Business IP and Intangible Asset Blog, Michael D. Moberly

Intangible Assets The Rapid Maturation Of Ideas!

April 26th, 2013. Published under Intangible asset focused company culture., Intangible Asset Value, Intangibles as strategic assets. No Comments.

Michael D. Moberly     April 26, 2013    ‘A blog where attention span matters’.

As noted repeatedly in this blog and by numerous intangible asset strategist colleagues, there is no other time in business governance history when, globally speaking, larger percentages, i.e., 80+%, of most company’s value, sources of revenue, and ‘building blocks’ for growth and profitability are more rooted in – evolve directly from intangible assets, i.e., intellectual property, structural, relationship, intellectual/human, and strategic capital, proprietary know how, brand, and reputation, etc.

So, today it has become an indisputable economic fact – global business reality that the primary sources of most company’s value and revenue have shifted from tangible (physical) assets, e.g., property, equipment, inventory, etc., to intangible (non-physical) assets.  In other words, the global business landscape is being less shaped and influenced by the development, production, and/or flow of physical (tangible) goods and services than it is by the flow of ideas, information, and other forms of intangible assets.

One consequence is that in today’s tightly wound and increasingly compressed transnational R&D environments, product cycles, and business transactions,  ideas can mature very rapidly as ‘value add’ and revenue producing competitive advantages or intangible assets.  But, if those assets are ineffectively managed, i.e., protected, preserved, and monitored, etc., they can easily meld into open (public domain) sources or otherwise be vulnerable to myriad forms of compromise.  The reality then becomes, once such assets enter, inadvertently or otherwise, the public – global domain, conventional intellectual property (law) protections carry little, if any deterrent affects and becomes akin to ‘the genie getting out of its bottle prematurely’.  Trying to get ’the intangible asset genies’ back into their managerial and legal cocoon becomes a frustrating, time consuming, legally challenging, and costly experience.  Should such risks materialize, the rightful (intangible) asset holder (developer, owner) should be prepared to expect the assets to be, at best, only partially recoverable, and, at worse, irrevocably lost.

The long held American adage ‘talk is cheap’ no longer has relevance, at least in my view, in the current go fast, go hard, go global business transaction environment.  Unfortunately though, this adage remains somewhat indicative of a broader attitude which a significant percentage of business decision makers still hold regarding the value of information-based (intangible) assets.  That is, information is frequently considered to be valuable only if, or when, some specific action can be taken as a result.  In this context, it’s important to recognize that mere ‘ideas’ can mature very rapidly today, and, ‘in the right hands’ can be quickly converted to ‘contributory value and sources of revenue for a business.

Somewhat unfortunately, the consistently expanding and seemingly insatiable (nanosecond) demand for information and communication connectivity represents a growing influence about how large percentages of business decision makers conceive and use information-based assets, that is, in contexts that are primarily oriented toward short-term application versus a long term and/or strategic use and contributory value.

One result, often falling under business decision makers’ radar, influenced in part by the presumed speed in which we prefer ‘things to happen’, is that information-based assets, i.e., ideas and intellectual capital have become more than mere tools to manage other assets, they are now stand alone commodities with varying cycles of contributory value and relevance to the owners.  (Branscombe, Anne Wells. Who Owns Information? From Privacy to Public Access. Basic Books 1994)

The real ‘back story’ in my view, is that (ideas) intangible assets can advance an organization or company economically, competitively, and strategically only so long as the assets’ control, use, ownership, and contributory value is monitored and preserved.  In other words, there is effective stewardship, oversight, and management (of the assets) in place.  Similarly, it’s important to recognize that the contributory value of intangible assets and intellectual property seldom remain constant (static), rather it can change or fluctuate, sometimes quite rapidly for various reasons which is the rationale that value preservation, asset monitoring, and risk mitigation measure be sufficiently flexible to reflect the assets’ status, value cycle(s), defensibility, and sustainability.

