Archive for December, 2008
December 18th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets. No Comments.
Michael D. Moberly December 18, 2008
It’s an economic fact today that 65+% of most company’s value, sources of revenue, and future sustainability lie in – are directly linked to intangible assets! The key takeaway from this (for management teams) is that, while its important to know what intangible assets are and ‘which one’s your company has’, it’s equally important now to (a.) know precisely how those (intangible) assets contribute to value, revenue, and sustainability, (b.) understand how to leverage-position those assets to maximize their value and then extract value, and (c.) effective (best practice) stewardship, oversight, and management techniques.
Familiarity with intangible assets can deliver lucrative – competitive advantage multiplers, for example:
1. Add predictability to business transaction when intangible assets are in play…by assessing the stability, fragility, defensibility, and sustainability of the assets (due diligence). It also elevates the probability for achieving projected returns, sustaining competitive advantages, and contributes to recognizing (facilitating) asset synergies – efficiencies and affirming projected exit strategies.
2. Reduce probability of costly, time consuming, momentum stifling legal challenges…by recognizing circumstances that can ensnare and/or entangle (intangible) assets to impede, erode, or undermine deal value, competitive advantages, and/or projected performance.
3. More effective convergence of accounting, reporting, and valuing assets…by providing portals to (a.) knowledge management programs, (b.) intellectual property development and enforcement, (c.) Sarbanes-Oxley and FASB, and (d.) the balanced scorecard.
4. Build an ‘intangible asset’ company culture…that (a.) recognizes, produces, and sustains control, use, ownership, and value of intangibles, and (b.) provides more timely awareness and pursuit of asset rights issues, i.e., ownership, value, infringement, misappropriation, theft, etc.
5. Develop more comprehensive business continuity-contingency plan…that encompassess all forms/contexts of intangible assets to produce stronger and quicker recovery following significant business disruptions and/or disasters.
December 17th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets, Looking Forward. No Comments.
Michael D. Moberly December 17, 2008
Why would it be a good idea now for companies to seriously consider devoting (minimal) time, resources, and committment to developing a culture that recognizes, produces, and sustains control, use, ownership, and value of (their) intangible assets? Perhaps the biggest reason is because today, its an economic fact that 75+% of most company’s value, sources of revenue, and future wealth creation lie in – are directly linked to intangible assets!
Why then, given this ‘business reality’, would there be decision maker resistance to putting forth that time, those resources, and the committment to building an internal (company) culture to achieve this end? For starters, here are four truthful, but increasingly less prudent reasons, i.e., intangible assets (1.) lack physicality, (2.) don’t appear on balance sheets, (3.) tend to fall outside conventional ‘mba’ precepts, and (4.) require ‘outside-the-box’ strategies to monetize and extract value!
One of my goals-objectives when serving clients is to, among other things, lay a foundation for building a company culture that builds upon Dr. Edgar Schein’s work in which he suggests a company culture begins with ‘shared assumptions that employee’s learn while solving (internal) problems’. Standing alone, Dr. Shein’s point sounds very academic for the real world of globally operating companies and business transactions. But, when decision makers factor 75+% of (their) company value, revenue, and future sustainability likely lie in intangibles, one could rightfully conclude that devoting that minimal time, resources, and committment to building such a culture would be an exercise that would not only deliver favorable results, but, equally important, likely produce additional intangible assets that would, in turn, contribute to (company) value, revenue, and sustainability.
But, how would decision makers know when their efforts for building such a culture would actually produce the intended results, i.e., a fully functioning (intangible asset) company culture? According to Dr. Schein’s work it would be evident at the point in which ‘employees (are observed) expressing (manifesting) it as being valid and worthy enough to be taught to new employees as the correct way to perceive, think, and feel in relation to (addressing) persistent challenges and problems they and the company face’. So, when 75+% of most company’s value and revenue evolve from intangible assets, it would be prudent – make good business sense to assume that a significant percentage of those ‘persistent challenges and problems companies face’ are, in fact, variously related to their intangible assets.
So, what’s a bottom line to building a company culture that recognizes, produces, and sustains control, use, ownership, and value of intangible assets? It’s a shared and linked (enterprise wide) set of characteristics, beliefs, assumptions, and behaviors about intangible assets, i.e., (1.) they’re real, credible, and convertible sources of value, revenue, and future sustainability, and (2.) should guide – underlie decisions, actions, and strategic planning!
December 16th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, intangible assets. No Comments.
Michael D. Moberly December 16, 2008
Serious financial times, like today, demand equally serious and readily executable strategies to elevate 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, the utilization of intangible assets.
