Michael D. Moberly   August 31,  2010

If you’re like me, you want to know ‘back stories’ or, what prompts and/or influences certain phenomena to take shape (occur).  In the case of intangible assets, one of the first, and perhaps most influential early studies on intangibles that I read was Brookings ‘Understanding Intangible Sources of Value’.  But, for all the forward looking insights gleaned from the Brookings study itself and the product of its various working groups, it wasn’t intended necessarily to provide readers with the ‘underliers’ of why intangibles evolved so rapidly at the outset of the twenty-first century.

Or, as Baruch Lev stated it so well, ‘if intangibles are so risky, their benefits so difficult to measure and secure, and their liquidity (tradability) so low, how did they become the most valuable assets most companies possess?

The answer, Lev suggests, lies in two international economic developments, i.e., (1.) the increasing intensity of business competition, and (2.) the commodization of physical assets.

The first international economic development that influenced the ascendance of intangible assets was, according to Lev, the de-regulation of particular economic sectors, i.e., transportation, financial services, and telecommunications, etc.  In other words, as these, and other sectors de-regulated (went global), it served to intensify the overall competitive (global business transaction) environment.  As competitiveness intensified, a demand for continual/perpetual innovation evolved, i.e., the development and introduction of new products, services, and cost efficiencies.  Thus, continual/perpetual innovation quickly came to be a requisite to not merely competitiveness, but, successful business operations and sustainability.  As the global competitive pressures intensified further, companies already in the mix, or those that aspired to do so, responded by engaging in more innovation, fueled, in large part by greater awareness, appreciation, and investment in intangible assets.

The second international economic development that influenced the ascendance of intangible assets was, again, according to Lev, the commmodization of physical assets.  Translated, this means that competitors globally, had access, essentially on an equal footing, to those physical assets that were now so necessary for becoming global in scope.  For example, the ‘physical assets’ of FedEx, DHL, and UPS became globally operational, almost simultaneously.  Companies worldwide would now have access to, what I often call ‘instaneous supply - distribution chains for their goods and products’.  Therefore, a truly global and more responsive (timely) marketplace could evolve, and did so quite rapidly.

But, as competitors globally gained (equal) access to those physical (transportation, financial services, and telecommunication) assets, it meant that those assets, now engaged in intense competition, would not, standing alone, generate extraordinarily high profits and create sustained values.  Rather, profits and elevated shareholder value would come to be created through the prudent use (development, acquisition of) intangible assets unique to, for example, each air cargo carrier.  Each carrier then developed their own distinctive bundles, combinations, and/or synergies of intangible assets that better enabled them to withstand and respond more aggressively to the competition.

Obviously today, all three air cargo carriers remain intact and compete against one another.  But, the intangibles each company developed, out of necessity (competitive pressures) influenced the contributory value of intangibles and their ascendancy to representing 65+% of most company’s value, sources of revenue, and ‘building blocks’ for future wealth creation.

(Adapted by Michael D. Moberly from the work of Dr. Baruch Lev, ‘Encyclopedia of Social Measurement’ Volume 2, Elsevier, 2005.)

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

Michael D. Moberly   August 30. 2010

As the respected consultant and researcher Karl-Erik Sveiby once noted, ‘my argument about the value of information is not that it is wrong to regard information as being valuable, rather, it’s that we should reconsider our mindsets about its value’.

Of course, from my perspective, having been engaged in safeguarding information-based intangible assets for a significant portion of my professional career, I still sense the prevailing, all be it, naive ’talk is cheap’ mindset is perhaps the single greatest challenge that companies and/or holders of proprietary information face. 

There’s little question, people (employees) enjoy - variously receive some pleasure talking to others about their work.  And today, there is such an array of platforms, in addition to verbal, that provide people with opportunities to convey, often times in very specific detail, their work related projects, activities, travels, etc.  Of course, most companies with a modicum of understanding (appreciation) for their vulnerability to the leakage of proprietary and/or sensitive information, now endeavor to restrict information through social media platforms available.

A significant percentage of companies elect to address the proprietary nature of information via non-disclosure and/or confidentiality (employee) agreements.  Typically, NDA’s are filled with a lot of do’s and don’ts but little contractual language is devoted to explaining to inquisitive twenty-something employees ‘why’ certain information should remain proprietary.  I’m not talking, of course, about information and/or data that is mandated to be kept free from breaches via HIPPA or other regulatory mandates.

