Archive for '‘Safeguarding Intangible Assets’'
Michael D. Moberly February 15, 2017 ‘A business intangible asset blog where attention span really matters’!
The manner-in-which companies – businesses, and their leadership, approach, prepare for, and ultimately respond to the potential for and/or the materialization of risk(s) to their IA’s, as one may expect, varies considerably. Practically speaking, I find the most significant variable is learning whether business leaders I have engaged even conceive of risk (exposure) in threshold or tolerance contexts. With little doubt, there is far more attention paid to the cost of premiums and total dollar limits to the occurrence of a specific adverse event. So, it becomes more of a matter of business-company leadership equating or assuming their threshold and/or tolerance for risk is reflected in the insurance plan and/or insurer in which they have struck a deal. However, truth-be-told, in a large percentage of conversations between insurers and insureds, the words ‘intangible assets’ seldom, if ever, are a distinct-separate aspect to such discussions.
Of course, there is a percentage of forward looking – thinking business leaders and management teams who recognize the absolute importance of anticipating and trying to mitigate IA-specific risk, which is what we are about here. After all, it is economic fact that 80+% of most company’s value, sources of revenue, competitive advantage, and reputation lie in – emerge directly from IA’s. Experience suggests however, that IA specific risk, if-when it is distinguished from other (general) types-categories of risk, many of which remain fixated on tangible-physical assets, is likely to be-a-reflection of and addressed relative to (subjectively) pre-determined (risk) thresholds and/or tolerances of insurers and underwriters. This conventional approach of course, is generally weighted toward the type and content of a company’s physical-tangible products and services vs. the contributions of intangibles.
It is after all, the manner-in-which the company’s IA’s are integrated and applied to those products and/or services that individually or collectively elevate their value, competitiveness, and revenue generation capacity. Ironically, it is those same intangible features and characteristics, i.e., inputs, which simultaneously find attractivity-appeal to global cadres of ultra-sophisticated economic and competitive advantage adversaries.
This leads to another facet of IA risk management which is emerging with consistent frequency and is a consequence of a management team’s felt obligation and/or necessity to ‘get to the market space first’ with their innovation, product, or service. In other words, the go fast, go hard, go global phenomenon is itself a driver of risk to IA’s. In these circumstances, risk is likely to materialize at a very rapid pace commensurate with the accelerated investment, innovation, and product development-launch cycles, etc., which are necessary to the race to be first. Therefore, IA risk is indeed relevant to the globally predatorial and ‘legacy free’ entities, operating at each stage of product-service development functions, which includes drawing economic-competitive advantage information from targeted-companies’ value, supply, and distribution chains, which…
• adversely affects the fragility, stability, and defensibility of
• renders IA’s more distinguishable and thus, their content, more vulnerable
to (specific, targeted) compromise, infringement, competitive advantage
undermining, and value dilution.
• creates more fertile ground for reputation risk(s) to materialize.
Still, another (third) facet of IA-specific risk management lies within company leadership who (mistakenly) assume IA’s constitute infinite resources which are readily and fully renewable, retrievable, recapturable should they be subject to compromise, infringement, or undermining, etc. Those holding such perspectives usually find fewer distinctions between IA’s and tangible assets, even, sometimes, espousing the former are mere extensions of the latter which presumably can be repaired, restored, and returned to productive – operational status in relatively brief periods of time following an adverse act or event. In this reality, IA’s exist primarily-variously in the form of intellectual, structural, and/or relationship capital and often are more fragile and diverse. Thus IA’s tend to be more challenging, costly, and time consuming to replicate, i.e., develop and exploit in a manner that is equally collaborative, competitive, and profitable as before.
For these reasons, I am suggesting, it would be prudent to characterize any one, or combination of the risk management issues cited above, not in contexts of if, rather, in context of when they will materialize and the specificity, depth, and/or breadth which the risk will manifest. Corollaries to these particular-characterizations of IA risk management is another aspect which I call ‘risk illiteracy’. I define ‘IA risk illiteracy’ as an absence of operational awareness-familiarity for the need of having, at the ready, rapid and effective mitigation – intervention measures specific to a company’s valuable and competitive advantage IA’s.
