Business IP and Intangible Asset Blog, Michael D. Moberly

Intangible Assets: Untested – Impractical Theoretical Concepts…Not!

Michael — Mon, 10 Jun 2013 12:40:21 +0000

Michael D. Moberly June 10, 2013 ‘A blog where attention span matters’!

I routinely have the opportunity to talk with a cross-section of business leaders and entrepreneurs about my favorite topic; intangible assets. One particularly stimulating conversation occurred with a very astute colleague and yes, it was about intangible assets.

My colleague certainly intended no disrespect to me or other intangible asset advocates and strategists by suggesting, that the development, use, and exploitation of intangible assets remains largely theoretical. Without elaboration, I presumed she meant intangibles in general, lacked sufficient practical, business (bottom line) relevance to move outside the theoretical realm, a position which I obviously disagree!

Having taught in higher ed for 25+ years, I can say, without hesitation, that a significant percentage of the time when I uttered the word theory in a classroom or at a professional association presentation, the initial reaction among students as it often is with even the most astute business persons, is fairly consistent and tends to occur in the following order, (1.) a muffled, but audible sigh, followed by (2.) a glazing of the eyes, as if to say, we’re going to take a nap now while this guy (me) tries to explain a theory which we’re already inclined to presume has little, if any, relevance to the ‘real business world’.

As a reaction to the consistency of such scenes, I adapted my classroom and now business presentations to characterize
‘theories’ somewhat differently, by pointing out that theories, be they about intangibles or other issues are merely thoughtful and generally well researched attempts to explain particular activities, behaviors, or phenomena. This approach has worked better and one I still apply today as a more seasoned intangible asset trainer and strategist.

Unfortunately however, there remain some audiences who are inclined to rudely characterize theories as merely constituting an academics’ guess, hunch, untested opinion, or supposition which is certainly not applicable to intangible assets.

Still it’s frustrating to hear otherwise intelligent, experienced, savvy, and successful business persons be dismissive or worse, reject well established and globally recognized economic facts about intangible assets by characterizing them as unsubstantiated (theories) that will not hold up to the scrutiny, rigors, and stresses of today’s aggressive and competitive business (transaction) environment.

In my business realities, a theory is an expression of a concept or idea that is testable, replicable, and is based upon well-grounded hypotheses. And, in the world of business management, economics, and organizational behavior intangible assets have become an undeniable economic fact and global business reality wherein 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, stability, sustainability, and profitability lie in – evolve directly from intangible assets!

In my judgment, what prompted Brookings Institution, Athena Alliance, IC Knowledge Center, the Intangible Asset Finance Society and other prominent ‘think tanks’ and professional associations over the years to engage intangibles was by delineating and demonstrating…

their
conspicuous role in most all business transactions…
the need for effective stewardship, oversight, management, exploitation, and monetization of the assets…and
the forward looking role for intangible assets in routine business contexts/transactions…
the unrelenting reality that conventional financial statements and balance sheets no longer convey an adequate, nor complete picture of a company’s entire (real) financial health absent fully addressing the role and contributory value of intangible assets.

The inclusion of a company’s intangible assets in valuation and management is, to be sure, a more comprehensive, and Im might add, correct approach to accurately describing a company’s value, its sources of revenue, its future wealth creation potential, its sustainability, profitability, and overall stability. Thus, to respectfully appeal to the various business persons who remain reluctant and/or skeptical insofar as applying intangible assets to their business and/or circumstances, what follows are real definitions, categories, and examples of intangible assets!

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction. I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

Intellectual Capital Calculating Infringement Damages?

Michael — Sat, 11 May 2013 14:30:47 +0000

Michael D. Moberly May 11, 2013 ‘A blog where attention span matters’.

Here is a hypothetical which represents one of multiple issues in the global arena of intangible assets that I find pose persistently troubling aspects which I have yet to find definitive answers.

Let’s say for example, Company A produced, possesses, and utilizes, what I term ‘proprietary intellectual capital’ (know how) or ‘PIC’ for short. When I arrive at Company A, as an intangible asset strategist, to conduct training and assessment of their intangibles, it’s apparent management team are respectfully lacking in achieving operational familiarity with intangible assets, i.e., identifying, unraveling, assessing, utilizing, exploiting, etc.

Again, this is a hypothetical, but one which, I would venture to say most every intangible asset strategist and practitioner has or will likely experience. In this instance a management teams’ failure to recognize PIC as possessing and contributing identifiably specific value, efficiencies, or competitive advantages to their company.

