Archive for 'CFO’s'
Michael D. Moberly April 26, 2016 ‘A blog where attention span really matters’.
In no other arena of economic and social relations has the statement “knowledge is power” (Sir Francis Bacon) proven more relevant than in today’s global business economies wherein operations and transactions are increasingly rooted in the creation, utilization, and conversion of IA’s (intangible assets), particularly intellectual, structural, relationship, and creative capital…
To consistently and lucratively exploit their IA’s, holder’s must be positioned to sustain indeterminate control, use, ownership, and monitor their value, materiality, and risk.
Collectively, this makes IA’s relevant to each practice area-specialization of law.
Achieving operational familiarity with client businesses which are IA intensive-dependent is an unqualified entrée for professional service (law) firms to expand offerings to reflect the economic reality that business activities-transactions are now routinely dominated by and contingent on continuity of development, utilization, exploitation, and safeguarding their IA’s!
Many businesses-organizations remain in the early stages of the knowledge (IA) era, even though IA’s have become permanent fixtures-components to business economics as sources of value, revenue, and competitive advantage, etc.
Achieving operational familiarity with IA’s, is an outcome of this seminar which sets the stage for each (law firm) practice area – specialization to become a collaborative, competitive, and sought after leader whenever and however IA’s are in play.
Michael D. Moberly March 20, 2013 ‘A blog where attention span matters’!
A prudent and routine requisite to new business initiatives is that a ‘compelling business case’ accompany all such proposals. The term ‘business case’ generally speaking, should be normative in content and context, e.g., incorporate projections of (a.) return-on-investment, (b.) margins, (c.) marketing, (d.) pricing, and (e.) sustainability, etc., not necessarily in that order.
With respect to the still relatively new practice of safeguarding intangible assets, a key starting point for management teams, c-suites, and boards is recognition – acceptance of the economic fact that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability, and profitability lie in – evolve directly from the intangible assets a company produces, acquires, and possesses.
Below represents my views – perspectives of key components/elements for building a compelling business case for putting in place effective practices to safeguard a company’s intangible assets!
For starters, let our attention be drawn to the business realities associated with we live, work, and conduct business (transactions) in (a.) an increasingly aggressive, competitive, and predatorial (global business) environment, and (b.) a global (business) economy exists, largely driven by knowledge, knowhow, and other intangible assets such as intellectual property, brand, and reputation. That’s undisputed.
In this regard, a compelling business case for safeguarding intangible assets should, at minimum…
A. A demonstration of ways to quantify ‘return on security/safeguard investment’, i.e.,
- how to effectively articulate intangible asset safeguard (IAS) services to decision makers in ways that they (1.) readily understand, (2.) are more receptive to, and (3.) build credibility with IAS practitioners
- elevate decision maker receptivity to a business case, by positioning IAS practitioners as business professionals first, and IAS practitioners, strategists, analysts, researchers, and educators second…
B. Demonstrate (articulate) precisely what the organization/company can expect to receive, i.e., benefits, by describing how and when stages in which ‘net present value’ will be realized for the organization, i.e.,
- decrease asset fragility
- elevate asset stability
- elevate (as multiplier effects) organization integrity and customer/client confidence
C. Avoid focusing on conventional risks and threats contexts or formats, i.e., identify, assess, mitigate using the conventional ‘FUD’ approach, i.e., highlighting fear, uncertainty, and doubt. Rather, the business case should demonstrate:
- how it fills an existing process-procedural void
- how it enhances – strengthens an existing process-procedure
- that it’s not merely a duplication or new twist to an existing service or procedure
D. Reflect (incorporate) an organizations’ culture and operating characteristics in terms of key factors – drivers of decision makers’ receptivity to new (additional) initiatives.
E. Demonstrate how IAS’s can effectively influence conventional perspectives of business risk taking by preventing – mitigating losses and/or depreciation in the assets’ contributory value or as sources of revenue, and that intangibles and competitive advantages should no longer be:
- accepted as ‘just another risk of doing business’ which organizations may knowingly or inadvertently assume as preludes to developing new markets or products.
