Michael D. Moberly   February 11, 2010

Today, for many intangible asset specialists, its puzzling, even occasionally frustrating, but more importantly, unfortunate anytime we hear company management teams, leadership, c-suites, and/or boards express-convey a sense of dismissiveness about intangible assets, or a reluctance to utilize intangible assets in general, and their company’s intangible assets in particular. 

Its become a universally accepted economic/accounting fact and business reality, in the knowledge-based (global) economy, not merely theoretical ‘academic speak’ or self-serving marketing jargon, that 65+% of most company’s value, sources of revenue, building blocks for future wealth creation and sustainability today, lie in - are directly related to intangible assets and intellectual property.  

Given this, It seems appropriate then to respectfully ask, are management teams listening?, when far too few of them are benefitting from those realities.

Intangible asset specialists are professionally obligated to respectfully and aggressively engage business leadership globally, to bring relevance and clarity for the full and efficient utilization of a company’s intangible assets.  One requisite to helping companies and management teams achieve this state of awareness, is by incorporating more relevant, timely, and respectfully simplified narratives designed to more effectively, but quickly, articulate three key-essential things, (1.) the practical existance of intangible assets, (2.) their contributory value to a company, and (3.) how to identify, utilize and exploit them to benefit a company. 

An obvious, and perhaps one of the biggest challenge for intangible asset specialists however, aside from issues related to intangible asset monetization, is articulating that intangible assets are just that, they’re intangible.  That is, they lack physicality.  But, their lack of physicality does not mean their performance and value cannot be objectively measured and benchmarked. 

So even though most management teams readily understand and recognize intangible assets’ existence, and appreciate their singular/individual contributions and importance to their company, e.g., brand, reputation, image, goodwill, customer/client (external) relationships, and internal know/intellectual capital, etc., there still remains a sense of reluctance and/or desire among some management teams to advance to the next level of intangible asset utilization and exploitation.

That next level would entail-encompass, in my judgment, four key elements, i.e., taking a more active role in…

1. engaging best practice fiduciary responsibilities for the management, stewardship, and oversight of the intangibles, 

2. identifying, unraveling, positioning, leveraging, and efficiently utilizing a company’s intangibles,  

3.  recognizing how to effectively exploit intangibles to generate revenue, enhance company value, create building blocks for future wealth creation and company sustainability, and 

4.  put in place measures to ensure control, use, and ownership of the assets is indeterminately sustainable, and their value and materiality (to the company) is consistently monitored.

Michael D. Moberly   February 2, 2010

In 2010 it would seem to be a management team, board, and c-suite ’no brainer’ that enterprise risk management initiatives should universally encompass, without much argument or opposition, a company’s intangible and intellectual property assets!  

The full inclusion of intangible assets in ERM initiatives is epecially relevant today in light of the global economic fact (business reality) that steadily rising percentages (65+%) of most company’s value, sources of revenue, building blocks for future wealth creation and sustainability lie in - are directly related to the (a.) production, (b.) acquisition, and (c.) effective utilization of (a company’s) intangible assets and intellectual property. 

Taking this perspective one, and perhaps obvious, step further, it would also seem prudent, when the risks to those valuable, yet frequently fragile, assets are experiencing elevated vulnerability (probability) to loss, infringement, misappropriation, value erosion-dilution, and/or competitive advantage undermining, as they are today, that designing a position to oversee a company’s intangible asset risks would be an equally prudent consideration that would compliment management teams’ mounting fiduciary responsibilities for consistent and effective stewardship, oversight, and management of those assets.  

And, even more complimentary, the intangible asset risk positions’ overall performance (results, outcomes, and contributions, etc.) would be readily observable (transparent), measurable, and quantifiable.

At this point, risks to the intangible assets that a company produces and/or acquires is often spread, sometimes haphazardly and absent coordination or consensus, across an enterprise and subject to the sometimes subjective (risk taking) perspectives and spirit of business unit management.  While it is entirely imprudent to dismiss or disrespect the perspectives espoused by business unit management, stakeholders, and/or owners, it is true that efficiencies and effectiveness can be achieved when there is consenus and collaboration (enterprise wide) regarding the:

1. stewardship, oversight, and management of a company’s intangible and IP assets

2. abiliy to sustain control, use, ownership, and monitor the value, materiality, and risks to intangible and IP assets is articulated and understood as requisites integral to a company’s success, profitability, and sustainability.

