Archive for June, 2008
June 28th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap. No Comments.
Michael D. Moberly June 28, 2008
We’re well into the 21st century and the role intangible assets’ are playing as value and growth creators is widely discussed, understood, and accepted at the 5,000 foot elevations in business communities globally.
At those elevations, it’s come to be a well known economic fact – business reality that steadily increasing percentages, perhaps as much as 75%, of a companies’ value, sources of revenue and future wealth creation have shifted from tangible (physical) assets to intangible assets, or, as the British sometimes refer to them as ‘invisibles’.
One question is, why isn’t this reality resonating – manifesting itself with a broader sense of urgency within the U.S. business communty, especially with small, medium size enterprises (SME’s), to the point they willingly engage in strategies to maximize and extract as much value as possible from the intangible assets those very companies have likely developed and continually, even routinely, produce?
Cutting to the chase, I, like other national voices advocating greater recognition and utilization of intangible assets, meet with astute, intelligent, and extraordinarily talented and successful business leaders who are apt to use sophisticated techniques to schedule employee work schedules to rightfully save overtime pay, but, mention the words intangibles or intangible assets and eyes glaze over!
What’s puzzling is, why aren’t these decision makers acting on this information, whether it comes from me or myriad of other sources? Why are these ‘within hands reach’ sources of value, revenue, and future wealth creation essentially being overlooked, neglected, or, in some instances, literally being dismissed?
In part, the lack of business enthusiasm for intangible assets may be attributed to:
1. accountants who may or may not fully grasp the contributory significance of intangibles (and reporting – accounting for same) therefore are reticent to introduce or explain the relevance of intangibles to clients…
2. faux strategic planning which is more akin to near term – quarterly-based perspectives that exclude discussions about better utilization of intangibles…
3. a tendency to develop explanations of intangibles that are synonymous with intellectual property to which business decision makers may attach little, or no relevance because they don’t have nor plan to have any IP…
4. a self-deprecating assumption by some business decision makers that their company possesses no valuable intangible assets, i.e., competitive advantages, proprietary know how, etc., worthy of the time necessary to identify and assess…
5. the mere lack of physicality of intangible assets…
6. consultants’ that inappropriately characterize the process of identifying, assessing, and extracting value from intangible assets as being far more complicated and time consuming than necessary, and I hasten to add, is the reality…
Understanding and taking affirmative steps to maximize and extract as much value as possible from the intangible assets a company has developed, is not rocket science, it’s just good business!
June 27th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap. No Comments.
Michael D. Moberly June 27, 2008
In any book written by Thomas Friedman, readers are treated to insightful and thought provoking observations and perspectives. Friedman’s The World Is Flat represents another confirmation that not only is the world flat, it’s getting flatter every day through the convergence of:
1. restless, forward-looking, forward-thinking investors, companies, and individuals with strong entrepreneurial tenants unwilling to wait for past practices, conventions, and/or traditions to evolve and reflect today’s business realities…
2. technologies and capital that permit businesses to collaborate in real time and/or form virtual alliances to accommodate the growing universality of consumer needs and demands.
Friedman’s first hand, been there, done that approach to research, interspersed with relevant interviews with current players and thought leaders make for responsibile prognostications about the flat world, e.g., ‘globalization is going to be increasingly driven by two things’:
1. individuals and companies that understand the flat world and are willing and able to adapt quickly to its processes and technologies (p.183) and
2. new players (who) are stepping on the playing fields, legacy free (p.176-178)
Friedman’s notion of legacy free players warrants our comment. As business transactions are being increasingly influenced/driven by intangibles, IP, proprietary know how and competitive advantages, etc., we must respectfully recognize a reality in which a significant majority of the world’s inhabitants still remain somewhat unfamiliar with the legal tenants (concept) of private property and certainly intellectual property.
Ultimately, the flatter world has contributed to:
a. creating business realities in which intangible assets have far outpaced tangible assets as the dominant source of a company’s (1.) value, (2.) revenue, and (3.) future wealth creation.
b. business alliances, transactions, and R&D that are largely shaped and driven by a constant and nanosecond stream of intellectual capital and data
c. conventional IP enforcements becoming reactive, symbolic, if you will, even irrelevant insofar as protecting, preserving, and monitoring the value of IP and intangible assets.
