Michael D. Moberly    April 28, 2010

Intangible assets are increasingly valuable and exploitable commodities that allow company management teams and boards to consider and pursue an ever widening range of business transactions in which intangibles will be part of the deal, that is, they can be bought, sold, transferred, traded, assimilated, or licensed.

Business transaction management teams have those same responsibilities, only they’re elevated somewhat, due to the expectation that in most any transaction, one or both parties’ intangible assets will be in play, that is, they will be integral factors when negotiating and pricing a deal.  That’s because, 65+% of most company’s value and sources of revenue today lie in - evolve directly from intangible assets! 

However, absent effective guidance in the development of intangible assets, most would score high on the transferrability, replication, and/or imitation scale.  This makes the the assets particularly vulnerable to devaluation, or hemorrhaging, as I refer to it, that is, they become impaired in some manner relative to their ability to produce/deliver the projected value, competitive advantages, and revenue streams after the deal has been closed.

For transaction management teams, it’s absolutely essential that they be alert to the potential for, if not the probability that, some level of asset hemorrhaging can occur in both pre and post transaction contexts.  In some instances, asset hemorrhaging can literally commence before the ink dries on a transaction contract.

A key starting point to prevent and/or mitigate any asset hemorrhaging from occurring, is to avoid permitting an over-heated sense of urgency and speed to affect the transaction management teams’ responsibilities.  When management teams view a transaction primarily through a lens of urgency and speed, a frequent consequence is that the critical due diligence and asset assessments become hurried and templated and not as thorough and specific, nor examined in both pre and post transaction contexts, as they should.  Of course, in today’s hyper-competitive global business environment, where its likely there will be multiple and simultaneous suitors to a transaction, a sense of urgency and speed are almost endemic!

Transaction management teams are obliged then, to frame - structure their role, particularly the duties related to the due diligence and assessment of intangible assets, in a manner that:

1. Recognizes the ability to obtain (retain) full control, use, ownership, and value of those assets is essential to negotiating a profitable and sustainable transaction outcome.

2. Secures approval to integrate asset protection and value and materiality monitoring measures at the earliest stages, as well as, throughout the transaction negotiation process to reduce the probability of and be promptly alerted to actions that can (a.) undermine asset value, competitive advantages and the assets’ ability to continue to produce revenue, and/or (b.) trigger costly and time consuming legal disputes and challenges that can disrupt the momentum of and/or jeopardize an otherwise viable transaction. 

While the goal of a transaction management team remains the same; to facilitate stronger, more secure, and profitable transactions, its now prudent to include an intangible asset specialist on the team, who can, among other things, identify, unravel, and assess the value, risks, defensibility, and sustainability of the intangible assets that are in play.

I welcome and look forward to receiving your thoughts and comments.

Michael D. Moberly   April 9, 2010

In a 2006 ACCA study, the principle investigators (Chris Martin, Julie Hartley) stated that in most instances a company’s intangible assets could be imitated - replicated, presumably by competitors or other economic/competitive advantage adversaries, given (a.) sufficient time, (b.) resources, and (c.) incentives to do so.  So far, no big surprise here.

More specifically, the research report stated that (intangible) asset imitation correlated to the assets’ (1.) technological complexity, (2.) obsurity, or non-obviousness, and (3.) cost of replication.  Again, a pretty straight forward perspective.

The significance of this study, in my view, does not lie so much in the reality competitors will attempt to imitate/replicate others’ intangible assets, which occurs routinely.  Rather, the significance of this study is that it points to management/leadership team and board fiduciary responsibilities to exercise consistent  oversight and monitoring of their intangible assets’ status, i.e., value, revenue producing, and competitive advantage delivering capabilities.

Effective starting points to achieve this, in my judgment, are for management teams and boards to:

1. Be less passive and assuming about the development and evolution of their company’s intangible assets.

2. Adopt a much more proactive and aggressive role in developing and utilizing intangible assets as sources of value, revenue, and growth.

3. Put in place practices to effectively protect and monitor the assets (contributory value and performance) throughout their value and functionality cycles.

The key underliers to this lies with management team and board foresight and leadership to recognize two things, (a.) the inevitability that competitors and adversaries will endeavor to imitate others’ intangible assets if/when possible, and (b.) the importance of taking time during the (intangible) asset development and utilization process to integrate often times inexpensive, but critical features that will not only reduce the assets’ vulnerability to imitation, but also create disincentives to imitation, e.g., making the asset more:

1. Technologically complex that dis-incentivizes adversaries because replication requires incurring costs for the aquisition of new, perhaps specialized, technologies.

