Archive for 'Intellectual capital management.'

Intangible Asset Damages

July 14th, 2014. Published under Intangible asset protection, Intangible asset training for management teams., Intellectual capital management.. No Comments.

Michael D. Moberly     July 14, 2014    ‘A long form blog where attention span really matters’.

A not-so-hypothetical circumstance…

The following represents a not-so-hypothetical circumstance which I’m confident many readers have encountered. For me, as an intangible asset strategist and risk specialist, it represents one of the more consistent and disconcerting challenges insofar as safeguarding intangible assets, for which I have no one-size-fits-all answer. The hypothetical begins this way. I have been invited by Company A’s management team to conduct intangible asset awareness training and assess their intangible assets.

During the early stages of the engagement, it quickly becomes apparent that Company A has developed and utilizes company centric proprietary intellectual capital (know how) that delivers efficiencies and market – sector competitive advantages. However, as the engagement proceeds, it becomes even more apparent that the firms’ management team lacks sufficient operational familiarity with those and other particularly valuable intangible assets they have produced in terms of identifying, unraveling, assessing, distinguishing, utilizing, exploiting, and safeguarding, etc.

With respect to each of the latter, the company’s failure to recognize the contributory value, sources of revenue, and competitive advantages their specialized proprietary intellectual capital (intangible assets) are delivering represents an obvious breakdown in asset stewardship, oversight, and management. Fortunately, it is a breakdown that not only must, but usually can be remedied providing the value and functionality (life) cycle of the asset or assets remain relevant and durable.

In defense of management teams…

I should say in defense of management teams’ absence of operational familiarity with (their firms’) intangible assets, such circumstances, unfortunately, are relatively common. That is, countless companies globally have deeply embedded, in their routine business operations and processes, a myriad of intellectual, structural, and relationship capital and other forms of intangible assets which frequently, for lack of a better explanation, are taken for granted and therefore remain unacknowledged, undervalued, and thus, at risk.

So, the maximum contributory value, competitive advantages, and efficiencies these assets could deliver may remain un-exploited, if not idle, throughout their potential functionality – value cycle.  Importantly, under such circumstances, a company may never fully recognize the economic or competitive advantage benefits. An especially unfortunate element to this hypothetical is that a company management team may have no perspective for the importance or necessity to preserve (safeguard) the contributory value and competitive advantages the asset are delivering, and which the company has likely, but unknowingly, grown dependent.

Ex post facto trade secrecy requisites…

So, one important question is, can, or should this company’s proprietary intellectual capital as portrayed here, be cast (ex post facto) as trade secrets?  This of course, representing one strategy to help remedy the situation?  More specifically, can these intangibles meet the six requisites of trade secrecy (ex post facto) when in fact, the proprietary intellectual capital has not previously been recognized nor treated in a manner consistent with those criteria?  Nor are any procedures/practices in place to safeguard, i.e., preserve control, use, ownership, and monitor value, materiality and risk to those assets, i.e., infringement, theft, and/or compromise? Admittedly, I am doubtful.

A second, and equally important question is that if, not when, this particular proprietary intellectual capital is stolen, copied, or otherwise compromised, absent having any specific (trade secret requisites) safeguards in place, does Company A have grounds to mount a viable legal recourse in terms of seeking damages, assuming of course, the firm becomes sufficiently aware in a timely fashion that such adverse acts, i.e., the loss, theft, and/or compromise, have actually occurred?

The patent statute…

As articulated by Scott Hampton, Hampton IP and Economics, USC 35, 284, often referred to as the ‘patent statute’, states that patent infringement damages should be in an amount adequate to compensate the patent holder for the defendant’s infringement of the patent-at-issue.  But, in this hypothetical, Company A, the developer of the intangible assets, but previously unacknowledged user, has neither filed or been issued a patent, so this prospective remedy strategy seems, at best, very shaky, if not irrelevant.

Given my predilection that risks, i.e., theft, misappropriation, compromise, etc., to most intellectual capital assets will materialize with litigation promoted as the relevant strategy to try to regain control and use of the assets, plaintiffs will routinely endeavor to make a determination, usually early, as a element of the pre-litigation process, whether to seek lost profit – competitive advantage damages, or limit the remedies they are seeking to a reasonable royalty?  Again, its doubtful either are viable strategies for this particular hypothetical, but nevertheless, worth exploring.

Most companies do not go down the conventional intellectual property path…

It’s useful to recall at this point that today, globally speaking, it is an economic fact that 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability either lie in – evolve directly from intangible assets of which conventional intellectual properties are merely one type or category of intangible asset.  However, a reasonably high, but realistically unknown percentage of companies with developed intellectual and structural capital assets presumably and purposefully opt out of the conventional intellectual property (patent) path due in large part no doubt to the expense.

So, the intent of this post is to bring clarity to the initial dilemma (question) in Company A’s hypothetical, that is, with its contributory value and efficiency – competitive advantage delivering intangible assets, can it be realistically be positioned (ex post facto) to legally seek monetary damages if key proprietary intellectual capital – structural were to be stolen or compromised when conventional intellectual properties, i.e., patents or trade secrets were not in place from the outset?

Panduit Corporation v. Stahlin Brothers Fibre Works, Inc.