In most instances, the answer to the ’why’ question lies in the fact - business reality that the (protected) information contributes to delivering value, revenue streams, and competitive advantages to a company so long as it does not enter the public domain.

While I’m confident they exist, I have yet to see NDA’s and/or confidentiality agreements that address the ‘why’ in this manner, in other words, acknowledge that the information to be kept proprietary and/or secret produces value to the company, and if it were to become something other than proprietary or secret, there is a reasonable probability the associated competitive advantages, value, and/or revenue streams would be lost, undermined, or erode fairly rapidly.

The ‘information security-protection’ literature is replete with the views and experiences of countless practitioners, along with various ‘insider’ theft of proprietary information studies. etc.  Thus, I suspect I am hardly the first to raise - frame the issue in this manner.   

I suspect, in this social media era, assuming a twenty-something employee fully appreciates the connection between signing an NDA during their employee orientation process and the (real and contributory) value of that information, which in most instances, they have yet to see, let alone access, is a fairly weak assumption.  

I remain skeptical therefore, that employees who seemingly find it both acceptable and desirous to post sometimes intimate and daily details about their life, and the life of ‘friends’ on their social media platforms will become information asset protection (security) zealots overnight.

Let’s be clear, this post is not about trying to pigeonhole all twenty-something employees as being naive and potential information leakers.  Rather, I’m merely saying that it would be prudent, and ultimately more effective, to devote an appropriate amount of time discussing ‘the value of information’ as an component of employee on-boarding processes.  

Ester Dyson, a reknown information technology consultant, once said on a related matter, that ‘the trick (to information asset protection) may not lie in trying to control the number of copies, or even the ability to copy for that matter, rather it may have more to do with influencing a relationship with originators and users of information’.  For the 90+% of new and existing employees, whom studies assure us will never become an ‘information leaker’, I agree!

The ‘Business IP and Intangible Asset Blog’ is researched and written by Mr. Moberly to provide insights and additional views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

Michael D. Moberly   July 23, 2010

What do I mean by designing and executing monitoring covenant’s in merger and acquisition representations and warranties?   It’s somewhat akin to the the statement routinely misattributed to Peter Drucker, i.e., if it can’t be measured, it can’t be managed. 

So, similar to Druckers’ perspective, in M&A’s, if control, use, ownership, and value of about-to-be-acquired/purchased (intangible) assets of a targeted company are not monitored and found to be sustainable (pre and post transaction) then there’s a reasonable probability the desired outcomes and/or projected returns, synergies, and efficiencies, etc., will be significantly impaired, diminished, or left unrealized altogether.

It’s not that intangibles are particularly unstable in comparison to tangible or other types of assets.  Rather, it’s due to the fact that the contributory value and competitive advantages intangible assets can bring to a deal have become essential to its success.  But, in today’s globally competitive and highly predatorial business (transaction) environment, intangible asset value and competitive advantages can be rapidly undermined, erode, or irrevocably lost, if there are no monitoring (representation, warranty) covenants in place for oversight.

Conservatively, when 65+% of most company’s value, sources of revenue, and foundations for future wealth creation today lie in - evolve directly from intangible assets; it seems a ‘no brainer’ that in a majority of instances, the essence of an M&A, i.e., what’s really being merged or acquired, are intangible assets!

An effective way for M&A professionals then to increase the probability that the desired - projected returns will be achieved is to ensure that M&A planning and due diligence not be focused solely on a company’s balance sheet that tends to roll up intangibles into a single heading of goodwill.  Rather, decisions to merge-acquire or don’t merge-acquire should include the question, how fragile and sustainable are the intangible assets under consideration?  In other words, is asset value and materiality vulnerable to erosion or undermining prior to, or immediately following, deal closure which, in either instance, will adversely affect projected returns?

Again, in today’s M&A environment, a seller’s or acquisition target’s intangible assets carry a readily exploitable liquidity that outpaces and utterly disregards conventional intellectual property enforcements. This of course, elevates asset vulnerability to many different forms of internal-external compromise that serve as preludes to (asset) value erosion which can literally sabotage deals. 

