Michael D. Moberly April 18, 2012
First, let’s agree that managing and safeguarding a company’s intellectual (relationship and structural) capital (IC) is a business necessity and fiduciary responsibility. It’s simply not an option nor a luxury for companies that wish to remain economically and competitively ahead. Why, because a company’s IC serves as one of several key (intangible asset) underliers and enablers of company growth, profitability, and sustainability.
IC is often characterized (defined) as a company’s collective knowledge, know how, and skills that accumulate and/or accrue over years of operation. But, that’s not all, IC is also the understanding of how and when to best apply and/or adapt that knowledge to fit particular circumstances or challenges.
Managing and safeguarding intellectual capital starts by recognizing the economic fact that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability evolve directly from intangible assets, of which IC is just one.
A ’best practice’ IC management and protection regime should:
- be relevant and flexible to accommodate diverse and complex companies and circumstances as well as each of the formats which IC manifests itself (exists)
- not impede or appear debilitating to existing business processes, operations, and functions
- recognize that IC is perishable, easily transferrable, and consistently vulnerable to theft, misappropriation, and/or compromise
- be tailored to address (mitigate) the often nuanced and increasingly sophisticated vulnerabilities and risks relative where and how a company conducts its business-transactions, its industry sector, and its product/service lines.
Managing and safeguarding a company’s IC, in its most simplistic form, also consists of two key responsibilities:
- conducting – maintaining an inventory of a company’s IC.
- possessing the knowledge and skill sets to objectively assess and distinguish how much andwhat aspects of a company’s IC are:
- in use – and, determine if they can be used more effectively and profitably to add value to the company.
- not in use – and, determine if they remain relevant, material, and/or useful to the company or, perhaps to other entities, vs. remaining as stagnant assets and costs.
Interestingly, Davis and Harrison (authors of ‘Edison in the Boardroom’) estimate that only 30% of many company’s entire IC portfolio may actually be in use, with the remaining 70% likely found in various (other) forms, e.g., intellectual property that has become obsolete, and/or embedded in various products or services that are no longer in the company’s inventory.
While these estimates may well be accurate, I tend to discourage companies from using those estimates if they inadvertently influence and/or pre-judge the outcome of an IC inventory – audit. My reasoning is that most companies possess – have embedded a virtual variety of IC, much of which is distinctive to an enterprise or project which ultimately needs to be recognized and assessed. But, the Davis and Harrison percentage estimates do catch one’s attention and perhaps that’s what they were supposed to do?
Let’s suggest for a moment that a company’s board and senior leadership conclude that it would be useful to resource an IC management audit – inventory. Should that occur, the (audit, inventory) team should be charged with the mandate to identify, assesss, manage, and exploit the company’s IC in the same-similar manner they would with other business (intangible) assets.
Unfortunately, there remain far too many company management/leadership teams and boards who cling to the perception that intellectual property enforcements, i.e., issuance of a patent, is synonymous with – equates to IC safeguards and management, when in fact it is only through the managed exploitation of IC (and IP) that value, sources of revenue, and building blocks for growth and sustainability can be generated.
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