Hampton points out, as we know, there is no single method for calculating lost (profit) damages, but the most common is a four-part test first recognized in 1978 in case of Panduit Corporation v. Stahlin Brothers Fibre Works, Inc.  According to the Panduit test, says Hampton, to obtain damages, the profit, in our  Company A hypothetical, a real patent owner must prove…

  • a demand exists for the (patented) product or presumably process, i.e., intellectual and structural capital.
  • there is an absence of acceptable (non-infringing) substitutes in the current market space.
  • there is sufficient manufacturing and marketing capacity to exploit that demand, and
  • with some reasonable precision, the amount of profit Company A would have made, had the adverse act not occurred.

Hampton also points out there are other means of proving lost profit damages in addition to the above Panduit test, such as measuring increases in the cost of product inputs.  Is it feasible then, for Company A to plausibly characterize the latter as costs related to the development (internally) or acquisition (externally) of other suitable (replacement) intellectual capital for that which had been misappropriated – comprised?

Please consider the following as a respectful call to action!  That is, for companies operating in the increasingly and irreversibly competitive and predatorial knowledge-based global economy where growing percentages of most company’s value, revenue, profitability, and sustainability are inextricably linked to the use and exploitation of their intangible assets, i.e., intellectual, relationship, and structural capital, most all of which are quite vulnerable when effective processes – procedures are not in place, i.e., (a.) to sustain – preserve asset control, use, ownership, value, and monitor their materiality and risk, and (b.) for asset stewardship, oversight, and management,

A special thanks to Scott Hampton, Hampton IP and Economics for the inspiration for this post at http://hamptonip.com

As always, reader comments are most welcome.

Intellectual Capital Calculating Infringement Damages?

May 11th, 2013. Published under Intangible Asset Value, Intellectual capital management.. No Comments.

Michael D. Moberly     May 11, 2013    ‘A blog where attention span matters’.

Here is a hypothetical which represents one of multiple issues in the global arena of intangible assets that I find pose persistently troubling aspects which I have yet to find definitive answers.

Let’s say for example, Company A produced, possesses, and utilizes, what I term ‘proprietary intellectual capital’ (know how) or ‘PIC’ for short.  When I arrive at Company A, as an intangible asset strategist, to conduct training and assessment of their intangibles, it’s apparent management team are respectfully lacking in achieving operational familiarity with intangible assets, i.e., identifying, unraveling, assessing, utilizing, exploiting, etc.

Again, this is a hypothetical, but one which, I would venture to say most every intangible asset strategist and practitioner has or will likely experience.  In this instance a management teams’ failure to recognize PIC as possessing and contributing identifiably specific value, efficiencies, or competitive advantages to their company.

I should say in this management teams’ defense however, this overall circumstance is not uncommon, in that many firms have, deeply embedded, in their routine operations and processes, a myriad of intellectual, structural, and relationship capital which frequently, due to its longevity and endurance is, for lack of a better explanation, taken for granted and remains unacknowledged as a distinguishable (intangible) asset that may deliver contributory value, competitive advantages, or efficiencies, etc., anyone of which could be exploited beyond their current use (status).

An additional (obvious at this point) exacerbating factor to this hypothetical is that the company management team has no perspective for the importance or necessity to preserve (safeguard) the contributory value and competitive advantages particular PIC is delivering and which the company has grown dependant.

So, one dilemma is, should or can PIC’s as portrayed here, be properly and defensibly cast, in an ex post facto manner, as trade secrets?  Admittedly, that’s very doubtful. Or, could the PIC meet, again in an ex post facto manner, the six requisites of trade secrecy when in fact, the proprietary intellectual capital has neither been recognized nor treated in a manner consistent with the requisites of trade secrecy, nor are any procedures in place to safeguard – preserve control, use, ownership, and monitor value, materiality and risks associated with infringement, theft, and/or compromise of this PIC?

A second, and equally important dilemma in my view is that if, not when, this particular PIC is stolen, copied, or otherwise compromised, absent having any specific safeguards in place, does Company A have any recourse at all, in terms of damages, assuming of course, the firm becomes aware, in a timely fashion that such adverse acts have occurred?

As articulated by Scott Hampton of Hampton IP and Economics, Title 35, Section 284 of the United States Code, often referred to as the ‘patent statute’, states that patent infringement damages should be in an amount adequate to compensate the patent holder for the defendant’s infringement of the patent-at-issue.  But, in this hypothetical, Company A, the developer and user of this PIC has neither filed or been issued a patent, so that remedy strategy seems, at best, irrelevant.

When litigation is evident to try to settle infringement, theft, misappropriation, and/or asset compromise claims, plaintiffs will routinely make a determination, usually early in the pre-litigation process, whether to seek lost profit damages, or limit remedies to only a reasonable royalty, again it’s certainly questionable whether either applies in this hypothetical.

Let’s recall now that today, globally speaking, 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability lie in – evolve directly from intangible assets of which conventional intellectual properties are one.  But, a significant percentage of companies purposefully or otherwise, opt out of the conventional IP path.

Hopefully, this brings clarity to my initial dilemma (question), which is, can Company A, with its revenue – competitive advantage producing intangible assets, ever be positioned to seek lost profit damages if a key PIC were to be stolen when conventional intellectual properties, i.e., patents or trade secrets are either not in place or maintained?  More specifically are there satisfactory remedies to firms like Company A proprietary intellectual capital has been misappropriated?

Hampton says there is no single method for calculating lost profit damages, but the most common is a four-part test first recognized 1978 in the Panduit Corporation v. Stahlin Brothers Fibre Works, Inc. case.

According to the Panduit test, to obtain damages, the profit, in this instance, Company A could make but for the infringed intangibles, a real patent owner must prove…

  • demand for the (patented) product or presumably process.
  • the absence of acceptable non-infringing substitutes in this market space.
  • manufacturing and marketing capacity to exploit the demand, and
  • the amount of profit (the patent owner), i.e., Company A would have made.