If either occurs prior to M&A finalization, the value of the about-to-purchased or acquired (intangible) assets can quickly hemorrhage and sometimes ’got to zero’.   At that point, M&A terms will certainly necessitate change based on a determination (assessment) of the extent of asset deterioration or whether the intangibles can rejuvenate to sustain the buyer’s original objectives.

To effectively mitigate such vulnerabilities-risks, its important for buyers and equity sources to have in place, a highly proactive ‘deal impact analysis’ process (capability), e.g., monitoring covenants.  Such (negotiated) covenants are intended to permit monitoring of key intangibles so that the parties can be alerted, in a timely manner, to any acts and/or events that adversely affect changes in the assets’ value or materiality.

If impairments or discrepancies arise, the terms may be re-negotiated as warranted without necessarily losing deal momentum, timing, or resorting to costly and time consuming dispute resolution options.  Most traditional forms of M&A due diligence still constitute ’snap shots in time’.  That is, they do not provide buyers-sellers with the level of on-going monitoring that’s necessary to address the easily exploitable and nanosecond liquidity (value erosion vulnerabilities) now common in transactions in which intangibles are in play.

The ‘Business IP and Intangible Asset Blog’ is researched, written, and produced by Mr. Moberly to provide insights and additional and sometimes alternative views for company management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

Michael D. Moberly   June 7, 2010

Unfortunately, there remain a significant number of company management teams and boards that believe ‘the right things to measure’ insofar as revenue and profitability are concerned, are only those things (assets) that get reported on balance sheets! 

While that conventional view is understandable, most companies today have nuanced mixes of processes, procedures, and intangible assets that actually create-deliver the majority of (company) value, sources of revenue, and influence new areas of business.  In fact, U.K.’s Department of Trade and Industry (DTI) Future and Innovation Unit cited in their study/survey, seven specific (intangible) value streams that their study/survey revealed that warranted investment and management to literally form the basis-foundation for unlocking a company’s true potential. 

These seven ’intangible value streams’ were the product of DTI’s 2001 study/survey titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’. 

The DTI report puts for the view that the seven intangible value streams comprise ‘the intangible raw materials that employees use to (a.) collaborate with one another, in order to, (b.) achieve company goals, (c.) solve company problems, and (d.) exploit opportunities for profitability and growth’.  

The seven intangible value streams identified in DTI’s survey, which consisted of in-depth interviews of 50 successful organizations, are:

1. Building an effective strategy for managing and maintaining relationships with key stakeholders.  This entails (a.) understanding how to identify key (internal, external) stakeholders and develop, organize and sustain that network of relationships, and (b.) recognizing that the nexus of ideas and opportunities evolving from that network will play an important role towards achieving and sustaining a company’s competitive advantage.

2. The added value a company can achieve from the effective management and use of its largely internally held knowledge and expertise.  In the current globally competitive and predatorial business transaction environment, a companies survival (sustainability) is interwoven with the ability of management teams and boards to ensure the knowledge and expertise (developed and/or acquired) are effectively and consistently shared and used throughout an enterprise, particularly the tacit knowledge and expertise that’s literally held in the minds of individual employees.  Absent the impetus - a system for knowledge and expertise dissemination and sharing within a company, they will be less likely (receptive) to (a.) identify gaps in their knowledge/expertise base, and (b.) respond quickly enough to identify, assess, and act on potential opportunities, and (c.) will become more vulnerable to sudden losses of knowledge/expertise, e.g.,  a key employee leaving and/or the misappropriation of key proprietary (competitive advantage delivering) information, etc.

3. Communicating (bringing) clarity of purpose to employees relative to their role in - contribution to company success.  Clarity of purpose also lends itself to building a ‘company culture’ in which employees are more inclined to recognize-understand the importance of achieving a balance between company goals and the daily (company) operational needs for building and sustaining intangible (asset) value streams, one of which is goodwill.

4. Building a sustainable company culture that encourages greater awareness of new and/or changing market developments that facilitates a quicker grasp and produces a more timely and effective response in terms of adapting to - exploiting those new developments and opportunities.

5. Regardless of the quality of product or service a company produces/delivers, they will likely count for little (in terms of value, etc.) if reputation with consumers, customers, clients, and/or suppliers is low, has been damaged, or is otherwise impaired.  A companies reputation and trust have literally become the foundations for building and sustaining competitive advantages and market position.  Company management teams and boards that are dismissive about or give little credence to those objective and essential components to success will likely be similarly dismissive about the rapidity which risks-threats to a company’s reputation (trust, image, goodwill, etc.) can materialize and create irrevocable damage and losses.

