Archive for 'Sustainability of intangible assets.'
Michael D. Moberly February 20, 2017 ‘A business intangible asset blog where attention span really matters’!
Deploying IA-specific ‘risk mitigators’, at the right time, to the right set of assets, and in the right manner can deliver obvious benefits, i.e., counter, prevent, and/or mitigate risk. Those are the obvious and desired outcomes. But, also, when company leadership and (risk) management teams recognize IA-specific risk mitigators are applicable-relevant to most any circumstance where valuable – revenue generating – competitive advantage producing IA’s are being developed and/or already in play, their contributory value rises accordingly.
For most business circumstances, the presence of and the potential for significant (IA specific) risk to materialize and variously jeopardize an IA-dominant undertaking or transaction is real and persistent. The initial management team action, in my judgment, preferably undertaken in advance, should be to do what is necessary to try to mitigate or prevent those risks from materializing – elevating to the point they can adversely (irreversibly) affect an outcome.
Effectively mitigating-preventing risks directed to undertakings dominated by IA’s or myriad of other business transaction circumstances, for that matter, lie in recognizing that putting risk mitigators in place, at the right time, focused on the right set of assets, i.e., those in play, and in the right manner, can deliver obvious and necessary benefits. The benefits are two-pronged, i.e., (1,) to thwart, counter, and mitigate risk, and (2.) measurably contribute to more valuable and competitive (desired) outcomes.
Those business leaders and management teams who assume risks to a IA’s can be adequately dealt with via the purchase of conventional business insurance (riders), without deploying risk mitigators, I suggest, have misread – misunderstood the current risk environment. That is, the ‘keystroke speed’ and asset-specific targeting capabilities of ultra-sophisticated and predatorial global economic and competitive advantage adversaries with advanced data mining technologies, have indeed become the norm, certainly not an anecdotal (one off) exception.
The effective and timely deployment of IA-specific risk mitigators (at the right time, right place, and right way) are businesses’ prelude to – segue for ensuring the IA’s in play remain as fully intact as possible in terms of their capability to continue to generate value, produce sources of revenue, and underlie competitive advantages.
The primary objectives to deploying IA-specific risk mitigators are to affect the assets’, and their holders’ receptivity – vulnerability to compromise and/or undermining throughout the contributory value – materiality cycle of the assets. This is best achieved when there are coordinated processes – actions in place to recognize, monitor, sustain, and acknowledge…
• asset’s exposure to costly and momentum stifling (risk) acts-events.
• IA’s contributory role and value will favorably distinguish companies
within their sector.
• necessary levels of control, use, ownership, value, equity, and resilience
for the IA’s.
• deployment of IA-specific risk mitigators are not mere operational
electives that can be dropped, dismissed, or delayed indefinitely.
As consistently conveyed since the ‘Business IP and Intangible Asset Blog’ published its initial post in May, 2006, whenever, however, and wherever valuable, revenue generating, and competitive advantage IA’s are in play, company-business leadership and management teams are obliged to consider there will be various types, levels, and motives for (IA-specific) risks to materialize.
The acts of, assessing and monitoring IA-specific risks and identifying effective techniques – strategies to prevent, mitigate, or neutralize, does not require leaders to reach beyond-outside their professional domains of expertise in order to take the necessary action.
Perhaps the most important-relevant component to IA-specific risk mitigation is to…
avoid making purely arbitrary-subjective assumptions about
circumstances when, where, how, and why particular IA’s are
in play and their vulnerability to risk, e.g., fragility,
stability, defensibility, and liquidity if-when compromised.
A common denominator to most all IA-specific risk (and, management) is the persistent presence of (global) economic and competitive advantage (legacy free) adversaries, ultra-sophisticated data mining technologies and methodologies, anyone-of-which by their actions and capabilities, impose consistent risk.
Michael D. Moberly August 1, 2016 ‘A blog intersecting intangible assets and business!’
Intangible asset specific due diligence is a necessary, but often overlooked component in consummating business transactions, especially pre and post monitoring.
For management teams, c-suites, boards, and stakeholders, it’s important, more so today than perhaps ever before, to recognize that merely because a deal, transaction, or M&A has been proposed, appears promising and has progressed to its relevant due diligence stage, does not constitute assurance any of the projected-anticipated value, synergies, efficiencies, scalability, and competitive advantages will actually materialize or be sustainable.