Again, when risks to information-based intangible assets materialize, they can impact a company in many ways, e.g.,

• undermine competitive advantages, strategic planning, new business/product rollouts, etc.
• erode anticipated (profit) margins
• create time consuming distractions that disrupt and/or impede a projects’ momentum,
• entangle assets in costly and lengthy legal disputes
• cause investors to change their exit strategies and/or deter future rounds of investment

A good thing is, more management teams are recognizing the importance, through blogs like this and those of my colleagues, of taking steps to safeguard and preserve the standalone and contributory value and competitive advantages their intangible assets produce, the more profitable and sustainable their decisions and transactions will be.  A downside is, there remain percentages of management teams who sometimes…

• are too quick, in my view, to adopt a lawyer-law centric vs. a asset management, stewardship, and oversight approach for enforcing intangible asset rights, in part because they may be unfamiliar with their options, the broad nature of asset risks, and business – strategic needs, or
• mistakenly assume computer/IT security is synonymous with intangible asset preservation, that is to say, all (valuable) intangible assets exist in electronic ‘bits and bytes’ formats and can be adequately protected by conventional firewalls and passwords.
• mistakenly assume intangible asset safeguards will impede the flow and accessibility of intangible (information) assets necessary for business operation minimums.
• mistakenly place too much trust and faith in all employees, business partners, and others who have knowledge and/or access to their company’s intangible assets or ‘crown operating – profit making jewels’.

It remains essential then, that decision makers have a clear understanding where the value of their firm, which they have fiduciary responsibilities, lie and the form and context which that value manifests itself, i.e., intangible assets, competitive advantages, intellectual capital, etc., and ultimately perhaps, as intellectual property.

Though frequently characterized as being cliché, the emergence of the still relatively new global business economy dominated by intangible, rather than tangible assets, is prompting increasing numbers of business decision makers and boards to rethink the way they make decisions, manage, and value their companies and the intangible assets they produce and/or acquire.

What’s exactly ‘new’ about the new (knowledge – intangible asset dominated global) economies remains somewhat debatable, say’s Dr. Baruch Lev of New York University. But, one important feature about the 21^st century is crystal clear, he confirms, intangible assets are playing an increasingly important and integral role in most company’s value and wealth creation potential.

Lev goes on to say that economic activity today consists increasingly of exchanges of ideas, information, expertise, and know how, which are, of course, intangible assets.  Thus, company profitability is more often driven by its collective competencies and capabilities (again, intangible assets) than by control over or use of physical resources or tangible assets.

Each blog post is researched and written by me with the genuine intent it serves 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  unsubstantiated commentary or information piggy-backed to other sources.  Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion 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 m.moberly@kpstrat.com

Company Culture: How Definable Is It?

June 28th, 2012. Published under Company culture and reputation., Intangible asset focused company culture.. 1 Comment.

 Michael D. Moberly   June 28, 2012

“Culture eats strategy for breakfast,” is a phrase widely attributed to Peter Drucker, which I understand was framed and hung on the wall of FMC’s so-called ‘war room’.

The phrase itself, was elevated in prominence in 2006 by Mark Fields, Ford Motor Company’s President of the America’s who has been credited with initiating a culture change at Ford.   

A dominant task Field engaged in at Ford was to replace a culture (work environment) that had come to be routinely characterized with terms such as bitterness, distrust, fear, and betrayal, etc., to a culture that came to be characterized with quite different terms such as creativity, innovation, and (employee) sense of responsibility.

Readers familiar with the American auto industry however, surely understand that the culture reversal that took place at Ford, under Field’s tutelage, or any U.S.-based automaker for that matter, is often fragile and linked to collective bargaining agreements. 

There is certainly no intent here to minimize Mr. Fields efforts as I’m confident his presence and advocacy served as both impetus and rallying point to achieve the culture change objective.  But perhaps it’s prudent to recognize that large scale (enterprise wide) culture changes are seldom the product of a single individual’s efforts, i.e.,

no matter how far reaching one’s vision or how brilliant one’s strategy, neither can be realized if they haven’t evolved from and are supported by a receptive and like-minded company culture.!

Realistically, Ford, like other U.S. carmakers at the time were approaching their own respective ‘fiscal cliffs’ which no doubt served to bring about a greater than usual sense of receptivity and urgency to accept change.  Recognizing that if substantial (cultural) change was not forthcoming and in fairly rapid order, those fiscal cliffs would be more than metaphors, they would, in many experts’ view, materialize as irreversible catastrophes to the U.S. auto industry as a whole.

