Archive for January, 2010
Michael D. Moberly January 15, 2010
In a 2008, UK-based study titled ‘The Hidden Marketplace’ it was reported, to no particular surprise, that there’s quite strong agreement among company management teams that intellectual property and probably intangible assets as well, are (1.) valuable assets, that, (2.) warrant protection.
A reality though, as reported in the study, again, no surprise here, is that those dual perspectives of value and protection, are more reflective of managerial aspirations than reality. That is, management teams seldom translate (execute) their espoused perspectives about IP into concrete actions such as (a.) registering their IP, (b.) engaging in employee IP awareness training, and/or (c.) pursuing – taking action against (internal, external) IP infringers.
Admittedly, this (study) research project focused predominatly on the demand side – consumptive aspects of the larger counterfeit market. Specifically, the research sought to get a better picture of what is happening in those so-called ’hidden marketplaces’, i.e., places of employment wherein employees routinely purchase counterfeit and/or pirated goods. A very worthy objective for the principle investigators of this study (as an outgrowth of the project as whole) was to develop relevant tools and assistance for employers and enforcement agencies to help address the (IP theft-infringement) problem from the inside.
This study also examined three (other) issues relevant to the principles of the Business IP and Intangible Asset blog, i.e.,
1. employee attitudes regarding the value of IP
2. a company’s (management team) approach to protecting its own IP, and
3. what levels of awareness exist among employers – management teams about the problems associated with IP theft in their workplace.
These issues, in my view, would be better framed in a normative context, i.e., (a.) what should management team attitudes be about protecting their company’s IP, and (b.) what is the necessary (appropriate) level of awareness management teams should possess regarding IP protection to effectively benefit their company?
The answer to these questions lie in management team recognition that it’s quite likely, 65+% of their company’s value, sources of revenue, and building blocks for future wealth creation and sustainability are directly related to (their) intangible assets and IP. Underpinning that recognition is management teams’ ability and committment for sustaining (managing) control, use, ownership, and monitoring the value and materiality of its IP and intangible assets. Absent those requisites, its unlikely progress will occur!
January 13th, 2010. Published under Analysis & Commentary: Studies, Research, White Pap, Business Applications, Fiduciary Responsibility, Reputation risk.. No Comments.
Michael D. Moberly January 13, 2010
It used to take years of dedicated bad management to destroy a company, now it can be done almost overnight, and it’s not just due to the range of hazards, e.g., fraud, financial calamities, terrorism, and/or failures in supply chains, etc., that can threaten a company, it is the speed which such risks can strike and how they can rapidly escalate and cascade throughout an enterprise internally and externally! (Adapted by Michael D. Moberly from remarks of Sir John Bond, Chairman of UK based HSBC)
Risks to business continuity and intangible assets such as intellectual property, brand, reputation, image, goodwill, supply chains, and competitive advantages are rising and asymmetric. In many respects, they represent outgrowths and/or consequences of a hyper-competitive, predatorial, winner-take-all, go fast, go hard, go global business transaction environment functioning in knowledge-based economies.
At least one favorable consequence though, in my view, is more attention is being drawn (normatively speaking) to the precise role and (fiduciary) responsibilities of corporate boards relative to including (addressing) business enterprise (business) risk as routine action items on their agendas, sometimes through ‘risk committees’.
An initial step toward achieving this essential addition, again, in my view, lies in ensuring boards receive professional, objective, and relevant briefings and awareness training absent any ‘agenda’ other than providing strategic and/or tactical insight, perspective, and guidance to benefit the company.
In 2005, Lloyds and The Economist Intelligence Unit collaborated to create a briefing paper (study) titled ‘Taking Risk On Board: How Business Leaders View Risk’. The report (a.) explored the extent to which risk is now a board-level responsibility, (b.) described what boards see as their risk-related priorities, and (c.) identified what they do and don’t do to implement effective risk management strategies in their organizations.
The Lloyds – The Economist Intelligence Unit report concluded that yes, most boards are taking risk more seriously. However, in most instances, a board’s rationale for doing so had been prompted more by the imposition of governance and regulatory mandates and not necessarily by a genuine recognition that their company’s business strategy would benefit from fully integrating (top down) risk management initiatives directly and consistently into board decision-making.
Somewhat more disconcerting however, was the finding that board’s frequently characterized the act of addressing risk in their boardrooms as constituting (a.) constraints, (b.) diversion of resources, and/or (c.) obstacles (impediments) to necessary – normal business risk-taking.