The probability that any calculated – anticipated projections related to a business transaction outcome will materialize to benefit its initiator, preferably sooner than later, is increasingly dependent on the sophistication of due diligence management teams to recognize the economic fact that today, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, future wealth creation, and sustainability reside in – evolve directly from IA’s (intangible assets). To increase the probability that initial projections (to a transaction’s outcome) will materialize as intended, the scope of transaction due diligence must include identifying, unraveling, assessing asset fragility and transferability, mitigating risks, and otherwise safeguarding-preserving the key – contributory IA’s value and competitive advantages.
The key forms which the dominant, most valuable, and competitive advantage driving IA’s exist are intellectual, structural, relationship, and competitive capital and reputation/brand. In most instances, it is these IA’s and their scalability which likely drew attention around which the initial and underlying rationale for imagining and undertaking a particular transaction was framed
True, in many instances, valuable – competitive advantage driving IA’s can be variously fragile and vulnerable to various risks, including value – competitive advantage fluctuation, misappropriation and infringement. For good reason then, the ability to monitor control, use, ownership, and value of key IA’s to the transaction, in both pre and post contexts, will sustainable and lucrative projections be realized. The rationale; more companies today engage in domestic – international trade and business transactions as a matter of routine. Too, for a significant percentage of those transactions, the negotiations are aggressive, competitive, predatorial, and come with winner-take-all outcomes. Under these circumstances, dismissing and/or relegating these business – transaction realities and fiduciary responsibilities about IA’s to the un-initiated, unaware, or unfamiliar when IA’s will inevitably be dynamic contributors to lucrative outcomes of transactions.
In that regard, I have had the privilege, over the years, to engage countless business decision makers and strategists across industry sectors. In private conversation, few, if any of these executive dispute my characterizations and advocacy of IA’s. Assuming these conversations are representative, it would seem prudent then that IA’s would be applied to all relevant aspects of a business transaction process, especially pre-post (transaction) due diligence where sustaining – monitoring control, use, and ownership of IA’s contributory role, value, and competitive advantages are paramount to the outcome.
Michael D. Moberly May 9, 2016 ‘A blog where attention span really matters’!
My experiences as an observer of venture forums is that they are fast paced and highly charged ‘electric’ events wherein management teams of a growing array of RBSU’s (research based startups) university-based spinoffs, and early stage companies, most all of which are rich in – dependent upon IA’s (intangible assets) give impassioned ‘elevator pitches’ to prospective investors whose expertise and inclination – receptivity to invest have evolved to become increasingly narrow and specialized, as perhaps it should.
The format for venture forums I have attended is that pitches are limited to 3-5 minutes wherein the spokesperson explains their companies’ mission, key-competitive aspects of their innovation, additional research-trials necessary, fiscal projections, business model, why investment is warranted, and how the investments will be applied should an investor deem it a worthy risk. Should a ‘pitch’ be well received, the company representative will likely be peppered with questions from prospective investors or their representatives, one of which is invariably ‘what’s your IP position’?
What’s your IP position…
Of the numerous venture forums attended, the most consistent answer to this albeit over-rated, misunderstood, yet seemingly obligatory questions are…
• has a patent application has been filed (provisional),
• is a patent pending, or
• has a patent been issued?
Through my lens as an intangible asset strategist and risk specialist, the importance attached to achieving formal/official IP (intellectual property) status for one’s innovation is overstated, perhaps variously inflated. And, the consistency which prospective investors ask the IP position question collectively suggest both parties assume conventional IP, patents particularly, are requisites to securing investment capital necessary to proceed. I hold a somewhat different perspective. There are other equally, if not more relevant factors to any innovation under consideration which prospective investors should sort out as part of their ‘invest – don’t invest’ decisions.
True, IP status does provide investors with the necessary legal standing and recourse options should the invested enterprise fail, not meet its projections, or its (protected) proprietary information succumb to infringement or challenge within the typical 3 – 5 year exit strategy plan investors frequently demand. And, yes, patents and other forms of intellectual property are obligatory for WTO and TRIPS signatories.