I should say in this management teams’ defense however, this overall circumstance is not uncommon, in that many firms have, deeply embedded, in their routine operations and processes, a myriad of intellectual, structural, and relationship capital which frequently, due to its longevity and endurance is, for lack of a better explanation, taken for granted and remains unacknowledged as a distinguishable (intangible) asset that may deliver contributory value, competitive advantages, or efficiencies, etc., anyone of which could be exploited beyond their current use (status).

An additional (obvious at this point) exacerbating factor to this hypothetical is that the company management team has no perspective for the importance or necessity to preserve (safeguard) the contributory value and competitive advantages particular PIC is delivering and which the company has grown dependant.

So, one dilemma is, should or can PIC’s as portrayed here, be properly and defensibly cast, in an ex post facto manner, as trade secrets? Admittedly, that’s very doubtful. Or, could the PIC meet, again in an ex post facto manner, the six requisites of trade secrecy when in fact, the proprietary intellectual capital has neither been recognized nor treated in a manner consistent with the requisites of trade secrecy, nor are any procedures in place to safeguard – preserve control, use, ownership, and monitor value, materiality and risks associated with infringement, theft, and/or compromise of this PIC?

A second, and equally important dilemma in my view is that if, not when, this particular PIC is stolen, copied, or otherwise compromised, absent having any specific safeguards in place, does Company A have any recourse at all, in terms of damages, assuming of course, the firm becomes aware, in a timely fashion that such adverse acts have occurred?

As articulated by Scott Hampton of Hampton IP and Economics, Title 35, Section 284 of the United States Code, often referred to as the ‘patent statute’, states that patent infringement damages should be in an amount adequate to compensate the patent holder for the defendant’s infringement of the patent-at-issue. But, in this hypothetical, Company A, the developer and user of this PIC has neither filed or been issued a patent, so that remedy strategy seems, at best, irrelevant.

When litigation is evident to try to settle infringement, theft, misappropriation, and/or asset compromise claims, plaintiffs will routinely make a determination, usually early in the pre-litigation process, whether to seek lost profit damages, or limit remedies to only a reasonable royalty, again it’s certainly questionable whether either applies in this hypothetical.

Let’s recall now that today, globally speaking, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets of which conventional intellectual properties are one. But, a significant percentage of companies purposefully or otherwise, opt out of the conventional IP path.

Hopefully, this brings clarity to my initial dilemma (question), which is, can Company A, with its revenue – competitive advantage producing intangible assets, ever be positioned to seek lost profit damages if a key PIC were to be stolen when conventional intellectual properties, i.e., patents or trade secrets are either not in place or maintained? More specifically are there satisfactory remedies to firms like Company A proprietary intellectual capital has been misappropriated?

Hampton says there is no single method for calculating lost profit damages, but the most common is a four-part test first recognized 1978 in the Panduit Corporation v. Stahlin Brothers Fibre Works, Inc. case.

According to the Panduit test, to obtain damages, the profit, in this instance, Company A could make but for the infringed intangibles, a real patent owner must prove…

demand for the (patented) product or presumably process.
the absence of acceptable non-infringing substitutes in this market space.
manufacturing and marketing capacity to exploit the demand, and
the amount of profit (the patent owner), i.e., Company A would have made.

Hampton also points out there are other means of proving lost profit damages in addition to the Panduit test, such as measuring increases in the cost of product inputs. Could Company A then plausibly characterize the latter as costs related to the development (internally) or acquisition (externally) of other suitable intellectual capital to replace that which had been misappropriated – comprised?

Let’s be clear. I am only exploring potential remedies or defensible strategies to secure economic – competitive advantage relief for companies operating in the increasingly and irreversibly competitive and predatorial knowledge-based global economy where growing percentages of most company’s value, revenue, profitability, and sustainability are inextricably linked to intellectual, relationship, and structural capital, i.e., intangible assets, most all of which are quite vulnerable when effective processes – procedures are not in place, i.e.,

to sustain – preserve asset control, use, ownership, value, and monitor their materiality and risk.
for asset stewardship, oversight, and management.

A special thanks to Scott Hampton, Hampton IP and Economics for the inspiring this post (www.hamptonip.com)

Intangible Assets: Management Team’s Responsibility To Engage!