2. Obscure and non-obvious to competitors and adversaries in ways that they cannot readily observe or deduce.

3.  Costly to replicate by requiring time, resources, and costs comparable to the learning and development processes the originator of the asset experienced.

For management/leadership teams and boards today, the above represents not only prudent business practices, but fiduciary responsibilities as well.

Michael D. Moberly   January 2, 2010

The increasingly essential (fiduciary) responsibility for managing a company’s reputation risk should not emulate the conventional Hollywood-style publicist or public relations model.  Company reputation risk management is now about conceptualizing-framing enterprise-wide practices to objectively and proactively address reputational risks that are, in every sense, ‘internet asymetric’!

Respectfully then, any company reputation risk management initiative which integrates that ‘hollywood’ model’ will quickly find itself well behind the curve when it comes to trying to monitor and/or address the realities of the nanosecond, unfiltered, predatorial, and sometimes revengeful and conspiratorial (manufactured) communications that are, unfortunately, increasingly routine in the (global) online social media and networking communities. 

With more frequency, company reputational risks are sparked, initiated by, and/or evolve from social (online) media sources, e.g., blogs, message boards, competing/underming web content, and other social (viral) networking communities that literally transgress, circumvent, and/or bypass traditional forms of communication and information dispersal.  The problem - challenge this poses to company’s is fairly straight forward, that is, adverse social media communications can expose - render organizations vulnerable to ever expanding reputational risks and threats 24/7.

There are three questions relevant to reputation risk management best practices that warrant management team reflection.  One question lies in the warp speed in which unfiltered and sometimes ‘manufactured’ social media - networking community communications can materialize to have their initial (measurable) adverse affect - impact on company. 

A second question lies in identifying appropriate and forward looking best practices to assess the ‘realness’ and duration of such adverse communications.  In other words, how will (not if) such communications impact the company, its customers, its suppliers, and its stakeholders-shareholders?

And, of course, a third question lies in assembling a decision making team with the inclination and capability to objectively, effectively, and consistently identify, monitor, and assess any/all (company) adverse communications.  An important key is that these assessments should not be conceived-framed in conventional risk - threat models.  Rather, the assessments should be executed in contexts of (a.) how such communications can exacerbate additional vulnerabilities (portals) that may/can create cascading affects to the company’s reputation, and (b.) the probability, speed, and potentially global elements that those vulnerabilities may materialize. 

And finally, a fourth question is, are most reputation risks really subject to being controlled in the necessary timely fashion/manner so as to prevent, or, at minimum, mitigate the risks/threats to permit a company to effectively and rapidly (fully) recover (e.g., economically, competitive advantages, sales, etc.,) from the adverse communications?

Michael D. Moberly   November 16, 2009

Intangible asset value; how long can it be sustained?  Three points to consider.  First, unfortunately for management teams and boards, the answer to the question is its not indeterminate!  Second, in today’s globally predatorial business (transaction) environment, risks/threats to intangible assets, e.g., the capability of economic-competitive advantage adversary’s to execute strategies to erode and undermine another company’s asset value, are persistant and assymetric.  Third, 65+% of most company’s value lie in - are directly related to intangible assets and intellectual property.

In their Deloitte report titled, ’The Economic Role of Intellectual Property’ (Noonan Haque and Greg Smith) identify/describe the ’key issues’ knowledge-based company’s confront as being, (1.) rapid R&D breakthroughs, (2.) diffusion of knowledge, information, and data, and (3.) increasingly abbreviated asset lifecyles.  An assets’ life (value, function) cycle can of course, be influenced by a range of factors. 

Consequently, a worthy exercise for management teams and boards to engage today, is to devote time to examining and understanding the variety of intangible assets being produced (by their company) and reach consensus on the asset value protection-preservation-maximization strategy (model) that best fits their company, their sector, their innovation, and their core business goals.  One objective is to put in place a viable strategy to practice effective and consistent management, stewardship, and oversight of those assets to strenghten and lengthen their respective life-value-function cycles.

Other practical and immediately useable products of this exercise will be (a.) determining how to monitor (asset) value and materiality, and (b.) ensuring the production and utilization of the company’s (intangible, IP) assets are effectively aligned with the company’s core mission.