But, the global business transaction environment is becoming increasingly aggressive, predatorial, competitive, and legacy free. This translates of course to proprietary information, irrespective of its IP status, is, all but certain, to be targeted and sought. That coupled with the persistent challenges and vulnerability to intangible asset (IP) infringement, theft, and/or counterfeiting make an RBSU’s IP position little more than legal symbolism. Should companies elect to pursue other strategies to safeguard their proprietary – competitive advantage intangible assets, i.e., trade secrecy for example, those legal portals for bringing action against the inevitable infringers, thieves, and counterfeiters in locales where a company’s most valuable assets are in play also carries some ambiguity.
Legal – economic safety nets…
Through my lens, conventional IP has less relevance as a legal – economic safety net than startup management teams – prospective investors should assume. Too, the costs associated with mounting an IP infringement – misappropriation suit are significant, if not cost and time prohibitive for resource conscious startups to pursue regardless of case credibility.
It’s prudent for investors and IP holders alike to acknowledge patents and most other forms of IP, no longer serve as…
• standalone deterrents, or
• reliable prognostications of innovation value.
The more relevant venture forum questions are…
I urge prospective investors – venture capitalists to re-phrase their ‘IP position’. For example, rather than merely asking ‘what’s your IP position’ assuming it is an important criterion, perhaps a more relevant and telling question would be…
has the proprietary know how, i.e., intellectual, structural, and
relationship capital that underlie the startups’ innovation and
serve as the cornerstone to the IP on which an investment would be
premised, been adequately safeguarded from its inception!
Important to recognize patents start life as proprietary information and trade secrets…
It’s a well acknowledged adage in the information asset protection arena that patents typically start life as trade secrets and proprietary know how. Therefore, if key – distinguishing know how underlying innovation and its prospective investment has been treated in a cavalier manner…
• absent the requisite minimums of trade secrecy or other best
information asset protection practices
• prior to filing a patent application,
• it’s prudent for prospective investors to ascertain
• the status, i.e., fragility, stability, and commercial-fiscal
sustainability of the assets being considered for investment.
Asset vulnerability, probability, criticality, and speed…
Today, the vulnerability, probability, criticality, and speed which know how, i.e., intellectual and structural capital assets particularly, can be compromised, infringed, misappropriated, or stolen are integral to any ‘invest – don’t invest’ decision.
Before making an investment in intangible asset rich and dependent companies, it’s important to direct probing follow-up questions to company management teams. Doing so will allow prospective investors to more objectively assess whether control, use, ownership, and value of the underlying intangible assets are…
• sustainable relative to an intended exit strategy, and
• reflective of the assets’ functionality and value cycle.
Today, with increasing certainty, ineffectively safeguarded intangible assets (IP) will quickly hemorrhage in value, competitive advantage, and elevate investor’s vulnerability to costly, time consuming, and momentum stifling challenges and exit strategy headaches!
Michael D. Moberly January 28, 2016 ‘A business blog where attention span really matters’!
National Public Radio (NPR) is a privately and publicly funded non-profit membership media organization that serves as a national syndicator to a network of 900 public radio stations in the United States.
NPR produces and distributes news and various cultural programming, however, individual public radio stations are not required to broadcast all NPR programs, instead most broadcast a mixture of NPR programs and content from other providers, i.e., American Public Media, Public Radio International, and Public Radio Exchange, as well as locally (station specific) programs.
There numerous qualities My experience in identifying and prioritizing most organization’s IA’s (intangible assets) commences with assessing the assets’ strategic relevance to mission, i.e.,
- the sustainability – longevity of the asset’s contribution to an organization’s overall value and/or to a particular project or initiative.
- their consistency insofar as sources of revenue and competitiveness, and
- their defensibility.
There is an important caveat to this process however, at least through my lens. That is to ensure IA prioritization is not portrayed in a subjective (high, medium, low) continuum context or range estimates, ala Antique Road Show. Instead, asset prioritization should include clear and objective demonstration of their collective, collaborative, competitive, and/or individual contributory role(s) and value.
IA’s, of course, materialize in various ways. For example, relationship capital (an IA) that a public radio station and its staff forge with their communities of listener’s and stakeholders, holds substantial value and frequently triggers new initiatives, projects, and/or programming which in turn deliver multi-layered competitive advantages, i.e., attractive platforms for articulating – communicating issues of the day to all corners of a station’s community of listeners and stakeholders. As it is for any journalistic – news gathering – reporting enterprise, relationship capital is an essential, highly prized, and very valuable IA which embodies, in this instance, a public radio station’s brand.