- characterized as probabilities, rather as inevitabilities if effective IAS’s, risk assessments, and due diligence has not preceded every transaction…
F. Know precisely, in ‘return on security investment’ terms:
- what should-must be measured
- how it is to be measured
- when it can be measured (especially relative to the life-value cycles of the assets that are the subject of the risk assessment – due diligence…
G. Avoid portraying IAS’s as merely a snapshot-in-time process. IAS’s should be flexible and self adjusting as circumstances warrant, i.e., as asset value – functionality – risk cycles change or fluctuate.
H. Consider including intangible asset reporting (risk, accounting, materiality breach) mandates in Sarbanes-Oxley and FASB (141, 142) should be integrated into IAP business cases by demonstrating how IAP services can be aligned with those mandates to achieve – bring additional efficiencies and effectiveness, i.e.,
- Merely developing (quantitative) risk equations may add little, if any value unless-until those equations are and/or can be linked (tied) to the organizations’ strategic planning and regulatory mandates it must abide by, i.e., SOX, FASB, etc.
- Identifying – describing ‘particular indicators (practices, activities, etc.) known to elevate an organizations’ vulnerability – probability that their IP, intangible assets, and/or proprietary competitive advantages may be challenged or contested
I. Draw attention to our professional role as intangible asset strategists to not to impede or necessarily stop a transaction, rather to:
- facilitate and enable more secure, sustainable, and lucrative transactions
- elevate the probability that when a deal and/or exit strategy is being planned and executed the value of an organizations’ intangible assets, proprietary competitive advantages, and IP will remain stable and intact.
Each blog post is researched and written by me with the genuine intent they serve as a useful and respectful medium 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 piggy-backed to other sources, or unsubstantiated commentary. 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 firstname.lastname@example.org
Michael D. Moberly September 26, 2012
Let’s face it, intangible assets are not always easy to articulate, to explain, or define, particularly to those unfamiliar or unaccustomed to recognizing their contribution to a company’s value and revenue.
Unfortunately, intangible assets are, in many sectors, still perceived – interpreted as obscure and/or theoretical concepts best espoused in – suited for university lecture halls’ than ‘real world’ business applications. After all, intangible assets do lack physicality, thus they bear no conventional ’brick and mortar’ components to measure, manage, or account for using the most customary methods.
Intangible asset practitioners and strategists who conduct briefings, seminars, and/or awareness training about these elusive assets are well advised to have a strong reaching repertoire at the ready to respond to an array of often times warranted criticisms and/or skepticisms about what intangible assets are and strategies to utilize, leverage, and/or exploit them best. The more persuasive and convincing manner in which such inevitable questions are addressed relative to their global universality and relevance to business wellbeing, will help achieve a two-fold mission….
- recognize that 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability today lie in – directly evolve from intangible assets, and
- demonstrate better, smarter, and more effective techniques to identify, foster, utilize, manage, and exploit (a company’s) intangible assets as attributes that can be converted to value, sources of revenue, competitive advantage, and sustainability.
That’s why it’s absolutely essential for intangible asset strategists to articulate as much (definitional, business, economic, and competitive advantage) clarity as possible to minimize – mitigate any managerial and/or administrative hesitancy, reluctance, and/or skepticism to aggressively engage intangible assets.
So, the mission is quite clear; articulate what intangible assets are, what they aren’t, the various forms they take, and how and when they’re effectively applied, can lay valuable and strategic groundwork to boost a company’s value, sources of revenue, competitive advantage, market position, and longevity.
Ironically, in the midst of this extended and generally global, economic downturn (malaise), conventional wisdom would suggest that decisions makers of all stripes would find it in their business’ interest to seek, or, at least be more receptive to considering – examining (new, different, viable) options to elevate their company’s performance potential for successfully weathering not just the recession, but achieving a sustainable prognosis well into the future. Of course, that would require engaging and executing on the intangible assets their respective company’s inevitably produce and possess.