Michael D. Moberly     January 13, 2010

It used to take years of dedicated bad management to destroy a company, now it can be done almost overnight, and it’s not just due to the range of hazards, e.g., fraud, financial calamities, terrorism, and/or failures in supply chains, etc., that can threaten a company, it is the speed which such risks can strike and how they can rapidly escalate and cascade throughout an enterprise internally and externally! (Adapted by Michael D. Moberly from remarks of Sir John Bond, Chairman of UK based HSBC)

Risks to business continuity and intangible assets such as intellectual property, brand, reputation, image, goodwill, supply chains, and competitive advantages are rising and asymmetric.  In many respects, they represent outgrowths and/or consequences of a hyper-competitive, predatorial, winner-take-all, go fast, go hard, go global business transaction environment functioning in knowledge-based economies. 

At least one favorable consequence though, in my view, is more attention is being drawn (normatively speaking) to the precise role and (fiduciary) responsibilities of corporate boards relative to including (addressing) business enterprise (business) risk as routine action items on their agendas, sometimes through ‘risk committees’.

An initial step toward achieving this essential addition, again, in my view, lies in ensuring boards receive professional, objective, and relevant briefings and awareness training absent any ‘agenda’ other than providing strategic and/or tactical insight, perspective, and guidance to benefit the company.

In 2005, Lloyds and The Economist Intelligence Unit collaborated to create a briefing paper (study) titled ‘Taking Risk On Board: How Business Leaders View Risk’.  The report (a.) explored the extent to which risk is now a board-level responsibility, (b.) described what boards see as their risk-related priorities, and (c.) identified what they do and don’t do to implement effective risk management strategies in their organizations.

The Lloyds - The Economist Intelligence Unit report concluded that yes, most boards are taking risk more seriously.  However, in most instances, a board’s rationale for doing so had been prompted more by the imposition of governance and regulatory mandates and not necessarily by a genuine recognition that their company’s business strategy would benefit from fully integrating (top down) risk management initiatives directly and consistently into board decision-making.

Somewhat more disconcerting however, was the finding that board’s frequently characterized the act of addressing risk in their boardrooms as constituting (a.) constraints, (b.) diversion of resources, and/or (c.) obstacles (impediments) to necessary - normal business risk-taking.

(Perspective and insight for this post was gleaned from - adapted by Mr. Moberly from a 2005 report produced by Lloyds and The Economist Intelligent Unit titled ‘Taking Risk On Board’.)

Michael D. Moberly   December 28, 2009

‘Creative industries’ are (typically) broadly comprised of small, medium enterprises (SME’s) that share a commonality of consistently engaging in imaginative, forward looking - forward thinking activities and, therefore are frequently embedded with intangible assets.

Creative industies and their founders-management teams tend to be individualistic and entrepreneurially oriented (spirited).  The creative industries include such activities (professions) as architecture, crafts, entertainment, music, advertising/marketing, as well as numerous niche consulting firms who sense little need, in today’s nanosecond global business transaction environment, to be bound (limited) by, for example, conventional business plans and/or models, etc., that reward accumulation of tangible (physical) assets to the exclusion of intangible assets with little or no recognition - appreciation for the economic fact that intangible assets now comprise 65+% of the value, sources of revenue, future wealth creation, and sustainability for most companies.

The key drivers of creative industries are, in most instances, the intangible assets they create and learn how to effectively utilize and exploit.  Equally likely, creative industries will be ’learning organizations’, that is, their founders-management teams will consistently seek, assess, and find ways, when-where appropriate, to exploit ’creative change’ within their organization.  In other words, they embrace researching and learning about change as an essential tool and/or ingredient for executing their vision of normative competitiveness, i.e., how competition - competitiveness must (should) materialize in the go fast, go hard, go global business environment as foundations for companies to be sustainable.

Collectively, the ’creative industries’ represent an increasingly important and profitable segement of the economy, one in which the Association of Certified Accountants (ACCA) reports may account for as much as 10% of the global economy and this sectors’ growth rate is reported to be up to three times the rate of the rest of the economy.