Company culture defined…Like a former U.S. Supreme Court Justice remarked regarding a landmark pornography decision, which I now paraphrase, ‘I don’t know precisely how to define it, but I know it when I see it’.   That’s quite similar to the way that company culture is often characterized, e.g., as somewhat of an invisible (intangible) temperament and/or attitude that links companies, employees, and stakeholders together.

More importantly though I believe, is company culture being characterized as an ‘internal version of a company brand’ because it encompasses a company’s mission, vision, and values.

Grant McCracken is one, among several prominent ‘company culture advocates’ today who clearly understands how an effective (company) culture can impact a business, e.g., “culture is a company’s last mile” as McCracken is often quoted.  McCracken specializes, he says, in the intersection of commerce and culture where company culture sits at the intersection of anthropology and economics.

All in all, McCracken paints a very seductive picture about company cultures and makes a compelling case that culture may well be marketing’s next silver bullet.

But, myself, along with many of my intangible asset advocate colleagues, have long understood, presumably like McCracken, that a well designed, honed, and monitored (company) culture can produce – deliver what I refer to as ‘contributory value’ to many different aspects, venues, and transactions a company routinely engages.  In other words, culture can become an extraordinarily valuable (intangible) asset that can benefit a company in many ways, particularly in the marketplace.

We recognize that any initiative, sometimes regardless of the motivation, to develop – instill a sustainable (company) culture change will inevitably incur various challenges and hurdles, not the least of which are positively re-directing long embedded beliefs and back-channel habits

some of which will be of such significance and duration that the probability for failure will be substantially elevated. 

This is especially significant when company leadership lacks, for starters…

• a clear understanding of their company’s intangible assets, of which company culture is one
• a strategic appreciation for the implications that a culture change will, in most instances, bring to a business, i.e., employees, management teams, c-suites, boards, stakeholders, and a company’s overall perception in its market space, and
• tested strategies at the ready to leverage, exploit, and/or market a culture change once it has been achieved, to benefit a company.
• the ability to promote its own culture internally will likely experience a hard time promoting and defining its brand externally

Another unfortunate reality is that some of the skill sets expected of management teams, c-suites, and boards today related to company success, sustainability and profitability, are not necessarily skills that coincide with initiating, valuing, managing, and monitoring changes in company culture .

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects of interest.  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry or comment at  314-440-3593 or m.moberly@kpstrat.com

SHRM Survey Confirms: Company Culture and Culture Management Are Valuable Intangible Assets!

June 19th, 2012. Published under Company culture and reputation., Intangible asset focused company culture.. No Comments.

Michael D. Moberly   June 19, 2012

Society for Human Resource Management Survey…

Company culture and its management are obviously on the minds of HR managers as SHRM commissioned a survey in early 2012 that asked 770 HR leaders to identify significant workforce management and staffing challenges.  The challenges the survey respondents identified were:

• employee engagement
• employee retention
• effective performance management
• employee recruitment, and
• company culture management

To the point of this post, a full ninety percent of the respondents stated that (company) culture management is either important or very important!  That finding is particularly instructive insofar as it should prompt management teams to further recognize that devoting time, energy, and resources to developing and sustaining a positive company culture will deliver impressive and measurable returns.

Most importantly in my view, it can now be stated, with considerable authority, that a well managed 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 elevate a company’s overall performance.

Supplementing this view of course, is the economic fact that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability today evolve directly from intangible assets one of which is a positive and 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.

What is a company culture…?

Based on the fine work of Dr. Edgar Schein, a company culture consists of progressive stages, and will emerge and become observable…

• as employees (collectively) recognize and begin to act on a shared system of values, norms, beliefs, and attitudes that defines and clarifies what is important.
• as employee’s at all levels recognize they learn as they’re solving 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 face, which, in turn, leads to efficiencies, competitive advantages, and reputational value, etc.  (Adapted by Michael D. Moberly from the work of Dr. Edgar Shein)

For most companies, the initial step in developing a 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, preferably as consistent and positive behaviors 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 that it cannot be replicated or sustained through a market change or significant economic downturn as we’re experiencing 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 dashboards remain largely focused on tangible-physical assets vs. intangible (non-physical) assets 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 relative to enhancing and measuring employee engagement, retention, performance, and recruitment.