The point is, there is no other time in modern company governance (managerial, financial) history when intangible assets are more relevant to a company’s stability, sustainability, and profitability. The intent here is to draw attention to the business reality that a company’s intangibles constitute accessible, frequently valuable, and potentially monetizable assets that can be used – leveraged to genuinely help many companies better ’weather’ this recession.
For ‘bricks and mortar’ (tangible asset) thinkers and managers, its easy to continue to rationalize the dismissal – subordination of intantible assets as constituting viable and strategic pathways to stability and sustainability because, for example, they (a.) don’t appear on balance sheets, (b.) lack physicality, and/or (c.) require departure from conventional ‘mba’ precepts. It’s difficult though to dismiss (challenge) the economic fact that 75+% of most company’s value, sources of revenue, and foundations for future sustainability lie in – are directly linked to intangible assets.
My intent is to respectfully signal that better utilization of a company’s intangible assets now, is a relevant and viable exercise that could literally help thousands of small, medium enterprises (SME’s) and small, medium multi-nationals (SMM’s) better weather this financial crisis.
There are, of course, some important fundamentals that all parties 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 identify, unravel, and assess (internally, externally) its intangible assets…?
– how can my company know (assess) whether its intangible assets actually deliver – contribute to stakeholder value, revenue, and future wealth sustainability…?
– what best practices should my company use for the stewardship, oversight, and management of its intangible assets in order to sustain (protect, preserve) their control, use, ownership, and value…?
– what strategies should my company consider for positioning, leveraging, and extracting value from its intangible assets…
Let’s be realistic though, better utilization of a company’s intangible assets standing alone, probably won’t constitute the silver bullet necessary to completely survive the recession unscathed. Acquiring business operational familiarity with intangible assets though, can better position companies to be receptive to considering new ways to utilize, leverage/exploit, and extract value from intangible assets, i.e., (a.) experience measured growth despite the recession, (b.) sustain-build competitive advantages, (c.) advance relational capital, and (d.) build new and stronger business (strategic) alliances, among other things.
Knowing The Value Of Your Intangible Assets: It’s The Key To Effectively Addressing ‘Insider’ Risks/Threats
December 12th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, Insider Threats. No Comments.
Michael D. Moberly December 12, 2008
Information asset protection is not solely about recognizing and (subjectively) assessing risks and threats anymore. It’s also about recognizing and distinguishing the value of (targeted, high value. competitive advantage) information assets, which broadly speaking, fall into two categories:
– Objective value: Information assets that have objective value are often directly linked to business continuity, i.e., legal, financial, etc.
- Subjective value: Information assets that have subjective value tend to evolve-flow from their nature and/or context, i.e., customer lists, pricing lists, strategic planning documents, new product launches, etc.
Distinguishing informations assets’ subjective – objective value has relevance to the role of information asset protection specialists on two levels, i.e., by providing (1.) context/perspective for identifying what type of safeguards are necessary (suitable) and how to operationally segregate the safeguards, i.e., protection processes, technologies, practices, procedures, etc., and (2.) insight about the expected/anticipated immediacy and criticality of adverse impacts to a company should a particular risk/threat materialize, and/or (b.) information loss occur.
Information asset protection is also about understanding basic methodologies for valuing the information assets, i.e.,
Fair Market Value – The price which property (ala information assets) would exchange hands between a willing buyer and a willing seller with neither being under any compulsion to buy or sell and with both having reasonable knowledge of the relevant facts.
For example – in instances in which an insider acquires and sells information assets to an information broker, business intelligence operative, competitor, or foreign agent without knowing the ultimate end user, ‘fair market value’ is merely a euphenism for the highest price.
Value-in-Exchange – Considers the action of buyers, sellers, and investors and implies the value at which the asset (proprietary information, trade secret, etc.) would sell on a piecemeal – compartmentalized basis.
For example – the proprietary information/trade secret sought and acquired by the insider has multiple and/or stand alone elements of value, i.e., a formula, plus the process to operationalize that formula.
Value-in-Use – The value of a piece of proprietary information and/or trade secret that is an on-going contributory element to the business enterprise.
For example – the asset sought/acquired is integral to a company’s business operations and is necessary to sustain market share, competitive advantages, image, goodwill, etc., i.e., Coca-Cola syrup recipe.
December 11th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap. No Comments.
Michael D. Moberly December 11, 2008
Analogy – ‘If I find a hole in my company’s proprietary information fence, the job of information security is to patch the hole. The job of an information asset protection specialist is, in addition to helping patch the hole, determine…
1. What caused the hole in the fence to develop in the first place and were there precipitating factors and/or precursors…?
2. Under what circumstances was the hole in the fence discovered…?
3. Who knew the hole in the fence existed before it was discovered, but did not report it…?
4. How long the hole in the fence existed before it was discovered…?
5. What information assets got through the hole in the fence before it was discovered and patched…?
6. Is there evidence that the information assets that got through the hole in the fence before it was discovered and patched were specifically targeted or randomly selected…?
