Archive for 'Fiduciary Responsibility'
Michael D. Moberly April 30, 2013 ‘A blog where attention span matters’.
Fiduciary responsibilities include circumstances in which one individual has placed substantial trust and confidence in another to manage and safeguard money and/or property, either tangible and intangible, I might add.
A fiduciary relationship is also one in which an individual has an obligation to act for another’s benefit, be they stakeholders or stockholders, etc., in which expectations of faith and confidence are presumed. In its most basic form, a fiduciary relationship extends to numerous instances in which one party, i.e., the beneficiary, places confidence in the another, i.e., the fiduciary, and such confidence is accepted.
A fiduciary responsibility though, generally establishes only when such ‘faith and confidence’ extended by one party, is actually accepted by the other party. And, on somewhat of a cautionary note however, mere respect for another individual’s judgment or general trust one may have in an individuals’ character are generally deemed insufficient for creating – establishing a defensible fiduciary relationship.
Insofar as the duties – responsibilities associated with a fiduciary relationship, they include loyalty and reasonable care of the assets (again, tangible as well as intangible) entrusted to the fiduciary’s care, which I refer in the instance of intangible assets, (a.) stewardship, (b.) oversight, and (c.) management. Too, each of these fiduciary’s actions (responsibilities) are expected to be performed for the advantage and benefit of the beneficiary thereby creating (a.) dependence by the beneficiary, and (b.) influence by the fiduciary.
Anytime when fiduciary responsibilities regarding intangible assets are examined, two aspects must be fully considered, (1.) it is an economic fact – business reality that 80+% of most company’s value, sources of revenue, globally lie in – directly evolve from intangible assets, and (2.) Stone v. Ritter (2006), a Delaware court, in a very substantive way, drew attention to board – director oversight (management, stewardship) of compliance programs and company assets. In part, the court’s decision read…
’…ensuring the board is kept apprised of and receives accurate information in a timely manner that’s sufficient to allow it and senior management to reach informed judgments about the company’s business performance and compliance with the laws…’
Rebecca Walker describes this decision in her paper ’Board Oversight of a Compliance Program: The Implications of Stone v. Ritter’, this particular decision as numerous experts assert, will come to be viewed (applied) less for its focus on board oversight of compliance programs per se, and more for bringing clarity to what actually constitutes ‘board oversight’ of a company’s assets, and by extension, its intangible assets.
Again, the quite clear message conveyed by Stone v. Ritter came at a time when increasing percentages of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability and innovation were evolving directly from intangible assets. So, any declaration, judicial or otherwise, that this increasingly valuable asset class, i.e., intangible assets, now has fiduciary responsibilities attached at the board and senior management levels is indeed significant and worthy of our notice.
I respectfully add however, that the insights and strategies described here extend well beyond the minimums articulated in the Stone v. Ritter court decision. Accommodating the spirit and intent (impact) of Stone v Ritter to the intangible asset side of any business, is certainly achievable, especially when senior management teams, including security and risk management executives, accounting, and legal counsel are engaged in amiable collaboration.
A critical key of course is that boards and senior management are well prepared to (a.) recognize what information (about intangible assets) they need, and (b.) demand the relevant and objective information regarding intangible asset asset performance (indicators) and other equally important quantifiers as the basis for identifying and objectively assessing…
- intangible assets’ stability, defensibility, and contributory value.
- the various transaction contexts in which intangibles will be in play and/or elements to a transaction
- strategies to prevent, counter, and/or mitigate risks and vulnerabilities to the assets that extend well beyond conventional snap-shots-in-time audits or mediocre checklists to include a range of adverse events, acts, and/or circumstances that will, when materialized, impair, erode, and/or undermine the assets’ contributory value, and competitive (market space) advantages.
- techniques for structuring business transactions to sustain/preserve the desired levels of control, use, ownership, and value of the (intangible) assets in both pre and post transaction contexts.
- how to achieve greater efficiencies and profitability when (intangible) asset stewardship, oversight and management are aligned with a company’s core mission, strategic planning, financial management, and the value – functionality cycle of the assets.
Absent consistent efforts to ensure each of the above occurs, boards and senior management will fall short of the fiduciary responsibilities articulated in Stone v Ritter, i.e., to know what’s going on inside their company!
Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community. Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk. As such, my blog posts are not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources.
Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction. I always welcome your inquiry at 314-440-3593 or email@example.com
Michael D. Moberly March 20, 2013 ‘A blog where attention span matters’!
A prudent and routine requisite to new business initiatives is that a ‘compelling business case’ accompany all such proposals. The term ‘business case’ generally speaking, should be normative in content and context, e.g., incorporate projections of (a.) return-on-investment, (b.) margins, (c.) marketing, (d.) pricing, and (e.) sustainability, etc., not necessarily in that order.
With respect to the still relatively new practice of safeguarding intangible assets, a key starting point for management teams, c-suites, and boards is recognition – acceptance of the economic fact that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability, and profitability lie in – evolve directly from the intangible assets a company produces, acquires, and possesses.