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 structural and relationship capital to consistently deliver measurable performance and returns.

But, building a principled company culture is not something which evolves exclusively 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). Instead, a well-grounded and principled company culture provides permanence, depth, and confidence among employees and their abilities.

A risk intelligent company culture…

My professional preference would be that a company’s culture would also be a risk intelligent culture.  An important step toward developing a ’risk intelligent company culture’ is recognizing that risk is not solely an external phenomena, i.e., all risk does not emanate from outside a company.

An equally important step in developing a risk intelligent (company) culture is rooted in recognizing that company value can be favorably affected by integrating aspects of risk management with human resource management, e.g., a significant percentage of (company) risk evolves from various employee behaviors and actions, including management teams and boards.

In other words, according to Deloitte’s, The People Side Of Risk Intelligence: Aligning Talent And Risk Management, risk touches virtually every aspect of employee (HR) management, and employees touch virtually every aspect of risk management.

A risk intelligent company, Deloitte’s report points out, executes at the point in which there is convergence of…

• risk governance – how a company treats (identifies, assesses) risk and assumes responsibility for risk oversight and strategic decision making.
• risk infrastructure management - how a company assumes responsibility for and understands how to design, implement, oversee, and sustain an effective risk management program.
• risk ownership – how and when employees assume some degree of ownership (responsibility) for identifying, assessing, monitoring, reporting, and mitigating risk.

In light of the economic fact that U.S. businesses lose an estimated 7% of their annual revenue to various forms of occupational fraud, a risk intelligent culture (workforce) can be a strong advantage.

In a risk intelligent company (culture), employees, management teams, c-suites, and boards collectively assume an obligation to…

• understand the adverse consequences of unattended risks
• how existing risk management policies are being interpreted and practiced internally by employees

Too, when management teams, boards, and employees collectively assume responsibility for cultivating company-wide awareness (culture) about risks is a prelude to creating a risk intelligent company culture.

Lastly, and perhaps most importantly, it’s important to recognize two realities insofar as developing a ‘risk intelligent company culture’…

• any change in (company) culture generally precedes changes in employee behavior
• cultural and behavioral changes are less a product of formal risk policies, controls, and pronouncements, than they are the result of effective (employee) incentives and rewards.

As pointed out by former Harvard researchers Matthew Bunn and Anthony Wier, a ‘good company culture is comprised of 20% equipment and 80% people’.  Certainly, no argument here!

(The inspiration for developing this post is attributed to a fine piece authored by Jennifer King at Software Advice) http://blog.softwareadvice.com/articles/hr/culture-chief-1061212/

Risk Intelligent Company Culture: A Valuable Intangible Asset!

April 26th, 2012. Published under Intangible asset focused company culture., Intangibles as strategic assets, Value Propositions. No Comments.

Michael D. Moberly   April 26, 2012

This post is not about regurgitating the requisites for achieving a risk intelligent company, rather, its how to develop a sustainable risk intelligent ‘company culture’!

Unconventional approaches to risk management make sense today, says Rick Funston (Principal, Deloitte).  Risk intelligence, he says, is the ability to effectively distinguish between two types of risks, i.e., the risks that must be…

• avoided (for a company) to survive, by preventing significant losses or harm, and
• taken (in order for a company) to thrive by gaining competitive advantage.

Risk intelligence, Stephen Wagner and Rick Funston state in their appropriately titled book ‘Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise’ embodies the ability to translate the above distinctions into better and more practical business decision making and actions to improve company’s:

• resilience to adverse (risk) events/acts
• agility to recognize and take advantage of business opportunities in which some level of risk is present.

An initial and important step toward developing a ’risk intelligent company culture’ is recognizing that risk is not solely or exclusively an external phenomena, i.e., all risk does not originate outside a company.

According to Deloitte’s, The People Side Of Risk Intelligence: Aligning Talent And Risk Management, risk virtually touches every aspect of employee (HR) management, and therefore, employees affect virtually every aspect of risk management. That appears to be the makings of a fairly substantial value proposition basis for ‘kick starting’ a intelligent company culture.

So, a second, and equally important step toward achieving a risk intelligent company culture is recognizing that a company’s value can be favorably affected by integrating – merging risk management and human resource management. The rationale for doing this, in my judgment, is embedded in the reality that a significant percentage of (company) risks actually evolve from – are inherent to employee behaviors, attitudes, and actions, which includes, Wagner and Funston add, management teams and boards.