I am confident public radio leadership appreciate – recognize (station) value, competitiveness, and impact to their respective communities of listeners. These are frequently attributable to prudent ‘envelope pushing’ initiatives, be it through exceptional personnel, new programming, or schedule modifications integrated-enhanced through community outreach, social media, podcasts, an informative website, and a receptively engaging staff. Each serve public radio as legitimate and effective leverage points to…
- attract capable and creative-innovative intellectual capital (staff).
- operate an organization with an appealing-gratifying work culture and ethic.
- deliver substantive content about issues of the day to its communities of listeners, readers, contributors, and sponsors, and
- strengthen, expand, and ‘bank’ relationship capital.
It is indeed indisputable economic fact that IA’s play increasingly significant roles in organizations, ala 80+% of their value and sources of revenue, etc., lie in – emerge directly from IA’s. So, again, I encourage IA prioritization unravel IA’s relative to their individual and/or collaborative and ‘contributory role-value’, e.g., to a particular project or initiative, a station’s mission and its competitive advantages.
Mr. Moberly is an intangible asset strategist and risk specialist and author of ‘Safeguarding Intangible Assets’ published by Elsevier in 2014, email@example.com View Mr. Moberly’s videos on YouTube at ‘safeguarding intangible assets’ or his CNN and CNBC videos at his webpage http://kpstrat.com
Michael D. Moberly November 30, 2012
The former Speaker of the U.S. House of Representatives’ Thoms P. (Tip) O’Neill, is noteworthy for many things, one of which was his often espoused perspective that ‘all politics is local’. We understand that ‘homey’ perspective because it’s very much ‘in your face’ during each national election cycle. But, I’m confident Speaker O’Neill would agree that while most U.S. politics remains local, it routinely has coinciding national, regional, and international implications as well.
In many respects, the same holds true for many business transactions today, particularly when intangible assets are in play, because their origins are often global, not just local. Drawing further emphasis to this lies the economic fact that 65+% of most company’s value, sources of revenue and ‘building blocks’ for (company) growth, profitability, and sustainability evolve directly from an array of intangible assets.
So, very much akin to political contests, most business transactions are conducted in increasingly competitive and predatorial contexts, with winner-take-all outcomes, but, never-the-less, bear local, regional, national, and certainly international implications.
One significant difference between business transactions and political contests, is that business transactions carry fiduciary responsibilities relative to the stewardship, oversight, and management of intangibles in pre and post transaction contexts because among other things, there is a contractual and legal relationship formed between the parties. Whereas, the rhetoric politicians espouse during campaigns is broadly understood as being just that, unaccountable and non-binding rhetoric, until the next election cycle.
Credibility, confidence, and efficiencies and be added to the work of transaction management teams when intangible assets are in play as it increases the probability that pertinent details, particularly those related to sustaining control, use, ownership and monitoring the value and materiality of the assets (pre and post transaction) are considered. In other words, intangibles must and should be fully addressed in any transaction and the transaction management teams’ on-going reports to their c-suite and board regarding transaction progress.
Too, it’s important to bring clarity to business transactions by distinguishing intellectual properties and intangible assets. Conventional forms of IP are actually a subset of intangible assets. IP enforcement mechanisms are well known, i.e., patents, trademarks, copyrights, etc., but are not necessarily synonymous with…
- sustaining control, use, ownership, or monitoring value, materiality, and sustainability of intangible assets, or
- the ability to extract value (commercialization) benefits from a transaction.
Because intangible assets are almost inevitably in play in business transactions, transaction management teams are now well advised to:
- Be consistently mindful of the economic fact – business reality that 65+% of a transactions’ value and ultimately the sustainable economic benefits lie in intangible assets…
- Treat the control, use, ownership, and value of the intangible assets that are in play as business decisions and fiduciary responsibilities integral to relevant legal processes…
- Recognize intangible assets are vulnerable – at risk especially pre-post transaction stages, so techniques to mitigate risks – threats and sustain control, use, ownership, and monitor the assets value and materiality is essential…
- Recognize that if certain risks – threats materialize (pre – post transaction) they can:
- undermine competitive advantages and erode projected profitability
- cause time consuming and costly distractions that disrupt transaction momentum
- ensnare-entangle the assets in costly legal challenges and/or disputes.