Those engaged in business (IP, intangible asset) management who are unfamiliar with this position or dismiss its relevance are certainly doing a disservice to their company and/or client!

Michael D. Moberly    September 18, 2009

Due diligence management teams must be fully cognizant of the reality that the control, use, ownership, value, and materiality of the targeted (intangible) assets do not remain static assets during the (due diligence) process.  They are subject (vulnerable) to being compromised, misappropriated, competitive advantages undermined, and/or value eroded if not properly monitored in both pre and post transaction contexts.  In fact, there’s good evidence to suggest asset vulnerability actually elevates during this time.

What’s more, any of those adverse events (outcomes) can occur in rapid-fire order and cascade throughout the transaction and change its entire structure, e.g., adversely impact the projected (sought after) economic and competitive advantage benefits initially envisioned for the transaction.

Another reason why its important to continually monitor intangible assets throughout a due diligence process is because the time frame when buyers and/or sellers of the intangibles can leverage - extract - realize the most value is continually being compressed.  This is due, in no small part, to the globally predatorial business intelligence and data mining operations, among other things, that can rapidly ’get out front’ of deals and/or transactions to adversely affect (undermine, erode) an assets’ (strategic) value and thereby render the transaction less attractive or severely hamper its (envisioned) viability.

The considerations described below represent additional factors that should be taken into account when management teams ’frame and structure’ a due diligence strategy, any one of which can constitute either a ‘red flag’ or signal a probability that the transaction will be effective, i.e., is there evidence of:

1. a broad company culture that genuinely recognizes the value of the core (revenue - value producing intangible) assets?

2. consistent stewardship, oversight, and management of those assets?

3. consistency in the representation of those assets, ala Sarbanes-Oxley, FASB, etc., in which risks, value, materiality, and financial performance are accounted for and measured?

4. business continuity-contingency planning that includes the core intangible assets?

5. strategic planning intended to achieve fuller utilization (monetize, extract value) from the intangible assets?

Michael D. Moberly    September 17, 2009

When conducting ’due diligence’, there are multiple objectives.  Three key ones are to (1.) recognize that 65+% of most deal - transaction value lies in the targets’ intangible assets, (2.) provide superior knowledge and insight to principals about the status of about-to-be-purchased assets relative to a deals’ terms, objectives, projected returns, and exit strategies, and (3.) examine any circumstances that may adversely affect the target and/or transaction to ensure control, use, ownership, and value of those assets under consideration (about-to-be-purchased) are sustainable in both pre and post transaction contexts.

In other words, due diligence must account for the reality that the control, use, ownership, value, and materiality of those assets can be rapidly compromised, undermined, misappropriated, eroded, and/or fluctuate to adversely impact the projected (sought after) economic and competitive advantage benefits of a transaction.

It’s essential therefore, that due diligence represent/serve a clients’ interests better by being much more than a cursory or confirmatory review of the presence, absence, and/or position of a target’s intangible assets or merely provide decision makers with subjective, snap-shot-in-time estimates.  Instead, in today’s increasingly predatorial and ‘wired’ business transaction environment in which data mining and business/competitor intelligence are routinely applied, due diligence must bring strategic clarity (certainty) to management teams decision making process, particularly regarding the status, fragility, stability, sustainability, defensibility, and strategic value of the targeted assets.

Understanding the strategic value of intangible assets starts by recognizing that the dominant value drivers of most targeted company’s assets no longer lie in tangible-physical assets, i.e., plants, equipment, inventory, etc.  Rather, today, and for the (irreversible) foreeable future, intangible assets will continue to be the overwhelmingly dominant source of most company’s value, revenue, sustainability, and foundations for future growth, expansion, and wealth. 

There are many forms - types of intangible assets, e.g., intellectual property, intellectual capital, brand, reputation, image, goodwill, etc., which is why those critical insights that due diligence should provide to decision makers cannot be correctly/properly articulated solely by using conventional templates and snap-shots-in-time techniques.  It’s also because, in today’s hyper-aggressive and globally competitive transaction environment, asset value and materiality can fluctuate rapidly especially if adverse circumstances exist which includes, among other things, the assets being subject to compromise, misappropriation, infringement, erosion, or undermining prior to or immediately following deal closure.

Michael D. Moberly       July 3, 2009

There are many different views about what it takes to execute a successful launch of a new company and commercialization of its ideas, products, and/or services.  Having a very commercializable product or service, a viable business plan, and sufficient experience and capital to execute a focused marketing strategy represent just three of the conventional ingredients that elevates the probability a launch will be successful.