IA risks that do materialize will, in most instances, alter the parameters of a businesses’ tolerance, threshold, and literacy of risk, irrespective of a companies’ – businesses size, sector, maturity, and/or financial health.
To be sure, risks to IA’s, representing most all types and categories, are persistent and can materialize even in circumstances in which experienced and talented management teams are in the lead. Of course, a percentage of business leaders, whether they acknowledge it, or not, signal their thresholds and/or tolerances for risk to the IA’s under their (company’s) control, use, and ownership. Of late, this is especially relevant to IA risks that can materialize at ‘keystroke speed’ to adversely impact (product-service) value, revenue, competitive advantages, sustainability, and equity, ala reputation risks.
Ultimately, a company’s thresholds-tolerances for IA risk, which each presumably signals or establishes, should never be of the one-size-fits-all variety. That’s because, in large part, the materiality of IA’s can fluctuate, ala their fragility, defensibility, sustainability, and contributory values. Instead, company leadership and management teams are obliged to consider (assess – factor) IA risk management variables such as…
• speed of (risk) materialization and its expansion – embeddedness
throughout an enterprise.
• criticality of risks to all or specific parts/units of a company and its
products and services.
• a company’s current capabilities and speed which it can mitigate –
• a company’s overall resiliency, ala recuperative capabilities as a target
of a materialized risk vis-à-vis customers, clients, consumers, and
As such, business leadership and management teams are obliged to approach and engage IA risk mitigation and management as integral to structuring (engaging, undertaking, negotiating, and executing) any new business initiative, transaction, product-service rollout, R&D, etc.
Michael D. Moberly July 28, 2016 ‘A blog that intersects intangible assets with business’!
As I have endeavored to convey since my initial post to this blog in mid-2006; the importance for business decision makers to recognize that, in each transaction they engage, correctly identifying, assessing, and mitigating risk to the IA’s (intangible assets) which play increasingly significant roles insofar as being consistently positioned to achieve the projected and sustainable outcomes!
The reason, steadily rising percentages (80+%) of most transactions’ value, projected sources of revenue, future wealth creation and competitiveness reside in – evolve from IA’s. That’s an objective and replicated economic fact, not business cliché or hyperbole. So, when business transaction management (M&A, due diligence) teams, etc., overlook, or elect to dismiss and relegate relevant IA’s, for whatever reason, i.e., IA’s not routinely reported – integrated in balance sheets or financial statement, it’s tantamount, in my judgment, to ignoring how/where value is created, revenue is generated, and sound strategic planning should originate.
In growing numbers of instances, engaging, identifying, assessing, valuing, and mitigating risks to IA’s most relevant to a transactions’ and/or operations’ projected and presumably lucrative outcome rises to a fiduciary responsibility ala Stone v. Ritter.
For decision makers, the implications are clear; an immediate charge to themselves and their transaction management team is to determine if IA’s are being correctly incorporated – addressed in the various tasks, i.e., due diligence, asset inventory, audit, and valuation, etc. Should decision makers find their transaction teams are doing neither, it’s fair to suggest achieving operational familiarity with business’s IA’s by sector and type of (reason for initiating a) transaction, would be a prudent undertaking and would produce revelatory insights that can be immediately applied to further transaction negotiations, i.e., mitigating risks by ensuring ownership, control, use, and value – competitive advantages of the relevant IA’s will be sustained.
As regular readers of this blog know, there is an abundance of business economic research (NYU’s Stearns School of Business, The Brookings Institute, and key UK universities) that consistently paint convincing and objective portraits about the 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.
Each parties’ transaction management-oversight team is variously obliged to work collaboratively to reveal, unravel, and assess contributory relevance and value of IA’s. The reason, IA’s routinely and variously embedded and interact on multiple levels within an enterprise. In other words, IA’s (particularly intellectual, relationship, structural, and competitive capital) will very likely apply to multiple business – operational activities, initiatives, and projects. However, IA’s contributory role and value to routine business operations and/or a specific transaction can – will – may fluctuate, sometimes quite rapidly and not always for the better.