(Perspective and insight for this post was gleaned from – adapted by Mr. Moberly from a 2005 report produced by Lloyds and The Economist Intelligent Unit titled ‘Taking Risk On Board’.)
Michael D. Moberly January 12, 2010 (Part Two of Two Part Post)
There should not be any particular mystery, managerial, or otherwise, about best practices for utilizing-exploiting a company’s intangible assets! Yes, there is some specialization that is helpful insofar as identifying, unraveling, positioning, leveraging, and maximizing the value of intangibles. In most instances, that expertise can be readily achieved without the encumbrances of conventional ’mba’ speak that tends to (a.) favor tangible (physical) assets, and, (b.) be out-of-step with business realities of the knowledge-based (global) economy in which 65+% of most company’s sources of value, drivers of revenue, and building blocks for future wealth creation and sustainability lie in – are directly related to intangible assets and intellectual property (IP).
Some key ’managerial mysteries’ about intangible assets that must be overcome are:
1. inhibitions (reluctance) to advocate and/or develop strategies to measure – count them in relatively absolute terms.
2. the assets’ lack of physicality, i.e., one knows they exist and recognizes their contributory value and the economic-competitive advantages they deliver, e.g., brand, reputation, image, goodwill, intellectual capital, etc., but one can’t necessarily touch or see those assets in the same manner as physical (tangible) assets, e.g., plants, equipment, inventory, capital, etc.
To further help demystify intangible assets, its important to recognize they exist in three broad categories:
1. Intangible goods and products whose value can be established in the marketplace, e.g., licenses, franchises, patents, trade secrets, and brand value, etc.
2. Intangible competencies which include distinctive and perhaps proprietary processes and routines, e.g., know how and intellectual capital held and practiced by employees and capable of being created and deployed to the right people at the right time in ways that deliver competitive advantages, value, and bottom-line profits.
3. Latent capabilities which include such things as reputation, image, leadership, innovativeness, and the caliber (capability, capacity) of the workforce to create, identify, and respond to market opportunities to accommodate todays hypercompetitive, aggressive, predatorial, and winner-take-all (global) business transaction environment.
Becoming a more forward looking – forward thinking company through more effective stewardship, oversight, management, and reporting of intangible assets carries some degree of risk, most of which can be mitigated while accruing significant business benefits.
(Perspective on this post was gleaned by Mr. Moberly from long term research conducted by faculty of the Cass Business School, City of London, UK)
Michael D. Moberly January 11, 2009 (Part One of Two Part Post)
Unfortunately, discussions about a company’s intangible assets rarely prompt management teams’ pulse to race as this blog consistently tries to make the case it should. There are a variety of reasons why management teams representing SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) tend not to attach higher priority to strategies for engaging, utilizing, and building (more) value in their company’s intangibles, many of which have been discussed here in previous posts.
For some, the subject of intangible assets is shrouded in - veiled by conventional ‘mba’ speak, that sometimes is out-of-step with the realities of global, knowledge-based economies in which 65+% of most company’s sources of value, drivers of revenue, and building blocks for future wealth creation and sustainability lie in - have shifted to intangible assets and intellectual property and away from tangible (physical) assets.
Intangibles’ lack of (conventional) physicality has no doubt contributed to some management teams being fretful – uneasy about devoting time to identifying and utilizing intangible assets, notwithstanding the fact that in most instances, they already exist – have been developed/produced by their company. Again, no doubt, some of that reluctance is attributable to the still much admired Deming (conventional mba) perspective that ‘one can’t manage what one can’t measure’. In some circles, this long standing tenent of business management has been ‘misinterpreted’ to mean that intangibles, since they lack physicality, can neither be managed or measured effectively.
In other words, because a company’s key assets lack physicality, management teams, at first blush and absent training/orientation, may be less inclined – receptive to recognizing/engaging them as actual or potential sources of value. In many instances, intangibles merely await management team action, but, because they’re not seeable or touchable in a conventional (Deming) context, their further contributions to (company) value, revenue, and sustainability are left off board room agendas.
For most SME’s and SMM’s, their intangible assets actually exist in a fairly broad spectrum ranging from, (1.) intangible goods and products, (2.) intangible competencies and/or knowledge, and (3.) latent capabilities, each of which will be discussed in the next post.
