Archive for 'Business Applications'

Intangible Assets Better Explanations!

August 18th, 2015. Published under Business Applications, Intangible asset training for management teams.. No Comments.

Michael D. Moberly    August 18, 2015   ‘A blog where attention span really matters’.

Intangible assets, better explained will facilitate their integration in managerial – strategic lexicon…but, let there be no question, I am a strong and unapologetic advocate of intangible assets!

An occasionally frustrating aspect to my client work in the IA arena is sparked, in part to the murky and confusing language, sometimes perceived as contradictory, used to define (describe, distinguish) IA’s, e.g., they

  • are the non-physical ‘things’ of value that a company owns.
  • have no set monetary value and little or no objective (consistent) means of measurement.
  • lack conventional sense of physical presence, i.e., they’re not subject to being seen or touched.

I am not suggesting this occasional frustrations can…consistently fit the increasing number of IA intensive and dependent firms regardless of the multiple realities above, e.g.,

  • they lack a conventional sense of physicality.
  • their performance and value is challenging to objectively monitor and measure.

I have encountered countless circumstances in which uninitiated management teams, boards, investors alike, struggle to make sense of IA’s, i.e., what the British often describe as the ‘invisibles’ which actually, is quite realistic and even understandable because, among other things, seldom, if ever, are IA’s singularly reported on company balance sheets or financial statements, that is, unless they have been acquired externally, or ‘lumped together’ as goodwill.

Decision makers and strategists are hard pressed…to deny the reality that rising percentages of organizations have far fewer tangible (physical) assets in their inventory. Instead, their ‘inventory’ is conceived and built using an array of IA’s. Forward looking-thinking organizational strategists are apt to say, and, quite correctly, the development and effective use of IA’s is essential to organization’s near and long term success and serve as cornerstones for (organization) viability, sustainability, profitability, and competitiveness.

Still, to the uninitiated…i.e., those operationally unfamiliar with intangibles, including those who are suspect and/or dismissive about IA’s contributory role and value coupled with their ambiguous definitions, contribute little to achieving the much needed ‘eureka’ moments, i.e., I get it, which is critical to these irreversibly permanent fixtures to the knowledge (IA) based global economy which most would agree, we’re only in the initial stage.

An often overlooked and misunderstood reality about IA’s is that most every organization, not just the new, IA intensive-dependent ones, through their management teams and employees, routinely create, use, and ‘bank’ a substantial amount of IA’s in the form of intellectual, relationship, structural, and competitive capital. But, unfortunately, in conventionally led enterprises, these IA’s are less apt to be recognized or efficiently utilized, because in large part I find, a not insignificant number of leaders – decision makers still perceive their organizations functioning in traditional ‘brick and mortar’ contexts, dominated by physical – tangible assets, which are presumed to be their primary means for creating value and/or serving as sources revenue.

Through my lens, there are infinite types – categories of IA’s…i.e.,

  • knowledge-based, or are born out of the intellectual capital held between our ears,
  • issued to our company as intellectual property, i.e., patents primarily, or
  • merely the accumulation of relationships, experience, and specialized (operational) know how that creates efficiencies and adds value.

When IA’s are prudently and optimally linked to understanding how and when to effectively, efficiently, and profitably use-apply them, it’s all but sure they will produce desirable and profitable outcomes and competitive advantages.

So, whether one is operating an already successful business or overseeing an SUBUR (start-up based in university research), I find most leaders – decision makers – strategists gravitate to their respective comfort zones often comprised of facts, figures, formulas, and ratios, etc., which their operational familiarity is firmly ensconced. In other words, quantitatively tangible components unfortunately with far too much regularity remain the framework for business decisions and strategic planning.

Organization decision makers’ find these comfort zones are easy to sustain because the measurement and accounting tools they are accustom to using and relying upon remain conventionally framed through a very conventional tangible assets lens, and less acquiring confidence in IA’s!

Today, those conventional comfort zones…packed with tangible numbers which still fit neatly on balance sheets and financial statements are being, quite necessarily challenged in favor of embracing and engaging the intangible sides of organizations. Management teams are obliged to push their conventional thinking and practices beyond the tangible to the intangible relative to the contributory value IA’s consistently deliver.