A technique I developed to determine and potentially remediate adverse (IA) fluctuations in a timely manner, relative to their dominant contributory role and value in transactions in a timely manner is to ensure an ‘IA transaction impact analysis’ is fully integrated into the (transaction) due diligence process in both pre and post contexts. As information derived from the (transaction impact) analysis is communicated to decision makers, a more definitive portrait of projected outcomes will arise, particularly materialization of risks which can adversely affect one or more of the IA’s in play.
The rationale for incorporating an IA transaction impact analysis for M&A’s and other types of business transactions is to better position decision makers to identify – become aware of risk circumstances – scenarios which, if they materialize, may impair or otherwise adversely affect the transaction via the IA’s in play.
I advocate IA ‘transaction impact analysis’ to focus primarily on what I find to be the three challenging IA’s to sustain – preserve their (projected, assessed) contributory role and value, particularly post-transaction, i.e., intellectual, relationship, and structural capital.
Transaction management team members undertaking – engaging in the ‘impact analysis’ are obliged to possess strong operational familiarity with (IA) risk mitigation and containment, i.e.,
• to recognize the inter-relatedness of IA’s insofar as their contributory role, value, and associated risks.
• how IA’s can become impaired, misappropriated, infringed and vulnerable to risk.
• to assess the probability that particular risks can-will materialize.
• how specific risks can adversely affect projected economics, competitive advantages, and/or synergies of a
• to assess the resiliency and sustainability of key IA’s.
Equally important, this ‘transaction impact analysis’ can reveal a range of risk circumstances/scenarios for decision maker consideration while retaining options to proceed with…
• viable plans for risk mitigation, as well as,
• aspects which re-negotiation may be warranted in light of the now known risk(s) and/or asset impairment(s).
The objective remains the same…to facilitate more secure, profitable, and sustainable transactions going forward, not impede them.
Michael D. Moberly June 27, 2016 ‘A blog where attention span really matters’!
Change and varying levels and/or periods of disruption have become routine characteristics to many of our respective work environments. Similarly, indeterminate repetition of past practice singularly rooted in the notion ‘that’s the way it’s always been done’, absent curiosity or consideration of the structural changes that have occurred in the interim, has, in growing number of instances, wisely give way to nuance.
Of the multiple nuances referenced here, one is that information/data (acquired, developed, transmitted, and received) is likely to achieve – produce the value which it is most capable of delivering if there are structural assurances in place for individuals and/or business units, etc., which have the ability to use-apply that information effectively actually get it. More succinctly perhaps, a fundamental shift occurs, away from the pretentiously broad (simple) construct of ‘knowledge is power’ to a more nuanced construct of sharing the right information-knowledge with the right people is power’!
Of course doing so, puts organizations – companies on a prelude to a (necessary) ‘revolution’ of sorts, in terms of how their proprietary information is safeguarded and ultimately disseminated – shared. The rationale for doing so emanates from the greater need today wherein there is emphasis on…
• the speed of knowing, and
• the speed which effective action can be taken – applied, as a product of knowing.
• better projections of individuals and/or (business) units that need to know.
• recognizing what information individuals-units are not getting, but should.
For me and others working in the IA (intangible asset) arena, this collectively translates as a new paradigm for safeguarding proprietary information during its acquisition, development, analysis, and sharing. Among other things, this entails…
• recognizing the challenges and adversaries.
• knowing what specific information should – needs to be safeguarded.
• reduce, if not eliminate the conventional informational silos frequently erected around dated presumptions
of ‘need to know’, as if ‘secrecy’ was somehow innate.
Please consider how many companies/organizations function-operate as if their information assets are classified or a national secret? Organizations are now obliged to position their intake, development, and analysis of information to ensure it is disseminated – shared with individuals – business units that can process – utilize the information most effectively.