Hampton also points out there are other means of proving lost profit damages in addition to the Panduit test, such as measuring increases in the cost of product inputs.  Could Company A then plausibly characterize the latter as costs related to the development (internally) or acquisition (externally) of other suitable intellectual capital to replace that which had been misappropriated – comprised?

Let’s be clear. I am only exploring potential remedies or defensible strategies to secure economic – competitive advantage relief for companies operating in the increasingly and irreversibly competitive and predatorial knowledge-based global economy where growing percentages of most company’s value, revenue, profitability, and sustainability are inextricably linked to intellectual, relationship, and structural capital, i.e., intangible assets, most all of which are quite vulnerable when effective processes – procedures are not in place, i.e.,

  • to sustain – preserve asset control, use, ownership, value, and monitor their materiality and risk.
  • for asset stewardship, oversight, and management.

A special thanks to Scott Hampton, Hampton IP and Economics for the inspiring this post (www.hamptonip.com)

Each blog post is researched and written by me with the genuine intent it serves 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  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 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

Safeguarding Intangible Assets!

January 23rd, 2013. Published under Intangible asset protection, Intellectual capital management.. No Comments.

Michael D. Moberly    January 23, 2013

1. Intangible asset safeguards, particularly those directed to intellectual, structural, and relationship capital, should include provisions for rapid maneuverability to (a.) reflect-address changes in asset value, risk, and vulnerability, and (b.) reflect the assets’ life and functionality cycle. Most information asset safeguards and risk mitigation initiatives tend to remain constant throughout the life, value, and functionality cycle of the specific asset(s) being protected and regardless of routine changes most of those assets’ will inevitably encounter, i.e., contributory value to current or future company projects as well as risk.

Exacerbating this today’s is the increasingly aggressive, competitive, and predatorial global business (transaction) environment, in which the value and relevance (useful life-value cycle) of intellectual, relationship, and structural assets routinely experience uniquely compressed time frames for utilization relative to their relationship and contribution to specific (new company) initiatives, tasks, processes, and operations.

It’s prudent then, for the design and implementation of information asset safeguards to incorporate the capability of being maneuverable, i.e., to increase or decrease the level of protection warranted to reflect fluctuations in, not only an assets’ value and relevance, but asset risks, threats, and vulnerabilities.

2. Avoid ‘pushing what should be done off the table’! Each day companies are presented with an array of risks, threats, and challenges which often get translated as being urgent and therefore opportunities (pressure) to push what should be done off the table. At least one consequence of pushing ‘what should be done’ off the management team (c-suite, boardroom) table (agenda) is that companies will direct disproportionate attention to the proverbial internal – external choruses, which offer, in my view, largely speculative, worst-case scenario, and/or snap-shots-in-time assessments of risks, threats, and vulnerabilities.

Due to potentially devastating (enterprise-wide) consequences which intangible asset risks, threats, and vulnerabilities can produce almost instantaneously, I strongly discourage companies from dismissing them, but, neither should they serve as subjective, ‘knee jerk’ rationales for indiscriminately implementing sweeping and costly (intangible asset) safeguards absent, at minimum, cursory research to ensure they’re neither subjective nor snap-shot-in-time anecdotes.

Instead, adopting forward looking and objective (intangible) asset safeguard strategies linked to an assets’ contributory value and its functionality cycle rather than narrowly focused, time-bound, and anecdotal assessments is the most effective, efficient, and prudent approach.

3. Foster relationships! Any initiative to safeguard a company’s intangible (intellectual, structural, relationship capital) assets must absolutely include capabilities to sustain (a.) control, (b.) use, (c.) ownership, and monitor (d.) value, (e.) materiality, (f.) sustainability, and (g.) risk.

To achieve the desired level of success, any such initiative must also include fostering collaborative (internal and stakeholder) relationships. This can occur by ensuring the assets’ originators, developers, users, and owners have been properly and effectively engaged at the outset, i.e., earliest stages of development and/or acquisition, as the impetus for literally assuming ‘ownership for success.

Unfortunately however, some company’s tend to be exclusion oriented and unreceptive to fostering collaborative relationships for their valuable intangible assets.  Occasionally, this evolves from the misperception that computer/IT system security equates with, or worse, eclipses intellectual capital (asset) safeguards which is often rooted in the misconception that all valuable (company) information exists solely in electronic ‘bits and bytes’ and is safely stored in stationary servers, back-up sites, or ‘clouds’.  Those who hold or cling to such perspectives seem to be oblivious to the economic fact – business reality that today, 65+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, sustainability and profitability evolve from – lie in intangible assets!

Make no mistake I’m certainly not suggesting computer/IT security is not absolutely critical to every company, particularly as target specific risks/threats are rapidly becoming much dreaded and a potentially devastating norm. That said, in my view, computer/IT security would be better understood as being complimenting to, rather than dominating, company strategies and initiatives to safeguard valuable and proprietary intellectual, relationship, and structural capial intangible assets.

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.

Intellectual Capital War…Intellectual Capital Emergency!

August 7th, 2012. Published under Intellectual capital management.. No Comments.

Michael D. Moberly   August 7, 2012

Let me start this post by stating unequivocally, the title is, in no way, a metaphor for the seemingly endless, so-called patent wars!