Michael — Tue, 07 May 2013 12:41:41 +0000

Michael D. Moberly May 7, 2013 ’A blog where attention span matters’!

Asset risks can materialize instantaneously, sequentially, and simultaneously and rapidly cascade throughout an enterprise to produce long lasting, and with increasing frequency, permanent adverse economic (competitive advantage) effects, so, in today’s increasingly predatorial global business environment….

First, the responsibilities associated with safeguarding (preserving use, ownership, and monitoring value, materiality, and risk to intangible assets are now akin to fiduciary responsibility (Stone v. Ritter). They should not be construed as merely constituting new business jargon or optional tasks that can be dismissed or neglected, i.e., it will get done as time permits, when the resources become available, or when competitors do it.

Second, in today’s increasingly ‘flat world’ (Thomas L. Friedman) in which R&D, global business transactions, and company operations are routinely conceived, shaped, driven, and executed by the interconnected flow of data and information, i.e., intangible assets, it makes it all the more important that management teams converge their expertise to ensure the intangibles that are in play, are effectively safeguarded and positioned to realize the economic and competitive advantage benefits which they are capable of delivering without succumbing to risks, challenges, or other forms of asset compromises.

To better enable this, practices, processes, and strategies must be in place, along with a (enterprise-wide) culture that recognizes and appreciates intangible assets, and possess levels of alertness and skill to sustain sufficient control of and monitor key assets’ value, materiality, and risk.

Third, the time frame(s) when most companies can realize the greatest value from their increasingly intangible asset intensive products and services continues to erode, variously due to…

the abbreviated value and functionality cycles’ of intangible assets.
the absence of (conventional) market entry barriers and enforceable intellectual property law which allow for…
- global cadres of ‘instantaneous’ competitors and infringers, and
- extraordinary profits gleaned from (intangible) asset theft, infringement, piracy, and counterfeiting operations that pollute legitimate supply chains.

Fourth, intangibles’ development, acquisition, and utilization must be aligned with core business (and security and risk management) strategies rather than being considered primarily as intellectual property-based legal processes and/or decisions. That’s because, conventional forms of intellectual property enforcement, patents primarily…

no longer serve as deterrents, safe harbors, or consistent indicators of asset (company) value.
can advance a company (economically, competitively) only so long as a company can sustain unchallenged – undisputed use, ownership, and value, of its IP.
are relatively easy prey (vulnerable) to global networks of legacy free players and increasingly sophisticated entities engaged in predatorial data mining, business/competitor intelligence operations and economic espionage.

Fifth, safeguards for intangible asset intensive firms and transactions can be best addressed not solely through legislative mandates which, while generally being politically well-intentioned, are often unenforceable on a global scale, particularly in regions with highly country-centric IP and technology transfer law. Rather, effective intangible asset safeguards are a product of real attitudinal and operational adjustments in a company’s outlook, strategic thinking and planning coupled with a strong recognition that key intangibles, particularly those linked to ‘operational know how’ are highly sought after globally, and therefore consistently at risk.

Sixth, it’s virtually impossible today to engage in any type of business activity or transaction in which intangible assets are not in play and integral to achieving a favorable outcome. Ultimately then, the line between a company achieving profitability and fighting for its financial survival is now more closely linked than ever before, to its ability to

identify, mitigate, and safeguard against risks to its intangible assets ranging from disputes, challenges, theft, infringement, or other forms of (asset) compromise while simultaneously extracting – exploiting value and converting intangibles into sources of revenue.

Indeed, intangibles have become embedded in even the most routine business operation and/or transactions. Absent this acknowledgment, the result is often that substantial asset value, competitive advantage, company reputation, and market space may be irreversibly lost, undermined, or er

ode.

Intangible Assets and Fiduciary Responsibilities!

Michael — Tue, 30 Apr 2013 12:20:26 +0000

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!

Intangible Asset Roadmap

Michael — Mon, 29 Apr 2013 11:42:01 +0000

Michael D. Moberly April 29, 2013 ’A blog where attention span matters’.

It’s really quite straight forward, embedded in the economic fact – business reality that increasing percentages of company value and revenue lie in – evolve directly from intangible assets, management teams, boards, and other business decision makers, regardless of a company’s size, the location of its headquarters’, its maturation, its receptivity to being innovative and forward looking, or industry sector(s) it serves, its quite likely that a practical and viable roadmap for (a.) putting intangible assets to work, and (b.) preserving their (contributory) value and competitive advantages will be beneficial.