In a flat world, risks to a company’s intangible assets and IP are neither constant nor consistent, rather they’re asymmetric, that is, they vary, can change rapidly and can attack from all sides simultaneously!
Also, in the every flattening world, it’s essential for companies to develop relevant and instantaneous metrics for measuring actual (asymmetric) risks to their intangibles and IP and also develop business cultures’ that have elevated levels of awareness, alertness, and accountability for practicing effective stewardship, oversight, and management of intangibles and IP!
June 26th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap. No Comments.
Michael D. Moberly June 26, 2008
Why is it that…
1. You can probably pinpoint the precise time of day your desk stapler went missing, but you’re absolutely clueless about the status, stability, sustainability, defensibility, and value of your intangible assets, IP, trade secrets, and (proprietary) know how and competitive advantages…
2. You will entrust your most valuable intangible assets, business practices, and trade secrets to people or employees you only say hi, goodbye, and thanks to at the office or Kinko’s…
3. Most companies learn about the value of their misappropriated, compromised, or infringed trade secrets, proprietary know how, intangible assets and IP by asking legal counsel what their fees will be to try to get them back…
If you assume…
1. Your most valuable intangible assets, know how and competitive advantages are protected by computer/IT security, non-disclosures, and non-competes, try listening to cell phone conversations in hotel lobbies and airport lounges, or glance at the laptop screen of the person seated next to you…
2. Your ideas and innovation are adequately protected because a patent has been issued, its time you learned about global data mining, business intelligence, and information brokering operations, or just go to www.globalfleecemarket.com and see your company’s products, ideas, and competitive advantages in counterfeit-pirated form…
3. No one is interested in your strategic planning, client lists, pricing strategies, research, and business practices, why are there 19+ university programs in the U.S. and Canada, plus hundreds of seminars conducted globally to train people in the art and science of collecting – analyzing business and economic intelligence…
Michael D. Moberly June 21, 2008
It’s important that decision makers’ responsible for the stewardship, oversight, and management of company intangible assets, IP, competitive advantages and know how recognize that the hemorrhaging of those assets can begin before the ink dries on transaction contracts.
The kind of economic – competitive advantage hemorrhaging I’m referring to is that which is attributed to internal theft, misappropriation, infringement, counterfeiting and piracy. This sort of hemorrhaging, in today’s hyper-competitive, predatorial, winner-take-all global business transaction arena, is often facilitated by two parallel attitudes of management teams:
1. Sense of deal urgency-expediency which become the transaction driver, an outcome of which is that effective due diligence and/or market entry planning are overlooked, neglected, or even dismissed.
2. Assumption that deals can be consummated and revenue streams commenced before the assets’ in play (i.e., intangibles, IP, know how, competitive advantages, etc.) will fall prey to infringement, misappropriation, counterfeiting, and/or piracy.
In order for such attitudes (transaction strategies) to deliver consistent success, decision makers would presumably have to know precisely:
1. When (windows, time frames) acts of infringement, misappropriation, theft, counterfeiting, and/or piracy will occur…and,
2. The time required for the adversaries to translate those acts into commercialization-production of the product and/or service being targeted and enter legitimate – illegitimate supply and distribution chains.
Real knowledge of #1 and #2 above reflect the (legitimate) company’s head start in the market place. Unfortunately, it remains respectfully rare for companies’ to have all the necessary internal asset (value) protection, preservation, and monitoring capabilities in place and deliverable to the c-suite to make such distinctions in real time to thwart the adverse consequences.
Head starts, of the type portrayed here, are elusive and must be counted in the context of hours and days, not weeks, months, or quarters. Transaction teams that tout such a strategy may well be mis-reading two business realities:
1. Any economic and/or competitive advantages the adversaries’ will glean through infringement, counterfeiting and/or piracy will be short-lived and/or outpaced by rapid changes in consumer – market demands which only the legitimate originator will be able to deliver…and,
2. Intangible assets, intellectual capital, and IP are (readily) renewable resources.
Respecting the ‘narrowness’ of margins today, both assumptions should be revisited!