As far as I know, during the 70th episode of the television series Star Trek: The Next Generation, the phrase “whoever acquires the most toys wins” was expressed.  While many of us, myself included have joked about this seemingly non-descript phrase, or perhaps good naturedly mocked one of our neighbors for their seemingly perpetual acquisition of ‘toys’, i.e., cars, riding lawn mowers, HD TV’s and sound systems, etc.  It’s certainly not inconceivable then to consider something similar is occurring with respect to the rising trend of intellectual capital dependent economies whereby knowledge (intellectual capital) is one of the most highly sought after commodities (intangible assets) aside from the basic necessities for sustaining life, or making life better.

In other words, the demand for intellectual capital (knowledge) from governments, industry sectors, and universities, etc., emanate from the well understood concept that knowledge and intellectual capital equates with economic and its closely linked brother, political power.  Thus, the absolute need to attract, acquire, sustain, and effectively exploit the most current, relevant, and forward looking intellectual capital – knowledge possible is a necessary prelude for developing countries particularly, to achieve the much coveted (a.) respected player status, and (b.) a sought after inviteee to the global innovation table.

Not winning, or at least medaling in some portion of the ‘knowledge wars’ (a phrase I believe was coined by Sean Coughlan, BBC’s education correspondent in an article he authored – reported in late 2011) can be devastating, often irreversible, and puts governments, countries, and industry sectors nearer the ‘intellectual capital cliff’.

Knowledge produces power, more specifically, knowledge produces economic power, Coughlan quite correctly says.  Neither is particularly surprising because we are, don’t forget, in the midst of a very long term, perhaps permanent, knowledge (intangible asset) based global economy which most duly recognize.  However, there are persistent and increasingly predatorial initiatives to acquire the type of economic power that only originates from the development, funding, nurturing, and/or acquisition of intellectual capital and its cousins, structural and relationship capital.  That’s because, among other things, intellectual (relationship and structural) capital, are key drivers that render investments in research and innovation attractive which in turn, hopefully produce innovative and sustainable products and entire industry sectors.

Put another way, most countries, universities, and investor groups are looking for the right combination of intellectual (capital) ingredients that will turn university research and technology transfer projects into corporations, ala Google, Apple, Oracle, and country specific ‘silicon valley’s’ across the globel that are the foundations for skilled jobs to replace those lost in previous financial calamities, and otherwise, merely try to keep engage and keep pace in the increasingly globally inter-connected and intellectual capital dependent economies and business transaction environments.

For any country (government) or company not to invest resources toward developing and nurturing a permanent foundation of sustainable intellectual capital would, and should be “unthinkable”, says Maire Geoghegan-Quinn, the European Commissioner responsible for research, innovation and science, who is trying to spur the European Union to keep pace in turning ideas into industries.  She announced £6bn funding to kick-start such projects in 2012.  The aim of that funding is to support 16,000 universities, research teams and businesses, because a million new research jobs, she no doubt correctly claims, will be needed to keep pace with global competitors in the health, energy and digital economy sectors.

Some characterize the situation this way, ‘we need to re-boot economies with the focus being on permanent growth of intellectual capital’.  I agree!

(This post was inspired by a fine article authored by Sean Coughlan, BBC’s education correspondent in September, 2011)

Intangible Assets and Frugal Innovation…

June 27th, 2012. Published under Frugal Innovation, Intangibles as strategic assets, Intellectual capital management.. 1 Comment.

Michael D. Moberly    June 26, 2012

Frugal innovation is, according to Navi Radjou, Dr. Jaideep Prabhu, and Dr. Simone Ahuja, authors of ‘Jugaad Innovation: Reigniting Innovation in the U.S. and Beyond’…

much more than merely stripping out cost, it essentially prompts individuals to re-think the entire production process as constituting a reversal of most contemporary product design approaches and/or methodologies!

In their, many say, revolutionary book, the word ‘frugal’ is replaced with the Hindi term ‘Jugaad’ which means an innovation, i.e., an improvised solution born from ingenuity and resourcefulness when faced with scarce resources.

As the authors point out, ‘Jugaad innovators’ are most notable for possessing mindsets that encompass multiple (and simultaneously held) attitudes, practices, and abilities, each of which is conducive  to seeking and developing opportunities under adversity by…

  • doing more with less (resource constrained circumstances)
  • thinking and acting flexibly
  • keeping things simple
  • always including the margin, and
  • following one’s heart.

But, let’s be clear, ‘frugal innovation’ commences, like most innovative endeavors, with an idea. The difference is, frugal innovation is conducted under frugal, and, some would say, adverse circumstances with little or no seed capital.  My experience suggests, frugal innovation will produce a compliment of intangible assets.  Those intangible assets will usually take the form of intellectual, structural, and relationship capital, which in many instances are proportionately comparable to the output of corporate and/or university sponsored R&D initiatives in which there are generally, sufficient resources committed and innovation development conditions are anything but frugal.

As is frequently typical with many new initiatives, some espouse the view that frugal innovation is a ‘tricky skill set for western innovators to emulate’.  That’s because, that argument goes, a requisite to being a successful and frugal innovator, is having grown up in an environment where frugality is the primary, if not the only, option available to hopefully bring one’s innovative idea to fruition.

Needless to say, I don’t fully agree with that perspective.  Instead, I am very confident, in fact I know a substantial number of ‘western creatives’ who would find frugal innovation an especially attractive concept and strategy, perhaps even more so during this extended economic downturn in which funding and sources of capital are tight, to say the least.

