Archive for October, 2009
Michael D. Moberly October 30, 2009
In no other arena of economic and social relations has the phrase ’knowledge is power’ (coined by Sir Francis Bacon in 1597) proved more relevant than in today’s global knowledge-based economies wherein profitable business operations and transactions are increasingly dependant on company management team’s ability to foster, harness, utilize, and convert intangible assets (knowledge, know how, intellectual capital, etc.) into value, revenue, competitive advantages, and market position.
To do so consistently however, the rightful holder of those assets (management teams) must (also) be able to sustain (protect, preserve, manage) those assets’ control, use, ownership, and monitor their value and materiality throughout their respective value – life – function cycle.
In intangible asset-IP intensive companies, consistent and effective stewardship and oversight of the know how (intangible assets) produced are essential managerial (stewardship, oversight) dimensions, particularly with respect to a company’s sustainability, growth, and ability to execute successful transactions when those assets are in play and/or part of a deal. In any case, each is literally underpinned and shaped by the interconnected and frequently broadly dispersed flow of data and intellectual capital (intangible assets). This makes it all the more essential that the holders of those assets sustain sufficient control, as a prelude and/or precursor to, realizing (gaining) any economic – competitive advantage benefits.
In other words, ‘knowledge is (can be) economic – competitive advantage power’ today, as Sir Francis Bacon suggested it would in 1597, but only if its owner/holder can effectively sustain the necessary control, use, and ownership, and monitor its value and materiality indeterminately!
Michael D. Moberly October 29, 2009
Will the economic fact that increasing percentages (65%+) of most company’s value and sources of revenue lie in – are directly related to intangible assets become the impetus – rationale for management teams and boards to assess and possibly convert the traditional position of ‘information asset protection manager’ to ’intangible asset risk management and protection officer’?
The underlying requisites for company’s to be able to reap the economic – competitive advantage benefits that come from the effective utilization of their intangible assets lies in their ability to (a.) sustain (protect, preserve) control, use, and ownership of those assets, (b.) monitor their (contributory) value and materiality, and (c.) recognize the array of risks/threats to those assets. Each of these would, in effect, become some of the responsibilities associated with intangible asset risk management and protection.
Management team and board responsibilities for the stewardship and oversight of their company’s intangible assets have become fiduciary in nature which will surely prompt them, and legal counsel to collectively re-assess conventional responsibilities of the often times (vertical, siloed) information asset protection program that routinely focuses on proprietary information and intellectual property.
Some additional and key responsibilities of the ‘intangible asset protection and risk management’ position would entail, among other things…
1. Designing and putting in place best practices to forsee, intercede, and mitigate the various and asymmetric risks/threats directed to a company’s intangible assets that could (a.) elevate reputational risk, (b.) undermine/erode asset value, and/or (c.) lead to asset infringement, theft, or misappropration…
2. Recognizing the boundaryless nature of intangible assets and the extended and interconnected networks in which the exist…
3. Developing enterprise-wide platforms to foster a collaborative culture that understands and respects the development and contributory value of intangible assets…
Michael D. Moberly October 28, 2009
Converging and bundling a company’s intangible assets with its core mission – business strategy is a timely, important, and growing trend. But, why is such an exercise worthy of management team and board’s time?
First, its an economic fact – business reality today that, 65+% of most companies’ value, sources of revenue, sustainability, and foundations for future wealth creation today lie in – are directly related to intangible assets.
Second, when properly executed, the convergence – bundling of a company’s intangible assets will better reflect-address a company’s core business mission and strategic (operational) culture which, in turn, can deliver more effective and efficient utilization of those assets by, among other things, identifying opportunities and strategies to (maximize) extract value!
Third, converging and bundling a company’s intangible assets with its core business mission is not just a masqueraded prelude to downsizing, shifting of resources, or elimating business units. Rather, convergence and bundling are about integrating the valuable – contributory intangible assets a company produces and recognize them as business disciplines. The objectives of course, are to (a.) elevate the assets’ value, (b.) deliver (additional) revenue and (enterprise wide) sustainability, and (c.) position the assets to become viable (strategic) foundations for (company) growth and expansion. All of which, its important to note, have relevance to shareholders and shareholder value.
