Archive for 'Sustainability of intangible assets.'
Michael D. Moberly November 30, 2012
The former Speaker of the U.S. House of Representatives’ Thoms P. (Tip) O’Neill, is noteworthy for many things, one of which was his often espoused perspective that ‘all politics is local’. We understand that ‘homey’ perspective because it’s very much ‘in your face’ during each national election cycle. But, I’m confident Speaker O’Neill would agree that while most U.S. politics remains local, it routinely has coinciding national, regional, and international implications as well.
In many respects, the same holds true for many business transactions today, particularly when intangible assets are in play, because their origins are often global, not just local. Drawing further emphasis to this lies the economic fact that 65+% of most company’s value, sources of revenue and ‘building blocks’ for (company) growth, profitability, and sustainability evolve directly from an array of intangible assets.
So, very much akin to political contests, most business transactions are conducted in increasingly competitive and predatorial contexts, with winner-take-all outcomes, but, never-the-less, bear local, regional, national, and certainly international implications.
One significant difference between business transactions and political contests, is that business transactions carry fiduciary responsibilities relative to the stewardship, oversight, and management of intangibles in pre and post transaction contexts because among other things, there is a contractual and legal relationship formed between the parties. Whereas, the rhetoric politicians espouse during campaigns is broadly understood as being just that, unaccountable and non-binding rhetoric, until the next election cycle.
Credibility, confidence, and efficiencies and be added to the work of transaction management teams when intangible assets are in play as it increases the probability that pertinent details, particularly those related to sustaining control, use, ownership and monitoring the value and materiality of the assets (pre and post transaction) are considered. In other words, intangibles must and should be fully addressed in any transaction and the transaction management teams’ on-going reports to their c-suite and board regarding transaction progress.
Too, it’s important to bring clarity to business transactions by distinguishing intellectual properties and intangible assets. Conventional forms of IP are actually a subset of intangible assets. IP enforcement mechanisms are well known, i.e., patents, trademarks, copyrights, etc., but are not necessarily synonymous with…
- sustaining control, use, ownership, or monitoring value, materiality, and sustainability of intangible assets, or
- the ability to extract value (commercialization) benefits from a transaction.
Because intangible assets are almost inevitably in play in business transactions, transaction management teams are now well advised to:
- Be consistently mindful of the economic fact – business reality that 65+% of a transactions’ value and ultimately the sustainable economic benefits lie in intangible assets…
- Treat the control, use, ownership, and value of the intangible assets that are in play as business decisions and fiduciary responsibilities integral to relevant legal processes…
- Recognize intangible assets are vulnerable – at risk especially pre-post transaction stages, so techniques to mitigate risks – threats and sustain control, use, ownership, and monitor the assets value and materiality is essential…
- Recognize that if certain risks – threats materialize (pre – post transaction) they can:
- undermine competitive advantages and erode projected profitability
- cause time consuming and costly distractions that disrupt transaction momentum
- ensnare-entangle the assets in costly legal challenges and/or disputes.
Thus, business transaction management teams are encouraged to integrate the above guidance, particularly when transactions involved intangible assets, which they inevitably do today; it will enable-facilitate stronger, more secure, profitable, and efficient transactions, not impede them!
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Please watch for Mike’s book ‘Intangible Assets: Security Managers Roadmap’ to be published soon!
Michael D. Moberly August 9, 2012
As stated in this blog on numerous occasions since its inception in mid-2008; it’s crucial for business decision makers to recognize that in a vast majority of transactions they will initiate or become engaged, correctly identifying and assessing intangible assets plays an increasingly significant role in achieving a desired and sustainable outcome!
The reason of course, is that steadily rising percentages (65+%) of most transactions’ value resides in intangible assets. So, if a transaction management team overlooks intangible assets, it’s tantamount to excluding how/where value is created, revenue is generated, and strategic planning is executed.
This makes it all-the-more-important, perhaps rising to a fiduciary responsibility, at the decision maker level, to determine if a transaction management team is incorporating intangible assets in their task. If so, are intangible assets being addressed in a due diligence, inventory, auditory, or valuation context? If a transaction management team is doing neither, it’s fair to say it’s time to elevate their operational familiarity and understanding of intangible assets.
As readers know, there is an abundance of research that consistently paints a convincing picture 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.
One technique to remedy, or at least mitigate this, is for decision makers to receive an advance ‘heads up’ from their transaction management team by ensuring an ‘transaction impact analysis’ is part of their task. As the term implies, an asset impact analysis can provide decision makers with a more definitive picture of potential outcomes, should a risk(s) materialize and adversely affect one or more of the key (intangible) assets. This can be achieved…
- collectively, i.e., that reflects the inter-relatedness of intangible assets’ contributory value and associated risks.
- individually, i.e., if a key asset is identified as being impaired in some manner, or is found to be already misappropriated or infringed.
- by assessing the probability that particular risks will materialize to adversely affect the projected economics, competitive advantages, and/or synergies of a transaction with emphasis on mitigation and containment.