Below represents my views – perspectives of key components/elements for building a compelling business case for putting in place effective practices to safeguard a company’s intangible assets!
For starters, let our attention be drawn to the business realities associated with we live, work, and conduct business (transactions) in (a.) an increasingly aggressive, competitive, and predatorial (global business) environment, and (b.) a global (business) economy exists, largely driven by knowledge, knowhow, and other intangible assets such as intellectual property, brand, and reputation. That’s undisputed.
In this regard, a compelling business case for safeguarding intangible assets should, at minimum…
A. A demonstration of ways to quantify ‘return on security/safeguard investment’, i.e.,
- how to effectively articulate intangible asset safeguard (IAS) services to decision makers in ways that they (1.) readily understand, (2.) are more receptive to, and (3.) build credibility with IAS practitioners
- elevate decision maker receptivity to a business case, by positioning IAS practitioners as business professionals first, and IAS practitioners, strategists, analysts, researchers, and educators second…
B. Demonstrate (articulate) precisely what the organization/company can expect to receive, i.e., benefits, by describing how and when stages in which ‘net present value’ will be realized for the organization, i.e.,
- decrease asset fragility
- elevate asset stability
- elevate (as multiplier effects) organization integrity and customer/client confidence
C. Avoid focusing on conventional risks and threats contexts or formats, i.e., identify, assess, mitigate using the conventional ‘FUD’ approach, i.e., highlighting fear, uncertainty, and doubt. Rather, the business case should demonstrate:
- how it fills an existing process-procedural void
- how it enhances – strengthens an existing process-procedure
- that it’s not merely a duplication or new twist to an existing service or procedure
D. Reflect (incorporate) an organizations’ culture and operating characteristics in terms of key factors – drivers of decision makers’ receptivity to new (additional) initiatives.
E. Demonstrate how IAS’s can effectively influence conventional perspectives of business risk taking by preventing – mitigating losses and/or depreciation in the assets’ contributory value or as sources of revenue, and that intangibles and competitive advantages should no longer be:
- accepted as ‘just another risk of doing business’ which organizations may knowingly or inadvertently assume as preludes to developing new markets or products.
- characterized as probabilities, rather as inevitabilities if effective IAS’s, risk assessments, and due diligence has not preceded every transaction…
F. Know precisely, in ‘return on security investment’ terms:
- what should-must be measured
- how it is to be measured
- when it can be measured (especially relative to the life-value cycles of the assets that are the subject of the risk assessment – due diligence…
G. Avoid portraying IAS’s as merely a snapshot-in-time process. IAS’s should be flexible and self adjusting as circumstances warrant, i.e., as asset value – functionality – risk cycles change or fluctuate.
H. Consider including intangible asset reporting (risk, accounting, materiality breach) mandates in Sarbanes-Oxley and FASB (141, 142) should be integrated into IAP business cases by demonstrating how IAP services can be aligned with those mandates to achieve – bring additional efficiencies and effectiveness, i.e.,
- Merely developing (quantitative) risk equations may add little, if any value unless-until those equations are and/or can be linked (tied) to the organizations’ strategic planning and regulatory mandates it must abide by, i.e., SOX, FASB, etc.
- Identifying – describing ‘particular indicators (practices, activities, etc.) known to elevate an organizations’ vulnerability – probability that their IP, intangible assets, and/or proprietary competitive advantages may be challenged or contested
I. Draw attention to our professional role as intangible asset strategists to not to impede or necessarily stop a transaction, rather to:
- facilitate and enable more secure, sustainable, and lucrative transactions
- elevate the probability that when a deal and/or exit strategy is being planned and executed the value of an organizations’ intangible assets, proprietary competitive advantages, and IP will remain stable and intact.
Each blog post is researched and written by me with the genuine intent they serve as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community. Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk. As such, my blog posts are not intended to be quick bites of information piggy-backed to other sources, or unsubstantiated commentary. Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of any of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction. I always welcome your inquiry at 314-440-3593 or firstname.lastname@example.org
Michael D. Moberly December 13, 2012
The assurance of privacy for social networking apps is a valuable, competitive advantage driving intangible asset that should be integrated before launch and certainly not dismissed or squandered!
As an admitted intangible asset advocate and strategist, personal privacy, and, I mean real and consistent personal privacy, not just the sort conjured in legal ease as a ‘check the box’ prelude to joining a social networking platform, is an incalculably valuable intangible asset that unfortunately, some ‘app’ developers appear to be squandering and/or ‘turning a blind eye’ in an effort to achieve near term revenue streams.
What’s’ really being squandered when such technological indiscretions occur are consumer presumptive trust, the company’s reputation, and its relationship capital. Each is an intangible asset, and each has significant value, but, when those assets experience erosion and/or undermining, i.e., user privacy did not appear a primary factor in the apps’ development, substantial reputational, financial, and market space losses can materialize very rapidly.