An often overlooked and underestimated ingredient to a successful launch though, is recognizing that 65+% of its projected value and sources of revenue will lie in intertwined combinations of intangible assets, intellectual property, proprietary know how, and competitive advantages.

Unlike patents, trademarks, and/or copyrights however, the USPTO does not issue, to the launching company, a certificate that says, ‘these are your launch critical assets’.  Instead, the responsibility for (1.) recognizing those critical assets exist, and (2.) how they individually and collectively contribute to - convert as value, revenue, and competitive advantages, lies solely with the launching company’s management team!  

Consequently, in today’s hyper-competitive, predatorial, and global business environment, another ingredient to successful new company (product, service) launches is executing best practices to sustain control, use, ownership and value of those launch critical (intangible) assets throughout their respective function - value cycle.  Such practices must reach beyond conventional intellectual property protections, i.e., patents, trademarks, and copyrights which are routinely outpaced, circumvented, and disregarded globally. 

While today’s go fast, go hard, go global launch mentalities may not leave time for new company management teams to properly reflect on and/or budget for these increasingly essential safeguards, their absence accounts for vulnerabilities and losses that literally undermine even the best laid business plans and minimize, if not negate, any projected near term and strategic success of a new product-service launch! 

Continuing to hedge (neglect, overlook) launch critical assets’ maintenance (e.g., protect, preserve, monitor their use, ownership, and value) will elevate risk-threat probabilities to the point they actually become inevitabilities in which complete or partial (asset) value erosion-dilution can occur, which in turn, creates irreversible marketing boundaries that will impede any potential success of a new product - service launch!

Keeping launch critical asset genies in their bottle! - The ability to effectively safeguard launch critical assets starts with management team recognition of (1.) the contribution and value of the ‘launch critical assets’, (2.) the risks-threats which those assets are routinely exposed that can rapidly erode their value and undermine the launch, and (3.) taking steps to ensure their complete control, use, ownership, and value is defensible and sustainable in both pre and post launch contexts.

If - when launch critical assets get out of their bottle as a result of neglect, oversight, or an illegal or unethical act, the management team must have procedures to put in motion immediately to try to recover the assets’ value and competitive advantages that have been compromised.  Once assets have been compromised, the liklihood a company will achieve a complete (economic, competitive advantage) recovery however, is largely dependant on two things, (1.) timely awareness, and (2.) a speedy and effective response.  Delays in compromise discovery and securing effective guidance about what actions to take, and when, will complicate and weaken the launching company’s (legal) position insofar as the possibility of achieving a favorable outcome.

Today however, a favorable outcome should not only be asset retrieval, but re-establishing control, use, ownership, and value of the ’launch critical assets’ and removing any/all ’compromised assets’ from the global arena until another launch can be executed.

In order to facilitate the probability of a fuller recovery when launch critical assets have been compromised, its prudent to undertake a thorough intangible asset, intellectual property, proprietary know how and competitive advantage assessment as quickly as possible.  The assessment findings will contribute to management team deliberations on two critical fronts, i.e., assessing-identifying…

   1. priorities and options for trying to (re-) establish ownership and/or (re-) obtain control and use of the, by now hemorrhaged  ‘launch critical intangible assets’.

   2. strategies to try to stop and/or mitigage further economic -competitive advantage hemorrhaging (of those assets), i.e., devaluation, undermining, infringement, misappropriation, etc., to try to revive the launch!

Risk-threats to a company’s launch critical (intangible) assets should not be dismissed or mis-characterized as merely representing ’just another risk of doing business’ in today’s hyper-competitive, winner-take-all global business environment.  Far too many companies lose, inadvertently relinquish, and/or become entangled in extraordinarily costly, time consuming, and momentum stifling legal disputes and challenges when effective safeguards have been overlooked or disregarded! 

Michael D. Moberly   June 12, 2009

The business transaction landscape is no longer shaped solely by the flow of physical-tangible goods and services rather by the flow of information and intangible assets!  Corporate and institutional value has literally shifted away from collections of physical (tangible) assets to collections of information and know how-based intangible assets, e.g., intellectual capital which, in itself, has become quantifiably valuable and a stand alone commodity for which sustaining control, use, ownership, and consistently monitoring value are paramount and integral to business’ near-long term success, profitability, and sustainability.  