Most respectfully, I return to the original theme of this post, that is, its challenging for some management teams, c-suites, and boards to step outside their ‘past practice’ comfort zones and/or b-school teachings that generally give short shrift to intangibles, to acquire the motivation necessary to critically examine/assess viable alternatives apart from what they believe has worked best for them and their company previously.
Members of management teams, c-suites, and boards are generally, and in most instances, quite correctly, pragmatists who exercise, usually in their own way, varying degrees of risk aversion. These operational characteristics, while generally admirable, contribute in various ways to sustaining a broader reluctance and/or skepticism about the prospects of embracing any new, and for many, untested initiative, particular in the midst of an economic slowdown.
Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of this post, 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. And, I always welcome your inquiry at 314-440-3593 or email@example.com
Michael D. Moberly July 30, 2012
As most of us recognize, Jack Welch (former Chairman of General Electric) made numerous contributions to the way companies are managed. One of which was his ability to recognize the core elements of an issue and separating the proverbial fluff.
I think two good examples of this lie in the following statements, both attributed to Welch, i.e.,
- an idea is not necessarily a biotech idea…that’s the wrong view of what an idea is…an idea is an error-free billing system…an idea is taking a process that used to require six days to do and getting it done in one day…we get 6 to 7 percent productivity increases routinely now, mostly because of ideas like that…everyone can contribute…
- an organization’s ability to learn and translate that learning into action rapidly, is the ultimate competitive advantage…
The desire to learn and development and execution of ideas generated from what one has learned of course, can manifest as intangible assets, or more specifically as intellectual and structural capital.
That’s why we recognize the importance of having mechanisms in place whereby ideas can be understood, assessed, and accordingly, rise to the surface in a ‘jack welch’ context. Otherwise, potentially useful, valuable, and competitive advantage driving ideas can go unrecognized, under-valued, or even dismissed, and if there ‘good one’s’ all too often, competitors will exploit as their own. That’s why I commence most engagements by laying the foundation for the parties to achieve a mutual understanding and respect for…
- the economic fact that 65+% of most companies’ value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability evolve directly from numerous categories – types of intangible assets!
By doing so, paves the way for helping company’s identify their intangibles and producers, unravel the assets’ origins, and assess their contributory value and effective alignment with core business objectives and strategic planning. This routine is designed to coincide with a second component, which is, putting in place what I refer to as ‘what fits best works best’ practices and procedures intended to sustain (protect, preserve monitor,) control, use, ownership, and the revenue – value producing elements of the intangible assets or, ideas.
This approach, which I advocate, does not overlook, nor does it under-estimate the reality that business operations and transactions now routinely have global elements and are often conducted under extraordinarily competitive, predatorial, and winner-take-all circumstances. That said, this approach is, more frequently than it should at this point, confronted with an ‘obstacle course’ of hierarchical skepticism and reluctance which generally translates as…
- a reluctance to acknowledge the intangible assets a firm produces and possesses,
- an absence of confidence in ways to better utilize, exploit, and extract value from intangible assets, know how, and competitive advantages, etc.,
- unfounded concerns or misconceptions about the resources, cost, time, and/or processes necessary to elevate intangible assets as routine agenda items in c-suites, boards, and management teams,
- professional embarrassment about having not already done so!
When rising percentages of most company’s value, sources of revenue, and sustainability lie in intangible assets, it just shouldn’t be that difficult to cast such skepticisms and reluctance aside in order to get the message that a firm’s intangible assets absolutely must be on discussion agendas!
Otherwise, if a company’s normally risk taking decision makers remain skeptical or unconvinced about these fiduciary necessities, they should be prepared to lose, forego, or more politely, inadvertently relinquish most, if not all of the prospective value, revenue, competitive advantages, and strategic benefits those assets may (could) have produced.