Here’s just one example, probably among thousands, which I believe goes to the heart of the issue. Parker Higgins highlighted a privacy problem in Electronic Frontier Foundations’ blog (March 8, 2012), i.e., how apps need to respect user privacy rights from the start.
In the post, Higgins’ describes a Texas developed app that facilitates, ‘ambient social networking’. Translated, that means the app runs in the background of one’s phone collecting and sharing location data, etc., and then notifies the user when your friends and/or others with shared interests are in proximity, thus, enhancing serendipitous meetings.
I am certainly not suggesting these types of apps are inherently wrong or necessarily violate the increasingly tenuous and blurred presumptions of privacy app users have some right to expect. After all, one must willingly purchase the app, therefore buyers/consumers presumably understand (are forewarned about) the apps features and its often requisite connection to other social networking sites.
As Higgins quite correctly points out though, it certainly doesn’t require much imagination to foresee how sending a steady stream of data and information of all types to a third party, that may not have a (personal) privacy or data retention policy in place, can, and therefore, as the number of users increase, will inevitably give rise to a host of potentially significant personal privacy issues, particularly when the primary target market for the apps are children.
So, I reiterate, personal privacy, presumed or not, is, in my view, an extremely valuable, yet very fragile form of intangible asset and should be treated as such.
There is no question, if I were a board member or shareholder of an app developing firm, I would make every effort to obligate management (app development) teams to consider ‘personal privacy’ as being integral, if not a fiduciary responsibility to app development and not just ‘play fast and loose’ with app privacy features, and instead incorporate it as a real (business, added value) intangible asset!
The personal privacy issues Higgins and I claim are being dismissively disregarded, bring to the forefront, as they are today, a larger problem in app development, which is, initially building and marketing a ‘minimum viable product’ only to see how it’s received by niche consumers, and then adding personal privacy features later. But, cutting personal privacy corners that are likely to undermine the relationship capital, trust, and reputation that is essential for the app sector’s sustainability is, to be sure, much more than mere shortsightedness. As aptly noted by Marissa Levin (Successful Culture Blog) a lifetime that has become largely ‘app driven’, we also must consider safeguarding the humanity of our companies!
Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of this post, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance. And, I always welcome your inquiry at 314-440-3593.
Michael D. Moberly November 30, 2012
The former Speaker of the U.S. House of Representatives’ Thoms P. (Tip) O’Neill, is noteworthy for many things, one of which was his often espoused perspective that ‘all politics is local’. We understand that ‘homey’ perspective because it’s very much ‘in your face’ during each national election cycle. But, I’m confident Speaker O’Neill would agree that while most U.S. politics remains local, it routinely has coinciding national, regional, and international implications as well.
In many respects, the same holds true for many business transactions today, particularly when intangible assets are in play, because their origins are often global, not just local. Drawing further emphasis to this lies the economic fact that 65+% of most company’s value, sources of revenue and ‘building blocks’ for (company) growth, profitability, and sustainability evolve directly from an array of intangible assets.
So, very much akin to political contests, most business transactions are conducted in increasingly competitive and predatorial contexts, with winner-take-all outcomes, but, never-the-less, bear local, regional, national, and certainly international implications.
One significant difference between business transactions and political contests, is that business transactions carry fiduciary responsibilities relative to the stewardship, oversight, and management of intangibles in pre and post transaction contexts because among other things, there is a contractual and legal relationship formed between the parties. Whereas, the rhetoric politicians espouse during campaigns is broadly understood as being just that, unaccountable and non-binding rhetoric, until the next election cycle.
Credibility, confidence, and efficiencies and be added to the work of transaction management teams when intangible assets are in play as it increases the probability that pertinent details, particularly those related to sustaining control, use, ownership and monitoring the value and materiality of the assets (pre and post transaction) are considered. In other words, intangibles must and should be fully addressed in any transaction and the transaction management teams’ on-going reports to their c-suite and board regarding transaction progress.
Too, it’s important to bring clarity to business transactions by distinguishing intellectual properties and intangible assets. Conventional forms of IP are actually a subset of intangible assets. IP enforcement mechanisms are well known, i.e., patents, trademarks, copyrights, etc., but are not necessarily synonymous with…
- sustaining control, use, ownership, or monitoring value, materiality, and sustainability of intangible assets, or
- the ability to extract value (commercialization) benefits from a transaction.
Because intangible assets are almost inevitably in play in business transactions, transaction management teams are now well advised to:
- Be consistently mindful of the economic fact – business reality that 65+% of a transactions’ value and ultimately the sustainable economic benefits lie in intangible assets…
- Treat the control, use, ownership, and value of the intangible assets that are in play as business decisions and fiduciary responsibilities integral to relevant legal processes…
- Recognize intangible assets are vulnerable – at risk especially pre-post transaction stages, so techniques to mitigate risks – threats and sustain control, use, ownership, and monitor the assets value and materiality is essential…
- Recognize that if certain risks – threats materialize (pre – post transaction) they can:
- undermine competitive advantages and erode projected profitability
- cause time consuming and costly distractions that disrupt transaction momentum
- ensnare-entangle the assets in costly legal challenges and/or disputes.