The rules of engagement have changed!  The predatorial elements (impact, consequences, losses) attributed to the globally persistent business intelligence and data mining industry’s are unfortunately routinely omitted from most business information asset protection and management equations.  Initiatives (programs) to effectively safeguard and manage business information (intangible) assets must include practices to mitigate these technologically sophisticated, predatorial, and global phenomena.

Think differently about past practices and conventions!  The laws associated with intellectual property enforcements are largely reactive, not proactive, and typically apply after, and if, an information loss has occured and acknowledged by its’ rightful owner (holder).  IP holders are almost solely dependant on their respective levels’ of awareness and alertness to the assets’ vulnerability, probability, and criticality to loss and/or compromise and their willingness and resources to aggressively pursue suspected wrong doers.  Business information asset protection and management therefore, must be much more proactive in order to reflect and accommodate the nanosecond nature of information flows and transactions, i.e., practices, procedures, and policies must be in place, on the front end, to sustain control, use, ownership, and monitor value.

Michael D. Moberly    June 4, 2009

No longer is safeguarding a company’s IP, intangible assets, and proprietary know how solely about identifying and assessing ‘risks and threats’.  It’s also about determining - factoring the value of those assets and their contribution to revenue, competitive advantage, and sustainability. 

Why is assessing asset value useful and how does it contribute to safeguarding valuable, information-based assets?  It helps management teams’ determine and prioritize (a.) what the most effective asset safeguards are, (b.) the level of (asset) stewardship and oversight necessary, and (c.) the criticality (adverse impact to a company) should specific risks - threats (to those assets) actually materialize.

Generally speaking, asset value falls into two, fairly broad, categories, e.g.,

Objective Value - the assets’ value evolves from its nature and/or context, i.e., legal documents, financial records, transaction contracts, HR records, employment contracts, etc. 

Subjective Value  - the assets’ value evolves from its contribution to revenue, company valuation, achieving competitive advantages and/or building - sustaining a company’s reputation, image, and goodwill, e.g., through client lists, product pricing, customer service, strategic planning, R&D, supply chains, marketing initiatives, etc.

Management teams will also find it useful, as a multiplier, to acquire a familiarity with two particular valuation methodologies to aid in identifying strategies to maximize, leverage, and extract value from the assets, e.g.,

The value-in-exchange methodology for valuing assets considers the actions of buyers, sellers, and investors and the value at which an asset would sell on a piecemeal basis.  For example,  IP, intangibles, or trade secrets, etc., may have multiple or stand alone value points.  A written chemical formula for a new product coupled with the manufacturing processes necessary to commercialize that formula may have greater value than the chemical formula would, standing alone!

The value-in-use methodology for valuing assets considers the on-going contributions the assets make to a company.  For example, assets such as IP, intangibles, and/or proprietary know how are frequently integral to a company’s current business operations, i.e., contribute to building and/or sustaining market share, competitive advantages, profits, reputation, goodwill, customer satisfaction, etc.

Michael D. Moberly    June 2, 2009

Business risk-threat-vulnerability equations have changed from merely being subjective prognostictions to inevitabilities when left unrecognized, unchecked, or ineffectively managed.  Consequently, there are, at minimum, six ways in which a company’s valuable intangible assets (i.e., IP, proprietary know how, competitive advantages, etc.) become entangled - ensnared in time consuming and costly legal disputes and challenges.  Typically, it’s a consequence and/or combination of:

1. Misplaced trust in business partners, research collaborators, and/or management team members…

2. Operational or procedural miscues that uneccessarily create - elevate the vulnerability of key assets to compromise, i.e., misappropriation, infringement, theft, etc.

3. Ineffective - inconsistent stewardship, management, and oversight of the underlying drivers’ of asset value and competitive advantage…

4. Unethical or illegal conduct of employees, contractors, vendors, etc., that trigger - facilitate asset compromises and undermine competitive advantages…

5. Management team assumptions that conventional IP (patents, trademarks, copyrights) constitute stand alone deterrents to infringement, misappropriation, and ultimately (product) counterfeiting…

6. Disregard for the speed which asset value and competitive advantages can be compromised and irreversably unermined…

In today’s hyper-competitive, globally predatorial, and winner-take-all business transaction environments, dismissing or characterizing any one of the persistent challenges above as merely constituting ‘another risk of doing business’ will, with increasing surety, lay a foundation for (a.) outright failure, and/or (b.) asset under-performance.