So, welcome to the specialized, but ever expanding arena of the information age and its outgrowth, the knowledge (IA) based economies, wherein IA’s now routinely play increasingly significant roles as contributors – facilitators to most organization’s value, sources of revenue, competitive advantages, sustainability, and ‘building blocks’ for growth and profitability.

But, despite the rising importance of IA’s and the contributions they consistently deliver to organizations in all (industry) sectors, they unfortunately remain, for some management teams and boards, challenging to define, recognize, distinguish, and measure. Hey, you have to work at it! (Adapted by Michael D. Moberly from the work of Thomas A Stewart, ‘Trying To Grasp The Intangible’.)

Managerial Introspection An Intangible Asset Positive!

December 18th, 2013. Published under Analysis and commentary, Business Applications. No Comments.

Michael D. Moberly    December 18, 2013     A blog where attention span matters!

Introspection is an intangible asset positive!  That is, a leader or management team member’s ability…no, make that, desire and recognition of the necessity to be introspective, is a valuable attribute or, in the context of this post, a positive, strategic, and personalized intangible asset!

Introspection is characterized by James Drogan, business professor at SUNY’s Maritime College as…

“knowing what you know, knowing what you don’t know, and knowing who knows what you don’t know and  knowing, when things are going really well, you’ve probably missed something”…

To many readers, the above characterization attributed to Professor Drogan may sound eerily reminiscent of former Defense Secretary Rumsfeld’s response to a question posed to him in a Pentagon briefing regarding fighting in the Iraq and Afghanistan war.

It’s important to me personally and professionally that the context for both are distinguished, as history does not portray Mr. Rumsfeld as being introspective by nature, but perhaps he was and just hid it well when he was in the presence of media.

Martin Christopher, Emeritus Professor of Marketing & Logistics at Cranfield School of Business and author of Logistics and Supply Chain Management states that ‘introspection is valuable, important, and perhaps even critical to successful business operations’, a characterization which I am wholly in agreement.

During my 20+ years in academia, I routinely observed students quickly review my assignments, particularly essay questions, submit a rushed response, and then leave it to me to interpret what they wrote and what they meant.  This is not the kind of skill set and considered thought process I desired students to achieve and which I strongly believed is necessary to succeed in today’s global business (transaction) environment that grows increasingly competitive, aggressive, and predatorial.  In other words, even answering undergraduate and graduate level essay questions, there is a need for introspection.

Introspection is not self-doubt, nor is it personal insecurity.  Rather, introspection, as a business leader or management team member, is a desire to assure yourself, that you have done all that you can do to fulfill the various obligations which have been placed on you and presumably, those which you have willingly accepted.  That is, introspection involves the self-confidence to be intellectually receptive to…

“knowing what you know, knowing what you don’t know, and knowing who knows what you don’t know and  knowing, when things are going really well you’ve probably missed something”

More specifically, as Donald Clark puts it in ‘after action review’, introspection is about learning, i.e., what worked, what didn’t work, why it didn’t work,  what I need to do about it to make it better, and what will I do differently the next time’?  To achieve this, of course, requires personal and professional confidence, not arrogance.  I would be very hard pressed to cite one example of a leader – manager who exhibits characteristics of arrogance who would ask such questions.

Introspection is about making yourself more valuable, i.e., an intangible asset positive!

The consequences of lack of introspection in college can be significant, at least at the time, i.e., failure of a course.  My experiences in academia, suggest that unfortunately, in few instances do students perceive introspection to be an important skill that is necessary to personal and intellectual growth and a skill that will serve them well post-college.

But still, its importance needs to be demonstrated.  As ‘Monday morning quarterbacks’ most of us, in the case of business, can see, or, at least surmise the adverse consequences of leaders and managers who lack of introspection.  The consequences can be severe, leading to the failure of a new business initiative, transaction, or an entire company.

Obviously, a better environment for business executives, decision makers, and managers to learn the art and benefits of introspection are in circumstances where the consequences for not being introspective or the continuation of arrogance, are less severe.  That is through training and/or seminars, and of course, an excellent subject to kick start such an initiative is intangible assets.

People, be they under-graduate or graduate students, or busy business executives will develop and/or gravitate to the skills that either…

  • interest them,
  • or that they see as necessary to achieve success.

For example, the Brookings Institute, and numerous other economics expertise entities globally, state, matter-of-factly, that 80+% of  most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability today either lie in or evolve directly from intangible assets.