Michael D. Moberly July 27, 2012
We all know, or at least we should, the knowledge – intangible asset-based business (transaction) economy is for real, it’s irreversible, and, we’re probably only on the front edge of it. I still find however, what some management teams are less familiar with is, the significance-importance of communicating internally, at least, information and data about the performance of their intangible assets, i.e., intellectual, structural, relationship capital, brand, goodwill, reputation, etc.
This post is not about offering the proverbial ‘sound bite, quick fix, or silver bullet’ for there is nothing particularly quick or easy about…
- building and sustaining core attributes that can help put and keep a company on the leading (competitive and financial) edge of their industry and/or market space, or
- developing practical and measurable ways to consistently improve the competitive, and thus financial, health of a company.
What may be innovative for some management teams though, lies in the premise of a 2007 Deloitte survey which states (paraphrased) that…financial indicators coming from conventional balance sheets as well as financial statements alone, neither capture, nor characterize a company’s (competitive, financial) strengths and weaknesses internally or within its value-supply chain.
There should be consensus by now that in an economy in which 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets, continued reliance on conventional balance sheets and financial statements that seldom, if ever address intangible assets other than possibly lumping them together as goodwill, does not constitute a complete picture, nor do they provide strategic perspectives necessary to sustain competiveness.
It is always my preference that my 65+%…phrase (above) serve as a prompt of sorts, for management teams – companies that are experiencing (a.) competitive – financial stagnation, and/or (b.) missed or lost (business, transaction) opportunities to recognize it may well be a consequence of relying on conventional financial statements as the primary source – guide for strategic planning and outlook. Again, absent an articulation of the contributory role and value of intangible assets.
To spark an internal dialogue within c-suites, management teams, boards, and business units to literally engage their respective intangible assets, I have developed and apply several, what I refer to as dialogue initiators, two of which are described below. I seldom execute them in a specific sequence, instead I find it more appropriate to ‘mix and match’ them in a ‘what fits best will usually work best’ manner.
One such dialogue initiator is revisiting the adage attributed to Dr. Deming many years ago, i.e., ‘you can’t manage what you don’t measure’! As we have come to know well, value and revenue constitute market drivers, and, by extension, lay the foundation for the destiny of many companies. So, when 65+% of most company’s value and sources of revenue originate – flow from intangible assets, as they do today, c-suites, management teams, and boards alike, would be well served to devote time, resources, and energy to developing, for internal consumption at least, practical and defensible methods for measuring intangible asset performance, particularly, which ones, relative to competitors.
Another dialogue initiator involves the importance of elevating management teams’ operational familiarity and achieving (business) confidence in utilizing – exploiting intangible assets, with emphasis on…
- what tangible assets are, what they aren’t, how to identify them, how they originate-evolve within a company, and how to assess their status and measure their contributory value.
- strategies for utilizing and extracting value from intangibles.
- the tenants of effective intangible asset stewardship, oversight, and management.
In best case, these, and other dialogues render decision makers more inquisitive and receptive to…
- asking the right questions and demanding more answers about the performance of their company’s intangible assets, and
- drilling down far enough (companywide) to determine precisely what asset performance indicators their company should be measuring.
Admittedly, some of the existing intangible asset performance – measurement methods (tools) warrant refinement (be more company specific) to engender the confidence that they actually paint the sort of comprehensive portrait of a company’s financial and competitive advantage health that’s so needed today, e.g.,
- the actual tools (techniques, formulas, measurement points, etc.) need more internal-external reliability and validity testing to become more defensible and mitigate skepticisms about their relevance and use.
- overcoming the often repeated misperceptions that measuring intangibles is too time consuming and doesn’t deliver a timely return.
- addressing the very relevant concern that developing and then communicating intangible asset metrics could render a company more vulnerable – at risk to competitive advantage undermining and/or asset value erosion, among other potential negatives.
