Michael D. Moberly August 11, 2009
When companies do not have clear and effective strategies in place to continuously safeguard, utilize, and monitor the value of their intellectual property and intangible assets, there are significant consequences that will likely occur, three of which are, (1.) company performance will be adversely affected, (2.) valuable assets will be at risk, and (3.) prospective investors will be influenced to look elsewhere.
There’s convincing evidence that financial analysts and investors are giving increased weight (ala attitudinal scrutiny) about how companies actually manage, utilize, value, and safeguard their intangibles and IP. A key driver of those (investment, financial analysis) attitudes is the economic fact that 65+% of most company’s value, sources of revenue, sustainability, and foundations for future wealth creation are thoroughly embedded in – evolve from – directly linked to a company’s intangible assets (and IP).
In other words, in today’s globally competitive, predatorial, and winner-take-all investment arenas, investor confidence is less likely to be achieved merely by proclaiming ownership of IP. Rather, underlying that confidence’ is a company’s demonstrated ability to sustain control, use, ownership, and value of those assets through effective ‘best practice’ strategies.
Surveys clearly show, as the one referenced here by Howery (A Survey of Investor Attitudes on IP Protection), that companies can favorably affect (build, enhance) investor confidence by demonstrating that a comprehensive, effective, and on-going strategy that’s aligned with a company’s core business, has been in place from the outset. More specifically, that strategy must demonstrate how a company’s IP and intangible assets are being:
1. safeguarded relative to market position, value, and competitive advantages, etc.
2. utilized, i.e., identified, assessed, positioned, leveraged, maximized, and exploited to extract value.
3. valued, i.e., reliable, understandable, repeatable, and objective tools are available to provide more than subjective, snap-shots-in-time asset valuations.
Intangible assets (and IP) are now key underliers of most companies overall competitive strategy, rather than being mere service functions and costs as they’ve been routinely portrayed previously. The above therefore, represent more objective markers of proper stewardship, oversight, and management that investors (analysts and asset-back lenders) can variously use as components to assess a company’s soundness, profitability, and sustainability.
The level of importance which investors accord to these markers is reflected in the reality that they recognize that companies with significant intangible and IP assets possess certain competitive advantages which collectively contribute to a company being more profitable and ‘suvivable’ if quality protection, utilization, and value monitoring strategies have been integrated and are in place. In today’s knowledge-based (intangible asset, IP) economy, companies that dismiss these essential managerial (fiduciary) principles and responsibilities will increasingly find themselves at a disadvantage!