What Business Decisions Makers Need To Know About The Global Infringement and Product Counterfeiting Industry And What They Can Do About It For Their Company
June 20th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, Business Applications, intangible assets. No Comments.
Michael D. Moberly June 20, 2008
In any business transaction in which intangible assets, IP, and (proprietary) competitive advantages are in play, it’s essential that the owners – holders of those assets, and/or those having fiduciary responsibilities for their stewardship, oversight, and management, recognize some of the challenges posed by the global culture and business of infringement and counterfeiting when negotiating, but, before finalizing, a deal.
Aside from the subjective estimates of losses attributed to infringement, counterfeiting, and product piracy, to be sure their large, it’s important to also recognize that these acts represent substantial (and growing) percentages of many countries’ GDP, sources of employment and personal income and ‘manufacturing’ base. It’s appropriate then, for business (transaction) teams to draw the conclusion that infringement, counterfeiting and piracy have moved well beyond the realm of annoying probabilities to inevitable and costly realities if left unchecked or un-considered.
When assessing – negotiating the expectations of a transaction, especially those in which intangible assets, IP, know how, and competitive advantages in play, prudent decision makers should recognize there are few, and in many instances, no impediments for existing or would-be infringers, counterfeiters, and product pirates to engage in such acts. In part this is because (a.) the ‘start-up’ costs are minimal, (b.) they can operate in relative anonymity globally, (c.) the legal deterrents’ are lax, inconsistent, or non-existant, (d.) there’s enormous potential for quick and very substantial margins (profits), and lastly, (e.) the extraordinary speed in which infringement, couterfeiting, and product piracy can materialize and adversely affect a companies’ margins, reputation, and goodwill. (Adapted by Michael D. Moberly from ‘Hot Property’, The Stealing of Ideas In An Age Of Globalization. Pat Choate)
The following represent a few key questions I’ve developed and urge prudence relative to assessing transactions in which intangibles, IP, know how, and/or competitive advantages are ‘part of a deal’:
1. What is your companies’ loss tolerance threshold (tipping point) insofar as economic, competitive advantage, market share, image, goodwill, consumer confidence…?
2. What is the probability such losses will be irreversible – permanent and what, if any, recovery options are available, and how much will they cost your company…?
3. What is the degree of global universality of your company’s products and/or services and are there any potential dual-use components or applications within those assets…?
4. What is the cultural (business, legal, government) receptivity to (climate for) infringement, counterfeiting, and product piracy in the host country-region where the transaction will be executed…?
While these represent only a few of the considerations I urge company transaction teams to consider, I especially urge them not to dismiss these questions solely for the expediency of a deal. It’s equally important to recognize that economic – competitive advantage hemorrhaging (attributed to infringement, counterfeiting, and/or piracy) can occur well before the ink dries on a transaction contract. A reality is though, some management teams (still) assume they can consummate deals and commence revenue streams before any assets will be infringed, counterfeited or pirated. In the ultra-competitive, predatorial, winner-take-all global business arena, such a position could be accurately characterized as ‘permissive neglect’!
Michael D. Moberly June 19, 2008 (Part two of a two part post.)
In today’s high stakes, nanosecond, winner-take-all global arena of business transactions, it’s important that each party recognize that intangible assets, IP, and (proprietary) competitive advantages will most always be in play, (i.e., part of any deal).
As noted in my June 18th post, a value-based assessment (inventory, audit) of those assets (that also incorporates a ‘business impact analysis) is a worthy step towards enabling and facilitating more secure and profitable transaction outcomes.
The value-based assessment (inventory, audit) I refer to encompasses three primary components:
1. Identifying, sifting through, and unraveling any embedded – intertwined intangibles and competitive advantages relevant to the transaction…
2. Identifying and assessing any under-the-radar risks, threats, and vulnerabilities that can entangle and/or ensnare the assets in costly, time consuming, and momentum stifling disputes or challenges…
3. Assessing the adequacy – effectiveness of any asset safeguards that have been in place (pre-transaction context) relative to protecting, and preserving the assets’ value and usefulness (post-transaction context)…
The value-based assessment can deliver timely and relevant insight to transaction decision makers by:
1. Alerting them to significant vulnerabilities-risks that warrant immediate attention, but yet may be favorably leveraged prior to deal closure…
2. Bringing operational, economic, and strategic clarity to the intangible assets that are in play (relevant to the deal)…
3. Identifying efficient and effecive asset protection and value preservation measures that can be put in place that (a.) reflect the circumstances of the transactions, and (b.) are aligned with the deals’ objectives, i.e., (1.) the life-value-function cycle of the assets, (2.) projected returns, and (3.) exit strategy!