7. How much (economic) impairment – hemorrhaging to value, materiality, competitive advantage, brand, image, goodwill, IP ownership, trade secrecy and/or strategic planning, etc., occurred as a result of the hole in the fence…?
8. Is it known who the recipients of the information assets that got through the hole in the fence before it was discovered and patched…?
9. How will the recipients likely use – exploit the information assets against the company…?
The responsibilities of information (security) asset protection specialists are now cross-functional and converge with risk management, HR, IT security, intellectual property counsel, audits, valuation, R&D, business units, and brand integrity, etc. The objective is to collectively collaborate with each to sustain (protect, preserve) control, use, ownership, and value of a company’s information assets. (The above analogy was adapted by Michael D. Moberly from a March, 2007 speech made by Joel Brenner, Director, Office of National Counterintelligence Executive (ONCIX) to the American Bar Association in Washington, D.C.)
December 5th, 2008. Published under Analysis & Commentary: Studies, Research, White Pap, Business Applications, intangible assets. No Comments.
Michael D. Moberly December 5, 2008
If we assume the authors of ‘The Economic Role of Intellectual Property’ (Noonan Haque, Greg Smith, Deloitte, London) are correct, which I essentially do, the key issues in a given industry today are, broadly speaking (a.) rapidity of R&D breakthroughs, (b.) rapid diffusion of knowledge, and (c.) abbreviated product lifecycles.
Strict reliance on patents (standing alone) however, as constituting a company’s primary means/strategy to achieve and sustain a competitive advantage in the global marketplace may, in reality, do quite the opposite, i.e., hand – shift the advantage to competitors because, among other things, lengthy patent processes can delay, even stymie, rollouts of new products in certain industry sectors. I suspicion that a sizeable number of business decision makers presume (their) market – competitive advantages can be indeterminately protected today by conventional forms of intellectual property, i.e., patents especially.
I’m not suggesting the current patent process be overhauled necessarily or done away with as some advocate. While I hold my own thoughts on this subject, I do recognize that matters related to intellectual property are global, complex, and multi-faceted, especially as innovativeness is no longer the exclusive province of a few, rather widely dispersed among an ever growing number of emerging economies that are increasingly intertwined with rapidly evolving economic powerhouses, i.e., China, India, Brazil, etc.
On the other hand, I am suggesting that other measures, perhaps secrecy for one, while recognizing it may present some new implementation, maintenance, and perception challenges for companies, can, quite possibly work well in some instances (in lieu, that is, of conventional IP) if properly coupled with (a.) effective stewardship, oversight, and management, (b.) realistic and monitorable policies, procedures, and practices, and (c.) product design excellence.
Admittedly, secrecy, in the eyes of some business decision makers, may appear a bit of a curious strategy in today’s ultra-connected global business environment where information, data, and knowledge routinely travel at warp speed. The notion of sustaining a ‘business secret’ is perhaps, somewhat realistically, an increasingly challenging, if not unfeasible prospect for some decision makers, for all but a very minimum time frame.
While I am a consistent, albeit eyes wide open proponent of (trade) secrecy under certain circumstances, the constant ‘rotation’ (movement) of information, data, know how, and people in network – node fashion within business units and/or entire industries, has become so frequent and routine, that neither a company nor its decision makers should assume any ‘knowledge-based advantages’ that may have already accrued, can be sustained for any extended, but particularly, indeterminate period of time!
Reputational Risks, Company Culture, and Layoffs: Recession Necessities Or Ineffective Use Of A Company’s Intangible Assets…?
Michael D. Moberly December 3, 2008
As companies increasingly find it necessary (during this recession) to reach deeper in their employee seniority ranks for layoffs; will their ‘company culture’ be adversely – irreversibly affected and come to manifest itself as another form of reputational risk?
The Economist Intelligence Unit (Reputation: Risk of Risks, 2005) characterizes reputation as ‘how a business is perceived by stakeholders, customers, investors, regulators, the media, and the wider public’. They go on to say that ‘the most valuable asset in the capitalist economy is not cash, stock, or buildings, but trust, and, although a shortage of cash can bring a company to its knees, it is more frequently a loss of reputation that deals the final blow’. Indeed, a very strong perspective about the importance and relevance of reputation to companies today.
When I think of ‘company culture’ on the other hand, without referencing a particular academia generated definition, multiple (Hollywood) films come to mind, one of which is ‘Castaway’ which conveys a clear and distinctive example, albeit a Hollywood version, of a company culture, ala FedEx.