(Perspective on this post was gleaned by Mr. Moberly from long term research conducted by faculty of the Cass Business School, City of London, UK)
Michael D. Moberly January 8, 2010
It’s surely a fiduciary responsibility of the new decade. But, there is no (proverbial) silver bullet, nor a one size fits all approach (template) for companies and management teams to commence unlocking and putting to use the value of their intangible assets. A prudent starting point though is to accept the economic fact that (65+%) of the origins, sources, and contributions to most company’s value, revenue, and future wealth creation have changed from tangible (physical) assets to intangible assets. In the global knowledge-based economies, that’s a business reality thats deeply embedded and irreversible.
Today, a necessary requisite to company sustainability and success lies in management team’s ability and determination to not merely recognize, but mobilize those frequently and long overlooked resources which are of course, intangible assets. Unfortunately, experience notes, intangibles are routinely (a.) taken for granted, (b.) inadvertently allowed to become stagnant or concealed, and (c.) in many instances, dismissed, neglected, and overlooked as potential and viable sources of value and revenue to companies.
However, as Weston Anson consistently states, as does the Cass Business School (UK) consistently emphasize in their research, the value of intangible assets depends upon – is related to how its used, in other words, the context. This means, instead, each company management team must:
1. devote time to (finding) identifying and unraveling individual assets and/or clusters and chains of intangible assets…
2. assess each assets’ status, stability, fragility, and contributory value to the company relative to revenue, forward looking ‘building blocks’ for additional/future wealth creation, competitive advantage, and (company) sustainability.
In the near term, as is so often the case, progress in the ‘intangible asset arena’ is largely dependant on the forward thinking proclivity of management teams to become learned advocates (of intangibles) and recognize it as an effective tool-strategy to stimulate change, innovation, and improvements in their company’s by engaging and utilizing intangible assets. Doing so today, is neither a ‘crap shoot’ nor overly fraught with risk, rather its merely being a prudent and intelligent manager who acknowledges and embraces the fiduciary responsibilities that underpin business success in this new decade!
Michael D. Moberly January 6, 2010
Generally, I tend to frame business issues and transactions through a broad, but nevertheless, single lens; the lense of risk. This includes mulling over strategies to mitigate and/or manage those risks, particularly, in my case, risks related to sustaining control, use, ownership, and monitoring value and materiality of a company’s intangible assets and intellectual property (IP).
Though, in many enterprise risk management equations today, there remain boards that do not share or embrace those perspectives, in part because they bring their own views and experiences about risk to the boardroom which, in my judgment, may be out-of-step with the expanding spectrum of asymetric risks that routinely confront businesses today. When this occurs in boardrooms, it makes it difficult, absent effective-high level training, for boards to…
1. find a common context to frame and build a strategic concensus for understanding, approaching, and prioritizing risk on behalf of the company
2. design an objective and quantitative framework to benchmark against, i.e., one that does not rely on situation specific and/or subjective anecdotes.
Also, another possible consequence is that ‘risk’ will not become a necessary and routine (action-discussion) item on board agendas. In fact, a 2008 Deloitte report titled ‘The Risk Intelligent Board’ suggested that a significant percentage of board members conceive-address company risk…
1. solely at an intuitive level
2. by relying (sometimes exclusively) on perspectives expressed by internal risk specialists in combination with a boards’ own risk management committee, and/or
3. in a narrow manner by focusing on protecting – mitigating risks that can adversely affect company value through existing and presumably, tangible (physical) assets.
While the Deloitte report courteously suggests there is nothing especially wrong with the above perspectives, they do represent the proverbial ‘half a loaf’ approach. Done correctly, the stewardship, oversight, and management of a company’s risks, at the board level, should include addressing risks in a manner that is aligned with achieving long term strategies.
Too, by regularly inquiring about – addressing risk in the boardroom, a persistent problem will be confronted and likely diminish, e.g., the tendency for risk management activities to take place in subjective, anecdotal, and isolated silos.
Respectfully, it’s difficult to appreciate why some boards are not attuned to seeking the necessary training to become Deloitte’s version of ’risk intelligent boards’, especially in light of the economic fact that 65+% of most company’s value, sources of revenue, and foundations for future wealth creation and sustainability lie in – directly evolve from intangible (not physical-tangible) assets!