Thus, business transaction management teams are encouraged to integrate the above guidance, particularly when transactions involved intangible assets, which they inevitably do today; it will enable-facilitate stronger, more secure, profitable, and efficient transactions, not impede them!
Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of this post, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to the circumstance. And, I always welcome your inquiry at 314-440-3593 or email@example.com
Please watch for Mike’s book ‘Intangible Assets: Security Managers Roadmap’ to be published soon!
Michael D. Moberly September 28, 2012
Few words can accurately convey how refreshing and encouraging it is to not just see this language produced in some non-descript corporate memo or employee handbook, but assertively voiced by a newly appointed general counsel of a major media company, i.e.…
“…Yahoo has a one-of-a-kind combination of assets. It is a leading global brand, has cutting-edge advertising platforms, huge scale and audience, a talented work force, and innovative technologies. As the growth of online advertising continues, we are well-positioned to leverage our brand, audience and offerings more effectively than ever before…”
“…it’s never OK to share information in an internal memo, even if the company issues public communications about the same subject, so, also off-limits for sharing are internal presentations and emails, confidential product and business plans, and revenue projections…”
“…we will fire employees who leak company confidential information and we will avail ourselves of all other legal remedies to protect those confidences, and, if you do it, you can go to jail and face a very large fine…”
This language came from Yahoo’s newly appointed general counsel, Ron Bell. There’s little doubt it was prompted, in whole or in part by a series of employee leaks to media regarding…well, it doesn’t really matter all that much to me what was leaked, what matters, is the fact that is was leaked!
So, what speaks to me, in this language, and I presume too many of my information asset protection colleagues as well, is that here is a professional, yes, an attorney, who appears, at least at the outset of his tenure, to clearly understand the potentially devastating and irreversible economic, competitive advantage, and reputation consequences which information asset leaks can impose on a company.
After all, in this knowledge-based global business environment, when 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability lie in – evolve directly from intangible assets, one of course, is information, such admonitions not only make good business sense, they are, in many respects, business requisites! But, before I go further, it is only appropriate for me, in good conscience, to distinguish leaks of the type referenced by Mr. Bell from those that may fall under genuine ‘whistleblower’ circumstances.
Interestingly, Kara Swisher, in her September 24th column at allthingsd.com/, suggested Bell’s earnest tone may be setting an unwinnable goal for Yahoo, or perhaps any company or organization for that matter, which after all, Swisher wrote, “people like to talk and share information, especially at a media company.”
What has, is, and in all likelihood will continue to affect Bell’s sensible and shrewd goal is that companies must consider the reality that in a growing number of instances, information that’s been tagged as proprietary, confidential, sensitive, and/or non-public, can be somewhat of a canard. That is, there is, simply stated, fewer bits and bytes of information, irrespective of safeguards and/or classification that cannot be gleaned rather legally from open sources using extraordinarily sophisticated and nanosecond paced data collection and business-competitive intelligence software. But too, there is a growing assortment of legacy free players, i.e., economic, competitive advantage adversaries globally, who warrant every company’s constant vigilance.
Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of this post, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance. And, I always welcome your inquiry at 314-440-3593 or firstname.lastname@example.org
Michael D. Moberly September 13, 2012
In light of the economic fact that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability globally reside in – evolve directly from intangible assets, it’s important that management teams, c-suites, and boards recognize, in a fiduciary responsibility context, that sustaining a strong, stable, and loyal base of skilled intellectual capital, i.e., employee know how, is an increasingly relevant and necessary requisite to not just achieving, but sustaining success, profitability. Of course, an important contributor to those outcomes is safeguarding those all-important ‘knowledge based (intangible) assets. Making the latter even more essential lie two important realities, (1.) the reality that most all company’s globally are in the midst, perhaps early stages, of a knowledge-intensive economies, and (2.) most company’s workforce are increasingly diverse, mobile, competitive, and global.
Intellectual capital (IC) represents the value employees provide to a company or client by applying their skills, knowhow, expertise, and the unique understanding of how best to use (exploit) their IC to create efficiencies, commercialization opportunities, and/or generate revenue and competitive advantages, in other words, some manner of competitive advantage.
But too, company management team must recognize that IC is a perishable, vulnerable, usually time-sensitive, and transferrable commodity. That is, it can ‘readily walk out the door at will’ or be bought, sold, licensed, transferred, loaned, misappropriated, stolen, etc.
Let’s be clear at the outset though, IC is not synonymous with intellectual property, i.e., patents, trademarks, or copyrights. True, intellectual property is generally composed of intellectual capital. IC however, standing alone, is not eligible for conventional intellectual property protections unless it would be internally designated as a trade secret. Thus, having pre and in-employment personnel security screening practices in place to ensure IC’s proprietary status is preserved becomes all the more important.