The above economic fact – business reality should surely prompt business leaders and management teams to not leave to or wait for its interpretation by competitors, but instead, ask, introspectively, ‘what should I and my company be doing about it today’?

Thanks to my good friend and colleague Dale Furtwengler for suggesting the appropriateness of this topic.

This blog post has been researched and written by me with the genuine intent it serve as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   My blog posts focus on a wide range of issues related to intangible assets and intellectual property.   Respectfully, each post is not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.

Comments regarding my blog posts are encouraged and respected.  Should any reader elect to utilize all or a portion of my posts, attribution is expected. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

 

 

Russian Companies and Value Creation: The Role of Intangible Assets

January 24th, 2013. Published under Analysis and commentary, Business Applications. No Comments.

Michael D. Moberly   January 24, 2012

I believe it’s necessary, if not essential that c-suites, boards, and management teams of U.S. based companies periodically take the time to look beyond the confines of their firm and personal-professional business experiences to seek out and study not merely what other countries, and their businesses/companiesare doing in the intangible asset arena, but also learn what and how those firms and their leadership are accommodating, interacting with, and otherwise engaging the global knowledge-based economy, that is unmistakably dominated by intangible (non-physical) assets versus tangible (physical) assets, where the former serves as the overwhelmingly dominant sources of value, revenue, and competitive advantage.

One such fine paper, I encourage others to ready and study is one co-authored by Drs. Tatiana Garanina and Dmitry Volkov, (both faculty members in the School of Management at St. Petersburg University) appropriately titled ‘Value Creation in Russian Companies: the Role of Intangible Assets’.  It is a timely paper!

In today’s vacillating and changing economy, the authors repeatedly make the point that management teams of leading companies are more apt to acknowledge and understand that the key sources for a company’s value creation are irreversibly rooted in its intangible assets.  Certainly, no argument here!

Quite interestingly, the manner in which the authors offer up this perspective is that….

  • as much as one third of all the effected investment solutions (in Russia) are based on a company’s existing intangible assets, and that
  • business decisions made on the basis of intangible assets allow management teams to make a more accurate prediction of income and profitability regarding their company in the future, and thus, projecting the company’s value for shareholders.

Equally relevant and timely elements of their paper, which the authors address, from a definitional perspective, are intangible asset composition and structure in which, through their analysis of 43 (sampled) companies, they distinguish intangibles into five aggregated fields, i.e.,

  1. mechanical engineering
  2. extractive industry
  3. power engineering
  4. communication services, and
  5. metallurgy.

Admittedly, this is a little different from western perspectives.  But, value creation through intangible assets, particularly in the previous decades, the authors state, represent new conditions for business development, but, which have not led to success for those companies which continue to rely on traditional/conventional tangible (physical) assets such as properties, labour, financial capital and other physical resources.

Such companies, the author’s note, are less able to cope with the aggressive and highly competitive market ‘rules’ which they advocate, further represents the importance and relevance of intangible assets by recognizing them as drivers of value and sources of competitive advantage.

Logic, they say, related to business in the knowledge-based (global) economy is advanced primarily by consistently achieving more…

  • favorable (business, transaction) outcomes, and
  • longer term (strategic) successes
  • through better value-creation through intangible assets.

Now, the authors submit that leading companies are trying to achieve not just cost reductions but value creation, which translates, in the author’s view, as reductions in the value of tangible assets, which, not-so-coincidentally advances another trend, which is the production of mostly intangible assets such as knowledge, know-how, and creativity, etc.

Another very astute point expressed by the authors is that, in their view, a key challenge for management teams and c-suites now is to create and develop the conditions that will allow them to increase the value of (their) intangible assets and therefore the value of the entire company!  That’s certainly true globally.

The intangible character of a growing percentage of (company, business) assets, the authors contend, is that not all intangibles are reflected on company balance sheets and/or financial statements, thus, they are not visible in a traditional (physical) sense. Sveiby, (1998) reportedly said that intellectual capital is “knowledge that can be converted into value”. Hence, the authors argue, only “intangible” value provides companies with opportunities to differentiate themselves from their competitors, thus, only managing a company’s intellectual capital properly will allow a company to achieve and preferably sustain competitive advantages over their rivals.