However, this ACCA report also strongly encourages the creative industrys’ to foster even more business-like strategies with respect to the production, utilization, and exploitation of their intangible assets.  Translated, this means taking more care to sustain (protect, preserve) control, use, ownership, and monitor value and materiality of their intangibles.  This will contribute to the creative industry sector becoming even more profitable, and perhaps more importantly, more sustainable (less ephemeral).

Michael D. Moberly    December 15, 2009

Quality, relevant, and transferrable intangible assets favorably affect a company’s value and can be legitmately exploited to elevate its attractivity to prospective buyers.  Owners contemplating selling their business would be well served by, at minimum, having a conversation with an ’intangible asset business specialist’ at the earliest stages of their often times, private deliberations. 

The business owner contemplating selling their company would find it useful to literally shop around to find a professional ’intangible asset business specialist’, not solely an accountant, tax specialist, attorney, or general business consultant, as those specialties are necessary and can be converged at subsequent stages of the process.  

A key discriminator in selecting an intangible asset business specialist is one with not merely experience, but one who possesses a deep knowledge-understanding of a cross section of intangible assets in current contexts and will offer respectful insights and strategies to business owners to aid them in two key areas:

1. Bring clarity to their specific company’s intangible assets, i.e., what they are, how they’re produced, how and where they deliver-contribute to a company’s value, revenue, brand, reputation, image, goodwill, etc., and how they can be effectively leveraged in the selling action.

2.  Explain the principles for identifying, unraveling, assessing, bundling, and focusing prospective buyers’ attention on their company’s most attractive, valuable, and transferrable intangible assets.

It’s an economic fact - business reality that intangible assets now comprise as much as 65+% of most company’s overall value, sources of revenue, and foundations for future wealth creation, as well as the increasingly critical sustainability and durability dimensions (of a company).   This means, for most businesses today, intangible assets (irrespective of the type of business, sector, company maturity, or the products and/or services offered) are key ingredients - contributors to a company’s standing.  That is to say, they’re embedded, sometimes unbeknownst or overlooked by a business owners in various various processes, practices, or procedures that can and should be showcased - leveraged in ’sell circumstances’.  

Michael D. Moberly   December 3, 2009

Respectfully, its evident that in a significant percentage of conversations I have with business decision makers and management teams about ‘intangible assets’ they are quick to express (perpetuate) the conventional (singular, largely accountancy) view that intangibles merely constitute - reflect a company’s ’goodwill’. 

In the increasingly global ‘knowledge-based’ economies wherein its an economic fact that 65+% of most company’s value, sources of revenue, sustainability, competitive advantages, and foundations for future wealth creation lie in - are directly linked to intangible assets, perpetuating the notion that its all attributable to - comes under a single heading of ’goodwill’ no longer captures (reflects) the depth, breadth, and/or contributions of a company’s intangible assets.  Unfortunately, for those company’s and management teams that cling to these conventional (narrow) views/perspectives about intangible assets, its unlikely they will be receptive to exploring the full range of intangible as noted below and their special relevance to their company.

Actually, Weston Anson (CONSOR) has organized intangible assets into recognizable categories, which I have taken the liberty of adapting and enumerating into fifteen primary categories, i.e., (1.) internally developed technologies, (2.) special advertising and marketing concepts, (3.) engineering designs and technical know how, (4.) proprietary issues related to customers and clients, (5.) competitor intelligence/research, (6.) real estate (certain property) rights, (7.) employee training, (8.) domain names, website design, etc., (9.) certain aspects of a company’s products and/or services, (10.) a company’s identity, reputation, image, (11.) special competitive aspects of contracts and agreements, (12.) intellectual property, (13.) R&D, (14.) particular competitive advantages within the HR arena, and (15.) the company’s collective intellectual capital.  (Please note each category has numerous subsets and/or sub-categories.)

In today’s global business context, intangible assets:

1. are the economic benefits anchored in a company’s intellectual capital and the distinctive features, processes, procedures, and/or programs evolving from that intellectual capital.

2. is the understanding how to effectively apply that know how to deliver competitive advantages and create value for the company.