Broadly speaking, achieving and sustaining that level of workforce today is often conditioned less on serendipity and more on having in place an effective recruitment, pre- and in-employment (personnel) security screening, and employee on-boarding processes that function in concert, not as standalones.
Once this level of workforce is achieved, it can translate as valuable intangible assets that can be smartly leveraged and exploited to achieve greater organizational resilience, an embedded institutional culture, and numerous (industry sector) competitive advantages which I’m hard pressed to believe any management team, c-suite, board, or investor would not readily endorse.
There’s no disagreement here that effective employee recruitment and on-boarding programs are contributing factors. But, the courage and audacity of management teams, c-suites, and boards to recognize, approve, and execute an effective pre-employment (and in-employment) personnel security screening program should not be overlooked based on ill-conceived, uninformed, risk adverse notions. Similarly, companies that rely exclusively on conventional one-size-fits-all, one time administered ‘paper and pencil’ honesty and integrity tests, while generally better than nothing, are seldom wholly sufficient.
In today’s increasingly global commerce and business transaction environments, pre and in-employment personnel security screening is, to be sure, not redundant to resume, reference, or criminal background checks, nor should it be reserved for only those individuals seeking employment in a classified and/or proprietary arena.
Allow me to draw an analogy to describe how pre and in-employment personnel security screening can produce valuable intangible assets. Physical security products/systems, i.e., intrusion detection, access control, and surveillance, etc., are common to building-environment design and operation. When applied correctly, they can deliver-produce, in my judgment, specific sets of intangible assets. Unfortunately however, seldom do the intangible by-products of tangible (physical) security products get articulated, translated, or leveraged insofar as how they contribute to elevating reputation, adding value to a company, or building-sustaining competitive advantages, etc.
In too few instances, are these intangible ‘feel safe, feel good’ asset attributes articulated as extensions of a company’s fiduciary responsibilities (i.e. Stone v. Ritter) or calculated in return-on-security-investment (ROSI) contexts. The reason, in large part, is because, intangible asset dimensions and/or by-products of most (physical) security products are frequently not well understood and noticeably absent a persuasive and quantified narrative that describes their contributory value.
In today’s increasingly security conscious global business environment, advocates of pre and in-employment personnel security screening programs should be prepared to offer reasoned, well- articulated, and business oriented counter arguments and rationales to the following, e.g.,
- The usually risk adverse legal counsel, who warn that caution should be exercised about public displays regarding the presence or deterrent effects of security systems or programs because either may unduly elevate user expectations. If a system and/or program are incorrectly applied or ineffective, and risks/threat does materialize, it may elevate propensity for greater liability.
- Intangible assets lack a conventional sense of physicality, they’re often obscure to the untrained eye, are challenging to quantify and/or measure performance in ways that translate as contributory value, i.e., delivering competitive advantages, elevating workforce stability, reducing risks-threats, etc.
- The reality that intangible assets are routinely portrayed through structured (codified) accounting-tax lens and too, they’re not required reporting on financial statements or balance sheets other than collectively as goodwill thus are interpreted as being less useful-relevant.
- The classical belief that public announcements about the presence-use of certain physical security systems or procedures undermine their presumed deterrent capabilities and thus compromise the intended (designed) benefits.
Some of the above perspectives are deeply held precepts, often based on anecdotal or one-off experiences, more than broad-based fact. Collectively, this often makes them uniquely challenging to refute, absent a good grounding in intangible assets. Most unfortunately then, the result often is that the intangible (asset) derivatives of physical security products and systems often go un-noticed, un-leveraged, and ultimately dependent on user-consumer imagination to draw their own, albeit subjective ‘feel good, feel safe’ conclusions versus the actual value-added risk mitigation premiums they produce.
The same holds true for pre and in-employment personnel security screening measures and the truly intangible risk mitigation benefits they can produce.
Again, the economic fact that increasingly higher percentages of most company’s value, sources of revenue, sustainability, and foundations for growth and sustainability globally, evolve directly from intangible assets should clearly serve as a strong signal security practitioners would be well served to learn more about intangible assets. But, not merely the by-products produced from deployment of physical systems and products, but since 65+% of most company’s value and sources of revenue lie in (their) intangible assets, how to safeguard them as well!
For a comprehensive list of intangible assets see http://kpstrat.com/blochure.
(This post was inspired by the excellent work of Dr. Nir Kossovsky in reputation risk, Zwi Kremer, Berndt Rif, and Michael Rosin on personnel pre-employment security screening, and Mary Adams on intellectual capital.)
Comments regarding my blog posts are encouraged and respected. While visiting my blog I encourage you to browse other topics (posts) which may be relevant to your circumstance. Either way, I welcome your inquiry at 314-440-3593 or email@example.com
Michael D. Moberly July 30, 2012
As most of us recognize, Jack Welch (former Chairman of General Electric) made numerous contributions to the way companies are managed. One of which was his ability to recognize the core elements of an issue and separating the proverbial fluff.