I believe it’s the CFO who, in most instances, should take the lead in stewarding, overseeing, and managing a company’s intangible assets. But, that must be premised on, among other factors…
- getting the correct information/data to the CFO.
- the CFO being receptive to and confident in that information/data, and
- the CFO recognizing how to effectively utilize and execute on that information/data in a timely manner to achieve the desired results.
(This post was inspired by a 2007 survey/report produced by Deloitte titled ‘In The Dark II: What Many Boards and Executives Still Don’t Know About The Health Of Their Business’.)
Michael D. Moberly March 22, 2012
I am extrapolating somewhat, but in Rob McLean’s fine article titled ‘Intellectual Asset Strategy and the Board of Directors’ (IAM December/January 2006), which I believe is still very relevant today, he says ‘boards are frequently drawn into intellectual asset management issues when there is a crisis, such as a lawsuit involving intellectual property rights’. ‘Few boards’, McLean suggests, and which I believe still reflects reality, ‘deliberately allocate time to intellectual asset issues as a matter of course’.
It’s unclear whether the references to boards in McLean’s piece are directed solely to large, Fortune 1000 types of companies or also include small medium enterprises and multinationals, i.e., SME’s and SMM’s respectively? While my professional interests tend to focus on the latter, my 20+ years of experience in intangible asset issues suggests that boards and senior management as a whole, convey little interest in the consistent stewardship, oversight, and management of those assets.
Consequently, as McLean points out, intangibles remain largely relegated to being only periodically included on board and/or c-suite agendas. In part, that’s because intangibles are still frequently perceived as being primarily legal and/or accounting processes/functions versus fiduciary (strategic business) decisions. McLean describes four levels of engagement to characterize boards’ interest, i.e., in…
Level I – boards’ are generally unaware of the importance of intangible (intellectual) assets and related strategies relative to company strategy or competitive industry trends…
Level II – boards’ may be peripherally aware that intangible (intellectual) assets have some importance in strategy and competitive trends at the company level…
Level III – boards’ have a high-level understanding that intangible (intellectual) assets have some importance in strategy and competitive trends at the company level…
Level IV – boards’ have a detailed understanding of the role that intangible (intellectual) assets and strategy play in strategic planning at both the company and business unit level…
McLean believes that if boards are being honest, most would characterize themselves as being in either Level I or II, a perspective which I believe is probably most reflective of today’s circumstance even though it suggests, if true, boards may well be out of touch with their fiduciary responsibilities as described in Stone v Ritter. I suspect many readers find themselves in agreement with McLean’s assessment as being reflective of their personal observations and experiences.
So, however full board and senior managers’ plates may already be, their stewardship, oversight, and management of intangibles (intellectual) assets, i.e., leadership in sustaining control, use, ownership, and monitoring their value and materiality should become permanent fixtures on their respective agendas. From the board and senior management perspectives, there are three broad, yet quite plausible, starting points to achieve this:
First – consider making changes in company governance structure and practices to genuinely reflect and be aligned with the economic fact that 65+% of most company’s value, sources of revenue, building blocks for growth and sustainability evolve directly from intangible (intellectual) assets.
Second – takes steps to ensure the right people receive the right information that allow them to focus on the right areas with respect to effectively and efficiently utilizing the company’s intangible (intellectual) assets. This includes information and insights related to maximizing, leveraging, and extracting value and whatever else can position those assets to deliver (more) value and competitive advantages.
Third – ensure the underlying responsibilities for identifying, assessing, and sustaining (protecting, preserving) control, use, ownership, and monitoring value and materiality of those assets is collaborative by including intangible asset specialists, legal counsel, accounting, risk management, IT, and relevant business units where intangible (intellectual) assets routinely originate and percolate!