Regardless, wherever a creative initiates/conducts their ‘frugal innovation’, success will be varyingly dependent on having access to an operational platform in which the tenants of ‘frugal innovation’ are already integrated and linked to processes and structures whereby they  can develop, test, and assess their idea (innovation) in not just a frugal, but a well managed environment coupled with the right amount of stewardship and oversight.

So, in my search to find an existing and preferably already operational U.S.-based company, that applied ‘frugal innovation’ principles, I became acquainted with a firm in Atlanta called Qwerkstation.com.

As it turns out, Qwerkstation was developed by Latanya Washington as a social workstation for entrepreneurially oriented individuals to explore and develop their ‘creative side’ by turning ideas into actual innovation.  Querkstation is a web-based platform in which individuals can truly observe and engage in ‘frugal innovation’ practices. During Qwerkstation’s development phase, Washington’s expertise in software allowed her to capitalize on the open source movement in software production from which she selected particular web application components and distinctively reconfigured them to literally create Qwerkstation.

As readers know, open source software development has been a boon to entrepreneurs for turning ideas into robust applications and digital products without the necessity of hiring software engineers which would all but negate the tenants of frugal innovation. The operational practices Washington adheres to, coupled with the digital functionalities she has embedded in Qwerkstation, collectively work in her favor by (a.) minimizing overhead costs, and (b.) better meet the needs of her target consumer, all-the-while operating in a genuinely frugal innovation manner.

Washington recognizes that frugal innovation has had a significant effect on her overall business processes and perhaps most importantly, outcomes, which I find to be valuable and sustainable competitive advantages, i.e., intangible assets.  Frugal innovators and creatives’ who engage Qwerkstation Washington believes, need to be highly focused and efficient, probably more so than in comparative companies with large capital reserves and ample resources.

It’s certainly my sense, at this point, that Qwerkstation is very much a global version of ‘frugal innovation’ which is not only an attractive, but very worthy first step to the innovation process.

(This post was inspired by the book ‘Jugaad Innovation’ authored by Navi Radjou, and Drs. Jaideep Prabhu and Simone Ahuja and the work of Latanya Wasington who founded Qwerkstation.com)

Intangible Assets and New Product Launches: Keeping Your Genie’s In Their Bottle!

June 12th, 2012. Published under Intangibles as strategic assets, Intellectual capital management., Sustainability of intangible assets.. No Comments.

Michael D. Moberly   June 12, 2012

Achieving successful and sustainable new product and innovation launches is increasingly dependent on management teams recognizing…

  1. 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.
  2. 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.

 

Intellectual Capital: Managing and Safeguarding…

April 23rd, 2012. Published under Analysis and commentary, Intellectual capital management.. 1 Comment.

Michael D. Moberly     April 23, 2012

There are countless companies that have executed well intentioned initiatives to manage and safeguard their intellectual capital (IC).  There is nothing particularly new here.

An important driver of this elevated and worthy interest in intangibles is that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability today evolve directly from intangible assets, one of which of course is internally produced or acquired IC.

IC represents the value employees provide to a company or client by applying their skills, knowhow, expertise, and the unique understanding of how best to use (exploit) that IC to create efficiencies, commercialization opportunities, and/or generate revenue and competitive advantages.

Let’s be clear at the outset though, IC is not synonymous with intellectual property, i.e., patents, trademarks, or copyrights.  True, intellectual property is generally composed of intellectual capital.  IC however, standing alone, is not eligible for conventional intellectual property protections unless it would be internally designated as a trade secret. Thus, having processes and procedures in place to ensure IC’s proprietary nature is preserved becomes all the more important.

IC also includes:

  • Human capital which is a company’s combined (employee) capability for solving a company’s (business) problems and how effectively a company uses its employees as measured by creativity and innovation.  Human capital is inherent in most employees and cannot necessarily be ‘owned’ (in a conventional sense) by a company other than through non-compete and non-disclosure employment agreements.
  • Structural capital which consists of a company’s supportive infrastructure, processes, and (proprietary) databases, etc., which collectively enable human and intellectual capital to function (more) effectively through the utilization of certain hardware, software, information systems, processes, intellectual property, and a company’s image.

In some settings, structural capital can be further categorized as…

  • Organizational capital, e.g.., a company’s operating philosophy and systems for leveraging and/or maximizing its capability…
  • Process capital, e.g., techniques, procedures, and programs used to implement as well as enhance the delivery of goods and services…
  • Innovation capital, e.g., intellectual property and other forms of intangible assets…
  • Relationship capital, e.g., readily identifiable items such as trademarks, licenses, franchises, and customer/client interactions and relationships.

Unfortunately however, existing research – studies indicate that management teams, c-suites, and boards generally fall short of (a.) recognizing all of the IC held within their firm, (b.) the various formats IC can manifest itself, and (c.) ensuring effective processes – procedures are in place to counter, prevent, and/or mitigate the growing array of risks, threats, and challenges associated with safeguarding – managing (sustaining control, use, ownership, and monitoring value and materiality of) intellectual capital.

My professional interest in company’s IC focuses on those aspects which are – have become embedded in a company’s processes and procedures to produce, develop new, and/or improve existing goods and/or services. In today’s increasingly knowledge (intangible asset) based global economy, IC in my view, represents the more significant of a company’s ‘building blocks’ insofar as its ability to solve problems, achieve profitability, and contribute to sustainability.