I think two good examples of this lie in the following statements, both attributed to Welch, i.e.,
- an idea is not necessarily a biotech idea…that’s the wrong view of what an idea is…an idea is an error-free billing system…an idea is taking a process that used to require six days to do and getting it done in one day…we get 6 to 7 percent productivity increases routinely now, mostly because of ideas like that…everyone can contribute…
- an organization’s ability to learn and translate that learning into action rapidly, is the ultimate competitive advantage…
The desire to learn and development and execution of ideas generated from what one has learned of course, can manifest as intangible assets, or more specifically as intellectual and structural capital.
That’s why we recognize the importance of having mechanisms in place whereby ideas can be understood, assessed, and accordingly, rise to the surface in a ‘jack welch’ context. Otherwise, potentially useful, valuable, and competitive advantage driving ideas can go unrecognized, under-valued, or even dismissed, and if there ‘good one’s’ all too often, competitors will exploit as their own. That’s why I commence most engagements by laying the foundation for the parties to achieve a mutual understanding and respect for…
- the economic fact that 65+% of most companies’ value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability evolve directly from numerous categories – types of intangible assets!
By doing so, paves the way for helping company’s identify their intangibles and producers, unravel the assets’ origins, and assess their contributory value and effective alignment with core business objectives and strategic planning. This routine is designed to coincide with a second component, which is, putting in place what I refer to as ‘what fits best works best’ practices and procedures intended to sustain (protect, preserve monitor,) control, use, ownership, and the revenue – value producing elements of the intangible assets or, ideas.
This approach, which I advocate, does not overlook, nor does it under-estimate the reality that business operations and transactions now routinely have global elements and are often conducted under extraordinarily competitive, predatorial, and winner-take-all circumstances. That said, this approach is, more frequently than it should at this point, confronted with an ‘obstacle course’ of hierarchical skepticism and reluctance which generally translates as…
- a reluctance to acknowledge the intangible assets a firm produces and possesses,
- an absence of confidence in ways to better utilize, exploit, and extract value from intangible assets, know how, and competitive advantages, etc.,
- unfounded concerns or misconceptions about the resources, cost, time, and/or processes necessary to elevate intangible assets as routine agenda items in c-suites, boards, and management teams,
- professional embarrassment about having not already done so!
When rising percentages of most company’s value, sources of revenue, and sustainability lie in intangible assets, it just shouldn’t be that difficult to cast such skepticisms and reluctance aside in order to get the message that a firm’s intangible assets absolutely must be on discussion agendas!
Otherwise, if a company’s normally risk taking decision makers remain skeptical or unconvinced about these fiduciary necessities, they should be prepared to lose, forego, or more politely, inadvertently relinquish most, if not all of the prospective value, revenue, competitive advantages, and strategic benefits those assets may (could) have produced.
Michael D. Moberly July 25, 2012
Let me be very clear at the outset. In no way do I, through the language I use in this post, intend to convey any disrespect to the victims and families or otherwise trivialize the recent tragic and senseless shootings that took place at the Aurora, Colorado movie theater.
It would be equally disturbing if this post was misinterpreted as representing an out-of-touch perspective interested only in Warner Brothers reputation and box office economics related to ‘The Dark Knight Rises’.
With that, allow me to explain to the global readership of this blog what influenced me to decide it was important to write this post.
First, while the words risk and threat have become firmly embedded in citizens’ lexicon following September 11, 2001, the Aurora theater tragedy served as one more kick-in-the-gut reality that risks-threats, of the type posed by James Holmes, are not especially difficult to foresee, after-the-fact. In most instances, and Holmes will likely be no exception, an abundance of cautionary warning signs will surely be found. Missing however, from those inevitable pieces of the puzzle though, is the essential ingredient we have come to call, connecting-the-dots. Dot connection after all, is necessary for substantiation and probable cause to act proactively. Correctly and consistently foreseeing the who, what, when, where, and how this or similar tragedies (risks, threats) materialize remains challenging on many levels.
One such level is identifying the presumed mental-emotional triggers (motives) that set in motion inexplicable elements such as Holmes’ site selection, timing, acquisition of weapons and ammunition, and planting explosive devices in his apartment, etc. I must admit, I am not a strong advocate of so-called profilers.
A second factor that influenced me to write this post, very much integral to the first, evolved from a corporate reputation risk seminar which, coincidentally I attended just prior to the Aurora shootings.
There is certainly no shortage of examples in which corporate – institutional reputation risk has manifested itself with disastrous human and economic outcomes. At Penn State, for example, the on-going revelations of child molestation were suppressed for 15+ years, while, in the Virginia Tech, Columbine, Gabby Gifford, and Aurora theater tragedies, everything unfolded in a matter of minutes.