Effective risk management, the Deloitte report suggests, and I might add, a risk intelligent company culture, commences at the point in which the following converge, i.e.,

Risk Governance – how a company (a.) treats risk, (b.) whether and/or how it assumes responsibility for risk oversight, and (c.)  how it incorporates (factors) risk in its strategic decisions and planning…

Risk Infrastructure Management – whether a company’s management team understands how to design, implement, monitor, and sustain an effective risk management program relative to the products or services produced and the type/nature, and locations of its business transactions…

Risk Ownership – whether a company’s employees and management team understands what their risk identification and mitigation responsibilities actually are, i.e., whether they internalize some) responsibility and/or assume some level of ownership for identifying, measuring, monitoring, and reporting risk…

In light of the economic fact that U.S. businesses lose an estimated 7% of their annual revenue to various forms of occupational fraud, notwithstanding losses attributed to intangible (IP) asset misappropriation, infringement, product counterfeiting, etc., a well-managed risk intelligent workforce can be a valuable (intangible) asset for any company.

A good starting point, say Wagner and Funston is to critically assess a company’s ‘unwritten rules’ relative to…

• what (employee) behaviors are actually being rewarded by applying these ‘unwritten rules’?
• do all employees, including management team and board, understand the company’s risk management priorities, objectives, and the strategic reasons behind them?
• are company – employee incentives aligned with the company’s risk management priorities?

In a risk intelligent company, management teams and boards assume an obligation to understand what the proverbial ‘unwritten company rules’, i.e., what they are and how they’re being interpreted-executed by employees.  One does not have to look far to see the adverse consequences – effects on companies when there is a strong (under-the-radar) operational reliance on ’unwritten rules’ as to how things actually get done and how, or if, the risks associated with those ‘unwritten rules’ are being managed?  So, analyzing the responses to the above questions insofar as how they may influence and/or perpetuate a company’s propensity to avoid or engage in risk taking is important.

Obviously then, becoming more intelligent (and objective) about the persistent, embedded, and asymmetric risks most companies routinely incur in a global-based economy and business transaction environment, is an important prelude to creating a risk intelligent company culture.

Management teams and boards, in my view, must assume a responsibility for elevating and cultivating a company-wide awareness of risk that fosters risk intelligent behaviors at all levels, which begins by:

1. adopting a common definition of risk that’s in accordance with national standards and best practices as well as being company specific.

2. clearly defining the roles, responsibilities, and authority (for managing and monitoring risk) with appropriate levels of transparency.

Lastly, it’s essential to recognize, insofar as developing a ‘risk intelligent company culture’ that (a.) a change in (company) culture generally follows a (employee) behavior change, and (b.) culture and behavior changes are less a product of formal risk policies, controls, and pronouncements, than they are the result of effective incentives and rewards.

This post was inspired by and adapted by Michael D. Moberly from a paper produced by Deloitte titled ‘The People Side Of Risk Intelligence: Aligning Talent And Risk Management’ and a fine book authored by Stephen Wagner and Rick Funston, appropriately titled ‘Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise’.

Company Cultures’ Focused On Intangible Assets Are More Efficient, Effective, and Profitable!

January 13th, 2012. Published under Company culture and reputation., Goodwill, Intangible asset focused company culture.. No Comments.

Michael D. Moberly   January 13, 2012

In today’s globally competitive and predatorial business (transaction) environment, company management teams and boards are consistently seeking ways to be innovative and create (additional) value, revenue, and competitive advantages.  One way this can be achieved is through the ‘executable inspiration’ that evolves from building a company culture that effectively and consistently identifies, utilizes, and exploits its intangible assets.

But, let’s make an important point first.  Intangibles are not the elusive or esoteric constructs as they’re frequently characterized merely because they lack a conventional sense of physicality or don’t appear on company balance sheets or financial statements other than when they’re lumped together as goodwill.

So, to achieve this almost surely profitable state, i.e., a company culture focused on intangibles, and to do so consistently, requires the internalization of:

• what intangible assets are
• the various forms and contexts in which they exist
• how they’re produced, and
• recognize (measure) they’re  contributory relevance and value to a company and/or business unit, i.e., underpin sources of revenue, competitive advantages, and growth opportunities.