Fourth, management teams and boards can kick start the process of converging and bundling their intangible assets by: (a.) determining who, how, and where those assets are produced and/or exist internally and externally, (b.) identifying the relationships and inter-connectedness of those assets to the company’s mission, and (c.) approximating the contributory (value) those assets produce internally and externally relative to the company’s products and services, as well as its brand, goodwill, image, reputation, etc.
Fifth, taken literally, converging and bundling a company’s intangible assets with its business strategy means recognizing that decisions related to the development and utilization of those assets become business decisions, not solely legal processes.
Ultimately, management teams and boards are obliged to elevate the level of management, oversight, and stewardship exercised over the full range of their company’s intangible assets and the favorable internal and external networks, relationships, and connections those assets facilitate and/or produce.
This post was adapted/modified by Michael D. Moberly from the work of Ron Carson.
Michael D. Moberly October 28, 2009
The risks (threats) to the intellectual property and intangible assets held by SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) are quickly rising to systemic levels!
Those systemic risks (threats) lie largely with ’insiders’ along with the proliferation of extraordinarily sophisticated and predatorial data mining, information brokering, infringement, misappropriation, and counterfeiting operations that function profitably on a global scale. The risks (threats) presented by these entities and the subsequent asset compromises that occur are persistent, assymetric, and frequently devastating to small company’s profitability, competitive advantages, and reputation, etc. Multiple respected studies consistently report that U.S. company’ losses of IP (largely attributed to insiders, infringement, theft, and misappropriation, etc.) range from $45 to $200+ billion annually.
True enough, the adverse affects/consequences of those IP – intangible asset losses/compromises incurred by U.S. SME’s and SMM’s, may not rise to the same ’systemic level’ as experienced by AIG, Lehman, or Bank of America, etc., but, they do carry adverse cascading (systemic) affects that are often equally devastating in the SME and/or SMM arenas.
BusinessDictionary.com (as noted in a previous post) defines systemic risk as the probability of loss common to all businesses, and inherent in all dealings, in other words, risk that cannot be circumvented or completely eliminated. If SME’s or SMM’s wish to expand, grow, and prosper it will be necessary and perhaps inevitable, at some point, for some or all of their IP and intangible assets to be part of a (business) transaction, and therefore, in play and therefore, at risk.
Systemic risk then, is the vulnerability, probability, and criticality associated with loss, theft, misappropriation, infringement, compromise, and/or leakage of IP (know how, trade secrets) which can constitute, for SME’s and SMM’s the equivilent of ’market shocks’ which, in turn, produce adverse ’cascading’ affects throughout an enterprise and its alliance partners, suppliers, and service providers as well.
Of course, those adverse affects are comparable to the systemic risks experienced by the financial services industry recently, i.e., defaults, bankruptcies, employee layoffs, loss of markets and market share, and competitive advantages, which unlike the bailed out and/or merged financial services sector firms, is generally irreversable and unrecoverable for SME’s and SMM’s.
Michael D. Moberly October 26, 2009
Question; are there systemic risks to the intellectual property and intangible assets held by companies?
The phrase-term ‘systemic risk’ has a relatively long history. But, its revival, beginning in early Fall, 2008 has now become part of our ’recession lexicon’. Its subsequent wide spread use in legislative (House, Senate) committee hearings on Capital Hill wherein testifying cabinet secretaries, legislators, regulatory agency heads, and c-suites routinely evoked the term (systemic risk) as part of a seemingly self-explanatory narrative, i.e. visualized sound byte, to convey (a.) how – why financial institutions and the financial services sector was literally unraveling, and (b.) the intertwined – embedded nature/elements of the globalized financial system. Then interestingly, systemic risk was also ultimately applied as the underlying rationale for the notion of ’too big to fail’, hence the TARP bailout provisions.
One, perhaps best understood, definition of systemic risk is provided by Steven Schwarcz of Duke University School of Law wherein he described it (systemic risk) as ’the probability that cumulative losses will occur from an event that ignites a series of successive losses along a chain of (financial) institutions or markets comprising a system’.
