Michael D. Moberly February 20, 2013
It’s an economic fact that 65+% that most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability, and sustainability today arise from – are embedded in intangible assets including IP (intellectual property). Irrespective of the on-going economic challenges, business decision makers will find it both prudent and lucrative to put forth the relatively minimal time and effort necessary to devise and implement an asset stewardship, oversight, and management (S.O.M) plan.
There here are numerous perspectives about what the ingredients of an effective S.O.M. plan should include. My perspective is that it include the following sequenced ideologies, i.e.,
- first, identify, unravel, and assess (distinguish) each intangible asset relative to its contributory value, sustainability, and vulnerability to compromise, i.e., undermine its competitive advantages or other act that adversely affects asset value.
- second, identify specific (asset) S.O.M. measures to ensure the rightful asset holder (company) are positioned to sustain control, use, ownership of the assets and monitor their value, materiality, and risks.
- third, explore – examine ways and opportunities which certain assets may be bundled or otherwise monetized and/or commercialized, i.e., licensing, as collateralization, auctioned or collaboratively applied to joint ventures.
A critical attribute of an intangible asset S.O.M. plan is for its designers – implementers to avoid focusing on an unmeasured presumption that a particular asset will deliver the most sustainable and strongest contributory value while being dismissive of other equally strategic intangibles.
Again, a well structured intangible (IP) asset S.O.M. plan should include a strong forward looking (projective oriented) posture that encourages identifying, unraveling, and examining specific assets that can serve as ‘building blocks’ (foundations) to a company’s future opportunities for growth, sustainability, and profitability.
So, an intangible (IP) asset S.O.M. plan is not solely about today, tomorrow, or otherwise, the near term, it’s also about taking the proverbial ‘long view’ with respect to adopting prudent strategies for utilizing and exploiting all things intangible.
Why is an intangible asset S.O.M. plan necessary? The answer lies in the fact that when business (asset) valuations were initiated in the 19th and 20th centuries, they were, at the time, exclusively about measuring the value of physical (tangible) property (assets), e.g., real-estate, inventory, and equipment, etc. But, beginning in the late 20th and certainly now in the 21st century, the value of businesses and companies are increasingly embedded with and dominated by intangible asset (and IP) portfolios. The reason is, globally speaking, businesses are significantly more dependent on and utilize these largely knowledge or know-how based assets which include all forms of intellectual, structural, and relationship capital to achieve competitive advantages, elevate company value, generate revenue, and (build) extend sustainability.
The Brookings Institution contributed to a global awakening of the intangible asset phenomena when it conducted and publicly released the ‘Intangibles Project’ report in the late 1980’s which clearly gave business credence to the economic fact – business reality that intangible assets, including IP, does not merely serve as a company’s market – sector competitive differentiators’, but also represent the increasingly dominant (primary) source of current – future company value, revenue, and sustainability.
With few exceptions at the time, there were seemingly few sufficiently forward looking – thinking management teams that understood the permanence, significance, and impact of the Brookings’ report other (intangible asset) value signals would come to have on business operations and transactions. For many management teams who ‘got it’, embarked on various transformations away from the conventional management and extraction of value from tangible-physical assets to identifying, nurturing, acquiring, and extracting value from intangible assets!
Let me be clear about a particular aspect of intangible (IP) asset S.O.M. plans. That is, I remain unconvinced that a pre-requisite for either plan development or commencement occur only after an intangible asset – IP audit and/or valuation have been completed. I am not suggesting, neither may not be helpful to management teams. But likewise, neither should be considered the absolute starting point for an intangible asset S.O.M. plan. That’s especially relevant in light of my perspective that an unnecessarily high percentage of companies and their management teams remain dismissive at best, or operationally unfamiliar at worse, of intangible assets and their stewardship, oversight, and management.
There are of course, specific accounting – valuation standards and methodologies used which can be useful rebuttal to technical scrutiny when asset origination, ownership, and/or value are being contested or litigated. Frankly, I often sense there are varying levels of subjectivity in asset valuations that reduces their credence.
Two things I remain confident about are, every company management team competing in this irreversible knowledge (intangible asset) based global economy absolutely must…
- engage their firm’s intangible assets, and
- be consistently engaged in strategies to exploit value, generate revenue, and elevate competitive advantages of all of its intangible assets.
Determining the group, team, or individual responsible for a intangible (IP) asset S.O.M. plan as well as a company’s intangible asset – IP portfolio, may respectfully warrant some training. Admittedly, there are various options (possible choices) as to who may be best or at least better suited to assume these responsibilities ranging from inside or outside legal counsel, external licensing agents, and/or intangible (IP) asset disposition firms.
Broadly speaking, any of the above may be a satisfactory choice, but, for this position, it may be somewhat relevant to company size, sector, and affordability. Professionally speaking, I am an advocate of making the selection internally, e.g., an individual(s) broadly familiar with
- the company’s operations and culture…
- inter and intra-sector global competitiveness…
- objective measurement and performance of individual (intangible) assets and/or the asset portfolio as a whole…
- current principles of asset assessment and valuation in order to assign values triage
- a proactive and strategic outlook relative to identifying, assessing, and prioritizing assets’ current contributory and (potential) future value…
- a current sense of global acts and conduct that can adversely affect asset control and value…
Too, whoever is selected, it is essential they can objectively frame and articulate each of the above as necessary into a ‘best possible and most affordable’ intangible (IP) asset S.O.M. plan.
And, of course, whatever the process and criteria used to select those responsible for the implementation and consistent operationalization of the S.O.M. plan, it will be important they have a clear and unmistakable chain of authority which ‘all things intangible’ flow.
It’s important for management teams to recognize that IP is merely one type or category of intangible asset. There are indeed millions of companies globally that do not hold or own, for a variety of reasons any issued – registered intellectual property. That said, it’ important for management teams to recognize that registered intellectual property often, has embedded within it various intangible assets that routinely serve as its foundation or ‘building blocks’.
Too, in most circumstances, comparable intangible (IP) asset S.O.M. practices and methods which are applicable to the Fortune 100’s are also relevant to SME’s (small, medium sized enterprises). In fact, I’m hard pressed to think of any business and/or sector that would not find an intangible asset S.O.M. plan beneficial insofar as…
- unraveling (and establishing) a clear, preferably uncontestable – documentable chain for each (intangible) assets’ origin, ownership, control, use, and assignment, if applicable,
- recognizing intangible assets produce varying levels of contributory value relative to a company’s sources of revenue and competitive advantages, and
- laying a foundation for recognizing the necessity to not merely utilize intangibles, but safeguard them, which collectively
- enhances a company’s operational and strategic outlook and positioning capability.
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