Michael D. Moberly September 14, 2012
As noted in numerous posts here, it is an irreversible economic fact (business reality) that steadily rising percentages (65+%) of most company’s value, sources of revenue, and ‘building blocks’ for growth and sustainability globally evolve directly from intangible assets!
Ensuring (monitoring) control, use, ownership and value of those assets throughout their respective life, value, and functionality cycle versus for the lifetime of the company and/or holder is, in my judgment, a more practical, efficient, and probably a more advantageous strategy.
The rationale is, in large part due to the assets’ increasingly integral role and relevance to the growing variants of business transactions constrained only by participant’s collective imaginations how to formulate relationships to achieve lucrative outcomes, be they joint ventures, collaborations, strategic alliances, etc.
But, companies are essentially on their own, to find the requisite expertise to not just understand intangible assets and their respective contributory value, but identify, safeguard, and preserve-monitor their stability, fragility, sustainability, and defensibility. Importantly, these responsibilities are rapidly becoming fiduciary in nature and fall exclusively to management teams and c-suites to delegate.
Practically, intangible assets actual and contributory value seldom remains static. In other words, intangible assets’ contributive elements – value may rise, fall, and otherwise fluctuate in cyclic fashion, i.e., in accordance with an assets’ contribution and/or functionality, again to a particular project, initiative, or a company as a whole.
A perhaps crude, but relevant characterization of an assets life, value, and/or functionality cycle is akin to what a doctor once told me about the need for a particular prescription medicine, i.e., ‘you will know when you don’t need it anymore when you start forgetting to take it and realize you are fine without it’.
This cyclic aspect to intangible assets’ (contributory) value, renders most conventional, snap-shots-in-time or one-size-fits-all valuation techniques less relevant or useful because among other things, they
- do not factor materialized intangible asset risks – threats that can take asset value to zero almost instantaneously, and
- provide little, if any, strategic (post transaction) context to asset value, in light of consistent presence of asset risks and threats.
We do know, once an (intangible) asset is compromised, infringed, or misappropriated, etc., their contributory value to a company’s competitive advantages, relationship and/or structural capital, or to a company specific initiative can begin to unravel and hemorrhage value and competitive advantages rapidly, globally, and in many instances, irrevocably.
For me, this makes it all-the-more-important to monitor intangible assets life, functionality, and contributory value cycles. The point in time which assets’ contributive features no longer carry the value they once did or are necessary to deliver competitive advantages, it’s quite logical to assume there is no longer a need to devote resources to preserving their proprietary status. This suggests those resources and that time should be devoted elsewhere, perhaps to newly developed and valuable intangible assets.