Perhaps, one of the more profound and thought provoking statements the authors make, is related to the composition and structure of intangible assets, i.e., intellectual capital. In many other research papers I have read, authors describe the ‘structure’ of intangible assets and try to define the primary component that (most) affects its market value. The authors claim there is no known uniformity, i.e., means, mechanisms, etc., to address this problem, at least in these researchers’ environment.

The paper is certainly not without its provocative perspectives put forth by its authors.  One example are their views on market capitalization value over periods of time. Even though, a number of theoretical works have stressed the strategic importance as well as the role of intangible resources as key value drivers for company’s competitiveness (Edvinsson, Malone, 1997; Sullivan, 2000; Wenner, LeBer, 1989); there remains, the authors believe, a lack of approaches that evaluate the mechanism by which these (intangible) resources actually contribute to create value (Carlucci, Schiuma, 2007). This is, they say, because of the idiosyncratic nature of these (intangible) assets (Hoskisson et al., 1999; Lippman, Rumelt, 1982).

As a result, the authors conclude more studies are needed in order to better understand…

  • the relationship between intangible assets,
  • the way these assets are clustered, and
  • their role in value creation.

Note:  This post represents a respectful adaptation of part of Drs. Tatiana Garanina and Dmitry Volkov’s paper titled ‘Value Creation in Russian Companies: The Role of Intangible Assets’. Both authors are members of the faculty at St. Petersburg University, in Russia.

My blog posts are researched and written by me with the genuine intent they serve as a worthy and respectful venue to elevate awareness and appreciation for intangible assets throughout the global business community.  Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of information, unsubstantiated commentary, or single paragraphed platforms to reference other media. 

Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of any of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or m.moberly@kpstrat.com.

Don’t Overlook Valuable Intangible Assets Security Products Deliver

February 20th, 2012. Published under Business Applications, Intangible Asset Value, Value Propositions. No Comments.

Michael D. Moberly     February 20, 2012

I am a firm believer that the introduction (presence) of security products, systems, and services in an environment produce – deliver intangible assets.  Security products and procedures are common to building-environment design and operation, e.g., access control, intrusion detection, and CCTV systems, etc.  Each produces sector-environment specific sets of intangible assets.  Seldom however do those intangibles get translated or leveraged as premiums or competitive advantages by the vendor, building designer, or security department.

In many instances, these ‘feel safe, feel good’ attributes manifest themselves as user expectations but are not incorporated in security ‘buy in’ presentations or return-on-security-investment (ROSI) equations because, as intangible assets, they’re frequently poorly understood and lack an effective narrative to describe their contributory value.

In today’s increasingly security conscious and (security) standards driven environment, those considering openly espousing (leveraging) the attributes of security systems and procedures should recognize:

  • legal counsel may caution such open/public displays because, by doing so, it may unduly  influence user expectations, thus when risks do materialize, a company may subject itself to elevated liability exposures.
  • intangibles lack physicality and thus are presumed to be too esoteric to promote as  competitive advantages to prospective clients and users as premiums.
  • intangible assets are routinely portrayed (reported) solely through accounting lens.
  • some security practitioners hold the belief that public announcements about the presence-use of security measures and/or systems undermine their deterrent factors and thus compromise the intended (designed) benefits.

While these perspectives are understandable and real, they’re also uniquely challenging to refute.  The result is, intangible attributes derived from security systems and products often go un-leveraged and ultimately dependent on individual user imagination to draw their own, albeit subjective ‘feel good, feel safe’ conclusions versus the value-added (risk management) premiums they are.

The economic fact that 65+% of most company’s value, sources of revenue, sustainability, and foundations for growth evolve directly from intangible assets casts these circumstances in a different light.

Traditionally the dominant sources of company value and revenue have flowed from tangible – physical assets, i.e., plants, real estate, equipment, and inventory, etc.  But, in today’s knowledge-based business (transaction) global economy the sources – origins of company value have shifted to intangible assets, i.e., intellectual property, proprietary know how, brand, reputation, image, and goodwill, etc.  (For a comprehensive list of intangible assets see http://kpstrat.com/brochure.) 

The phrase knowledge-based economy of course is a business-economic reality and certainly not merely a cliché relevant to only large firms.   For building designers, security product vendors, and certainly users, this phrase should serve as useful insight into how user’s ‘feel good, feel safe, and feel secure’ expectations have evolved.