Thus, business transaction management teams are encouraged to integrate the above guidance, particularly when transactions involved intangible assets, which they inevitably do today; it will enable-facilitate stronger, more secure, profitable, and efficient transactions, not impede them!
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 the circumstance. And, I always welcome your inquiry at 314-440-3593 or firstname.lastname@example.org
Please watch for Mike’s book ‘Intangible Assets: Security Managers Roadmap’ to be published soon!
Michael D. Moberly August 9, 2012
As stated in this blog on numerous occasions since its inception in mid-2008; it’s crucial for business decision makers to recognize that in a vast majority of transactions they will initiate or become engaged, correctly identifying and assessing intangible assets plays an increasingly significant role in achieving a desired and sustainable outcome!
The reason of course, is that steadily rising percentages (65+%) of most transactions’ value resides in intangible assets. So, if a transaction management team overlooks intangible assets, it’s tantamount to excluding how/where value is created, revenue is generated, and strategic planning is executed.
This makes it all-the-more-important, perhaps rising to a fiduciary responsibility, at the decision maker level, to determine if a transaction management team is incorporating intangible assets in their task. If so, are intangible assets being addressed in a due diligence, inventory, auditory, or valuation context? If a transaction management team is doing neither, it’s fair to say it’s time to elevate their operational familiarity and understanding of intangible assets.
As readers know, there is an abundance of research that consistently paints a convincing picture that if and/or when a merger, acquisition, or other type of transaction ‘goes south’, evidence of impending problems and challenges will surface quite early and will likely stem from one or more intangible assets.
One technique to remedy, or at least mitigate this, is for decision makers to receive an advance ‘heads up’ from their transaction management team by ensuring an ‘transaction impact analysis’ is part of their task. As the term implies, an asset impact analysis can provide decision makers with a more definitive picture of potential outcomes, should a risk(s) materialize and adversely affect one or more of the key (intangible) assets. This can be achieved…
- collectively, i.e., that reflects the inter-relatedness of intangible assets’ contributory value and associated risks.
- individually, i.e., if a key asset is identified as being impaired in some manner, or is found to be already misappropriated or infringed.
- by assessing the probability that particular risks will materialize to adversely affect the projected economics, competitive advantages, and/or synergies of a transaction with emphasis on mitigation and containment.
- by assessing the resiliency and sustainability of key intangible assets
The rationale for incorporating an transaction impact analysis is for decision makers to anticipate circumstances – scenarios that if a risk has or will materialize to the point it impairs or otherwise adversely affects key (intangible) assets. I tend to advocate asset impact analysis’ be initially focused on what I believe to be the three, most challenging intangible assets to sustain – preserve their contributory value, i.e., intellectual, relationship, and structural capital.
Too, a transaction impact analysis can reveal other cautionary circumstances/scenarios while retaining the option to proceed with a (a.) plan for risk mitigation, or (b.) re-negotiate the deals terms in light of the risk(s) and/or asset impairment(s). The objective essentially remains the same, that is to facilitate a more secure and profitable transaction going forward, not impede it!
Michael D. Moberly June 12, 2012
Achieving successful and sustainable new product and innovation launches is increasingly dependent on management teams recognizing…
- 65+% of most innovation’s value, projected sources of revenue, and potential ‘building blocks’ for growth and expansion evolve directly from the contributory nature and value of intangible assets, i.e., the intertwined combinations and collaborations of specialized and/or proprietary know how and intellectual capital associated with the innovation’s development.
- the absolute importance that must be attached to ensuring the’ innovation genie’ remains in its respective bottle through its respective life – value cycle, i.e., effectively protecting, preserving (sustaining) control, use, ownership, and defensibility of the innovation’s key elements.
Obviously, ‘keeping the innovation genie in its bottle’ is a metaphor, albeit a very important one, whereby innovation management teams are obligated to identify and monitor the role, contribution, and value which the intangible assets make to the innovation’s launch, their exposure to risks and threats, and again, throughout the innovation’s life-value cycle.