For pundits reporting on the tragedies at Penn State it did not take long to ask the question or perhaps worse, offer an opinion, about whether and/or to what degree that series of tragedies would adversely affect student enrollment, fund raising, town and gown relations, and university economics, etc. And, within 12 to 18 hours following the Aurora theater shootings, pundits were asking whether box office economics of ‘The Dark Knight Rises’ would be adversely affected and/or whether Warner Brothers should withdraw the movie from theaters in deference to the shooting victims and their families. To be sure, Warner Brothers executives were asking the same questions and soliciting opinions from a bevy of reputation risk and public relations specialists nearby. WB has now announced it would make a substantial donation to the shooting victims, presumably from the films’ box office receipts.
As most individuals occupying the c-suites and comprising the boards of companies understand; a company’s reputation, while it can be an extremely valuable intangible asset, it can also being a very fragile asset, vulnerable to an almost infinite number of risks and threats.
It used to take years of consistent mismanagement to destroy a company. Today, a company’s downward spiral, leading to an ultimate and premature demise can occur almost overnight. But, it’s not just due to a broader range globally persistent and asymmetric risks, threats, and hazards that can impair a company’s reputation. Rather, a company’s reputation demise is often linked to the speed which unchecked, dismissed, or overlooked reputational risks can materialize, escalate, and cascade throughout an enterprise and particularly to its stakeholders! (Adapted by Michael D. Moberly from remarks of Sir John Bond, Chairman of UK based HSBC)
Following the Aurora event, I’m quite confident that, in WB’s c-suites, someone posed the question whether the film should be pulled out of theaters altogether, not solely as a respectful gesture to the shooting victims and their families, but as part of a process to mitigate potential hemorrhaging of its reputation. While I have no firsthand knowledge of such questions or conversations, I can apply Bob Woodward’s award winning narrative nonfiction style to suggest, with a high degree of confidence that such conversations did occur!
As minimal evidence of this, wisely, WB did pull trailers of its upcoming ‘Gangster Squad’ and it’s reported they opted to literally cut a ‘violent movie theater shooting’ scene from that film. In my book, that’s a fairly clear example of reputation risk management at work!
I have frequently heard my colleagues say that once a company’s reputation has compromised through unforeseen events in which they are ill or unprepared to sensitively address or the company has not ‘banked’ a substantial amount of goodwill with its stakeholders in advance, reputation damage may well be inevitable. Recouping lost economics, competitive advantages, and consumer loyalty will be a long, costly, and time consuming endeavor.
In the end, it appears WB’s respectful silence immediately following the Aurora shootings, may well have, in this instance anyway, served as an important contributor to mitigating reputation risk to itself, and to one of its products, i.e., the film, ‘The Dark Knight Rises’!
When innocent people die or are harmed in an incident such as Aurora, Columbine, Gabby Gifford, Penn State, or Virginia Tech, it is the epitome of corporate, institutional, and/or government insensitivity to suggest there is ever any good that follows. In this instance however, it may well open eyes, minds, and doors to re-examining and re-calculating reputational risk by incorporating the variables noted here and not just to reduce the probability for its re-occurrence, but truly understand consumer reaction and resiliency, and the reputation of the victims!
Michael D. Moberly June 11, 2012
These are serious financial times that demand equally serious strategies to elevate a company’s probability of survivability and sustainability (post recession). Sometimes those strategies are new, or one’s that have been around for awhile but have been dismissed, overlooked, or subordinated like, for instance, more effective utilization and exploitation of intangible assets.
Few respected economists or business persons would disagree with the reality that, at least in their lifetime, there has been no other period in company governance (managerial, financial) history when intangible assets are more integral to a company’s value and revenue generating capability.
My initial intent here is to draw attention to the business reality that a company’s intangibles comprise, what I refer to as ‘in your face’ assets. They manifest in various forms, e.g., intellectual property, intellectual, relationship, and structural capital, reputation, goodwill, etc. What’s important though, is that intangibles, effectively used and exploited will genuinely aid companies to ‘weather’, what’s now projected to be, a recessionary period that may extend well into 2013 should Congress not develop and pass effective and strategic legislation to avoid the ‘financial cliff’ that is most certainly looming.
For the still ‘bricks and mortar’ (tangible asset) thinkers it’s all-to-easy, unfortunately, to maintain a subordinate and/or dismissive attitude toward intangibles insofar as whether they can actually serve as viable and strategic ‘building blocks’ to surviving this economic downturn. In large part, that’s because intangibles…
- don’t appear on balance sheets or financial statements unless they’ve been acquired or formatted only as goodwill.
- lack physicality which some still find challenging therefore, to measure their performance and/or value with replicable precision,.
- require a departure from conventional ‘mba’ (tangible asset oriented) precepts.
It’s difficult though to totally dismiss or ignore the economic fact that 65+% of most company’s value, sources of revenue, and foundations for growth evolve directly from intangible assets.
My second intent here is to respectfully signal to c-suite, boards, and management teams, regardless of industry or sector, that identifying, positioning, and exploiting intangible assets now, is not only a necessary and relevant exercise, it’s a fiduciary responsibility that can contribute to literally thousands of small, medium enterprises (SME’s) and small, medium multi-nationals (SMM’s) better weather this financial crisis.