In my view, architectural design, vendor competition, and security ‘buy in’ presentations must include effective articulation of the relevance and value add – contributory value of security products, services, and procedures in the form of intangibles such as competitive advantage premiums which can be prudently exploited.  Security and asset protection products of course, can deliver a broad spectrum of measurable client and user (intangible) benefits beyond conventional subjective risk-threat mitigation. 

Building-environment design and security measures (products, systems, etc.) can converge. For example in a security product (vendor) presentation I recently witnessed, it was clear the product had multiple potential selling points and numerous venues where it could be applied. Unfortunately however, the products’ inventor either did not recognize or chose not to address in his presentation at all, the various and attractive ‘security intangibles’ his product could deliver.

Had this security product inventor – vendor had a narrative to characterize and strategically bundle the multi-dimensional outcomes, i.e., security intangibles, his product could also deliver its quite possible client receptivity would have been substantially elevated because their return-on-investment projections would have been more clear and much broader.

Understanding Intangible Assets Leads To Better Business Decisions…

December 16th, 2011. Published under Business Applications, Business Transactions, CFO's, Company culture and reputation., Fiduciary Responsibility. No Comments.

 Michael D. Moberly    December 16, 2011

Without dispute, it’s an economic fact that today 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth lie in – directly evolve from intangible assets! 

But, it’s no longer sufficient for management teams to merely know what intangible assets are or which one’s their company produces and possesses or follow the conventional accounting path of lumping them altogether (indistinguishable) as goodwill.  It’s now essential, if not a fiduciary responsibility to:

  • sustain control, use, and ownership of the assets
  • know precisely how the (intangible) assets contribute to a company’s value, revenue, and sustainability
  • understand how to leverage-position the assets to extract as much value and competitive advantage as possible
  • exercise effective stewardship, oversight, and management of the assets and consistently monitor their value and materiality.

 By achieving this level of operational and financial familiarity with a company’s intangible assets, numerous and enterprise wide multipliers can follow, for example:

1.      Add predictability to business transactions when intangible assets and IP are in play by being able to assess the stability, fragility, defensibility, and sustainability of the assets (due diligence). 

 2.      Elevate probability that projected returns will be achieved, competitive advantages will be sustained, asset synergies/efficiencies will occur, and exit strategies affirmed.

 3.      Achieve effective convergence of accounting, reporting, and asset valuation by recognizing the linkages to:

           a.  knowledge management programs

          b.  intellectual property development and enforcement

         c.  Sarbanes-Oxley and FASB compliance

          d.  utilizing the balanced scorecard.

 4.      Reduce probability of costly, time consuming, and momentum stifling legal challenges and disputes regarding the assets by foreseeing circumstances that can ensnare and/or entangle (intangible) assets to impede, erode, or undermine a transaction’s value, competitive advantages, or projected performance. 

 5.       Build an ‘intangible asset’ company culture that contributes to:

            a.  recognizing, producing, and sustaining control, use, ownership, and value of intangibles

           b.  providing the necessary awareness to accelerate the pursuit of asset rights issues, i.e., ownership, value, infringement,  misappropriation, theft, etc.

 6.      Develop a comprehensive organizational resilience (continuity-contingency) plan that encompasses all forms/contexts of intangible assets in order to produce a stronger and quicker recovery following a significant business disruption or natural disaster.

While visiting  my blog, you are respectfully encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Intangible Assets: Still Not Easy To Explain or Define

December 2nd, 2011. Published under Analysis & Commentary: Studies, Research, White Pap, Business Applications, Goodwill. No Comments.

 Michael D. Moberly    December 2, 2011

Intangible assets are not easy to explain or define, particularly for those unfamiliar with their existence or unaccustomed to recognizing, let alone, measuring their contribution and performance, i.e., to company value, revenue, and sustainability.  For some, intangible assets are likely to be interpreted more as theoretical business concepts best espoused in a university lecture hall absent ’real world’ applicability.  For these individuals, intangible assets are interpreted more as theoretical (esoteric) accounting or business concepts best espoused in  university lecture halls and absent ’real business world’ application. 

Part of the definitional challenge lies in the fact that intangibles lack physicality.  So, regardless whether they’re called assets or not, it often boils down to a question about how one identifies, manages, and measures things which lack a conventional sense (state) of physicality?  While an experienced business person can’t really see or hear intangibles, even the casual business observer can distinguish companies that effectively capture and exploit their intangibles.