In other words, companies-organizations are obliged to move away from…
the conventional ‘who needs to know’ to operating cultures in which knowledge leads to better performance, merely by recognizing…
• who doesn’t know, and
• who isn’t being informed.
Specifically, endeavor to create an organization-wide community of situational awareness and application of intellectual, structural, relationship, and creative capital.
In other words, retired General Stanley McChrystal believes that government-defense entities, and by extension, companies and organizations, should be more concerned with essential strategic information that is…
• routinely being ‘locked away’ from legitimate users, based on an antiquated system of classifying
• than with individuals who may leak proprietary information.
Be assured, either can be damaging to an organization’s ability to achieve…but, given the vast amounts/levels of information that are regularly produced, i.e., ‘big data,, etc., arguably, organizations are rapidly approaching the point that sharing information and ensuring the right individuals-business units are provided information in a timely manner and accepting, even assuming some or all of the information may-will be leaked, infringed upon, and/or otherwise stolen-acquired by economic – competitive adversaries is a preferred position to keeping vital business information out of individual – business domains that could use it best.
This makes many conventional (business) instincts – practices of information asset protection, classification, and dissemination simply wrong-headed. Similarly, organization’s that (still) consider the influx of new strategies, new processes, and new techniques, i.e., structural, relationship, intellectual, and competitive capital as constituting non-collaborative and non-contributory tangible, (not intangible) assets will find business success elusive in today’s irreversible go fast, go hard, go global business environment. Instead, structural, relationship, intellectual, and competitive capital are integrated – collaborative categories of IA’s that warrant dissemination-sharing and action.
This post was influenced by a TED Talk given by Gen. Stanley McChrystal in March, 2014 and adapted for application to the private sector by Michael D. Moberly.
Michael D. Moberly May 23, 2016 ‘A blog where attention span really matters’!
The rationale underlying any business initiative – transaction should always be to maximize and ultimately extract as much value as possible from the assets in play because it’s an economic fact that…
…80+% of most organization value, sources of revenue, sustainability, competitiveness, and wealth/profit creation today lie in – directly evolve from IA’s (intangible assets).
It is then, an organization’s IA’s that will most always be in play because they are integral to both…
• transaction value, and
• near term outcomes.
This economic fact – business reality presents various fiduciary obligations to PSF’s and company decision makers irrespective of whether they are the originator, owner, buyer, or seller, etc.,
…to know, with the necessary specificity, what IA’s are and how to identify, unravel, and sustain their control, use, ownership and value throughout their respective economic, competitive, and/or functionality cycle and certainly a relevant pre-post (transaction) period of time.
Seldom can asset value maximization – extraction be fully achieved using conventional, generic precepts, checklists, or mere confirmatory reviews of registrations and filings. That’s because, the pillars of any organization’s IA’s are it’s…
• relationship, and
• competitive capital.
…which are routinely embedded in operations, processes, and/or functions that create efficiencies, competitiveness, brand, and value, etc., and generally lie under most conventional business radar.
So, when the motive – objective for parties is to initiate and/or be receptive to a transaction, there must be skill sets applied in advance to identify, unravel, preserve. maximize, and extract as much value as possible from the relevant assets in play, particularly, the IA’s. It’s prudent then for PSF’s (professional service firms) retained to support-oversee such transactions, regardless how small or periodic they may occur, possess current operational skill sets necessary to…
…strategize about ways to achieve sufficient operational familiarity with IA’s to respectfully engage business clients to recognize, assess, and distinguish their composition and contributory role and value in the global market space, particularly if/when the assets are effectively integrated, bundled, and safeguarded in both pre and post transaction contexts.
In far too many transactions, IA functionality – contributory value is overlooked, improperly assessed, misunderstood, or neglected insofar as the integral and contributory role they consistently play as sources of revenue, value, and competitive positioning.
The ‘Business IP and Intangible Asset Blog’ is designed to elevate awareness – bring operational familiarity to IA’s in the irreversible global business environment where 80+% of PSF’s business client’s value and sources of revenue actually lie.