In other words, continuous monitoring of key aspects of the innovation genie’s status is critical. A key reason is that there are an ever growing number of sophisticated strategies that economic and competitive advantage adversaries use to extract innovation genie’s from their proverbial bottle. The absence of effective innovation asset management and oversight can and frequently does lead to misappropriation, theft, product counterfeiting and/or piracy.
Any one of those risks-threats materialized, will undermine product launch success and adversely affect the innovation’s value, competitive advantages, and relevance within its market space. The probability that risks-threats to innovation assets will materialize, while dependent on several factors, it would be quite correct to assume they will continue to rise globally.
An essential requisite for any innovation management team who aspires to achieve even partial recovery of their compromised innovation (intangible) assets is having effective asset monitoring practices in place to not just prevent or mitigate any adverse effects from materialized risks, but also to know precisely when a compromise occurred and the precipitating factors.
Too, a thorough intangible asset – competitive advantage assessment should commence immediately following a compromise to determine precisely what aspects of the innovation were actually compromised – acquired and how it will impact the products’ launch and the business as a whole. This assessment and business impact analysis are, of course, essential to achieving any semblance of hope of recovering any of the innovation’s assets, if there is to be any.
These assessments and analysis can aid innovation management teams to be better positioned to deliberate on two important points:
1. the circumstances, priorities, and options relative to trying to (re-) establish ownership and/or (re-) obtain control and use of the, by now, economically and value hemorrhaged assets.
2. strategies to try to stop and/or mitigage further economic -competitive advantage hemorrhaging (of the assets), i.e., devaluation, undermining, infringement, misappropriation, etc.
And, of course, any delays in discovering a compromise and seeking experienced guidance about what actions to take, and when, can complicate and even weaken a company’s (legal) position for achieving even partial recovery from the multiple adversaries that are likely to be involved.
Realistically, returning an innovation asset genie to its rightful owners, i.e., bottle, in a manner in which some, or more preferably, most of its market space attractivity and competitive advantages remain reasonably intact, is not particularly high in today’s increasingly predatorial business environment.
Risk-threats to a companies’ innovation (intangible) assets should not be dismissed lightly or characterized as merely ‘just another risk of doing business’ particularly in today’s increasingly competitive, predatorial, and winner-take-all (global) business transaction – new product launch environment.
Far too many companies though lose, inadvertently relinquish, and/or their innovation assets become entangled or ensnared in costly, time consuming, and momentum stifling legal disputes and challenges, primarily over aspects of ownership, control, use, and value.
There are many different views about what it takes to sustain a successful (new) product – idea launch and its eventual commercialization. Obviously, having a very attractive and commercializable product along with sufficient capital to execute a well-researched business plan and marketing strategy represent a few of the traditional and necessary ingredients.
But, an often overlooked and underestimated ingredient to sustaining a successful business-idea launch is recognizing that unlike patents, trademarks, and/or copyrights, the USPTO does not issue, to the launching company, a certificate that says, these are your valuable innovation (intangible) assets, proprietary know how, intellectual capital, and competitive advantages, protect them!
Instead, the responsibility for recognizing that those assets exist and unraveling how they individually and collectively contribute to an innovation and then converted into value, sources of revenue, is solely the responsibility and discretion of the innovation’s management team and board.
Admittedly, today’s hyper-competitive go fast, go hard, go global business transaction and new product launch environment may not always allow sufficient time for innovation management teams to reflect on, address, and budget for the persistent and asymmetric nature of risks and threats to companies intangible (innovation) assets..
Continuing to hedge (neglect) these assets essential maintenance, i.e., protect, preserve, monitor their use, ownership, and value, can cause risk-threat probabilities to become inevitabilities in which complete or partial (asset) value erosion-dilution is likely to occur, which in turn, creates parameters-boundaries to a companies’ economic-competitive position capabilities and potential.
Michael D. Moberly May 31, 2012
A requisite to conducting superior due diligence for today’s intangible asset dominated and driven businesses, is possessing a depth of experience, knowledge, and investigative skill sets. These are unique differentiators and essential requisites which collectively serve as starting points for achieving the necessary and insightful (due diligence) product that allows management teams to make informed decisions, i.e., proceed, don’t proceed, buy, don’t buy, or invest, don’t invest!
Respecting the economic fact that 65+% of most company’s and transaction’s value, sources of revenue, and foundations for growth and sustainability evolve directly from intangible assets, selecting not just the right, but, the absolute best individual or firm to conduct due diligence is critical.