Michael D. Moberly January 5, 2009
When negotiating – executing any business transaction, its increasingly likely intangible assets and intellectual property (IP) will be in play, if not, they should be!
Merger and acquision due diligence that focuses specifically on intangible assets and IP is particularly relevant today because 65+% of M&A value – pricing are embedded in intangible assets and IP! Presumably, its in the interest of the ‘acquiring’ party’s due diligence to fully assess the status, stability, fragility, and defensibility of those assets to determine if control, use, ownership, and value can be sustained (practically and legally) pre and post transaction.
In addition, its equally prudent for M&A due diligence teams to examine the assets to:
1. identify and assess the existance of any ’me too’ aspects in which the value of the assets will diffuse or erode due to (a.) the breadth of the current field of those assets’ underlying technologies, or (b.) being readily superseded (undermined) if competitors – economic adversaries were able to acquire - launch new technologies that would render those assets’ commerically obsolete, i.e., significantly shorten their projected life-value-functional cycle…
2. determine if (a.) any component will be subject to export, and, if so, (b.) proper/current legal protections are in place in the U.S. and internationally, otherwise, additional legal – regulatory compliance events could be triggered along with significant costs attached…
3. fully unravel - verify their origins and identify/assess if any (problematic) legal restrictions and/or liabilities exist that could inhibit their (a.) complete and unrestricted utilization and/or commercialization, (b.) undemine its value, (c.) erode its competitive advantages and market position, or (d.) add substantial (post transaction) costs for litigation and/or remedies (fixes)…
4. determine if significant asset (IP) infringement, counterfeiting, piracy, misappropriation, theft, and/or compromises (above normal business risk thresholds) have – are occurring either before or as a reaction to the M&A transaction…
5. determine if key intellectual-human capital ‘drivers’ (i.e., personnel) are leaving the company in advance of the M&A (e.g., going to competitors, etc.) that could adversely impact projections/assessments for near term viability of the transaction and strategic sustainability, efficiencies, value, defensibility, and revenue generating capability of the assets, post transaction…
(Mr. Moberly adapted this post from the excellent work of L. Burke Files.)
Michael D. Moberly January 2, 2010
The increasingly essential (fiduciary) responsibility for managing a company’s reputation risk should not emulate the conventional Hollywood-style publicist or public relations model. Company reputation risk management is now about conceptualizing-framing enterprise-wide practices to objectively and proactively address reputational risks that are, in every sense, ‘internet asymetric’!
Respectfully then, any company reputation risk management initiative which integrates that ‘hollywood’ model’ will quickly find itself well behind the curve when it comes to trying to monitor and/or address the realities of the nanosecond, unfiltered, predatorial, and sometimes revengeful and conspiratorial (manufactured) communications that are, unfortunately, increasingly routine in the (global) online social media and networking communities.
With more frequency, company reputational risks are sparked, initiated by, and/or evolve from social (online) media sources, e.g., blogs, message boards, competing/underming web content, and other social (viral) networking communities that literally transgress, circumvent, and/or bypass traditional forms of communication and information dispersal. The problem – challenge this poses to company’s is fairly straight forward, that is, adverse social media communications can expose – render organizations vulnerable to ever expanding reputational risks and threats 24/7.
There are three questions relevant to reputation risk management best practices that warrant management team reflection. One question lies in the warp speed in which unfiltered and sometimes ‘manufactured’ social media – networking community communications can materialize to have their initial (measurable) adverse affect – impact on company.
A second question lies in identifying appropriate and forward looking best practices to assess the ‘realness’ and duration of such adverse communications. In other words, how will (not if) such communications impact the company, its customers, its suppliers, and its stakeholders-shareholders?
And, of course, a third question lies in assembling a decision making team with the inclination and capability to objectively, effectively, and consistently identify, monitor, and assess any/all (company) adverse communications. An important key is that these assessments should not be conceived-framed in conventional risk – threat models. Rather, the assessments should be executed in contexts of (a.) how such communications can exacerbate additional vulnerabilities (portals) that may/can create cascading affects to the company’s reputation, and (b.) the probability, speed, and potentially global elements that those vulnerabilities may materialize.
And finally, a fourth question is, are most reputation risks really subject to being controlled in the necessary timely fashion/manner so as to prevent, or, at minimum, mitigate the risks/threats to permit a company to effectively and rapidly (fully) recover (e.g., economically, competitive advantages, sales, etc.,) from the adverse communications?