Michael D. Moberly March 19, 2009 (Part 4 of 5 Part Post)
Getting intangible assets into the board room…
Getting intangible assets on decision makers’ radar screens and board room agendas in good (financial) times is challenging enough, notwithstanding the very real distractions businesses are experiencing globally with the recession. And, if your business is one of those that has been notified its credit line has been slashed or cutoff altogether along with your suppliers and accounts receivable, interest in seriously considering how to utilize – leverage intangibles unfortunately, may not receive the (immediate) attention it genuinely warrants.
But, all that said, because a company’s value, profitability, market position, competitive advantages and overall sustainability are so inextricably linked to intangible assets, they really should be routine action items now on the agendas of every c-suite, board room, and business unit, for two reasons:
1. potential liquidity (value) that’s embedded in the assets…
2. sustaining (protecting, preserving) control, use, ownership, and value of those assets for the duration of the recession is an essential component to a quicker and fuller economic – competitive advantage recovery…
Rob McLean wrote a fine piece titled ‘Intellectual Asset Strategy and the Board of Directors’ (IAM December/January 2006), which is especially relevant. Boards, he says, ‘are frequently drawn into intellectual asset management (intangible asset) issues when there is a crisis’. There’s little question that the current global recession would constitute such a crisis! But, few boards McLean suggests, ‘deliberately allocate time to intellectual asset issues as a matter of course’.
I can’t say for sure whether McLean’s references to ‘boards’ were directed to larger, Fortune 500 types of companies or small medium enterprises and multinationals, i.e., SME’s and SMM’s respectively? While, much of my professional interests tend to be focused on the latter, my experience suggests that boards and senior management in either group still convey insufficient interest in intangibles because, among other things, they’re primarily perceived as legal processes versus fiduciary (business) responsibilities.
With respect to boards’ actually engaging intellectual (intangible) assets, Mr. McLean describes four levels of engagement in which he characterizes boards’ interest in intangible assets…
Level I – are generally unaware of the importance of intellectual (intangible) assets and related strategies relative to company strategy or competitive industry trends…
Level II – may be peripherally aware that intellectual (intangible) assets have some importance in strategy and competitive trends at the company level…
Level III – have a high-level understanding that intellectual (intangible) assets have some importance in strategy and competitive trends at the company level…
Level IV – have a detailed understanding of the role that intellectual (intangible) assets and strategy play in strategic planning at both the company and business unit level…
McLean further suggests (with respect to company boards), that if ‘they are being honest, most would situate themselves at Level I or II’.
For those who find this (passive) characterization of board engagement with intellectual (intangible) assets reflective of their experiences, it should be a ‘wake-up call of sorts’ that however full the managerial/fiscal plate may already be; (a.) stewardship, oversight, and management of intangible assets, and (b.) sustaining – enhancing – leveraging – extracting value from (those) internally produced and/or acquired intangible assets should be permanent fixtures on board (D&O) agendas, even during a recession.
From the board and senior management perspectives, there are three broad, yet quite plausible, starting points to achieve this as pointed out in McClean’s article:
First – consider changes in company governance structure and practices to genuinely reflect and be aligned with the economic fact – business reality that 65+% of a company’s value, sources of revenue, foundations for future wealth creation and sustainability quite literally lie in – are directly linked to intangible (intellectual) assets.
Second – takes steps to ensure the right people receive the right information that allow them to focus on the right areas with respect to the company’s intangible assets. This includes information and insights related to maximizing, leveraging, and extracting value and other viable strategies aimed at positioning – leveraging those assets to deliver (more) value and competitive advantages.
Third – the underlying/foundational responsibilities for identifying, assessing, and sustaining (protecting, preserving) control, use, ownership, and value of those assets should be a collaborative (enterprisewide) practice that involves intangible asset specialists, legal counsel, security, marketing, risk management, IT, and relevant business units where the intangibles often originate and percolate!