Such a roadmap, particularly the type that I advocate which includes ’putting intangible assets to work’ for a company, starts, in my view, with (a.) the misnomer that intangible assets are synonymous with intellectual property, i.e., patents in particular, and (b.) re-framing the perception that the management, stewardship, and oversight of a company’s intangible assets fall exclusively to the legal and accounting domain.

Let’s be clear, most, if not all decisions and actions related to intangibles assets are and should be business decisions, preferably in collaborative concert with the c-suite, security, risk management, legal counsel, and accounting. Too, as articulated by a Delaware court in Stone v Ritter, they can also assume a fiduciary responsibility that includes (a.) having consistent operational familiarity, and (b.) preserving their control, use, ownership and monitoring value, materiality, and risk.

Let there be no misunderstanding, the (effective) management, stewardship, and oversight of a company’s intangible assets has permanently shifted from merely being optional tasks and/or ‘nice to have’ processes, to, as noted above, something akin to fiduciary responsibilities that can no longer be dismissed or neglected, e.g., it will happen only when (a.) time permits, (b.) the resources become available, (c.) competitors are observed doing it, or (d.) a professional standard or a legislative mandate is adopted leaving businesses with few, if any options, other than compliance.

Too, the intangible asset ‘roadmap’ advocated here, dispels the really unfortunate assumption held by far too many management teams that intangible assets and their management are the sole province of large, multi-national, Fortune 1000 categories of corporations. The reality is, intangible assets are firmly embedded in and being routinely produced by the 20+ million small, mid-size, and early-stage firms in the U.S. and no doubt, an equal number of international firms regardless of sector. A key issue, in my view, in both circumstances, does either understand it, know it, and actually (a.) put their intangibles to work, and (b.) have processes and procedures in place to identify, unravel, assess, protect, preserve, and monitor their intangibles’ contributory value and the competitive advantages and revenue they produce.

Most every company, with few, if any exceptions the author has had contact over the years, possesses what I refer to as ‘home grown’ (internally produced) intangibles that are frequently highly specialized and company specific irrespective of size, industry sector, or maturity. In most instances, I find these assets, managerially speaking, are not well suited for one-size-fits-all or snap-shot-in-time (asset) management approaches. Instead, they require nuanced handling aligned – commensurate with…

achieving the most effective and efficient use
maximizing their contributory-collaborative value, and
building and strengthening a company’s structural capital and competitive advantages throughout its supply-stakeholder value chain
particular types of (business) transactions.

For these reasons, I advocate practical, yet individualized intangible asset management approaches which I routinely refer to as my ’what fits best’ approach. That is, at least my experience suggests that ’what fits best’ for a company will usually ‘work best’ for a company insofar as helping achieve business goals and objectives through its stewardship, oversight, and management of its intangible assets.

So, whether one conceives my ‘roadmap’ through a conventional sequential lens or more as a ‘big picture’ mosaic that reflects – encompasses a range of challenges fully integrated with practical insights for solving (intangible) asset management, stewardship, and oversight challenges, my message remains laser focused; business decision makers, regardless of their specialization, professional experiences, or title, need to acquire, if they haven’t already, a strong operational and managerial clarity – familiarity with intangible assets because these skill sets are essential requisites for successfully and effectively managing intangible asset dominated/intensive companies in the globally competitive, aggressive, and predatorial business transaction arena in which there are absolutely no indicators of reversal.

I respectfully recognize, just making sense of the knowledge (intangible asset) based economy and the increasingly intense business environment it has given birth to, is not sufficient unless readers can literally use and apply the information provided, that is, to frame and execute their own profitable and sustainable roadmap for their intangible assets. That’s why the various chapters in our upcoming book will, individually and collectively, provide readers with relevant and current insights about, not just a starting point, but the practical steps that are necessary along the way to help management teams arrive at a successful, profitable, and strategically sustainable destination!

While I am a strong advocate of utilizing intangible assets as fully and completely as possible, it is not my intent to represent intangibles as constituting either a silver bullet or a one-size-fits-all template that will produce immediate financial – competitive advantage magic for a company.

I do know however, that it remains an irreversible economic fact that 80+% of most company’s value, sources of revenue, and growth potential lie in – evolve directly from intangible assets. Thus, unless and until management teams, boards, investors, stakeholders, and other business decision makers begin demanding that (their) company’s intangible assets ‘be taken out for a ride’, those assets will likely remain idle, taken for granted, and otherwise left unused, under-valued, and vulnerable to global competitors to acquire and use at will.