In an opening scene of Castaway, a FedEx employee played by Tom Hanks ‘jump seats’ to what appears to be an eastern European city’s newly established FedEx facility where he (Hanks) endeavors to elicit – instill a sense of timeliness and efficiency to the employees’ (country nationals’) work ethic for sorting and loading boxes on a FedEx truck for on time delivery.
While it’s likely FedEx had some oversight – influence in the film’s screen play, particularly the not so disguised message in that closing scene, i.e., neither rain nor sleet or being a ‘castaway’ for four years will prevent the delivery of a FedEx package. But, that’s precisely the point, FedEx, like thousands of other companies globally, do have a ‘company culture’ which underlies – produces its reputation, and in most instances, delivers value.
But, at what point (today) do layoffs that engulf employees, who quite literally embody the culture of a company, begin to manifest itself as (elevate) that company’s ‘reputational risk’? In other words, at what point will layoffs…
– irreversibly affect a company’s value, sustainability, and ability to lay the necessary foundations for future innovation and wealth creation?
– influence/motivate economic and competitive adversaries (globally) to exploit those circumstances to (further) undermine, erode, stifle, or sabotage their rivals’ strategic planning, project momentum, product launches, etc., to the point the targeted company’s ability to recover – recoup (post recession) losses are more difficult and costly, if not impossible?
To be sure, not all ‘company cultures’ are positive and perhaps that was the message the relevant House and Senate committees were sending to the c-suites of the U.S. automobile manufacturers last week. The message in this post is this; a company culture can be a dynamic and valuable intangible asset that is quite capable of change to reflect new products, services, and markets, so avoid turning your company culture into a ‘reputational risk’!
Michael D. Moberly December 2, 2008
What follows are a series of perspectives regarding the value of intangible assets relative to the current financial crisis, aka recession. While there are numerous individuals whose expertise in matters related to the monetization and/or devaluation of intangible assets surpasses my own, I do believe, rather strongly, that the overall state of intangibles still remains sufficiently untested to respectfully leave the door, at least ajar, to seriously present these perspectives with a straight face.
First, let me acknowledge upfront, I am an unabashed advocate of intangible assets, particularly in the areas which represent my contributions to this important field, e.g., identifying, unraveling, and sustaining (protecting, preserving) control, use, ownership, and value of the assets. Second, I remain unconvinced whether the value of a company’s intangible assets experience comparable devaluation in magnitude as have, for example, a company’s stock price over the past 90 days.
As I have stated many times previously (e.g., October 22d post, ‘The Financial Crisis Is A Perfect Time To Kick Start Discussions About Intangible Assets), I choose to frame these perspectives not solely through a Wall street lens, rather through the lens of thousands of main street and side street small, medium enterprises (SME’s) and small, medium multinationals (SMM’s) that are proportionately rich in intangibles. But, not wholly unlike their much larger NYSE and NASDAQ cousins, intangible assets still routinely go, in many instances, un-acknowledged, under-valued, under-appreciated, and under-utilized. And, there, in my judgment, lies the heart and soul of the problem, as well as the challenge.
I seek not to start with broad recommendations with high hurdles that necessitate massive restructuring of long-standing business practices, government policies and regulations, i.e., reaching regulatory consensus on reporting-accounting of intangibles on balance sheets. Rather, I seek to start, as I often do, by delving into what I believe are rudimentary issues about intangible assets. For purposes of analogy, I will use a west coast company, which I am somewhat familiar, that recently laid off and literally dismantled a long standing and globally embedded (internal) services unit.
A significant percentage of the laid off employees possessed not merely company – culture specific skills, rather readily transferrable and specialized intellectual capital, expertise, and know how, i.e., intangible assets.
While the demand for this company’s product (and related support services) will surely continue, albeit at a signficantly reduced pace, does the value of the company’s intangible assets decline proportionately when skilled employees are laid off. Keeping in mind, a significant percentage (perhaps 75+%) of this particular ‘silicon valley’ company’s overall value, sources of revenue, sustainability, and foundation for future wealth creation lie in – were directly linked to the intangible assets produced and delivered by at least, some of the now laid off employees.
For this particular company, and thousands of others facing similar challenges today, an underlying ‘blind spot’ of decisions makers, in my view, is that when employees are laid off valuable and sometimes irreplaceable, or, at least not readily replaceable, intangible assets, that have driven value, revenue, sustainability, and underlie (the company’s) competitive advantages, etc., are ‘walking out the door’ as well.
Why is it then, that for most companies, shedding employees represents decision makers’ initial response to financial crisis? Obviously, a significant rationale lies in the reality that fewer employees, quickly, if not immediately, translate as less payroll, hence less costs to the company. In these instances, it’s likely decision makers’ perceive employees more as tangible (fixed) assets, rather than not-easy-to-replace intangible assets. Company decision makers would be well served to look for options!