IC, in my view, can best serve a company’s tactical and certainly strategic interests only if those aspects that contribute to value, innovation, problem solving, revenue, and competitive advantages are designated as being proprietary, effectively safeguarded, or possibly bundled for licensing or other profit-revenue delivering modes.   Company management teams and other business decision makers must recognize IC is a perishable, vulnerable, and transferrable (intangible) asset (commodity).  That is, it can ‘readily walk out the door with employees’.

In most instances, I encourage company management teams to put specific practices/procedures in place to sustain the proprietary status of designated IC.  The intent of such an exercise is to reduce the probability that value driving IC would (purposefully, inadvertently, surreptitiously) enter the public domain or become known (acquired) by global competitors.  Should either occur, it would hasten diminishment of the assets’ contributory value, revenue generating capability, as well as any competitive advantages it may have influenced.

It warrant’s saying also that conducting periodic inventories and/or audits of intellectual property is no substitute for, nor does it equate with what’s necessary for managing and safeguarding IC assets, particularly in today’s highly competitive and globally predatorial business (transaction) environment. And, with steadily rising percentages of company value, revenue, growth potential, and sustainability tied directly to the production and effective use of intangible assets, like IC, the notion of dedicating an individual and/or team to be responsible for identifying, managing, using, and protecting (a company’s) IC is becoming a prudent business decision with a strong and defensible value proposition!

Key professionals, like Mary Adams of I-Capital Advisors, are respected thought leaders, strong advocates and practitioners serving this increasingly important business arena.

Readers interested in learning more about intellectual capital management are encouraged to visit the IC Knowledge Center and/or read ‘Intangible Capital: Putting Knowledge to Work in the 21st Century’ by Mary Adams and Michael Oleksak which was the inspiration for this post.

Intellectual Capital: Safeguards and Management Are Not Options!

April 18th, 2012. Published under Intangible asset protection, Intellectual capital management.. No Comments.

Michael D. Moberly    April 18, 2012

First, let’s agree that managing and safeguarding a company’s intellectual (relationship and structural) capital (IC) is a business necessity and fiduciary responsibility. It’s simply not an option nor a luxury for companies that wish to remain economically and competitively ahead.   Why, because a company’s IC serves as one of several key (intangible asset) underliers and enablers of company growth, profitability, and sustainability.

IC is often characterized (defined) as a company’s collective knowledge, know how, and skills that accumulate and/or accrue over years of operation.  But, that’s not all, IC is also the understanding of how and when to best apply and/or adapt that knowledge to fit particular circumstances or challenges.

Managing and safeguarding intellectual capital starts by recognizing the economic fact that 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability evolve directly from intangible assets, of which IC is just one.

A ’best practice’ IC management and protection regime should:

  • be relevant and flexible to accommodate diverse and complex companies and circumstances as well as each of the formats which IC manifests itself (exists)
  • not impede or appear debilitating to existing business processes, operations, and functions
  • recognize that IC is perishable, easily transferrable, and consistently vulnerable to theft, misappropriation, and/or compromise
  • be tailored to address (mitigate) the often nuanced and increasingly sophisticated vulnerabilities and risks relative where and how a company conducts its business-transactions, its industry sector, and its product/service lines.

Managing and safeguarding a company’s IC, in its most simplistic form, also consists of two key responsibilities:

  • conducting – maintaining an inventory of a company’s IC.
  • possessing the knowledge and skill sets to objectively assess and distinguish how much andwhat aspects of a company’s IC are:
    • in useand, determine if they can be used more effectively and profitably to add value to the company.
    • not in useand, determine if they remain relevant, material, and/or useful to the company or, perhaps to other entities, vs. remaining as stagnant assets and costs.

Interestingly, Davis and Harrison (authors of ‘Edison in the Boardroom’) estimate that only 30% of many company’s entire IC portfolio may actually be in use, with the remaining 70% likely found in various (other) forms, e.g., intellectual property that has become obsolete, and/or embedded in various products or services that are no longer in the company’s inventory.

While these estimates may well be accurate, I tend to discourage companies from using those estimates if they inadvertently influence and/or pre-judge the outcome of an IC inventory – audit.  My reasoning is that most companies possess – have embedded a virtual variety of IC, much of which is distinctive to an enterprise or project which ultimately needs to be recognized and assessed.  But, the Davis and Harrison percentage estimates do catch one’s attention and perhaps that’s what they were supposed to do?

Let’s suggest for a moment that a company’s board and senior leadership conclude that it would be useful to resource an IC management audit – inventory.  Should that occur, the (audit, inventory) team should be charged with the mandate to identify, assesss, manage, and exploit the company’s IC in the same-similar manner they would with other business (intangible) assets.

Unfortunately, there remain far too many company management/leadership teams and boards who cling to the perception that intellectual property enforcements, i.e., issuance of a patent, is synonymous with – equates to IC safeguards and management, when in fact it is only through the managed exploitation of IC (and IP) that value, sources of revenue, and building blocks for growth and sustainability can be generated.

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

 

‘The Power of Pull: How Smart Moves, Smartly Made, Can Set Big Things In Motion’

March 12th, 2012. Published under Book Review, intangible assets, Intellectual capital management.. No Comments.

Michael D. Moberly   March 12, 2012    (Book review with application to intangible assets.)

The persistent, asymmetric nature, and shear number of risks, challenges, and problems that companies routinely face today with respect to their intangible (IP) assets are not always reflected or addressed in conventional employee – management team training models which tend to ‘push out pre-built training’.

Conventional training methods and how they’re delivered may not be especially well-suited for knowledge (intangible asset) intensive businesses.  Exacerbating this is the go fast, go hard, go global, ultra-competitive, and predatorial business environment in which growing numbers of companies operate.