- by assessing the resiliency and sustainability of key intangible assets
The rationale for incorporating an transaction impact analysis is for decision makers to anticipate circumstances – scenarios that if a risk has or will materialize to the point it impairs or otherwise adversely affects key (intangible) assets. I tend to advocate asset impact analysis’ be initially focused on what I believe to be the three, most challenging intangible assets to sustain – preserve their contributory value, i.e., intellectual, relationship, and structural capital.
Too, a transaction impact analysis can reveal other cautionary circumstances/scenarios while retaining the option to proceed with a (a.) plan for risk mitigation, or (b.) re-negotiate the deals terms in light of the risk(s) and/or asset impairment(s). The objective essentially remains the same, that is to facilitate a more secure and profitable transaction going forward, not impede it!
Michael D. Moberly June 12, 2012
Achieving successful and sustainable new product and innovation launches is increasingly dependent on management teams recognizing…
- 65+% of most innovation’s value, projected sources of revenue, and potential ‘building blocks’ for growth and expansion evolve directly from the contributory nature and value of intangible assets, i.e., the intertwined combinations and collaborations of specialized and/or proprietary know how and intellectual capital associated with the innovation’s development.
- the absolute importance that must be attached to ensuring the’ innovation genie’ remains in its respective bottle through its respective life – value cycle, i.e., effectively protecting, preserving (sustaining) control, use, ownership, and defensibility of the innovation’s key elements.
Obviously, ‘keeping the innovation genie in its bottle’ is a metaphor, albeit a very important one, whereby innovation management teams are obligated to identify and monitor the role, contribution, and value which the intangible assets make to the innovation’s launch, their exposure to risks and threats, and again, throughout the innovation’s life-value cycle.
In other words, continuous monitoring of key aspects of the innovation genie’s status is critical. A key reason is that there are an ever growing number of sophisticated strategies that economic and competitive advantage adversaries use to extract innovation genie’s from their proverbial bottle. The absence of effective innovation asset management and oversight can and frequently does lead to misappropriation, theft, product counterfeiting and/or piracy.
Any one of those risks-threats materialized, will undermine product launch success and adversely affect the innovation’s value, competitive advantages, and relevance within its market space. The probability that risks-threats to innovation assets will materialize, while dependent on several factors, it would be quite correct to assume they will continue to rise globally.
An essential requisite for any innovation management team who aspires to achieve even partial recovery of their compromised innovation (intangible) assets is having effective asset monitoring practices in place to not just prevent or mitigate any adverse effects from materialized risks, but also to know precisely when a compromise occurred and the precipitating factors.
Too, a thorough intangible asset – competitive advantage assessment should commence immediately following a compromise to determine precisely what aspects of the innovation were actually compromised – acquired and how it will impact the products’ launch and the business as a whole. This assessment and business impact analysis are, of course, essential to achieving any semblance of hope of recovering any of the innovation’s assets, if there is to be any.
These assessments and analysis can aid innovation management teams to be better positioned to deliberate on two important points:
1. the circumstances, priorities, and options relative to trying to (re-) establish ownership and/or (re-) obtain control and use of the, by now, economically and value hemorrhaged assets.
2. strategies to try to stop and/or mitigage further economic -competitive advantage hemorrhaging (of the assets), i.e., devaluation, undermining, infringement, misappropriation, etc.
And, of course, any delays in discovering a compromise and seeking experienced guidance about what actions to take, and when, can complicate and even weaken a company’s (legal) position for achieving even partial recovery from the multiple adversaries that are likely to be involved.
Realistically, returning an innovation asset genie to its rightful owners, i.e., bottle, in a manner in which some, or more preferably, most of its market space attractivity and competitive advantages remain reasonably intact, is not particularly high in today’s increasingly predatorial business environment.
Risk-threats to a companies’ innovation (intangible) assets should not be dismissed lightly or characterized as merely ‘just another risk of doing business’ particularly in today’s increasingly competitive, predatorial, and winner-take-all (global) business transaction – new product launch environment.
Far too many companies though lose, inadvertently relinquish, and/or their innovation assets become entangled or ensnared in costly, time consuming, and momentum stifling legal disputes and challenges, primarily over aspects of ownership, control, use, and value.
There are many different views about what it takes to sustain a successful (new) product – idea launch and its eventual commercialization. Obviously, having a very attractive and commercializable product along with sufficient capital to execute a well-researched business plan and marketing strategy represent a few of the traditional and necessary ingredients.
But, an often overlooked and underestimated ingredient to sustaining a successful business-idea launch is recognizing that unlike patents, trademarks, and/or copyrights, the USPTO does not issue, to the launching company, a certificate that says, these are your valuable innovation (intangible) assets, proprietary know how, intellectual capital, and competitive advantages, protect them!
Instead, the responsibility for recognizing that those assets exist and unraveling how they individually and collectively contribute to an innovation and then converted into value, sources of revenue, is solely the responsibility and discretion of the innovation’s management team and board.
Admittedly, today’s hyper-competitive go fast, go hard, go global business transaction and new product launch environment may not always allow sufficient time for innovation management teams to reflect on, address, and budget for the persistent and asymmetric nature of risks and threats to companies intangible (innovation) assets..
