Intangible assets and competitive advantages…

A new dimension to managements’ responsibility…

Generate – Maximize – Extract Value

1. legal intangibles generate legal property rights that are defensible in a court of law, i.e., trade secrets, copyrights, patents, trademarks, and goodwill, etc., but they routinely hold the key to a company’s long term performance.

2. competitive intangibles are legally non-ownable, but they directly impact – contribute through effectiveness, efficiency, productivity, customer service/satisfaction, market value, and share price. Human-intellectual capital is the primary source of competitive intangibles from which competitive advantages flow.  Wikipedia

Intangible assets…

And competitive advantages are economic benefits anchored in distinctive features, processes, or programs that set a company apart from its competitors.  Michael D. Moberly

And competitive advantages often evolve over time within an organization and may not always be the result of a planned action or the product of specific capital allocation decisions.  Michael D. Moberly (adapted from Brookings Institution – Understanding Intangible Sources of Value

Are at the center of all innovation, they come at the beginning of the process (as ideas), at the middle of the process (as patents), and, of course, at the end of the process (as commercialization and distribution channels). Dr. Baruch Lev, NYU, Stearns School of Economics

And competitive advantages are the unique blend (combinations, collections) of activities, assets, relationships, history, and market conditions that an organization exploits in order to differentiate itself from its competitors, and thus create value.  Michael Porter, Harvard Business School

Competitive advantages…

Primary source lies increasingly in the unique proprietary knowledge they possess and the special value that comes with the unique understanding of that knowledge that provides a real edge.  McKinsey Quarterly , 2004
Largely evolve from getting an idea to the market first, and for some companies, the source of value is that race to market, not the permanent protection of intellectual property. Peter Likins

Stewardship, oversight, management, and security…

For each organization and/or transaction it’s important to recognize the assets in play and how to sustain their control, use, ownership, and value.  75+% of most company’s value, sources of revenue, and future wealth creation lie in their intangible assets, i.e., intellectual property, know how, competitive advantages, and brand, etc., their oversight, stewardship and safeguarding present challenges because intangibles:

• lack (conventional) physicality
• are non-monetary, they can’t necessarily be seen, touched, or physically measured.  (Michael D. Moberly)
• require managing the future value of a company which is the intangible part of business.  (Centre for Business Performan, Cranfield School of Management)

Intangible asset examples…

1.  Technology – software

• Internally developed (proprietary) software and software copyrights, automated databases, source code, enterprise solutions and custom applications…

2.  Marketing

• Lyrics, jingles (music), promotional characters and devices, photographs and video, newsletters, advertising/marketing concepts, results of focus groups…

3.  Engineering

• Industrial (new plant, equipment) designs, engineering drawings (blueprints) and technical know how…

4.  Customers - clients

• Communication-mailing lists, relationships, customer data bases and retrieval systems, special distribution channels, 1-800 numbers, relationships

5.  Competitor research          

• Actionable business intelligence, i.e., plans, intentions, capabilities…

6.  Real estate

• Zoning - construction permits, air, water, and mineral drilling-exploitation rights, right-of-way, easements, and building (expansion) plans/rights…
• Location visual scenery – proximity to

7. Personnel training

• Proprietary manuals, operations processes and/or procedures

8.  Internet

• Domain names, website design, B2B and e-commerce capabilities, web links, customer/client accessibility and use

9.  Products and services

• Warranties
• Trade dress, i.e., product shapes, color schemes, and packaging design/graphics…
• Open purchase orders, order and/or product back log,

10.  Corporate identity

• Trade name – marks, logo

11. Contracts – agreements

• Any contract that has a definable life and some form of exclusivity, e.g., supply, media, performance and pricing agreements, license and/or royalty agreements, advertising, construction, management, and/or service contracts, leases, operating and broadcast rights and licenses, route utilization, franchise agreements, subscription rights, futures contracts, co-branding agreements, endorsements, spokesperson contracts, venue naming rights…

12.  Intellectual property

• Patents, copyrights, trademarks, trade secrets, trade dress, trade name, service marks, mastheads, application, logo design
• Prior art search, flanker patents; patent applications, foreign patents
• Reprints, use/performance rights

13.  R&D

• Product research studies, formulas, process and assembly data
• Regulatory agency approval process-status

14. Communication

• Cable rights and/or transmission rights, FCC licenses and/or certification, bandwidth

15. HR  

• Wage rates, union contracts, non-compete and non-disclosure agreements (if transferable)…

16. Structural capital

• The structures and processes employees develop and deploy to increase productivity and performance (business process/method patents) 

17. Human capital

• Sum total of employees’ specialties, skills, attitudes, abilities, competencies
• Technical ‘know how’ documentation, i.e., lab notebooks, manuals, formulas, processes, and recipes (food, chemical formulas)

-  Adapted by Michael D. Moberly from ‘The Intangible Asset Handbook: Maximizing Value From Intangible Assets’ Weston Anson. 2007 American Bar Association  ISBN 978-1-59031-743-3
-  Adapted by Michael D. Moberly from ‘Untangling Intangibles’  Tamara Plakalo  Managing Information Strategies