For starters, a well-designed and executed due diligence plan must fully examine each of the target’s intangible assets. That’s because they will inevitably be in play in any transaction. Effective assessment and integration of intangibles serve increasingly significant role to a transaction’s success. On the other hand, with untold frequency, when intangible assets are not addressed or dismissed during due diligence, transaction failure can be imminent and materialize in a long, slow, and costly fashion, i.e., ‘failure by a thousand cuts’.
To increase the probability that certain projected transaction objectives or outcomes be realized, it’s imperative that the individual or firm contracted to conduct the due diligence can articulate the findings in objective business contexts and certainly not through a one-size-fits-all, snap-shot-in-time guesstimate oriented lens.
Key elements to superior due diligence in today’s intangible asset dominated and driven businesses, starts by possessing the experience, knowledge base, and investigative insight to…
- unravel (identify) how, where, and by whom the key (intangible) assets originated.
- determine and assess how or whether control, use, and ownership of the assets is or can be sustained.
- determine the assets’ contributory value and complimentary role(s) relative to current and future projects and initiatives, i.e., as potential sources of revenue and foundations for (future) growth and sustainability.
- recognize and differentiate the origins, motives, and asymmetric nature of global risks and threats to (intangible) assets that have become embedded in all transactions.
- understand how materialized risks can adversely affect asset value, a company’s competitive advantages, reputation, brand, and/or stifle project momentum and best practices to prevent or mitigate those risks.
- ensure asset control, use, ownership, and value are monitored for sustainability, especially in post-business transaction contexts.
- build a risk intelligent culture that renders a company more aware and resilient to significant and catastrophic risks, natural disasters, and/or business interruptions.
Anything less can produce an array of unwelcome challenges or worse, spell almost certain doom to the projected and desired outcomes of a transaction!
Michael D. Moberly May 29, 2012
Are company’s intangible assets, as producers (sources) of value, revenue, competitive advantages, and ‘building blocks’ for growth, sustainable? Being an intangible asset strategist and advocate, I believe this is an important question, particularly now, as we’re in the midst of the knowledge (intangible) asset based global economy and the first time in corporate governance history in which over the past decade, conservatively speaking, 65+% of most company’s value and sources of revenue evolve directly from intangible (non-physical) assets, rather than tangible (physical) assets.
Based on my experience in the intangibles arena over the past 20+ years, I am inclined to say the most correct answer to the question is, a very big ‘it depends’! As in most things intangible there are various points to consider, among them being…
- the contributory value and sources of revenue intangible asset can deliver are seldom indeterminate, due in part to the fact that protections and risk mitigation afforded to intangible assets (aside from intellectual property, i.e., patents, trademarks, copyrights, and under very strict circumstances, trade secrets where enforcement assistance is available through federal and state authorities) are solely dependent on the holders’ own initiative.
- today’s global business (transaction) environment is extraordinarily competitive, very predatorial, and laden with persistent, asymmetric, and sophisticated risks and threats wherein global adversary’s possess capabilities to execute strategies to misappropriate, diminish, and/or undermine an assets’ value and competitive advantage almost instantaneously.
In their fine Deloitte report titled, ’The Economic Role of Intellectual Property’, authors’ Noonan Haque and Greg Smith identify and describe the ’key issues’ knowledge-based company’s confront:
- rapid R&D breakthroughs
- diffusion of knowledge, information, and data, and
- increasingly abbreviated asset life (value, functionality) cycles.
I have found the following very useful exercises for management teams, c-suites, and boards, i.e., identify, design, and assess…
- strategies to exploit the assets that best fits the company, industry sector, culture, innovativeness, resources, and strategic business plan.
- strategies for asset management, stewardship, oversight, contributory value, and risk monitoring to strengthen and lengthen the assets life, value, and functionality cycles.
- strategies to ensure the production, acquisition, utilization, and exploitation of the company’s (intangible, IP) assets are aligned with the company’s core business mission.
Those engaged in business (IP, intangible asset) management but, remain unfamiliar with the above exercises or dismiss their relevance are certainly, in my view, leaving substantial potential value, sources of revenue, and growth opportunities ‘on the proverbial table’ and otherwise doing a significant disservice to their company and/or client!
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