To dismiss the importance for PSF’s to integrate this dimension into their practice area – service deliverables will, at minimum, manifest as adversely impacting firm’s billable revenues, competitive positioning, brand, and attractivity. On the other hand, offering IA services to existing and prospective clients is nearing a requisite for being consistently recognized as horizonal in the delivery of relevant and effective services to business clients in 2016, and for the foreseeable future.
The root of such services lie in preparing – positioning business clients to identify, preserve, safeguard, and extract value, efficiency, competitiveness, and sources of revenue from their IA’s. And, doing so, will most certainly, favorably affect their sustainability and outcomes to any transaction they wish to enter.
Michael D. Moberly December 29, 2015 ‘A business blog where attention span really matters’.
I begin with the principle that decision makers, management teams, boards, and strategic planners have a (fiduciary) responsibility to consistently insure their organization is positioned to provide the necessary stewardship, oversight, and management of the various IA’s (intangible assets) an organization has in play. This includes capabilities to…
- identify, unravel, cultivate, bundle, utilize, and extract as much value and competitive advantage as possible from its IA’s.
- monitor, inhibit, and/or mitigate risks to those assets which, if materialized, would undermine (asset) contributory – collaborative value, competitiveness, and materiality.
- sustain control, use, and ownership of the assets throughout their respective value cycle.
Absent these operational capabilities to execute at will, organizations are placing the value, competitive advantages, and revenue their IA’s produce at risk to irreversible undermining, erosion, or going to zero! In these circumstances, the value proposition which an IA strategist and risk specialist (consultant) can deliver include…
- Providing guidance/strategies as needed, for extracting value, delivering competitive advantages, and measuring IA performance.
- Adding predictability to business transaction outcomes, projected returns, and exit strategies when-where IA’s are in play.
- Assessing asset stability, defensibility, and fragility in both pre and post transaction contexts.
- Conducting IA due diligence designed to sustain competitive advantages and fully exploit asset synergies, efficiencies, and contributory value.
- Reducing the probability that project-transaction momentum can be stifled by recognizing and mitigating circumstances that can ensnare and/or entangle IA’s in play in costly and time consuming legal challenges undermine/erode asset value and performance which adversely affect reputation ‘risk points’.
- Bringing clarity to IA ’suitability’ factors, i.e., recognition, valuation, separability, transferability, life cycle, and risk.
- Introducing valuation and reporting of IA’s and integrating same in asset development, organization governance, and new initiatives.
- Designing organizational resilience (continuity, contingency) plans that fully encompass essential IA’s to provide rapid recovery following significant business disruptions, disasters, or other risk materialization.
- Monitoring IA value chains, i.e., the inter-connectedness between the production, acquisition, and utilization of IA’s vis-a-vis their contributory-collaborative value, revenue and competitive advantage generation.
- Building a ‘company culture’ that’s aligned – converges with an organization’s IA’s, i.e., mission, objectives, and strategic plan.
Michael D. Moberly May 8, 2015 ‘A blog where attention span really matters’.
Competitive (business) intelligence is alive and well and it’s certainly not all cyber-based even thought there is an abundance of off-the-shelf data mining software available that mitigates the tediousness and time associated with conventional approaches to business intelligence collection.
Perhaps what concerns me most has been the continued expansion of ‘legacy free players’ (Thomas Friedman, ‘The World Is Flat’). My definition of ‘legacy free players’ is quite similar to that of Mr. Friedman’s, that is, these individuals/groups may not be necessarily aligned with or employees of nation state sponsors which are frequently technology dependant and sophisticated, or even organized units/cadres of economic spies. Instead, ‘legacy free players’ are, for the most part, independent operators or groups of individuals whose country of origin and cultural perspective about honoring the proprietary information originated by – belonging to others is a relatively new concept insofar as respecting personal, let alone intellectual property rights. In other words, there is an absence of legal, social, or cultural legacy to others’ properties of the mind, i.e., intellectual – human capital.