The definitional and application challenges astute business persons routinely face about intangibles can largely be attributed to they’re…

  • lack physicality
  • seldom reported on balance sheets or other company financials
  • often being undistinguished as standalone assets, but merely lumped together as goodwill

Intangible asset specialists who conduct briefings and awareness training on intangibles should always be prepared to field an array of critical and skeptical questions about intangibles and their contribution and valuation.  How such questions are answered of course, affects, as it does in any profession, the overall credibility of intangible asset proponents insofar as articulating better, smarter, and more effective techniques to capture, utilize, manage, and monetize intangible assets.  This includes clearly articulating what intangible assets are, what they’re not, the various forms they take, how they originate, and equally important how and when they can be effectively and profitably applied as ‘building blocks’ to enhance a company’s value and create sources of revenue.

Ironically, in the midst of this extended economic downturn, conventional wisdom would suggest that company management teams and boards would be receptive to considering alternative and proven strategies to elevate and safeguard their company’s potential for successfully weathering this lingering recession.

Respectfully though, it’s often challenging for some management teams and boards to step outside their past practice comfort zones and disengage from what they believe has worked well in the past..  Successful companies ran by successful management teams are, for the most part realists and pragmatic risk takers and therefore understandably skeptical about intangibles for all the reasons cited above.  However, when such skepticism keeps companies tied to practices and strategies of a tangible (physical) asset based economy (world) instead of a knowledge-intangible asset based global economy, we’re not likely to experience the growth which we know we’re capable.

While visiting/reading my blog, you are encouraged to browse other topics/subjects (left column, below photograph) .  Should you find particular topics of interest or relevant to your circumstance,  I would welcome your inquiry at  314-440-3593 or m.moberly@kpstrat.com

Intangible Assets…Are Management Teams Listening?

February 11th, 2010. Published under Analysis and commentary, Business Applications, intangible assets. No Comments.

Michael D. Moberly   February 11, 2010

Today, for many intangible asset specialists, its puzzling, even occasionally frustrating, but more importantly, unfortunate anytime we hear company management teams, leadership, c-suites, and/or boards express-convey a sense of dismissiveness about intangible assets, or a reluctance to utilize intangible assets in general, and their company’s intangible assets in particular. 

Its become a universally accepted economic/accounting fact and business reality, in the knowledge-based (global) economy, not merely theoretical ‘academic speak’ or self-serving marketing jargon, that 65+% of most company’s value, sources of revenue, building blocks for future wealth creation and sustainability today, lie in – are directly related to intangible assets and intellectual property.  

Given this, It seems appropriate then to respectfully ask, are management teams listening?, when far too few of them are benefitting from those realities.

Intangible asset specialists are professionally obligated to respectfully and aggressively engage business leadership globally, to bring relevance and clarity for the full and efficient utilization of a company’s intangible assets.  One requisite to helping companies and management teams achieve this state of awareness, is by incorporating more relevant, timely, and respectfully simplified narratives designed to more effectively, but quickly, articulate three key-essential things, (1.) the practical existance of intangible assets, (2.) their contributory value to a company, and (3.) how to identify, utilize and exploit them to benefit a company. 

An obvious, and perhaps one of the biggest challenge for intangible asset specialists however, aside from issues related to intangible asset monetization, is articulating that intangible assets are just that, they’re intangible.  That is, they lack physicality.  But, their lack of physicality does not mean their performance and value cannot be objectively measured and benchmarked. 

So even though most management teams readily understand and recognize intangible assets’ existence, and appreciate their singular/individual contributions and importance to their company, e.g., brand, reputation, image, goodwill, customer/client (external) relationships, and internal know/intellectual capital, etc., there still remains a sense of reluctance and/or desire among some management teams to advance to the next level of intangible asset utilization and exploitation.

That next level would entail-encompass, in my judgment, four key elements, i.e., taking a more active role in…

1. engaging best practice fiduciary responsibilities for the management, stewardship, and oversight of the intangibles, 

2. identifying, unraveling, positioning, leveraging, and efficiently utilizing a company’s intangibles,  

3.  recognizing how to effectively exploit intangibles to generate revenue, enhance company value, create building blocks for future wealth creation and company sustainability, and 

4.  put in place measures to ensure control, use, and ownership of the assets is indeterminately sustainable, and their value and materiality (to the company) is consistently monitored.