Intangible Assets The Rapid Maturation Of Ideas!

Michael — Fri, 26 Apr 2013 12:38:54 +0000

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community. Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk. As such, my blog posts are not intended to be quick bites of unsubstantiated commentary or information piggy-backed to other sources. Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction. I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com

Pre-Employment Screening Reversal Theory

Michael — Thu, 25 Apr 2013 17:09:23 +0000

Michael D. Moberly April 25, 2013 ‘A blog where attention span matters’.

In the Spring/Summer 2012 edition of the International Journal of Intelligence Ethics, the author of ‘Reversal Theory: Understanding the Motivational Styles of Espionage’ brought some very worthy and intriguing context to the relationship between insiders and economic espionage by way of ‘reversal theory’.

In the article, an obviously experienced and certainly forward looking author distinctively applied Dr. Michael J. Apter’s ‘reversal theory’ to the persistent – ever present challenge of insiders relative to their predilection to engage in insider theft and/or economic espionage at some point during their employment.

In short, reversal theory (RT) as well described in the aforementioned article is a model for personality analysis. The premise is that people and their behavior change, perhaps regularly, overtime. In other words, people’s motivational states are not static, rather they’re quite dynamic. As such, behaviors people may engage in to obtain, presumably personal satisfaction, are also dynamic and certainly not static.

More specifically, RT suggests one’s personality evolves from – is embedded in patterns of (dynamic) change, not ‘fixed traits’ which some psychometric practitioners and researchers continue to advocate. The notion that there are particular ‘fixed (permanent) traits’ that people possess that in turn are associated with – linked to ‘predictable patterns of behavior’ is contrary to the principles of the RT model.

Put another way, as the author points out so effectively, is that RT actually ‘challenges the assumption that (fixed) personality traits or commonalities of behavior’ are linked to predictability. Again, the author points out that RT, if practiced correctly, would allow more organizations to screen out vulnerable and/or suspect applicants. But, my reality is, and I suspect the author may agree, continued reliance on conventional trait (employment screening) approaches have not produced the necessary consistency in identifying – distinguishing applicants who are vulnerable or otherwise, at some point in their employment tenure become receptive to engaging in adverse acts against their employer. In this instance, we’re talking about theft, misappropriation, and/or infringement of intellectual properties, proprietary (trade secret) information and other forms of intangible assets.

More specifically, both the and Dr. Apter agree that the conventional ‘static trait theory’ has not, and does not account for, nor does it address the very real reality that people are receptive to behavioral – attitudinal changes over time, some of which adversely affects their receptivity, propensity, and proclivity to ‘voluntarily’ engage in insider theft and economic espionage.

As most practitioners serving in the arena of endeavoring to thwart insider threats and economic espionage know all too well, there are myriad of anecdotal accountings and well intentioned studies identifying gradations, motives, tenacity, and intensity of the risks posed by ‘insiders’.

Unfortunately, the same challenges remain, if not become intensified, with of course the proverbial tweaks and/or technological variations insofar as how targeted assets are accessed and acquired by bad actors. What’s needed in my judgment, as has been noted multiple times in this blog, is that objective, replicable, and evidence-based research, beyond mere anecdotal reports or accountings, that present different, but certainly plausible explanations why particular employees, post hiring, willingly and voluntarily become ‘insiders’ and variously engage in economic espionage.

Through my lens, and the publication of well researched articles as summarized here, the private sector, as well as the intelligence community, are now absolutely obliged, more than ever before, to re-visit and re-think their personnel (pre-employment) screening processes and practices by, among other things, recognizing that periodic (in-employment) re-assessment is essential. At minimum, periodic re-assessment should include the means to identify and assess post-hires’ adverse (a.) receptivity, (b.) inclination, and/or (c.) newly acquired predispositions that may or may not have evolved since and be contrary to what was gleaned on or before the date-of-hire while having access to classified (proprietary, sensitive) information, i.e., intangible assets.

I should think, in part, the author’s application of reversal theory as aptly described in this article certainly warrants broad attention and study because it serves as a very worthy starting point for some serious and thoughtful discussion on this increasingly critical matter.