Setting that aside for the moment, of all the business leaders and management team members I have had the good fortune of conversing over the past 25+ years, when I introduce the subject of competitive intelligence, a substantial percentage of the time, their initial response is embedded with favorable rationalizations ranging from…
- everybody does it, to
- one is foolish if they don’t engage in some manner of competitor – business intelligence.
I am aware of no original research – objective data to indicate such characterizations are as accurate as business leaders assume, based on my many years of work-research in this arena, one would be well advised to consider the consistency of the responses suggest a significant percentage of businesses regularly engage in some level – form of competitor-business intelligence.
While their (intelligence) collection and analysis techniques may not be as sophisticated, analytical, or strategically oriented as those conducted by the countless private (independent) competitor intelligence firms operating globally, the information targeted and collected usually provides business decision makers with useable prognosticative insights variously related to the plans, intentions, and capabilities of competitors, i.e., what they are doing, have done, or, are about to do!
Simply stated, I find the adverse affects (of competitor – business intelligence) usually materialize in one of four ways, that is, the purpose, intent, and/or objective are to…
- undermine, erode, stifle, and otherwise get ahead of a competitors’ initiatives, competitive advantages, market position, and strategic planning.
Any company’s efforts to counter or mitigate the very real adverse affects of competitor intelligence begins with understanding one’s own company’s IA’s (intangible assets). This means recognizing that IA’s comprise increasing percentages – 80+% of most company’s value sources of revenue and ‘building blocks for growth, profitability, and sustainability! More specifically, IA’s are the real drivers – underliers to company’s value and sources of revenue which are precisely what competitor-business intelligence operatives are seeking, whether, I might add, they actually realize it or not!
Michael D. Moberly January 22, 2015 ‘A blog where attention span really matters’!
What economic – competitive adversaries are really targeting…
Having been actively engaged in the intangible asset arena since the early 1990’s as an intangible asset strategist and risk specialist, I am continually hard pressed to understand why the administration, cabinet secretaries, government agency heads, corporate c-suites, and repetitive pundits consistently portray the target(s) of global economic (cyber) espionage as intellectual property, i.e., patents particularly.
My suspicions are that by continually portraying private sector information asset losses in IP-only contexts more attention is drawn to the issue and using IP-laced language to describe the threat and loss presumes ‘the audience’ would find it challenging to understand the intricacies and distinctions of stolen or misappropriated intangible assets, i.e., intellectual, structural, and relationship capital.
It’s the intangible assets…The persistent initiatives of global economic and competitive advantage adversaries is targeting company’s intangible assets, particularly proprietary know how in the form of intellectual and structural capital that affords adversaries economic and often defense competitive advantages.
These assets are precisely what adversaries’ need, want, and therefore will aggressively and stealthily pursue because, because it is the quickest route to global competitiveness, sector dominance, and profitability while diminishing the reputation of the target (loser).
80+% global economic fact…There is no other time in business governance – management history when steadily rising percentages (80+%) of most company’s value, sources of revenue lie in – emerge almost exclusively, from intangible assets, e.g., intellectual, structural, and relationship capital, reputation, brand, R&D, contracts, and hybrid (proprietary) technologies, etc.
Issued patents do provide legal standing, but little or no deterrence…Issued IP provides holders with (legal) standing to bring criminal and/or civil action against today’s inevitable infringement. But, patent holders should avoid assuming its’ issuance provides much deterrence because potential economic, competitive advantage, and reputational gains are too probable and lucrative to pass up. So, any notion that the proprietary know how underlying – embedded in patents is magically safeguarded, through conventional IP deterrent affects is, truth be told, substantially more myth than reality.
Assumptions to the contrary represent, in my view, wishful, naïve, and out-of-date thinking.
Think about it…Why would an economic – competitive advantage adversary, data mining operation, information broker, or competitor intelligence firm engage in the presumed risk of acquiring (stealing) a U.S. patent when essentially the same information will be published and available online through the U.S. Patent and Trademark Office?
