IP law practices should consider preparing, especially in light of the universal economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability globally lie in – directly emerge from intangible (IP-related) assets.
This globally universal and irreversible reality suggests there is prudence for law firms to achieve operational familiarity with Islamic IP and its Sharia interpretations. That’s because
IA’s (intangible assets) and their close cousins, IP, are now consistently integral and in play in overwhelmingly large percentages of transactions related to business development, operation, growth, profitability, sustainability especially when tactical, strategic, negotiation, and outcomes are critical.
Fortunately, there are a few academic papers that shed practical light on the fundamentals as well as the intricacies of Sharia influences on Islamic IP law. A particularly useful paper which I frequently reference is authored by Silvia Beltrametti titled ‘The Legality of Intellectual Property Rights Under Islamic Law’.
After studying Beltrametti’s paper, it is clear her work/research on these matters, was not intended to serve as an instrument to sort out the conventions of Islamic, western, and Asian IP (intangible asset) law for an imagined or presumed (future – eventual) convergence. There is little doubt in my judgment, law firms that choose to acquire a rudimentary understanding of Islamic (Sharia) IP law can, in an early adapter mode, set a high bar for (law firm) competitiveness.
I am confident there are few, if any, minds who believe a global convergence of IP law is an inevitable extension of (business) globalization. Of course, understanding the distinctions and practicalities of Islamic IP (Sharia influences and interpretations) law can lead to many useful and necessary insights going forward.
Among other important aspects of Dr. Beltrametti’s work is that Islamic IP rights are essentially, in their early stages of promulgation and/or regulation. Going forward, there are obvious issues that need to be resolved. A prominent issue is whether the current political and cultural-tribal turmoil, war, and rhetoric that envelope a significant percentage of the land mass – countries where Islam dominates can subside. At least long enough whereby relevant principles of Islamic (Sharia) and western WTO (World Trade Organization) IP law can find common ground intellectually, operationally, and legally to achieve a level convergence whereby IP and technology transfer can be accommodated on a routine basis.
To be sure, there are substantial challenges which, no doubt, will require time, trust, and political will to resolve, assuming of course, there will recognition at some point, perhaps born out of mutual economic – trade necessities to…
• ameliorate perceptions of dominance of western IP law.
• encompass Islamic perspectives regarding legal rights to outcomes of intellectual capital.
• incorporate interpretive flexibility and adaptability with respect to Sharia law’s primary sources; the
Qur’an, the Sunna, Ijma and Qiya, which are often applied synonymously with Islamic law.
It is conceivable, not Pollyannaish, to believe all could be respectfully achieved – applied, as it has in other countries – regions, as a reflection of global business – trade – technology transfer realities. And, recognition of the economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, competitiveness, and sustainability today reside in or emerge directly from intangible and IP-based assets.
Silvia Beltrametti, (The Legality of Intellectual Property Rights Under Islamic Law, The Prague Yearbook of Comparative Law 2009. Mach, T. et al. (Eds). Prague, 2010. pp. 55-94).