6. Maintaining the correct mix of employee competency, i.e., skills, knowledge, and expertise are key facilitators-enablers for companies to grow in both capacity and scope.  This requires, of course, management team and board committment to consistent investments in developing and maintaining employee talents’ that are essential to not merely support existing operations, processes, and programs, but also be effective contributors to future (company) initiatives and strategic planning.

7.  Maintaining market position and competitive advantages today involves, among other things, ensuring that management teams and boards have the right processes and systems in place, at the right time, and at the right location to support company activities and initiatives as needed.  It should be noted however, in today’s seemingly nanosecond time frames when markets, transactions, and the needs and demands of stakeholders can change and risks-threats rapidly materialize, those company processes and systems must be sufficiently flexible and adaptable to accommodate those changes and execute at an equally rapid pace. 

Financial reporting systems focus on historic balance sheets, profits, and cash flow, but management teams and boards don’t necessarily get the right perception of assets’ prospective value through such a historical lens only. 

Value is an uncertain and increasingly risk laden factor embedded in the global business environment with succcess being all-the-more dependant on objective assessments being conducted that address future options and opportunities and extrapolations of historic costs as well as current (asset) performance. 

(This post was inspired by a report - survey produced by U.K.’s Department of Trade and Industry titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written to provide insights for companies, their management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  I welcome and respect your comments and perspectives at m.moberly@kpstrat.com.

Michael D. Moberly   June 3, 2010

The timeless management adage ’you can’t manage what you don’t measure’ has relevance to the knowledge-based economy where intangible assets have become the overwhelmingly dominant source (65+%) of most company’s value and revenue.  But, as important and valuable as intangible assets are to most companies, regardless of size or industry sector, relatively few management teams and boards take a consistent role in managing or measuring them.

So, why is that?  One reason (rationale) frequently cited, is that intangible assets are ‘lumped together’ and appear on balance sheets only in the context of goodwill, thereby dismissing or relegating all other forms and categories of intangibles that a company produces and uses to subordinate, non-contributory roles. 

Thus, it begs the question, why devote time and resources to managing, measuring, and delineating things (intangible assets) that are not going to individually appear on a balance sheet?  The conventional accounting practice of not delineating/distinguishing intangibles on balance sheets, provides a stronger rationale then for management teams and boards, perhaps already so inclined, to be less receptive to learning how to identify, assess, value, manage, and, most importantly, extract value and exploit competitive advantages from their intangible assets.

Today however, as intangible asset rich/intensive companies become the norm globally, it’s seems prudent for management teams and boards to consider revisiting those aforementioned ’why should we bother’ rationales by posing this single question, ’what does my company possess or produce that is valuable and provides competitive advantages, but is not included on its balance sheet’? 

The answer to the question of course, is intangible assets.  (For a comprehensive list of intangible assets please go to http://kpstrat.com and click on brochure and scroll to ‘what are intangible assets’.)

Intangible asset specialists readily concur that when management teams and boards avoid managing and measuring intangible assets, it’s akin, particularly in this knowledge-based economy, to ’sticking a company’s entire head in the sand’.  It puts companies at risk by not focusing on those factors (intangible assets) that have proven to be so essential and integral to profitability, growth, and sustainability. 

Strict adherance to the ‘you can’t manage what you don’t measure’ adage, often gets translated as managing and measuring things that present the fewest challenges, thus the right things, or perhaps the more complicated things, or things which management teams and boards are less familiar and comfortable, are less likely to be managed or measured.  And, in a knowledge-based economy, that usually means intangible assets! 

So, what are the right things management teams and boards should be measuring?  The answer again, are the intangible assets (performance indicators) that consistently produce benefits, i.e., add value to a company, facilitate revenue streams, create competitive advantages and foundations (building blocks) for growth, future wealth creation, and sustainability, etc.

When management teams and boards frame the question as noted above, a frequent result is that  intangibles are much less likely to be dismissed, overlooked, or neglected.  Instead, the assets’ contributory value will be recognized and exploited.

 (This post was inspired by U.K.’s Department of Trade and Industry report titled ‘Creating Value From Your Intangible Assets: Unlocking Your True Potential’.)