Admittedly, pursuing the ‘patent route’ is often a business decision (WTO requisite) reflective of today’s globally aggressive, predatorial, winner-take-all, and go fast, go hard, go global business (transaction) environment.
Ultimately, those charged with safeguarding valuable proprietary information of a company or client would be respectfully encouraged to ask, how and which knowledge-based intangible assets originating with a company warrant higher levels and more sophisticated safeguards and resilience planning? The answer, that’s where practitioners are obliged to devote their resources and time!
Michael D. Moberly January 21, 2015 ‘A blog where attention span really matters’!
For start-up management teams, the importance attached to launch their product or service cannot be overstated. It is important on many levels, one of which, it puts a new venture, on ‘the public stage’ and subject to all of the like – dislike variables which inevitably follow.
Should stake holder, prospective user, and investor reaction be favorable, launches can put a start-ups’ innovation a few steps closer to profitability, says Ans Heirman and Bart Clarysse formerly of Ghent University in their fine paper ‘Do Intangible Assets at Start-Up Matter for Innovation Speed?’
The speed which an innovation arrives at its launch stage is also important insofar as attracting initial rounds of investment. Another increasingly crucial factor that affects the speed which start-up innovations’ are positioned for launch is early recognition for safeguarding an innovations’ enabling and contributory intangible assets which in most instances are embedded in – underlie the innovation itself, i.e., intellectual, structural, and relationship capital or the proprietary know how and processes.
Unfortunately, I have observed many start-up management teams, be they RBSU’s or independent, imprudently directing their aspirations to seeking the issuance of a patent. Routinely, innovators rather naively assume ‘the patent route’, standing alone, will serve as sufficient safeguards for their innovation. And, most, if not every investor prefers, if not demands, an innovation be patented as a prelude to favorable investment consideration..
What innovators tend to discount or altogether overlook are equally valuable (enabling) intangible assets that routinely serve as the underlying foundation to every innovation. It’s now quite routine that 90+% of start-ups’ – innovations’ sources of value, revenue, and ‘building blocks’ for growth, profitability, and sustainability to reside in – evolve directly from intangible assets.
Even though Heirman and Clarysse’ paper was published in 2004, it still carries much relevance insofar as making a convincing case that antecedents to innovation, i.e., speed emminates from recognizing, safeguarding, and managing key intangible assets, again particularly, the intellectual, relationship, and structural capital.
Heirman and Clarysse also make a very favorable case that other equally important intangible assets, which they refer to as ‘pre-founding R&D efforts’, e.g.,
- innovation team tenure,
- the experience level of the start-ups’ founders and management team members, and
- third party collaborations, are also important contributors to innovation speed.
To this perspective, Heirman and Clarysse collected a dataset on 99 research-based start-ups (RBSUs) and applied an event-history approach. From this they found that experienced entrepreneurs understand that innovation speed is important for many reasons, i.e.,
- attracting – acquiring early investment to achieve more (greater) financial independence,
- achieving broader external visibility and legitimacy for their innovation as quickly as possible, and
- delineating the innovations’ competitive advantages as early as possible.
I agree with both Heirman and Clarysse that innovation R&D cycles can vary widely based on, among other things, the number and phases of product development, along with specialized technologies that may be required. Being an intangible asset advocate and strategist no surprise here.
Collectively, this confers additional credence on the view that identifying inter-connected clusters of contributory intangible assets is important insofar as they may re-emerge at some point as enablers to another RBSU innovation. In other words, RBSU management teams should avoid dismissing or neglecting intangibles as if they are a single use asset. Too, it’s perfectly feasible that certain intangibles can be extracted from an already launched innovation to become independent sources of value and revenue.
Heirman and Clarysse also found that RBSUs frequently differ with respect to their starting conditions, for example…
- start-ups which are further in their product development cycle (at founding) will likely launch their initial innovation (product) faster.
- innovations that require a beta-version (test) will obviously experience slower product launch times.
- experience level of startup founders and management team members can lead to faster launch times.