 

Enterprise Risk Management and Intangible Assets…

February 2nd, 2010. Published under Analysis and commentary, Business Applications, Enterprise risk management.. No Comments.

Michael D. Moberly   February 2, 2010

In 2010 it would seem to be a management team, board, and c-suite ‘no brainer’ that enterprise risk management initiatives should universally encompass, without much argument or opposition, a company’s intangible and intellectual property assets!  

The full inclusion of intangible assets in ERM initiatives is epecially relevant today in light of the global economic fact (business reality) that steadily rising percentages (65+%) of most company’s value, sources of revenue, building blocks for future wealth creation and sustainability lie in – are directly related to the (a.) production, (b.) acquisition, and (c.) effective utilization of (a company’s) intangible assets and intellectual property. 

Taking this perspective one, and perhaps obvious, step further, it would also seem prudent, when the risks to those valuable, yet frequently fragile, assets are experiencing elevated vulnerability (probability) to loss, infringement, misappropriation, value erosion-dilution, and/or competitive advantage undermining, as they are today, that designing a position to oversee a company’s intangible asset risks would be an equally prudent consideration that would compliment management teams’ mounting fiduciary responsibilities for consistent and effective stewardship, oversight, and management of those assets.  

And, even more complimentary, the intangible asset risk positions’ overall performance (results, outcomes, and contributions, etc.) would be readily observable (transparent), measurable, and quantifiable.

At this point, risks to the intangible assets that a company produces and/or acquires is often spread, sometimes haphazardly and absent coordination or consensus, across an enterprise and subject to the sometimes subjective (risk taking) perspectives and spirit of business unit management.  While it is entirely imprudent to dismiss or disrespect the perspectives espoused by business unit management, stakeholders, and/or owners, it is true that efficiencies and effectiveness can be achieved when there is consenus and collaboration (enterprise wide) regarding the:

1. stewardship, oversight, and management of a company’s intangible and IP assets

2. abiliy to sustain control, use, ownership, and monitor the value, materiality, and risks to intangible and IP assets is articulated and understood as requisites integral to a company’s success, profitability, and sustainability.

Company Boards and Business Risks…

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’.)

Intangible Assets: Creative Industries and SME’s…

December 28th, 2009. Published under Analysis and commentary, Business Applications, Intangible asset strategy. No Comments.

Michael D. Moberly   December 28, 2009

‘Creative industries’ are (typically) broadly comprised of small, medium enterprises (SME’s) that share a commonality of consistently engaging in imaginative, forward looking – forward thinking activities and, therefore are frequently embedded with intangible assets.

Creative industies and their founders-management teams tend to be individualistic and entrepreneurially oriented (spirited).  The creative industries include such activities (professions) as architecture, crafts, entertainment, music, advertising/marketing, as well as numerous niche consulting firms who sense little need, in today’s nanosecond global business transaction environment, to be bound (limited) by, for example, conventional business plans and/or models, etc., that reward accumulation of tangible (physical) assets to the exclusion of intangible assets with little or no recognition – appreciation for the economic fact that intangible assets now comprise 65+% of the value, sources of revenue, future wealth creation, and sustainability for most companies.

The key drivers of creative industries are, in most instances, the intangible assets they create and learn how to effectively utilize and exploit.  Equally likely, creative industries will be ‘learning organizations’, that is, their founders-management teams will consistently seek, assess, and find ways, when-where appropriate, to exploit ‘creative change’ within their organization.  In other words, they embrace researching and learning about change as an essential tool and/or ingredient for executing their vision of normative competitiveness, i.e., how competition – competitiveness must (should) materialize in the go fast, go hard, go global business environment as foundations for companies to be sustainable.

Collectively, the ‘creative industries’ represent an increasingly important and profitable segement of the economy, one in which the Association of Certified Accountants (ACCA) reports may account for as much as 10% of the global economy and this sectors’ growth rate is reported to be up to three times the rate of the rest of the economy.

However, this ACCA report also strongly encourages the creative industrys’ to foster even more business-like strategies with respect to the production, utilization, and exploitation of their intangible assets.  Translated, this means taking more care to sustain (protect, preserve) control, use, ownership, and monitor value and materiality of their intangibles.  This will contribute to the creative industry sector becoming even more profitable, and perhaps more importantly, more sustainable (less ephemeral).