With respect to the development of a culture, it will emerge and become observable as employees (collectively) recognize and begin to act on…

• a shared system of values
• that brings clarity to (defines) what is important,  and
• contains certain norms, values, beliefs and attitudes that manifest as acceptable means to solve problems
• which, in turn, leads to efficiencies, competitive advantages, and reputational value, etc., on behalf of a company and/or business unit.  (Adapted by Michael D. Moberly from the fine work of Dr. Edgar Shein)

It’s worthy to note also that building a company culture, particularly one focused on intangible assets is not, in my view, something which evolves exclusively in a top-down fashion, nor is it a characteristic owned and executed solely by a management team or c-suite. 

Ultimately, as employees (companies) acquire confidence and expertise in identifying intangible assets, they will be assessed for, among other attributes, their contributory value to company processes or procedures and if marketable commonalities or combinations exist that can be bundled and used/exploited to advance a company process, product, or service.

A well-grounded (embedded) intangible asset focused company culture provides permanence, depth, and confidence to employees relative to their abilityt to:

• understand and distinguish intangibles, recognize their importance, and how – where they exist and/or are in play in most all business processes and transactions
• tweak and/or nuance intangibles to benefit themselves, their position, and the company, e.g., building, strengthening, and sustaining competitive advantages and customer and supplier relationships, etc.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Intangible Asset Focused Company Culture…

December 20th, 2011. Published under Board oversight, CFO's, Intangible asset focused company culture.. No Comments.

Michael D. Moberly    December 20, 2011

 It’s good practice now for company management teams and boards to make a commitment to laying the necessary foundation for the development of a company culture that consistently extracts value and competitive advantages from the intangible assets it produces or acquires.

The single biggest business reason for doing this is that rising percentages (65+%) of most company’s value, sources of revenue, and ‘building blocks’ for growth lie in  – are directly linked to intangible assets!

Irrespective of the broad global acceptance of this business – economic reality, there remains resistance from some management teams and boards about the necessity to acquire the necessary skills and undertake the fiduciary responsibilities to profitably exploit and effectively safeguard the intangible assets.

Anecdotally, five reasons often cited by management teams and board for expressing skepticism or being dismissive about intangibles assets include…

• a genuine lack of familiarity what intangible assets really are
• their lack of a conventional sense of physicality or ‘tangibleness’ and thus are portrayed as being difficult to quantify and/or measure insofar as determining their contributory value and performance
• they don’t appear separately on balance sheets or financial statements, instead are lumped together into indistinguishable bundles of goodwill
• they tend to fall outside of Peter Druckers’ time honored ‘mba’ precept, i.e., if they can’t be measured, they can’t be managed
• they require outside-the-mainstream strategies to extract value, drive/sustain competitive advantages,  monetize, or used as collateral.

During most client engagements, one of my objectives is to devote a portion of time to identifying the principles and benefits of building a resilient and profitable intangible asset focused company culture.

My interest in building – advancing company cultures, particularly one devoted to intangible assets evolves from the superior work done by Dr. Edgar Schein in building productive and sustaining company cultures.  Dr. Schein points out that a company culture begins with ‘shared assumptions that employee’s learn while solving (internal) problems’. 

Standing alone, Dr. Schein’s perspective may appear, for the yet to be convinced, more suitable for a university lecture hall than the increasingly aggressive and competitive real world of globally operating companies and business transactions.  But, when management teams factor 65+% of (their) company’s value and sources of revenue evolve from intangibles, even the most reticent should correctly conclude that devoting even the most minimal time and resources to building an intangible asset conscious company culture would be an exercise that will deliver favorable and long lasting outcomes.

But, how would management teams know there was a payoff to a fully functioning (intangible asset) company culture?  Again, referring to Dr. Schein’s work it would become evident at the point in  makes perfectly prudent business sense to assume that a significant percentage of the challenges and problems companies face relative to stagnation are variously related to their reluctance or inability to effectively identify, assess, and extract value and competitive advantages from their intangible assets.