The ‘Business IP and Intangible Asset Blog’ is researched and written to provide insights for companies, their management teams, boards, and employees to aid in identifying, assessing, valuing, protecting, and profiting from their intangible assets.  It is in this context that I welcome and respect your comments and perspectives on these increasinly important matters at m.moberly@kpstrat.com.

Michael D. Moberly   April 23, 2010

Are there sufficient incentives for management teams and boards to devote time and resources to consistently and aggressively engage their company’s intangible assets as a prelude to extracting value and converting it into revenue?

We’re well into the 21st century and the role intangible assets’ are playing in companies as value and growth contributors and creators is widely understood at the 5,000 foot elevations in business communities globally.

At those elevations, it’s a well known economic fact and business reality that steadily increasing percentages (65+%) of most companies value, sources of revenue and future wealth creation have literally shifted from tangible (physical) assets to intangible assets, or, as the British sometimes refer to them as the ’invisibles’.

But, why isn’t this reality resonating more and with a broader sense of urgency at all levels of a business enterprise?  And why aren’t more management teams and boards willingly, and yes, even perhaps eagerly, engaging their company’s intangible assets and devising strategies to maximize, exploit, and otherwise seek ways to extract as much value as possible from un-under-utilized assets.

I, like other voices advocating greater recognition and utilization of intangible assets, meet with very astute, intelligent, and extraordinarily talented and successful business leaders who are apt to use sophisticated techniques and/or technologies to, for instance, schedule employee work schedules to reduce overtime pay, but, mention the words intangibles or intangible assets and their eyes are likely to glaze over and their minds wander.

Intangible assets, are, in most instances, the ‘low hanging fruit’ and the ‘in your face’ sources (facilitators, enablers, creators, and contributors) of value and revenue for companies, but, in many instances, they’re overlooked, neglected, or sometimes, literally dismissed. 

In part, the lack of management team and board enthusiasm for intangible assets may be attributed to:

1. Accountants who may or may not fully grasp the contributory significance of intangibles (and reporting - accounting for same) and therefore are reluctant to introduce or explain the relevance of intangibles to their clients.

2. Faux strategic planning, e.g., near term - quarterly focused perspectives that exclude interest in longer term (strategic) planning, particularly regarding the development, utilization, and exploitation of non-physical and intangible assets which are not typically reported on company balance sheets and whose performance is often perceived as being difficult to objectively measure with precision.

3. A tendency to characterize intangible assets as being synonymous with intellectual property (IP), when, in reality, IP is actually a subset (category) of intangible asset.

4. A self-deprecating assumption by some management teams and boards that their company does not produce or possess any significant or valuable intangible assets worthy of their time to identify and assess.

5. The mere lack of physicality of intangible assets, i.e., their non-physical nature which can’t necessarily be seen or touched in the same vein as conventional tangible (physical) assets such as equipment, inventory, property, vehicles, etc.

6. The seldom portrayed or poorly articulated ’value proposition’ (pathways, strategies) for extracting value from intangible assets.

7. And, consultants’ who, for their own reasons, may be inclined to characterize any one, or all of the above as being far more complicated, time consuming, and costly to execute than necessary, and I hasten to add, is the reality.

In response, I say to those hesitant management teams and boards; positioning and aligning intangible assets to extract value involves several intellectual/conceptual processes, or steps, that are indeed worthy of your time and attention, starting with…

1. Acquiring a genuine curiosity about identifying the intangible assets a company produces and/or has acquired.

2. Recognizing that intangible assets exist in many different formats and contexts, in other words, not solely as goodwill.

3. Learning how to identify centers, clusters, and origins of beneficial and contributory intangibles within a company. 

Unfortunately, in far too many instances, management teams and boards initially learn about the existance and/or value of their firm’s intangible assets under distressed circumstances, i.e., the assets have been lost, stolen, undermined, etc., in which case it may be too late for a company to fully (economically) benefit from those assets.  That’s because, often times, intangible assets are perishable and transferrble and once compromised, recovery and/or retrieval can be costly, time consuming, and seldom whole.