Few would argue, if/when a company’s intangibles are overlooked, dismissed, or neglected, it amounts to much more than merely missing a single opportunity! 

Michael D. Moberly   December 1, 2009

Lest we forget, its an economic fact - business reality that 65+% of most company’s value, sources of revenue, sustainability, and foundations for future wealth creation today lie in - are directly linked to intangible assets.  With such significant value being embedded in a company’s intangible assets its imperative that management teams have, in place, effective strategies to (a.) consistently identify, utilize and enhance those assets, and (b.) safeguard those assets, i.e., sustain their control, use, ownership, and monitor their value and materiality. 

Here are some key best practices that apply to every company, regardless of size, worth, or industry sector:

1. Bring personal, managerial, operational, and fiscal clarity to the term ’intangible assets’.

2.  Identify (determine) the types and categories (range) of intangible asset that exist in your company, e.g., go to http://kpstrat.com and ‘click on’ brochure in menu and scroll to ‘Examples of Intangible Assets’.

3. Unravel the developmental origins of those intangibles and create a company specific ’tool’ to assess their status, i.e., their fragility, stability, durability, sustainability, contributory value, and ownership.  It’s important to note that the development/production of intangibles is routinely tied to people (employees). 

4. Determine how (or if) those assets are consistently being captured and utilized (or, under-utilized, not utilized) within the company, e.g., determine specifically how they contribute to - linked to enhancing  particular operations, processes, an/or procedures by delivering efficiencies and/or competitive advantages, enhancing customer/client relations, influencing additional revenue sources, etc.

5. Determine how (if) the development and use of intangibles within your company are (effectively) aligned and integrated with the company’s core (strategic) mission.

6. Regularly communicate your company’s ‘intangible asset strategy’ to employees and institute mechanisms to ingratiate that strategy as a ‘company culture’.

Michael D. Moberly   September 4, 2009

Today, for even the most conventional company, the majority of its value and competitive advantages evolve not from tangible (physical) assets, i.e., property, factories, inventory, machinery, etc.  Instead company value and competitive successes evolve largely through combinations of integrated-aligned intellectual capital and intangible assets, e.g.,

1. Human capital = management teams, employees, etc.

2. Structural capital = intellectual property along with processes, methods, and best practices, etc., that deliver efficiencies, effectiveness, and contribute to value and revenue.

3. Relationship capital = all types/kinds of (internal, external) networks related to advancing brands and relationships with customers, clients, vendors, and partners, etc.

But, unlike the issuance of a patent or trademark by the government, there are no comparable confirmations for company management teams that say ‘here lies your company’s core value’ , i.e., its intangible assets and intellectual capital. The responsibility to recognize a company’s core value drivers and understand how to most effectively utilize (exploit) them is primarily a management function.  That function (responsibility) however, should not be executed as periodic, snap-shots-in-time reviews, proclimations, or assessments.  Rather it should be a routine (managerial) fixture that’s integrated with company stewardship, oversight, and strategic management practices.

So, what’s the benefit - ROI to management teams for doing this?

First, knowing specifically what and where a company’s value drivers are, i.e., intangible assets and intellectual capital will lay important foundations for management teams to utilize those assets more effectively, efficiently, and profitably, i.e., position, leverage, and exploit. 

Second, and perhaps most importantly, as management teams communicate the above, they can more effectively articulate (internally, externally) company value, something which can seldom be gleaned/achieved solely by reviewing conventional financial reports.

Third, this level of insight allows management teams to genuinely focus on ‘future potential, not merely past performance of their company’ as characterized in conventional financial reports.

Remember, intellectual capital is integrated-aligned combinations of know how that’s convertable into useable/effective practices, methods, procedures, processes, and favorable relationships.

(For additional illuminating work in this arena see Mary Adams at I-Capital Advisors.)

Michael D. Moberly   August 12, 2009

Many companies want to attract investors.  For IP and intangible asset intensive companies however, there are particular strategies that company management teams should execute to elevate their ‘attractivity’. 

Its important to know at the outset that surveys and studies (Howery, etc.) consistently find that investors are more likely to be attracted to companies that have sustained track records of integrated strategies to (1.) identify, (2.) assess, (3.) monitor, (4.) safeguard, and (5.) utilize their intangible assets and IP effectively.