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 firstname.lastname@example.org
Michael D. Moberly February 24, 2012
1. It’s an economic fact that 65+% of most company’s value, sources of revenue, sustainability, and growth potential evolve directly from intangible assets, therefore its all-the-more likely intangible assets will be in play and integral to most deals and/or transactions.
2. Conventional intellectual property protections issued, i.e., patents, copyrights, trademarks
a. no longer constitute standalone (global) deterrents to or safe harbors from would be infringers, product counterfeiters, or misappropriation.
b. lull asset holders/owners into assuming additional measures to sustain control, use, and monitor value of those assets are unnecessary
c. no longer serve as consistent predictors of asset value, transaction success, or asset control and use will be uncontested.
3. The value, competitive advantages, and efficiencies produced by intangible assets are often fragile, perishable, and non-renewable. Once compromised, full asset recovery (value) is seldom achievable.
4. The management, stewardship, and oversight of company’s intangible assets are often characterized as being the primary domain of legal counsel and accounting processes. Such conventional perspectives need to be re-framed as c-suite and board level fiduciary responsibilities.
5. The time frame when company’s can realize the most value from theirintangibles relative to an assets respective life – value – functionality cycle continues to be compressed. In part, that’s due to:
a. lower barriers to market entry
b. rapid profits achieved through globally organized asset misappropriation and infringement
c. product counterfeiting that routinely pollutes legitimate supply-distribution chains globally.
6. The growing global universality of regulatory mandates for accounting and reporting the value, materiality, and financial performance of intangible assets, e.g., the international equivalents to the Sarbanes-Oxley Act and FASB statements has led to greater transparency but has created the unintended consequence of open source vulnerability.
7. Knowledge-based (intangible) assets are increasingly vulnerable to compromise and undermining. Such risks have risen to the point decision makers should assume that once an asset has been compromised, economic and competitive advantage – market space hemorrhaging will commence immediately and globally.
8. Many of the risks to intangible assets, i.e., theft – compromise, etc., are attributed to highly sophisticated and globally predatorial data mining, open source data analysis, competitive intelligence, and state sponsored economic/industrial espionage operations. Anyone of which can undermine – counter a company’s strategic planning, new product launches, competitive advantages, and/or entangle assets in costly, time consuming legal challenges that disrupt – stifle deal momentum etc., at increasingly earlier stages.
9. Develop techniques/strategies for structuring business transactions to prevent, counter, and/or mitigate existing and emerging risks. They should extend beyond conventional (IT, IP) audits or business valuation checklists and be applicable to both pre and post (business) transaction contexts.
10. Intangible asset measurement, i.e., performance, contributory value, materiality, etc., should be lessabout how to measure and more about:
a. determining what assets to measure
b. which assets carry proprietary elements and competitive advantages, and
c. the inter-connectedness of those assets.
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 email@example.com
Michael D. Moberly January 20, 2012
I, like other intangible asset advocates routinely meet with astute and successful business leaders who are apt to apply sophisticated techniques and/or technologies to, for instance, schedule employee work schedules to reduce overtime, but, mention the words intangible assets and it’s quite likely they will exhibit a dismissive attitude.
We’re well into the 21st century and the important role intangible assets’ play in companies, according to numerous respected studies and personal experience, is slowly, but surely, being recognized at the c-suite and board level globally, i.e.,
…that steadily increasing percentages (65+%) of most companies value, sources of revenue and future wealth creation have literally shifted from tangible (physical) assets to intangible assets.
However, there doesn’t appear to be sufficient incentive for management teams and boards to go beyond mere recognition of intangibles to actually devoting time and resources to acquire the operational familiarity necessary to develop, safeguard, position, and convert them to sources of value and revenue. So why…
- isn’t this economic fact – business reality resonating more and assuming a broader sense of urgency at all levels of a business enterprise?
- aren’t more management teams and boards eager to engage their company’s intangible assets and devise strategies to exploit – extract as much value as possible?
After all, intangible assets, are, in most instances are the proverbial ‘low hanging fruit’, but unfortunately they’re still routinely overlooked, neglected, or sometimes, literally dismissed.