Interestingly, in 2004, Deloitte teamed with the Economist Intelligence Unit to conduct a survey titled; ‘In the dark: What boards and executives don’t know about the health of their businesses’.  The survey produced the following three key findings related to the importance of boards and senior managers to track non-financial aspects of company performance, i.e., intangible assets:

1. Factors driving boards and senior managers to monitor key non-financial performance indicators are:

    a. increasing global competition

    b. growing customer influences

    c. greater awareness of risks to company reputation, and

    d. accelerating product innovation

2.  Despite the growing need to monitor non-financial vital signs of their businesses, most boards and senior managers are struggling to do so.

3.  The biggest obstacles to enabling boards and senior management to track non-financial vital signs of their business are:

    a. lack of sophisticated measures, and

    b. doubts that they truly matter.

This Deloitte survey also found that an overwhelming majority of respondents (ranging from 90+% to 78%) described ‘critical and important drivers to (their company’s) success’ as (a.) customer satisfaction, (b.) service quality, (c.) efficiency and effectivness of business processes, (d.) brand strength, (e.) innovation, and (f.) quality of relationships with external stakeholders.  Please note that each of the aforementioned are routinely classified as intangible assets!

Understanding and taking affirmative steps to identify, maximize, exploit, and extract as much value as possible from a company’s intangible assets is not rocket science, it’s just prudent business practice today!

Michael D. Moberly April 19, 2010

Intangible assets evolving from small and mid-sized companies (SME’s) tend to be knowledge-based and serve as market/competitive differentiators, that is, if management/leadership teams and boards recognize and utilize them as such.

Intangible assets seldom contribute as ’stand alones’ in companies.  Instead they more likely serve to support, facilitate, and enable other assets’ contributory value embedded in a companies products, services, and/or capabilities.  In other words, they frequently exist in clusters and/or collections (of assets) which together, favorably influence a firms’ overall reputation.

But, the development, accumulation, and effective utilization of intangibles in SME’s are reflective of the entrepreneurial and forward looking/thinking orientation of a management team and/or board.  To say then, that it’s essential, if not critical today, that SME management teams and boards recognize and effectively utilize the intangible assets being produced in their company is certainly not an over-statement!

Personally, I advocate a three step process or practice to producing and utilizing intangible assets:

1. Intangibles should be thoughtfully produced and objectively monitored, rather than merely permitted - hoped to evolve over a period of time.

2. Proper and effective integration of intangible assets in the appropriate (company) processes, products, and services, so they can not only enhance (company) value, but also contribute to potentially new sources of revenue, is a key.

3. Perhaps equally important, intangible assets should be developed in ways so they can, if feasible, serve as hindrances, inconveniences, and/or barriers to (market) entry by competitors.

The latter can be achieved by purposefully designing those intangibles’ that can deliver value, revenue, and competitive advantages to include certain degrees of (proprietary) complexity and obscurity that create certain challenges and/or hurdles that will require competitors’ significant time, expense, and resources to try to replicate or imitate.

In addition, its essential for SME management/leadership teams and boards to recognize that, as their company matures, its likely there will be a commensurate increase in experience, expertise, and knowledge  that will enable/facilitate the development and integration of additional sets of intangibles that mirror an SME’s stage and/or life cycle, for example, (1.) a start-up with little or no customer capital/relationships as yet, (2.) established SME’s which have already developed customer bases and reputations, but have few, if any other intangible assets, and (3.) established SME’s built exclusively around one or two specific intangibles, or (4.) SME’s that have established multiple (clusters of) intangibles.

(This post was inspired by a 2006 research report titled ‘SME Intangible Assets’ produced by the (Association of Chartered Certified Accountants with Chris Martin and Julie Hartley serving as principle investigators.)

Michael D. Moberly   April 6, 2010

Unfortunately, there remain a significant percentage of management/leadership teams and boards whose perspective of intangible assets is, in my judgment, far too narrow. 

My experience suggests, after having engaged literally hundreds of executives and management/leadership teams of all stripes, its clear many retain the outdated, if not obsolete, perspective that intangible assets exist primarily, if not soley, in the context of goodwill. 

Yet ironically, when engaged about their company’s intangible assets, its routinely expressed in asset valuation and monetization contexts, without it seems, a comprehensive recognition and appreciation for the range of intangible assets that most companies, including theirs, have probably (already) developed, acquired, and are effectively using, but remain unnoticed and largely under their ‘mba oriented radar’.  