So, what’s a bottom line to building a company (enterprise wide) culture that recognizes, produces, measures and sustains control, use, ownership, and monitors the value and materiality of its intangible assets?  It’s a shared and well-linked set of characteristics, beliefs, assumptions, and behaviors that intangible assets…

• are real, credible, and convertible sources of value, potential revenue, and ‘building blocks’ for growth and sustainability
• should guide – underlie business decisions, transactions, and strategic planning!

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Recession Is Perfect Time To Exploit Intangible Assets

December 14th, 2011. Published under Intangible asset focused company culture., Intangible Asset Value, Intangibles as strategic assets. No Comments.

Michael D. Moberly     December 14, 2011

This lingering-sustaining business financial dilemma should, in my view, prompt management teams to initiate more discussions and strategies about utilizing-leveraging the intangible assets their company possesses and produces.  The reason; it’s time for all management teams to recognize (embrace) the economic fact – business reality that increasing percentages, as much as 65+%, of the value, sources of revenue, and ‘building blocks’ for most company’s growth today lie in – directly evolve from intangible assets, not physical (tangible) assets!

To prompt such discussions it’s necessary to:

• not be dismissive of intangibles
• recognize that intangible assets are not the sole province of large, multi-national Fortune 500 types of companies nor high-tech firms with intensive R&D programs and substantial portfolios of intellectual property
• recognize that accounting/financial statements that simply ’lump’ all intangibles into the bucket of goodwill, do not tell the whole and often times positive story about a company
• find a new accountant if the one you are utilizing is reluctant to ‘step outside the conventional cpa box’ to discuss intangibles.

Intangible assets are integral to ‘main street’ companies, that is, the literally thousands of SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) that are proportionately rich in valuable and potential revenue bearing intangibles.

Unfortunately, while intangibles play a very significant role – contribution to both SME’s and SMM’s, just like they do in larger corporations.  But, in the former, they’re more likely to go un-acknowledged, under-valued and under-appreciated and seldom do they rise to c-suite and boardroom agendas where practices can be initiated to reap the benefits, among them being, creating value and advancing competitive advantages for a company.  

Its time that intangibles become part of today’s (financial exigency) discussions and demonstrate how they can be deployed – leveraged to become part of the solution!  In that regard, there are many reasons why the financial exigency (50,000 foot) dialogue is not being more attentive to intangible assets. 

First, intangible assets have not yet become fully embedded in the lexicon of c-suite’s, board room’s, D&O’s, and business unit management.  Fully recognizing the range of intangible assets a company has developed or acquired and their contributions to value, market share, and competitive advantages are sometimes considered a little (too) esoteric and out of mainstream mba and accounting precepts.

Second, it seems to me, we’ve become overly focused on the 50,000 perspective with far too little serious and practical attention being paid to company’s internals, i.e., intangibles.   

That’s because, in my judgment, a large segment of the myriad of proposed (fiscal, monetary) initiatives being put forth about ‘how do we extract ourselves from this lingering recession’ overlook my reality that the markets are, in many respects, super-sized intangible assets. 

That is, ‘the markets’ have been, by far, the dominant underlying theme of the financial crisis dialogue.  But, the markets exist, evolve, flourish, or diminish largely on the basis of perceptions and analysis of image, goodwill, reputation, and confidence, all of which are intangible assets!

Third, I have yet to hear any of the ‘how do we get out of this recession’ economic prognosticators mention intangibles as being a viable factor in the solution chain, especially for those so-called ‘main street SME’s and SMM’s that have virtually no expectation of receiving a ‘personalized’ bailout or temporary reprieve from their very real financial woes.   

My view is that ‘beltway’ policy advisors and decision makers pay far too much attention to devising relatively shallow, dumbed-down and focus grouped phrases and sound bites which may temporarily placate some, but soon draw the ire of ‘joe the plumbers’ and elevate the concerns of baby boomers and particularly their parents, aunts, and uncles who remember, all too well, the Great Depression and consider making a ‘run on their bank’ and putting their hard-earned savings (drawing 1% or less interest) under their mattress, as constituting very rational decision.

Perhaps, instead, we should try injecting some useful and relevant dialogue about identifying, utilizing and leveraging the oft overlooked intangible assets which can:

• deliver more probable outcomes
• contribute to mitigating structural barriers to intangible asset monetization and asset-backed lending to cite just a few.