Of course, the necessity for the private sector to comprehensively address risks posed by insiders is elevated in large part because of the economic fact – business reality that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – directly evolve from often times readily available, perhaps even open source, intangible assets, many of which are rooted in – emanate from intellectual properties, proprietary information, and other forms of intellectual, structural, and relationship capital. As for the application of RT to government agencies, one hardly needs to say more than PFC Bradley Manning!

This globally universal economic fact alone should, in my view, and I suspect that of the author as well, should prompt companies and organizations to find the will and the resources necessary to effectively mitigate insider risks and economic espionage, be it state sponsored or conducted by independent actors. In other words, RT theory, in my view, warrants attention and thorough discussion!

Inspiration for this post lies with an article published in the Spring/Summer 2012 edition of the International Journal of Intelligence Ethics, titled ‘Reversal Theory: Understanding the Motivational Styles of Espionage’.

Intangible Asset Strategists and Consultants, A Message!

Michael — Wed, 03 Apr 2013 14:13:59 +0000

Michael D. Moberly April 3, 2013 ‘A blog where attention span matters’.

Let’s accept the following as economic fact; we live, work, and conduct business transactions in an increasingly and irreversible knowledge-based global economy, where 70+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability, and profitability lie in – directly evolve from intangible assets!

Equally importantly, let’s also accept the business reality that the aforementioned economic fact has yet to become so self-intuitive to management teams, c-suites, and boards that they will instinctively recognize the necessity to engage in strong and consistent stewardship, oversight, and management of the intangible assets their company produces and/or acquires.

This makes all the more essential for intangible asset consultants and strategists to develop an understandable script, if you will, to help clients understand the various ways their company can elevate its value, add sources of revenue, and solidify its sustainability through better utilization of its intangible assets. This can occur not just by recognizing intangibles assets and their relevance to business profitability and market space, but by taking affirmative steps to enhance, position, bundle, and exploit intangibles.

Developing such a script, according to Dale Furtwengler, an extraordinarily intuitive St Louis-based business strategist and author of ‘Pricing for Profit: How To Command Higher Prices For Your Products and Services’, is a critical component to increasing the probability business clients will pay a premium for effective outside counsel, i.e., intangible asset strategists’, that lead to practical, tactical, and strategic clarity insofar as identifying, unraveling, enhancing, positioning, exploiting, and managing intangible assets.

Thus, the more clarity decision makers achieve from consultants and strategists regarding intangible assets their company produces or acquires and are inevitably embedded in the products and/or services they produce will (a.) lead to better – more informed decisions about the necessity to engage an intangible asset strategist, and (b.) reduce the probability that particular buying decision will be postponed.

For that to occur however, a strategists – consultants ‘script’, Mr. Furtwengler argues, and I agree, must clearly and convincingly articulate how to calculate the monetary value of the intrinsic value which a consultants’ services and/or offerings will actually provide. The premise is, clients will pay a premium for value they understand and can rapidly apply.

Usually, Mr. Furtwengler points out, when prospective buyers (of intangible asset strategists’ services, for example) find themselves unable to distinguish one strategist’s services/offerings from others, they ask about pricing. That, of course often translates as an inability to quantify the value of what may appear, to prospective clients, as competing services and/or offerings because, rather unfortunately, pricing (fees) tends to be the primary form of measurement business decision makers understand insofar as distinguishing competing offerings – services.

Furtwengler effectively argues throughout his book that client’s expect to pay more to get more, but only, if ‘getting more’ has (recognizable and actionable) value to them. So, an intangible asset strategists’ ability to command higher fees lies solely with their ability to articulate (i.e., their script) that greater value, and how to monetize that greater value to benefit clients and their respective needs.

That said, Furtwengler recognizes that independent consultants/strategists site numerous reasons and/or rationales why they are resistant to raising their fees – prices, i.e.,

they don’t possess the brand/name awareness of larger (competing) full service consulting firms.
their clients only express concern – care about pricing/fees.
our competitors won’t raise their fees – prices, so we can’t.
we will lose sales and market share if we raise our fees.

As a counter to those ill-fated rationales, Furtwengler describes six ‘value propositions’ which are what prospective buyers of consulting services really value which I have extrapolated to intangible asset strategists and consultants, i.e.,

Innovative Image…that will accrue by purchasing intangible asset services that represent a buyer’s desire to elevate their (company) image by being associated with and being able to purchase such specialized ‘leading edge’ services.
Integrity…reduces the amount of time required for a prospective client to make a buying decision when they’re sure the consultant/strategist is trustworthy?
Service and Dependability…do it right the first time so clients do not lose time later for expensive remediation or complete do-overs.
Knowledgeable spokespersons…can also constitute time savings, i.e., a consultant/strategist who knows their services extremely well and can clearly and understandably articulate those services on a ‘what fits best basis’ to help prospective clients recognize what they really want, need and value.
Speed and Convenience…time savings and quick service.
Friendliness…a genuinely friendly image conveyed to prospective clients.