Straight forwardly, I believe such a perspective represents a clear example of ’the cart being ahead of the horse’.  The more prudent and strategic approach I believe, and one which I find especially useful is to first engage management/leadership teams and boards in quick and above all, relevant exercises to broaden their perspective and understanding about intangible assets, well beyond the narrow goodwill only context. 

In my judgment, a management team and board can articulate, design, and explore viable and company specific strategies to monetize and further profit from their intangible assets if they first genuinely understand (a.) what intangible assets, (b.) how to identify and assess intangible assets that exist within their company, and (c.) the assets contributions to company value, revenue, sustainability, and future wealth creation.

Once this occurs, attention should rightfully turn to exploring options and strategies to more effective leveraging, exploiting, and monetizing a company’s intangible assets!

Michael D. Moberly   January 8, 2010

It’s surely a fiduciary responsibility of the new decade.  But, there is no (proverbial) silver bullet, nor a one size fits all approach (template) for companies and management teams to commence unlocking and putting to use the value of their intangible assets.  A prudent starting point though is to accept the economic fact that (65+%) of the origins, sources, and contributions to most company’s value, revenue, and future wealth creation have changed from tangible (physical) assets to intangible assets.  In the global knowledge-based economies, that’s a business reality thats deeply embedded and irreversible. 

Today, a necessary requisite to company sustainability and success lies in management team’s ability and determination to not merely recognize, but mobilize those frequently and long overlooked resources which are of course, intangible assets.  Unfortunately, experience notes, intangibles are routinely (a.) taken for granted, (b.) inadvertently allowed to become stagnant or concealed, and (c.) in many instances, dismissed, neglected, and overlooked as potential and viable sources of value and revenue to companies.

However, as Weston Anson consistently states, as does the Cass Business School (UK) consistently emphasize in their research, the value of intangible assets depends upon - is related to how its used, in other words, the context.  This means, instead, each company management team must:

1. devote time to (finding) identifying and unraveling individual assets and/or clusters and chains of intangible assets…

2. assess each assets’ status, stability, fragility, and contributory value to the company relative to revenue, forward looking ‘building blocks’ for additional/future wealth creation, competitive advantage, and (company) sustainability.

In the near term, as is so often the case, progress in the ‘intangible asset arena’ is largely dependant on the forward thinking proclivity of management teams to become learned advocates (of intangibles) and recognize it as an effective tool-strategy to stimulate change, innovation, and improvements in their company’s by engaging and utilizing intangible assets.  Doing so today, is neither a ‘crap shoot’ nor overly fraught with risk, rather its merely being a prudent and intelligent manager who acknowledges and embraces the fiduciary responsibilities that underpin business success in this new decade!

Michael D. Moberly   December 24, 2009

The ‘resource based view’ (RBV) is an economic tool (perspective) to be used by management teams to determine their company’s strategic resources.  The principles of RBV, or, as it’s sometimes also referred to as the ‘resource dependance view’, state that a company’s resources include its (a.) assets, (b.) skills, (c.) intellectual/human capital, know how, (d.) capabilities, and (e.) processes, which collectively serve as foundations to enable companies to conceive, design, and implement specific strategies to improve (elevate) their efficiency and effectiveness.

An underlying principle of the RBV, is that a company’s resources evolve from - lie in the manner in which intangible assets held by - available to the company are identified, unraveled, assessed, bundled, positioned, and ultimately applied as constituting the key criteria for determining their strategic and contributory value, i.e., the assets-resources…

1. add financial value to a company by serving as real building blocks to pursue - achieve future wealth and company sustainability…

2. are integral to a company’s ability to purse (design, execute) efficient ‘value-creating strategies’ to (a.) outperform competitors, and (b.) identify and reduce (mitigate) its own (competitive, strategic) weaknesses.

3. serve as sources/means to differentiate a company, i.e., create distinctiveness and competitiveness…

4. are rare and possess a relatively immobile status, that is, they’re not easily transferrable, disseminated, or (illegally) acquired by others…

5.  are such that few, if any competitor’s possess, or have the capability to duplicate (imitate, replicate) them with sufficient precision and/or quality to achieve (product/service) comparability and competitive advantages in the eyes of consumers, etc., without considerable effort, time, and expense…

(Synthesized by Mr. Moberly from the work of Sylvia J. Flatt and Stanley J. Kowalzyk)