John Hagel, as most readers recognize, is a respected business consultant and author of ‘The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion’ along with co-authors John Seely Brown and Land Davison.

‘The Power of Pull’ describes the very real shift in power, which we’re now in the midst, according to the authors.  The ‘pull’ approach essentially creates circumstances which I would describe as being akin to a company culture or knowledge management program in which the right people, the right resources, and the right (relevant) knowledge (information) is easily and quickly ‘pulled’ together whenever and wherever its needed, to effectively meet a current demand or address a problem or challenge.

Too, the ‘shift’ the authors refer to is due in part to the continually evolving knowledge (intangible asset) based global business economy wherein today 65+% of most company’s value, sources of revenue and ‘building blocks’ for growth and sustainability lie directly with intangible assets.

Hagel believes conventional models for delivering company training are largely outdated and less relevant which may come as no particular surprise too many because conventional training:

  • tends to focus on the acquisition of knowledge that is already explicit and codified within a company and amongst its employees.
  • does not instill a (business) sense of anticipation, i.e., determining what training – information employees will need and when?
  • is well behind ‘the need’ curve, therefore little, if any, benefit will emerge to either a company or its employees if the same (push) delivery model continues.

Hagel’s ‘pull’ approach to training allows employees to quickly access relevant resources (information, knowledge, etc.) precisely when they need it, something which Hagel likens to the Google search engine.

Unfortunately, Hagel notes, the primary training model many companies still use is one that pushes, rather than pulls so the authors advocate companies should be building and utilizing ‘pull platforms’ for employees to access – acquire knowledge.

Another un-flattering reality Hagel notes, is that many companies continue to use a training (employee knowledge acquisition) model that does not include the ability to correctly anticipate (predict) when and how the need/demand for new knowledge will evolve in a company or quickly organize – bring the information together to accommodate the anticipated demand.

Hagel adds the need and demand for new information to solve/address a problem or challenge is frequently subject to internal miscalculations in terms of timeliness and accuracy of the information even though much of the needed knowledge – information is open source.

Companies should give favorable consideration to developing (internal) ‘pull platforms’ to accommodate that increasingly frequent and seemingly instantaneous need which, there’s little question, has become the norm for a large percentage of companies globally.

In a ‘pull platform’ as articulated by Hagel and his colleagues, the internal development of talent, knowledge, and expertise emphasizes, or perhaps is dependent upon (a.) on-the-job learning and other informal (learning) structures rather than (b.) conventionally produced (pre-built) and delivered training program.

In other words, ‘pull learning’ provides employees with the ability to rapidly confront the challenges-problems they’re experiencing through their ability to draw and/or pull out the resources needed to design-develop solutions whenever and wherever they’re needed.

Essentially, under the ‘pull technique’ employee learning becomes a by-product of the problems and challenges they encounter coupled with ever increasing requirements for measuring performance.  I suspect, and Hagel confirms, as companies take the ‘pull strategy’ more seriously, they will begin re-thinking many of their conventional practices, e.g.,

  • how the organization is designed
  • what kind of business strategy should be pursued, and
  • what kind of technology platforms are necessary to support the company and their employees in a work environment.

In addition to developing learning platforms that enable – facilitate ‘at will – on demand’ (employee) learning, moving to a fully ‘pull’ mindset approach requires, in many instances, redefining leadership.  Simply stated, in a ‘push’ world, company leadership develops a program and enlists others to follow it.

Whereas, in a ‘pull’ world, Hagel claims, it’s about helping employees develop relevant capabilities to become leaders in their own context, i.e., business unit, etc.  The goal is when employees engage an unexpected challenge or problem and are seeking, or in need of, a solution, they will have already acquired the necessary initiative and inquisitive disposition that encourages them to engage, not sidestep, the problem and find creative solutions to address – overcome it and, in the process learn from the experience.

Hagel sites three factors that are largely responsible for enabling and supporting the evolution of a ‘pull’ environment:

  • digital technology
  • economic liberalization, and
  • global competition.

Hagel suggests everything accelerates in terms of the pace of change in today’s business environment including uncertainty (risk) because, among other factors, new participants (players) have more opportunity to enter a market space and build scale very rapidly.

For further proof of the shift from push to ‘pull’, Hagel points to the long-term decline of return on (physical – tangible) assets for public companies.  Since 1965, return has gone down significantly and there are absolutely no signs this trend will reverse itself in the foreseeable future.  Replacing that of course, as previously stated, is the economic fact that today, steadily rising percentages (65+%) of most company’s value and sources of revenue evolve directly from intangible (non-physical) assets.  For Hagel, this represents ‘a huge red flag’ and all the more reason that the conventional ‘push’ strategy is no longer viable and should be changed.

All that said, many companies still don’t ‘get it’ and thus continue to hold on to the conventional practices and institutions associated with the ‘push’ business world even though it’s yielding diminishing performance.

Creating a proprietary library or body of knowledge in companies, for example, is often bound to fail Hagel argues, because they essentially keep companies and their employee’s knowledge and expertise (intangible assets) in a holding pattern of sorts.  Too, such conventional approaches do not recognize most company’s value and revenue sources have shifted from tangible assets to intangible assets, i.e., intellectual and relationship capital, unique know how, and the ability to know when, how, and where to apply (use) such know how.

Instead, Hagel asserts, companies should focus on creating effective and efficient knowledge ‘flows’, e.g., the pull world,  that allows employees to not only learn faster as the need arises, but also continually replenish their knowledge stocks, i.e., a company’s internal library if you will, of intellectual capital and unique know how (intangible assets).