Another, admittedly ‘cherry picked’ definition of systemic risk is provided by BusinessDictionary.com in which it (systemic risk) is defined as ’the probability of loss common to all businesses…and inherent in all dealings…risk that cannot be circumvented or eliminated’. This definition surely places the notion of systemic risk in an enterprise (IP-intangible asset) risk management (ERM) context.
A commonality embedded throughout the various definitions of systemic risk is the notion of a ‘triggering event’. A trigger is an event that causes (internal, external domino types of) consequences that adversely affects (a company’s) competitive advantages, asset value, market position, reputation, brand, image, goodwill, etc. In the case of a company’s IP and/or intangible assets, ‘triggering events’ could be the (a.) theft, misappropriation, infringement, and/or leakage, and/or (b.) significant counterfeiting or product piracy anyone of which could collectively undermine asset value, competitive position, etc.
Collectively then, this constitutes a fairly strong rationale why company’s should engage in routine monitoring, valuation, and ’stress tests’ on their IP and intangible assets. The purpose is to objectively and proactively determine if any (asset) materiality changes, value erosion, and/or undermining, etc., are occurring and prevent and/or mitigate same. Such exercises are now being recognized by management teams, boards, and c-suites alike, as useful and necessary ingredients to (a.) the effective stewardship, oversight, and management of their company’s intangible assets, and (b.) avoid costly and often times irreversible surprises!
Michael D. Moberly October 22, 2009
There’s little question that intellectual property (IP) and intangible assets are now key, foundational tenents for successful business management, primarily because both IP and intangible assets can, if stewarded and overseen effectively, become potential sources of substantial/domiant (company) value, revenue, sustainability, profit, growth, and competitive advantage.
To be sure, management teams, boards, and D&O’s who still consider IP and intangibles as merely constituting service functions and/or cost centers are well behind ‘the curve’ especially when most (prospective) investors view the presence and quality of a company’s IP and intangible asset strategy to be crucial enhancers of (a.) profit, (b.) share price, (c.) market position, and (d.) competitive advantage. In fact, most respondents to the Howery Survey of Investor Attitudes on IP Protection assert that company’s that lack an effective IP (intangible asset) strategy can have a detrimental effect on company performance.
In today’s increasingly know-how based business environment (economy) in which IP and intangibles are conservatively comprising 65+% of most company’s value, investors and financial analysts are giving much more weight to IP (and intangibles) when making their invest – don’t invest decisions. In fact, one in four of the Howery Survey respondents state they have actually turned down investment opportunities due to a company’s inadequate approach to IP. Fully 95% of the Howery survey respondents report that it is no longer sufficient, in the context of their investment decision, for a target company to merely own IP with no (aligned, integrated) protection, managerial, or competitive advantage peripheals.
Instead, the Howrey survey respondents believe, in substantial numbers, that before a favorable investment decision is made, the target company must have specific strategies (best practices) in place to not only exploit those assets, but also, have an IP and intangible asset protection program aligned with the target company’s competitive strategies.
The proverbial bottom line (in conjunction with the Howery Survey’s findings) is this; companies that presume, solely, that conventional IP enforcement protections are adequate to attract investors are finding instead, they’re no longer sufficient (standing alone) to favorably satisfy prospective investor demands vis-a-vis their investment decision criteria. To consistently attract serious investors, companies should also have in place (a.) comprehensive and on-going strategies to effectively safeguard those assets to reflect todays increasingly aggressive, predatorial, and winner-take-all business transaction environment, and (b.) seamlessly integrate same into a viable competitive strategy for utilizing and exploiting those assets.
(Adapted by Michael D. Moberly from the work of Howery, Simon, Arnold & White’s Survey Of Investor Attitudes on IP Protection)
Michael D. Moberly October 21, 2009
A franchise’s brand is everything, but also, it can be an extraordinarily valuable intangible asset!
Once a franchise has been established, there are two key brand (franchise) integrity management issues that each franchisor-franchisee should consider, i.e.,
1. The first is obvious, i.e., how to maximize profitability of the brand throughout its respective life-value-functional cycle.