Continuing to hedge (neglect) these assets essential maintenance, i.e., protect, preserve, monitor their use, ownership, and value, can cause risk-threat probabilities to become inevitabilities in which complete or partial (asset) value erosion-dilution is likely to occur, which in turn, creates parameters-boundaries to a companies’ economic-competitive position capabilities and potential.
Michael D. Moberly May 31, 2012
A requisite to conducting superior due diligence for today’s intangible asset dominated and driven businesses, is possessing a depth of experience, knowledge, and investigative skill sets. These are unique differentiators and essential requisites which collectively serve as starting points for achieving the necessary and insightful (due diligence) product that allows management teams to make informed decisions, i.e., proceed, don’t proceed, buy, don’t buy, or invest, don’t invest!
Respecting the economic fact that 65+% of most company’s and transaction’s value, sources of revenue, and foundations for growth and sustainability evolve directly from intangible assets, selecting not just the right, but, the absolute best individual or firm to conduct due diligence is critical.
For starters, a well-designed and executed due diligence plan must fully examine each of the target’s intangible assets. That’s because they will inevitably be in play in any transaction. Effective assessment and integration of intangibles serve increasingly significant role to a transaction’s success. On the other hand, with untold frequency, when intangible assets are not addressed or dismissed during due diligence, transaction failure can be imminent and materialize in a long, slow, and costly fashion, i.e., ‘failure by a thousand cuts’.
To increase the probability that certain projected transaction objectives or outcomes be realized, it’s imperative that the individual or firm contracted to conduct the due diligence can articulate the findings in objective business contexts and certainly not through a one-size-fits-all, snap-shot-in-time guesstimate oriented lens.
Key elements to superior due diligence in today’s intangible asset dominated and driven businesses, starts by possessing the experience, knowledge base, and investigative insight to…
- unravel (identify) how, where, and by whom the key (intangible) assets originated.
- determine and assess how or whether control, use, and ownership of the assets is or can be sustained.
- determine the assets’ contributory value and complimentary role(s) relative to current and future projects and initiatives, i.e., as potential sources of revenue and foundations for (future) growth and sustainability.
- recognize and differentiate the origins, motives, and asymmetric nature of global risks and threats to (intangible) assets that have become embedded in all transactions.
- understand how materialized risks can adversely affect asset value, a company’s competitive advantages, reputation, brand, and/or stifle project momentum and best practices to prevent or mitigate those risks.
- ensure asset control, use, ownership, and value are monitored for sustainability, especially in post-business transaction contexts.
- build a risk intelligent culture that renders a company more aware and resilient to significant and catastrophic risks, natural disasters, and/or business interruptions.
Anything less can produce an array of unwelcome challenges or worse, spell almost certain doom to the projected and desired outcomes of a transaction!
Michael D. Moberly May 29, 2012
Are company’s intangible assets, as producers (sources) of value, revenue, competitive advantages, and ‘building blocks’ for growth, sustainable? Being an intangible asset strategist and advocate, I believe this is an important question, particularly now, as we’re in the midst of the knowledge (intangible) asset based global economy and the first time in corporate governance history in which over the past decade, conservatively speaking, 65+% of most company’s value and sources of revenue evolve directly from intangible (non-physical) assets, rather than tangible (physical) assets.
Based on my experience in the intangibles arena over the past 20+ years, I am inclined to say the most correct answer to the question is, a very big ‘it depends’! As in most things intangible there are various points to consider, among them being…
- the contributory value and sources of revenue intangible asset can deliver are seldom indeterminate, due in part to the fact that protections and risk mitigation afforded to intangible assets (aside from intellectual property, i.e., patents, trademarks, copyrights, and under very strict circumstances, trade secrets where enforcement assistance is available through federal and state authorities) are solely dependent on the holders’ own initiative.
- today’s global business (transaction) environment is extraordinarily competitive, very predatorial, and laden with persistent, asymmetric, and sophisticated risks and threats wherein global adversary’s possess capabilities to execute strategies to misappropriate, diminish, and/or undermine an assets’ value and competitive advantage almost instantaneously.
In their fine Deloitte report titled, ’The Economic Role of Intellectual Property’, authors’ Noonan Haque and Greg Smith identify and describe the ’key issues’ knowledge-based company’s confront:
- rapid R&D breakthroughs
- diffusion of knowledge, information, and data, and
- increasingly abbreviated asset life (value, functionality) cycles.
I have found the following very useful exercises for management teams, c-suites, and boards, i.e., identify, design, and assess…
- strategies to exploit the assets that best fits the company, industry sector, culture, innovativeness, resources, and strategic business plan.
- strategies for asset management, stewardship, oversight, contributory value, and risk monitoring to strengthen and lengthen the assets life, value, and functionality cycles.
- strategies to ensure the production, acquisition, utilization, and exploitation of the company’s (intangible, IP) assets are aligned with the company’s core business mission.
Those engaged in business (IP, intangible asset) management but, remain unfamiliar with the above exercises or dismiss their relevance are certainly, in my view, leaving substantial potential value, sources of revenue, and growth opportunities ‘on the proverbial table’ and otherwise doing a significant disservice to their company and/or client!
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