Respectfully, the lack of management team and board enthusiasm for intangible assets may, in part, be attributed to…
- accountants who may not fully appreciate the business significance of intangibles because they’re not reported on balance sheets or financial statements unless bundled together as goodwill
- measuring the performance of intangibles’ is often perceived to be difficult, subjective, and readily defensible
- over emphasis on short term planning that diminishes positive outcomes of strategic planning that excludes the development, utilization, and exploitation of non-physical (intangible) assets.
- the misconception that intangible assets are synonymous with intellectual property, when, in reality, IP is actually a subset of intangible assets
- a self-deprecating assumption by some management teams and boards that their company does not produce or possess any significant or valuable intangible assets worthy of their time to identify and assess.
- the mere lack of physicality of intangible assets, i.e., their non-physical nature.
- the often times poorly understood and articulated ’value proposition’ related to utilizing intangible assets.
- and, consultants’ who, for their own reasons, may be inclined to characterize any one, or all of the above as being far more complicated, time consuming, and costly to execute than necessary.
In response, I say to reticent management teams and board’s that positioning and aligning a company’s intangible assets to extract value and create/enhance competitive advantages involves several processes or steps, that are worthy of their time and attention, starting with…
1. Acquiring a genuine curiosity about identifying the intangible assets a company produces and/or has acquired.
2. Recognizing that intangible assets exist in many different formats and contexts other than merely goodwill.
3. Learning how to identify centers, clusters, and origins of intangibles within a company.
Unfortunately, in far too many instances, management teams and boards initially learn about the existence and/or value of their firm’s intangible assets under distressed circumstances, i.e., the assets have been lost, stolen, undermined, or the commencement of a merger-acquisition in which case it may be too late to fully (economically) benefit from those assets. That’s because, intangible assets are often perishable and readily transferable, and once compromised, recovery can be costly, time consuming, and seldom whole.
Interestingly, in 2004, Deloitte teamed with the Economist Intelligence Unit to conduct a survey titled; ‘In the dark: What boards and executives don’t know about the health of their businesses’. The survey produced three key findings related to the importance that boards and senior managers should attach to tracking non-financial aspects of their company’s performance, i.e., its intangible assets.
The Deloitte study revealed…
1. Factors driving boards and senior managers to monitor key non-financial performance indicators as:
a. increasing global competition
b. growing customer/stakeholder influences
c. greater awareness of risks to company reputation (which is an intangible asset), and
d. accelerated product innovation
2. Despite the growing need to monitor a company’s non-financial vital signs, i.e., intangible assets, most boards and senior managers still struggle to do so.
3. The biggest obstacles to enabling boards and senior management to track non-financial vital signs of their business are:
a. lack of sophisticated measures, and
b. doubts that they truly matter.
4. An overwhelming majority of respondents (90+% to 78%) described ‘critical and important drivers to (their company’s) success’ as:
- customer satisfaction
- service quality
- efficiency and effectiveness of business processes
- brand strength
- innovation, and
- quality of relationships with external stakeholders
Please note that each of the above constitute intangible assets!
Understanding and taking affirmative steps to identify, unravel, exploit, and extract as much value as possible from a company’s intangible assets is not rocket science, it’s just a very prudent business practice today!
Michael D. Moberly January 18, 2012
Intangible assets are increasingly valuable commodities that can be leveraged to allow management teams and boards to pursue a broader range of business transactions and/or alliances. Too, intangibles will almost certainly be integral to negotiating a deal in terms of pricing and the fact they can be bought, sold, transferred, traded, assimilated, or licensed.
Why? Because 65+% of most company’s value, sources of revenue, and building blocks for growth lie in – evolve directly from intangible assets!