Michael D. Moberly June 18, 2008 (This is part one of a multi-part post.)
In today’s high stakes, nanosecond, winner-take-all business transactions arena its important to recognize that in most instances, one or both parties’ intangible assets, IP, and (proprietary) competitive advantages will be a significant part of the deal.
The manner in which a party approaches the transactions’ risk assessment – due diligence (process) is integral to achieving a positive – favorable outcome however, and this process must reach well beyond conventional business valuations.
But, protecting, preserving, and monitoring the value of the intangible assets, IP, and competitive advantages that are in play, in both pre and post transaction contexts, are often overlooked or discounted as to their relevance to the transactions’ success. This attitude is attributed to many things, one of which is the time honored, but today mistaken, assumption that conventional IP protections, patents especially, (still) constitute a sword and shield deterrent – protection against internal – external entities with an opposing and/or adversarial stake in the transactions’ outcome. In other words, the value and benefits those assets may bring can be significantly diluted, undermined, or even irrevocably lost when this process is neglected.
An initial step to try to favorably position the intangible assets, IP, and competitive advantages in play is to conduct a value-based inventory and assessment of those assets that incorporates a ‘business impact analysis’ (pre-post transaction). This is a thorough, systematic, and circumstance specific process that describes the (a.) status, (b.) stability, (c.) sustainability, and (d.) vulnerability of the (targeted) assets in play.
The purpose of this exercise is to enable and facilitate a more secure and profitable transaction to go forward, not impede it! Understandably then, its important to identify those assets that can sustain the transactions’ projected (a.) objectives, (b.) returns, and/or (c.) exit strategy under particular (extreme) circumstances in which misappropriation, business intelligence, and/or infringement, etc., can adversely affect the (pre-post transaction) value and projected benefits of those assets!
Michael D. Moberly June 17, 2008
Overview of the case study company…
The following is a much abbreviated example of an intangible asset assessment I conducted in Q1, 2006 using extensive open sources and interview with the companies’ outside IP counsel. This (abbreviated) excerpt only highlights ‘what the assessment revealed’.
The ‘case study company’ is headquartered in the U.S. and is the market leader (manufacturer, supplier) of an automotive services product. This company has multiple U.S. and international manufacturing, sales, training, and distribution sites. Its annual sales exceed $300 million.
The assessment revealed…
1. A presumptive reliance (by company executives and IP counsel) on patents as the (a.) sole means of protecting-enforcing rights to proprietary know how and competitive advantages, and (b.) dominant sources of (company) value.
2. An under-appreciation for the connections – relationships between the companies’ intangible assets and its revenue, value, competitive positioning, and customer/client goodwill, etc.
3. Key know how was intertwined (embedded) with employees, management teams, and business units at various levels, functions, and global locations, absent though, consistent appreciation for (a.) the competitive advantages those assets deliver, (b.) the assets’ value, or (c.) the assets’ proprietary elements.
4. A strong-viable, but, under-appreciated base of intangible assets consisting of (a.) a proprietary web-based customer/client training system, (b.) trouble-shooting programs and data bases for clients/customers with 24/7 accessibility, (c.) business unit personnel committed to (delivering) rapid turn-around times for customer services, trouble-shooting, product delivery, and repair, and (d.) R&D unit collaboratively linked to a university, key customer, and supplier for development of new product prototypes.
Business decision makers are finding its increasingly difficult to provide effective stewardship, oversight, and management of a companies’ ‘value creation processes’ without greater appreciation – recognition for their intangible assets!