A glaring reality today to Hagel’s work is that many things we come to know, at any one point in time, tend to become less useful or perhaps obsolete, given the rapidity of change in business circumstances and conditions.  He also claims, if all a company does is hold on to what it already knows and tries to defend it and extract value from (monetize) it, it’s likely to be a losing proposition.

In the current and increasingly aggressive, globally competitive and predatorial business (transaction) environment it’s essential for companies and their management teams to continually seek and find ways to engage (participate) in the diverse and expanding array of knowledge flows. Absent that, Hagel believes, we will surely see more companies falling by the wayside, in many instances because they simply had less capability or inclination to compete in a global marketplace.

Hagel also believes, and so do I, that some of the most profound learning opportunities may not actually occur within a company, rather at the edges of company operations and transactions, e.g., the structural capital found through relationships with partners, stakeholders, distribution channels, and supply chains, etc.  In other words, building and sustaining external relationships (structural-relationship capital) are two important strategies to consistently and favorably affect a company’s value, profitability, and sustainability.

So, while it may not be solely about (developing) talent within a company, it may be about a company’s foresight and ability to connect ‘talent with talent’ wherever it is, and build the relationships (structural, intellectual, and relationship capital) so talented employees can learn faster and better together.  And, I can’t agree more.

This post was dually inspired by the work of Mike Prokopeak in his article in Chief Learning Officer magazine (August 18, 2010) and John Hagel, John Seely Brown, and Land Davison’s book ‘The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things In Motion’.

HR Needs To Frame Its Data As Intangible Assets

March 6th, 2012. Published under HR, Intangible Asset Value, Intangibles as strategic assets, Intellectual capital management.. No Comments.

Michael D. Moberly    March 6, 2012

Most HR (human resource), or ‘people’ departments, and their directors/managers, are very skilled at gathering data to identify and track the conventional trends, e.g., recruitment initiatives, retention, training, terminations, absenteeism, attrition, layoffs, outplacement and the attendant costs, etc.

Framing the HR function in the context of its ‘contributory value’ to a company, i.e., as an accumulation of intangible (intellectual and relationship capital) assets is very necessary in today’s intangible asset dominated – driven business environment.  This helps with unit assessment and achieving more effective use of a company’s people-based intangible assets, i.e., intellectual and relationship capital. 

Management teams should demand the data their HR units churn out coincide with a company’s mission, strategic plan, and most of all, the knowledge-intangible asset economic and competitive advantage drivers of the company.  In other words, HR data much reach well beyond the conventional, e.g., the number of job candidates in the pipeline, recruitment and training costs, and/or skill shortages, etc.

Today, HR would be well served to collect, analyze, and explain data that will provide management teams with strategic insights about the impact, inter-connectedness, and use of the full range of people-based intangible assets, again, the intellectual and relationship capital being produced.

Fortunately, there are many HR managers-directors who already ’get it’ by demonstrating that HR’s role and contributions to a company should be guided and executed through an intangible asset lens that recognizes:

  • 65+% of most company’s value, sources of revenue, competitive advantages, and ‘building blocks’ for growth evolve directly from intangible assets.
  • un-used or under-used intellectual, structural, relationship capital will frequently result in irreversibly lost opportunities.

Many of the conventional (HR) measuring points fall into the ‘nice to know’ category but they frequently don’t convey their contributory value insofar as being the real drivers of most company’s performance and/or business transaction outcomes. In other words, some HR units simply haven’t expanded their (data) collection and reporting mission to conceptually or operationally characterize employee-based know how and intellectual capital as valuable intangible assets.

In a global business economy that is clearly and irreversibly tethered to knowledge-know how based intangible assets the kind of data and insight management teams need and want from their HR unit include such things as the readiness and speed in which a company’s workforce can adapt – accommodate changes necessary for sustaining competitive advantages, etc.

A remaining challenge of some HR units lies in their recognition of the data being selected to monitor, measure, and make available to management teams relative to its ‘connectedness’ to sustaining competitiveness and its effect on (business) performance in an ever broadening array of circumstances and transactions, .

 So, I’m advocating a new mantra for HR which starts by justifying:

  • why certain data is tracked-monitored and not others
  • how and why particular data matters to a company relative to its strategic mission and varied transactions.

In other words is the data relevant to helping a company consistently achieve positive and profitable business outcomes and will HR develop a different roadmap for achieving its contributing (added) value to a company?

The following example, in my view, would advance HR’s contributory value (role) and help make it more strategically relevant to a company, i.e., provide management teams with data that integrates a risk assessment feature that links intellectual and relationship capital assessments to specific challenges and/or risks a company faces relative to current operations as well as new (business) initiatives or transactions under consideration.

 A constructive action like this would bring clarity to ‘business risks’ that fall within HR’s purview. Risk, in this context, would include HR’s (objective) assessment about a workforce, i.e., its

  • ability and/or capacity to be innovative and sustain its competitiveness
  • flexibility and receptivity to rapid changes
  • speed for delivering new products and/or services
  • ability to collectively and rapidly solve problems
  • enthusiasm for ‘investing’ in their work, and
  • sum of employee attributes, training, specialties, skills, and know how, etc.

 Simply stated, it’s time HR ‘puts more skin in the game’!

(This post was inspired by and adapted from the work of Mike Prokopeak (Talent Management Perspectives) and his article titled, ‘What Financial Analysts Think of Human Capital’)