2. The second is perhaps less obvious, i.e., avoid characterizing the franchisor’s (so-called) ’trade secrets’, i.e., its secret recipes, sauces, processes, etc. solely in conventional intellectual property terms, rather frame those assets as valuable and proprietary competitive advantages (intangible assets) that require consistent management, stewardship, and oversight to (a.) monitor changes in the assets’ materiality and/or value, and (b.) indeterminately sustain control, use, and ownership over those assets.
Brand is the essence of a franchise! It’s a culmination of the key products’ name and the franchises’ overall reputation that’s recognized in the marketplace which is of significant value to not only the franchisor, but to its shareholders as well.
Franchise brand integrity (management) on the other hand, are those strategies, processes, features, designs, and business practices, etc., that collectively ensure the integrity of the (1.) products, (2.) intellectual property, (3.) image, (4.) reputation, and (5.) shareholder value.
The primary objectives of a franchise brand integrity (management) program are (1.) sustain and/or improve margins, (2.) sustain consumer – shareholder confidence in products and services, (3.) sustain (ensure) authenticity of the franchises’ products and services, and (4.) ‘keep the brand alive’ in the marketplace! But remember, effectively safeguarding each of the franchisors’ products is equal in importance to the promotions used to market that product.
(Adapted by Michael D. Moberly from the work of Richard and Penelope Post and their book ’Global Brand Integrity Management’)
Michael D. Moberly October 20, 2009
Let’s face it, intangible assets are not always easy to articulate, to explain, or define for those unfamiliar with their existance or unaccustomed to recognizing (measuring) their contributions to a company’s value, revenue, and/or sustainability. For them, intangible assets are, at first blush, likely to be perceived- interpreted more as esoteric and theoretcial concepts espoused in a university lecture hall absent ’real world’ applicability. After all, intangibles do lack physicality and there’s absolutely no conventional ’bricks and mortar’ elements to be found.
Intangible asset professionals who spend time conducting briefings and awareness training for internal clients or prospective (external) clients must always be prepared to field an array of critical, and sometimes skeptical questions. How those questions are answered of course, affects, as it does in any profession, the overall credibility of the intangible asset mission, i.e., to demonstrate better, smarter, and more effective techniques to utilize, manage, steward, and oversee (a company’s) intangible assets.
For some management teams and their directors and officers, there remains some skepticism about extending too much credibility to intangible assets. That’s why its so important to bring as much (definitional, business, and economic) clarity as possible to conversations (presentations, briefings, seminars) about intangible assets. This includes clearly articulating what intangible assets are, what they’re not, the various forms they take, and equally important, how, and when they are effectively applied, they can lay necessary foundations to boost a company’s value, revenue, and sustainability.
Ironically, in the midst of this economic downturn, conventional wisdom would suggest management teams and boards would be more receptive to considering – examining (new, different, but) viable options put before them that purported to elevate their company’s potential for successfully weathering the recession.
In that regard, and respectfully, its challenging for some management teams and boards to step outside their past practice comfort zones to critically examine/assess what they believe has worked best for them and their company previously. Management teams and boards are, generally speaking, realists and therefore reluctant – skeptical about embracing an initiative that appears overly optimistic insofar as outcomes are concerned and/or espouses too much simplicity in its execution.
Intangible assets are unique contributors to company value, revenue, sustainability, and future wealth creation!
Michael D. Moberly October 19, 2009
University ‘schools of business’ should become (more) involved in elevating awareness and providing guidance to management teams and boards of SME’s (small, medium enterprizes) and SMM’s (small, medium multinationals) regarding the effective utilization of their ’intangible assets’. Such an initiative, would involve, among other things, demonstrating how small businesses can:
1. identify, unravel, and determine/assess each assets’ contributory value.
2. apply near – long term strategies to more fully and effectively utilize – exploit their intangible assets to mitigate challenges to (their) viability, sustainability, and profitability exacerbated by this recession
Underlying a university (school of business) based intangible asset ‘awareness – guidance’ initiative, as proposed here, are multiple, inteconnected rationales (realities), four of which are:
1. significant percentages of U.S. workers have, and will continue to ’get their start’ through employment with a ‘small business’. Thus, sustaining those opportunities and those SME’s and SMM’s are economic imperatives for a region, state, and/or community, which universities can take a lead and share.