There are, of course, important fundamentals with respect to intangible assets, that every business decision maker should acquire familiarity relative to their company, i.e.,
- what intangible assets does my company produce, possess, and own, and what forms do they take…?
- how does my company unravel and assess (internally, externally) its intangible assets…?
- how can my company determine whether its intangible assets actually deliver – contribute to company value and sources of revenue…?
- what best practices are available for the stewardship, oversight, and management of intangible assets…?
- once my company’s revenue and competitive advantage producing intangible asset have been identified, how can their control, use, ownership, and value be sustained…?
- what strategies should my company consider relative to positioning, leveraging, and extracting as much value and competitive advantages as possible from its intangible assets…?
Let’s be realistic though, better utilization – exploitation of a company’s intangible assets standing alone, probably won’t constitute the silver bullet necessary to completely survive the recession unscathed. But, devoting even minimal time to acquire an operational familiarity with intangible assets, by reading this blog, among many other fine sources, can certainly elevate decision maker’s receptivity to considering and understanding intangible assets as being effective pathways to…
- experience measured growth despite the recession.
- sustain and build stronger competitive advantages.
- advance a company’s intellectual, structural, and relationship capital, and
- identifying new opportunities to build and/or strengthen strategic (business) alliances.
Michael D. Moberly June 6, 2012
On numerous occasions I have been present when management team members of SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) express dismissiveness and/or trivialize the relevance – applicability of the…
- phrase ‘knowledge-based global economy’, and
- economic fact that 65+% of most companies’ value, sources of revenue, and ‘building blocks’ for growth and sustainability evolve directly from a company’s intangible assets.
While it is certainly not my intent to characterize all SME and SMM management teams with the same broad negative brush, I never have to look very hard to find management team members who remain stagnant in their views, particular about utilizing – exploiting their intangible assets, and therefore prone to characterizing either statement above as being (a.) more cliché than reality, or (b.) more relevant to Fortune 1000’s than SME’s and SMM’s, which, in somewhat of a self-deprecating manner, assume large firms are superior because they have an endless supply of intellectual capital, innovation, and resources sufficient to build valuable and sustainable portfolios of intangible assets.
Of course, I don’t know how you as a reader of this blog may perceive the above, but I advocate this reality; unless and until management teams, c-suites, and boards:
- actually engage (i.e., identify, unravel, nurture, position, and assess) their company’s intangible assets on a regular basis, and
- recognize that consistent management, stewardship, and oversight of thoseassets are necessary preludes to
- exploit, leverage, and extract value from the assets, and
- sustain control, use, ownership, and monitor their value and materiality.
…such misperceptions will, in all likelihood, persist for the foreseeable future!
As Dr. Kenan Jarboe, Executive Director of Athena Alliance says, (a Washington, D.C.-based ‘intangible asset’ think tank) intangible assets are ‘veritable goldmines of un-acknowledged and un-utilized assets’. As long as they remain in those states, the result will inevitably be substantial and unrealized (asset) value being left on countless negotiating tables un-mentioned and untouched, yet increasingly vulnerable to economic and competitive advantage adversaries globally to capture and exploit for themselves.
Because my preference, by choice, is to focus on the SME and SMM community which consists of some 20+ million firms in the U.S. alone, I respectfully acknowledge that a significant percentage of those management teams and c-suites sense they have numerous other challenges and distractions which pre-empt having the energy, time, reflective inquisitiveness, and ultimately, inclination to act on their company’s intangible assets and try to turn them into producers of revenue, competitive advantage, and ‘building blocks’ for growth and expansion.
Equally respectfully, SME and SMM management teams are, generally speaking, realists! That is, they recognize that before embarking on a ‘new’ initiative, i.e., the management, stewardship, and oversight of intangible assets, three things, at minimum, must be in place (up front) before they may become receptive to devoting the necessary time and resources…
1. incentives, i.e., specific tax advantages and direct (immediate) financial inducements, etc., and/or
2. mandates by regulatory agencies (every company has doing it), and
3. relevant training, i.e. achieving a practical and operational familiarity with intangibles that allows management teams to rapidly commence identifying, unraveling, assessing, positioning, and exploiting their intangible assets.
With respect to #1 and #2 above, Dr. Jarboe (Athena Alliance) has written extensively on these subjects and they require (federal, state) legislative action. On the other hand, #3 is essentially independent. That is to say, forward looking – forward thinking management teams should feel obliged, if not compelled as a fiduciary responsibility emanating from their boards, stakeholders, customers, and/or clients, etc., to proceed now toward achieving the necessary level of operational familiarity that would enable them to engage their companies’ intangibles effectively, efficiently, and at will to extract as much value as possible!
While visiting my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) . Should you find particular topics of interest or relevant to your circumstance, I would welcome your inquiry or comment at 314-440-3593 or firstname.lastname@example.org