Experience tells us that if there was a scale for transferability, replication, and/or imitation of intangible assets they would surely score high on all counts. This is, intangible assets, in most instances are vulnerable to value erosion, undermining and competitive advantage hemorrhaging. In other words, they can become impaired in some manner relative to their ability to produce/- deliver the projected value, competitive advantages, and revenue streams after the deal has been closed.
This makes it all-the-more essential for transaction management teams to be alert to the potential for, if not the probability that, at some level, asset hemorrhaging will (can) occur in either pre or post transaction contexts. In some instances, asset hemorrhaging can literally commence before the ink dries on a transaction contract.
A key starting point to prevent or at least mitigate any such asset hemorrhaging is to avoid permitting an unwarranted sense of urgency and/or speed to affect the thoroughness of the transaction management teams’ responsibilities. When management teams view a transaction primarily through a lens of urgency and speed, a frequent consequence is that critical due diligence, particularly intangible asset assessments, become hurried and follow an ill-conceived or old ‘check the box’ approach that does not consider ways in which the assets can be adversely affected in both pre and post transaction contexts, as they should.
Of course, in today’s hyper-competitive and predatorial global business transaction environment, it is likely there will be multiple and simultaneous suitors or players to a transaction which often drives, unduly in many instances, a sense of urgency and speed to consummating the deal.
Today, transaction management teams are obliged, in my view, to structure their role, particularly how due diligence and intangible asset assessments are conducted in a manner that:
- recognizes the necessity to retain control, use, ownership, and monitor the value and materiality of the assets as being essential to negotiating a profitable and sustainable transaction outcome
- secures approval to integrate intangible asset protection and monitoring commencing at the earliest stage and throughout the transaction negotiation process
- reduces the probability of and be promptly alerted to internal-external acts or materialization of risks that can
– undermine asset value, competitive advantages and the assets’ ability to continue to produce revenue
– trigger costly and time consuming legal disputes and challenges that can disrupt the momentum of and/or jeopardize an otherwise viable transaction.
While the goal of a transaction management team remains the same; to facilitate stronger, more secure, and profitable transactions, it’s now prudent to include an intangible asset specialist on the team, who can, among other things, identify, unravel, and assess the value, risks, defensibility, and sustainability of the intangible assets that are actually in play.
Michael D. Moberly January 16, 2012
First, it’s important to recognize that a company’s competitive advantages (business differentiators) are, in most instances, intangible assets.
Second, in today’s globally predatorial, aggressive, and winner-take-all business (transaction) environment, companies need to put practices and procedures in place to render those competitive advantages (intangible assets) as durable and resilient as possible to an ever growing array of risks, e.g., undermining, de-valuation, imitation, infringement, etc.
In other words, the stability, fragility, defensibility, materiality, and value of a company’s intangible asset-based competitive advantages should be routinely monitored and assessed.
To more fully understand these necessities I rely on the following definitions. They serve to guide and bring consistency to my perspective and that of my clients in terms of how they should conceive (equate) a company’s competitive advantages as intangible assets, i.e., they
1. are unique blends and/or collections of attributes, processes, assets, relationships, history, and even market conditions that a company exploits to differentiate itself, and thus create value. (Michael Porter).
2. lie in the unique proprietary knowledge employee’s possess, and the special value that evolves from understanding how to apply that (unique) knowledge to provide the real edge. (McKinsey)
The word ‘unique’ is the common denominator. However, as effectively conveyed by Ed Adkins (www.mystrategicplan.com) developing competitive advantages (intangibles) isn’t always easy or straightforward, because, in many instances, they evolve (over a period of time) through:
- recognition, and
Unfortunately, there are a significant number of management teams, D&O’s, boards, and business unit managers who remain unconvinced or dismissive of the economic fact that today…
…65+% of a company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability directly evolve from intangible assets.
Only through the effective and consistent stewardship, oversight, and management of intangible asset-based competitive advantages can they form the foundation for sustainability and profitability, requisites that must not be relegated to mere or periodic (managerial) options, rather understood as fiduciary responsibilities!