The Seven Reasons Why Companies’ Should Engage Extra Efforts To Sustain Control, Use, Ownership, and Value of Their Intangible Assets and IP
Michael D. Moberly June 16, 2008
First – and perhaps foremost, the economic fact – business reality that today, 75+% of most companies’ value, sources of revenue, and future wealth creation lie in intangible assets and IP…
Second – conventional forms of IP ownership – enforcement (i.e., patents, copyrights, trademarks) no longer:
a. are stand alone) deterrents to would-be infringers, misappropriators, and/or thieves, nor do they singularly address the absolute need for sunstaining (indeterminate) control, use, ownership, and value monitoring of those assets…
b. serve the rightful holder-owner as consistent predictors – safe harbors of value, ownership, use, control and/or transaction predictability.
Third – the management, oversight, and stewardship responsibilities associated with intangible assets, IP, and proprietary know how have long been conceived – portrayed as being, almost exclusively, legal decisions and processes. This time honored perspective needs to be re-framed as continuous business decisions evolving from fiduciary responsibilities of board rooms and management teams…
Fourth - the time frame (i.e., asset life – value – functionality cycle) when companies should realize the most value from their intangibles and IP continues to be compressed and vulnerable, in part, because of lower entry barriers from competitors and the significant and almost instanteous profits achieved from sophisticated and globally organized misappropriation, infringement, conversion, and product counterfeiting operations and other (gray market) schemes that adversely affect legitimate supply-distribution chains…
Fifth - the growing global universality of regulatory mandates for accounting and reporting the value, materiality, and performance of intangible assets, i.e., the international equivalents to the Sarbanes-Oxley Act and the Financial Accounting Standards Board’ statements…
Sixth - the value of intangible assets and IP has become more fragile, perishable, and challengeable; when those assets are compromised:
a. recovering full (unchallenged) use and value is costly and time consuming
b. economic – competitive advantage – market position hemorrhaging will likely commence instantaneously…
Seventh – global data mining and business intelligence operations contribute to asset compromises and value dilution through aggressive, predatorial, and economically and culturally embedded networks that systematically target and analyze company (open source) data to rapidly undermine – counter a targets’ strategic planning and its intangible assets and IP at their absolute earliest stages of development and/or commercialization…
Investing In Early Stage Company Intangible Assets & IP: Mitigate Ways In Which Those Assets Become Entangled or Ensnared
Michael D. Moberly June 15, 2008
Experience suggests there are four (typical) ways in which early-stage companies’ intangible assets, IP, and proprietary know how become entangled and ensnared in time consuming and costly disputes and/or challenges, i.e., a consequence and/or combination of:
1st – misplaced trust in business partners, research collaborators, employees, etc.
2d – operational or procedural (internal) miscues, i.e., not attaching sufficient priority to sustaining control, use, ownership, and monitoring value of the assets
3d – unethical or illegal conduct of of others (internal, external)
4th – commercial competitor/business intelligence, data mining, and/or industrial espionage
In today’s hyper-competitive, global, winner-take-all business environment its absolutely incorrect to characterize the above forms of disputes and challenges as mere risks of doing business! For even early stage companies, absent well designed procedures and practices to protect, preserve, and monitor the value of their hard earned intangible assets and IP and the vulnerability – exposure of either to one or a combination of the above (forms of) disputes – challenges is rapidly becoming an inevitability! In other words, the probability than an early stage company, especially those with particularly innovative and commercializable intangibles and IP will experience at least one of these entanglements and/or ensnarements has elevated considerably.
For early stage company decision makers, its often tempting to focus time and attention on seemingly more immediate concerns such as company management, raising capital, and operations issues because these represent the conventional domains of business decision makers. Stewardship, oversight, and management over intangibles and IP is sometimes mistakenly characterized as unrecoverable costs rather than fiduciary responsibilities. Or, decision makers sometimes (mistakenly) assume that patent applications, provisionals, and/or patent issuances are sufficient (stand alone) forms of protection, i.e., the ‘patent and walk away syndrome’.
Delays however, in adequate protection, preservation, and monitoring the value of intangibles and IP is exceedingly risky today and proportionately elevates the probability than one or more of the aforementioned (forms of) entanglement and/or ensnarement will occur. If it does, it can not only limit recourse (options) against others who misuse, infringe, and/or misappropriate intangibles and IP rights, but, in the ‘winner-take-all’ business environment, an early stage company stands to lose everything its principals have worked so hard to achieve.