- a start-ups’ alliance with other firms does not significantly or favorably affect innovation speed.
- startups which collaborate with universities (perhaps as a spin-off, etc.) generally lead to longer innovation development and launch times.
As always reader comments are encouraged and welcome!
Michael D. Moberly December 12, 2014 ‘A blog where attention span really matters’!
Venture forums are typically fast paced and highly charged events where management teams of intangible asset intensive startups, university-based spinoffs, and early stage companies give impassioned ‘elevator pitches’ to prospective investors.
Most pitches are purposefully limited to 3-5 minutes wherein the spokesperson explains their companies’ mission, the innovation, further research that’s necessary, fiscal projections, business model, why investment is warranted, and how the investment will be used should an investor deem it a worthy risk. Following the ‘pitch’, prospective investors may ask the company questions, one invariably is, ‘what’s your IP position’?
What’s your IP position…
Of the numerous venture forums I have attended the most consistent answer to this albeit over-rated, misunderstood, yet seemingly obligatory question is, a patent…
- application has been filed (provisional),
- is pending, or
- has been issued.
The attention startup company’s attach to achieving IP status for their innovation, coupled with the consistency which prospective investors ask the IP position question, suggest each party believes that conventional IP, patents particularly are influential requisites to securing investment capital. Of course there are other factors considered in ‘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 IP is infringed or challenged within the 3 – 5 year exit strategy plan investors typically 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. That coupled with the persistent challenges and vulnerability to intangible asset (IP) infringement, theft, and/or counterfeiting make a startups’ 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 should be 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…
- stand alone deterrents, or
- reliable prognostications of innovation value.
More relevant venture forum questions…
I urge prospective investors – venture capitalists to re-phrase their venture forum questions. For example, rather than merely asking ‘what’s your IP position’ assuming that is an important criterion to ‘invest-don’t invest’ decisions, 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?
Patents start life as 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 the know how underlying a 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 only prudent for prospective investors to ascertain
- the status, i.e., fragility, stability, and 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 issues that should be fully explored as being integral to any ‘invest – don’t invest’ decision.
Before making an investment in intangible asset rich and dependant startup 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!
As always, reader comments are respected and welcome.
Michael D. Moberly December 5, 2014 ‘A blog where attention span really matters’!
“Intangible assets take years to build and a second to lose”! That’s a statement attributed to Gerald Ratner, a former UK retail magnate following the demise of his £500M jewelry business. As unfortunate as that circumstance was for Mr. Ratner, his company, its employees, and stakeholders, as an intangible asset strategist and risk specialist, the statement speaks volumes when it’s understood that…
- 80+% of most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability today lie in – evolve directly from intangible assets!
- unlike conventional forms of intellectual property, i.e., patents, copyrights, and trademarks, etc., each of which, by the way, are categories of intangible assets, governments’ issue no certificate that tells company’s what their intangible assets are. So, identifying, assessing, and safeguarding the contributory value of a company’s intangible assets are (fiduciary) responsibilities of management teams’ regardless of a company’s sector, size, or headquarters.
- growing percentages of companies operate in aggressive, hyper-competitive, and predatorial business transaction environments wherein intangible assets are at risk to an ever expanding array of asymmetric events, acts, and behaviors which can rapidly cascade to adversely affect asset value, sources of revenue, competitive advantages and otherwise entangle assets in costly, momentum stifling, and often irreversible circumstances.
Why? Because regrettably, intangible assets are frequently not identified as value-revenue contributors, therefore they go unrecognized, under-utilized, under-valued, and un-protected. In large part, this is related to intangible assets’…
- lacking physicality.
- falling under conventional ‘MBA light’ radar.
- mistakenly presumed to be the sole/primary function of legal and/or accounting.
- seldom, if ever being reported on balance sheets or financial statements.
So, is Mr. Ratner’s statement relevant to global businesses, and should companies’ begin engaging intangible assets they produce, possess, and become embedded as value laden intellectual, structural, and relationship capital? Absolutely!
As always, reader comments are respected and welcome!