I applaud Furtwengler for not even including in his book the conventional practice of framing service ‘pitches’ that emphasize fear, uncertainty, and doubt (FUD). For some intangible asset consultants and strategists, it’s difficult to resist utilizing – resorting to FUD factors, especially when a prospective client expresses a dismissive attitude about ‘all things intangible’.

If intangible asset strategists – consultants commence an engagement meeting with a strong narrative (script) that is not reliant on highly subjective FUD elements, and instead, includes a…

forward looking focus on the importance of providing strong methodologies for…

the stewardship, oversight, and management of intangible assets, and

sustaining control, use, ownership, and monitoring (asset) value, materiality, sustainability, and risk

…the probability of experiencing consistent enterprise-wide success increases substantially!

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 m.moberly@kpstrat.com

Intangible Asset Familiarity Produce Multiplier Effects and Strengthen Value Propositions!

Michael — Thu, 21 Mar 2013 12:35:17 +0000

Michael D. Moberly March 21, 2013 ‘A blog where attention span matters’.

For many business management teams and decision makers, when the term ‘multiplier’ (effect) is used, it frequently conveys an economic context and/or outcome and seldom eludes to management team behaviors or actions, i.e., one’s that influence the pursuit of new, or at least different ways of thinking.

Different ways of thinking include executing a process, an initiative, or utilizing/exploiting assets differently than what’s been done previously. The objective of course is, by doing so, will lead to (more) efficient and effective use, in this instance, of intangible assets, i.e., intellectual, relationship, and structural capital, etc., to achieve a more favorable economic, competitive advantage, and/or market position.

Achieving favorable economic, competitive, and market outcomes may be less likely to occur had those behaviors – actions of management teams and other decision makers not been influential as ‘intellectual multipliers’. Intellectual multipliers can represent either significant or relatively subtle changes to business operations and/or transactions that create efficiencies, elevate effectiveness, identify new opportunities, etc., which, of course, lay foundations for positive and lucrative outcomes.

For example, the ‘multiplier effects’ described below, can be the product of management teams’ acquiring an intellectual, operational, economic, and competitive advantage familiarity with intangible assets. That familiarity can influence – produce, in numerous instances, enterprise wide multipliers, e.g.,

Kick start strategic planning to achieve more complete utilization – exploitation of intangible assets and IP…
Elevate fiduciary appreciation for the stewardship, oversight, and management (S.O.M.) of company portfolios of intangible assets and intellectual property…
Contribute to aligning financial – risk management planning with (intangible) asset safeguards and a company’s core – strategic objectives by having practices in place to sustain control, use, ownership, and monitor asset value, materiality, and risk…
Facilitate more timely (aggressive) pursuit of intangible asset – intellectual property rights violations, i.e., compromises, infringement, misappropriation, etc…
Provide foundation for developing business organizational resilience (continuity and contingency) planning for intangible assets, IP, and proprietary competitive advantages to achieve quicker and more complete economic recovery during and following a significant business disruption or disaster…
Add – bring consistency to accounting by (a.) describing intangible assets in revenue conversion formats, and (b.) representing intangible assets commensurate with Sarbanes-Oxley and FASB Statements…
Elevate company’s public stature, i.e., reputation and image among its customers, suppliers, investors, and other stakeholders that can attract attention of ‘audiences’ well beyond a company’s traditional market – industry sector…
Strengthen the interface (convergence) with (a.) IT-computer safeguards and practices, (b.) knowledge management programs, and (c.) balanced scorecard initiatives…
Distinguish assets relative to their (a.) contributory value, (b.) life, value, functionality cycles, and (c.) facilitates more reliable quantifying – qualifying asset performance…
Provide more efficient and effective use of IP counsel and allocation of IT and information security resources…
Serve as leverage points in negotiating IT and IP insurance coverage and premiums…

Intangible Asset Safeguards A Compelling Business Case!

Michael — Wed, 20 Mar 2013 13:40:56 +0000

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.