A plausible reason why investors are giving increased weight (scrutiny) to these factors is because they understand (as economic fact) perhaps better than most, the reality that intangible assets and IP are the dominant drivers of most company’s value, sources of revenue, sustainability, competitive advantage, and growth.

Therefore, investing in company’s that have no, or insufficient, or un-enforced strategies (practices) to sustain control, use, ownership, and monitor the value of their IP and/or intangible assets will, at minimum, constitute a cautionary flag insofar as pursuing the investment is concerned.  In addition, both the value and usability of IP and intangible assets can be quite fragile, especially when effective safeguards have not been in place and routine (asset) monitoring has not occurred.  If management teams dismiss the importance of these strategies and pass on developing and executing them, the probability risks will materialize and push the investment beyond acceptable (risk) thresholds will surely elevate, making the company much less attractive to a mutually beneficial investment.

Similarly, its not likely that investor confidence in the protectability and usability of a company’s IP and intangibles will elevate solely because a company has proof of IP ownership.  Routinely, management teams naively portray conventional IP protections, i.e., patents, trademarks, and/or copyrights as synonymous with an asset protection strategy, (1.) the assets are/have been adequately protected from their inception, and (2.) post-investment usability of the assets is assured.  The reality is, in this consistently competitive, highly predatorial, and winner-take-all global business environment, neither are assured solely because a patent has been issued.

Generally, investors are experienced enough to recognize that, standing alone, conventional IP protections, while necessary, do not supplant a well conceived, executed, and enforced strategy, i.e., a  comprehensive set of policies, practices, and procedures.  When management teams make such mis-assumptions, investors are apt to (a.) abandon the prospective investment altogether, or (b.) ratchet-up the due diligence and asset assessments to leverage the risks for better terms.  Regardless, managerial oversight of these issues, or worse, negligence, will likely manifest itself as a frustrating and disheartening experience for the company in terms of attracting investment.

Michael D. Moberly    August 3, 2009

When early stage company’s intangible assets (IP, proprietary know how, etc.) become entangled or ensnared in time consuming, momentum stifling, and costly (legal) disputes, experience suggests it’s frequently a consequence or combination of…

  -  misplaced trust in and/or the unethical/illegal conduct of business partners, research collaborators, employees, investors, etc.

  - not attaching sufficient managerial priority to protecting and sustaining control, use, ownership, and value of the assets.

  - the actions of competitor/business intelligence or data mining operations, or even industrial (economic) espionage, either of which can rapidly undermine competitive advantage or result in the irreversible loss and erosion of asset value. 

  - naivete’ regarding the predatorial, winner-take-all aspects of engaging a global business environment. 

Each of the above are very real and persistent risks and when left unchecked or dismissing any as merely constituting an additional risk of doing business today borders on a breach of fiduciary - managerial responsibility. 

Understandably, early stage company management teams focus much of their time and attention to matters that appear more immediate, i.e., raising capital, furtherance of R&D, operations, etc.  Regardless, ground level stewardship, oversight, and management of intangibles and IP should not be relegated to optional ’I'll do it when time permits’ because its an economic fact, particularly for early stage firms, that 75+% of their value, prospective revenue streams, sustainability, and foundations for future growth are directly linked to their intangible assets.  

There are three factors that frequently influence early stage company management teams in this regard, i.e., they… 

1. do not have fully developed/articulated intangible asset or IP positions beyond what’s verbalized for prospective investors

2. mistakenly conceive the stewardship, oversight, and management of intangibles as non-returnable costs rather than investments that add assurances that their launch will be successful and profitable, and

3. mistakenly assume that patent applications, provisionals, and/or issuances are sufficient (stand alone) asset protections that either offset or deter the risks/threats cited above from materializing.  

The assumption that any company, especially early stage firms, can ’patent and walk away’ is not a sustainable business practice, that is, following patenting, risks/threats to intangible assets should not be assumed to solely be legal (IP) counsel problems, rather they continue to be management team and board decisions!  The probability than an early stage firm with particularly innovative and commercializable intangibles and IP will experience at least one of these threats, risks, entanglements and/or ensnarements has elevated considerably.