2. 65+% of most company’s value, sources of revenue, sustainability, and foundations for growth, expansion, and future wealth creation today lie in – are directly linked to intangible assets. This economic fact is relevant not only to Fortune 1000 types of firms, rather intangible assets are produced by and become embedded-integrated economic/competitive advantage drivers in most SME’s and SMM’s as well.
3. most SME’s and SMM’s will not be direct recipients of U.S. government ’economic stimulus’ monies. Instead, many must find their own creative means/devices to sustain their business during this recessionary period and await opportunities to re-access (their) credit lines and loans.
4. a significant, but unknown percentage of SME and SMM management teams and boards lack sufficient familiartity and/or guidance (training) about intangible assets, i.e.,
a. what intangible assets are, and the different forms/contexts they take…
b. the necessity to protect-preserve control, use, ownership, and monitor the value of intangibles…
c. current strategies to bundle, position, leverage, and extract value from intangible assets.
Effective utilization of a company’s intangible assets, is not being portrayed here as the proverbial ’silver bullet’ for small businesses to suddenly regain their standing, recoup their losses, and re-achieve profitability and sustainability undermined by this recessionary period. And, to be sure, there are strong and sometimes divergent views held by various professional sectors regarding the utilization, valuation, monetization and securitization of intangible assets.
In this increasingly knowledge-based (business) economy, the effective management, stewardship, and oversight of a company’s intangible assets should not be overlooked or neglected especially as they can be potentially viable and lucrative pathways (strategies) to achieve sustainability and opportunities for growth, expansion, profitability, as well as lay foundations for future wealth creation.
(Adapted by Michael D. Moberly from the work of Dr. Chris Martin and a 2007 report produced by the Association of Chartered Certified Accountants)
Michael D. Moberly October 16, 2009
Management teams and boards are becoming (more) familiar with and achieving (greater) confidence in the strategic management and oversight of their company’s intangible assets. This includes honing skills that lend themselves to identifying, unraveling, utilizing, positioning, bundling, and leveraging intangibles to enhance and extract value.
In turn, these strategic skills can be executed in a manner to create competitive advantages, e.g., (a.) leverage them to enhance and sustain ‘incumbancy leads’, (b.) showcase them (internally, externally) as best practices for monitoring – safeguarding asset integrity and value and (c.) apply them as petitions to improve and/or create (new, relevant, and more favorable) industry standards and/or state – local regulations, etc.
However, the ability to execute, sustain, and/or advance these (and other) competitive advantages is largely dependant on the foresight and willingness of management team’s and boards’ to ensure that intangible assets remain routine action items on their respective managerial – oversight agenda’s, for example, the necessity to produce:
1. on-going assessments of a company’s intangible assets relative to (a.) their control, use, ownership, and value, and (b.) their status, stability, fragility, sustainability, and contributory roles and value.
2. strategic (forward looking) assessments to project what intangible assets should be acquired, cultivated, and/or nurtured as preludes to creating and underpinning competitive advantages that reflect a company’s over-the-horizon (a.) strategic planning, (b.) product – service trajectories, (c) industry and sector forecasts, and (d.) consumer (supplier, vendor) expectations
Intangible assets left un-managed, un-recognized, under-utilized, or merely dormant will produce few, if any, (sustainable) competive advantages nor deliver any substantive or lasting value to a company. ensuring the asset’s value isn’t eroding or being undermined by competitors or virtual adversaries.
In strategically managing intangible assets, it’s important to recognize that they are consistently rising sources of value, revenue, and foundations for future wealth creation and sustainability in most companies. It’s important therefore, that neither management team’s nor board’s characterize-consider intangible assets as being the exclusive province of accountants and legal counsel.
Instead, all things intangible should be treated as strategic and collaborative (business) decisions many of which can be leveraged as offensive and/or defensive weapons to guide and advance a company.
(This post was adapted for application to intangible assets by Michael D. Moberly from the work of Markus Reitzig)