Intangible Assets Produced By Security Products…

Michael D. Moberly     February 17, 2014    ‘A blog where attention span really matters’!

 Security intangibles…

I have been advocating for sometime the importance of articulating the additional value security systems, services, and products deliver, which I refer to as ‘security intangibles’.  I would be remiss however, if I failed to note that, in today’s increasingly security conscious and (security) standards-compliance driven environments, those desiring to espouse – leverage ‘security intangibles’ should be aware that…

  • legal counsel may caution public articulation because, they believe, by doing so, may unduly heighten user expectations, thus if/when a risk/threat does materialize, a company may subject itself to elevated liability exposures.
  • intangible assets, by their nature, lack a conventional sense of physicality which some find far too esoteric to frame in product marketing materials or sales pitches, that sufficient enough to constitute a competitive advantages and/or client – user premium.
  • intangible assets are routinely portrayed – reported, almost exclusively in accounting and valuation contexts. There is little broad-based familiarity how to convert ‘security intangibles’ in terms of what security products and/or services produce, outside those conventional parameters.
  • some security practitioners hold the perspective that public announcements about the presence-use of security products and/or systems undermine (their) potential deterrent effects, and thus compromise the benefits they could produce.

Admittedly, these perspectives are understandable and even somewhat challenging to refute. However, based on my own, sometimes daily experiences in responding to these issues from various professional sectors, buyers (companies) are, as suggested, dismissing substantial value if they overlook or are dismissive of ‘security intangibles’, i.e., goodwill, reputation, and image, etc.  And, by overlooking security intangibles, individual user imagination and perception becomes the dominant interpretive variable in which users come to draw their own, albeit subjective conclusions which may not take into account the value-added and risk – threat prevention premiums, i.e., ‘feel good, feel safe, be productive’  or security intangibles.

Collectively, this should remind buyers of security products, systems, and/or services of the economic fact – business reality that 80+% of most company’s value and sources of revenue, etc., evolve directly from intangible assets. Thus, user expectations, i.e., the necessity to ‘feel safe, feel secure, and be productive’ can be legitimately and prudently articulated in the form of the contributory value and competitive advantages rooted in security intangibles.

Convergence of environmental design and security…

Building and environmental design and security intangibles can, and frequently do converge. For example in a security product (vendor) presentation I recently witnessed, it was clear the product had multiple potential selling points and numerous environments where this product could be deployed and would likely exceed buyer and user expectations.

Unfortunately however, the products’ inventor either did not recognize or chose not to incorporate either in her presentations or sales calls.  And again, this left the variously attractive and unique security intangible features of the product to the imagination, assessment, and measurement of uninitiated prospective buyers.

Had this security product inventor, turned vendor, developed a sales script narrative, something which I encouraged him to do, to artfully describe the products’ security intangibles and then demonstrate how to strategically bundle same, I have no doubt prospective client-buyer receptivity would be substantially elevated because, among other things, there would have been more measurable clarity and breadth to return-on-security-investment objectives.

Intangible asset value multipliers and risk mitigators…

Again, all too frequently, contributions intangible assets make to company value and/or serve as underliers or preservers of sources of revenue, are overlooked, neglected, or outright dismissed.  One reason is that these important and relevant attributes may not be so obvious to the uninitiated because conventional assessment is obscured by (a.) intangible assets’ lack of physicality, and (b.) company management teams and procurement personnel do not know precisely where or how intangibles can be accounted for, e.g., reported on balance sheets or financial statements, or whether they should even be reported at all.

Collectively, these circumstances lend themselves to the value add and competitive advantage elements of security intangibles remaining unrecognized, un-protected, undervalued, or not valued at all.

So, why is it necessary to acquire an operational familiarity of intangible assets…?

Because I am an intangible asset strategist and risk specialists, I routinely and respectfully characterize intangible assets to prospective clients and/or company management teams as being akin to the proverbial ‘hand in front of our face in a pitch dark room’. That is, they’re often developed internally, sometimes over time, and become embedded in a company’s routine operations, processes, and functions, but, in many instances, remain under a management teams’ mba – tangible (physical) asset oriented radar and thus seldom reach prominence on their respective ‘dashboards’.

Similarly, company’s engage in countless HR-related functions as well as a range of business transactions in which the intangible asset components of either go unnoticed, unused, and seldom effectively exploited.

So, why, or how, I’m often asked, is it beneficial and necessary for company management teams, c-suites, and procurement personnel to acquire an operational familiarity with intangible assets now?  And, how can such familiarity translate as multiplier effects and risk mitigators as the title of this post suggests?

The answer of course lies in being able to recognize, position, and exploit a company’s intangible assets, be they security intangibles or others, with the objective to extract as much value as possible in the form of generating favorable reputation, image, goodwill, and competitive advantages, etc., for the duration of the assets’ contributory value – functionality cycle.

Ultimately, it seems to me that when 80+% of a company’s value and sources of revenue either lie in or evolve directly from intangible assets, management teams are obliged to…

  • begin exercising consistent, effective, and sufficient stewardship, oversight, and management of their intangible assets, and
  • sustain control, use, ownership, and monitor the assets’ value,  materiality, and risk.

Outcomes and multipliers of effectively incorporated security products…

Other, equally valuable and beneficial outcomes, i.e., multipliers of effectively incorporated security products, systems, and/or services include…

  • recognizing the initial objective is to identify, unravel, and safeguard the sources of value which, in this case, the ‘security intangibles’ deliver to consumers and users of the environments in which they have been deployed.
  • adding predictability to outcomes of materialized risks – threats buttressed by objective calculations for assessing people and property (asset) vulnerabilities, preventing, mitigating, and/or restricting potential cascading effects and their collective relevance to achieving projected returns, sustaining competitive positioning and internal – external synergies, efficiencies, and reputation.
  • reducing the probability the ‘security intangibles’ will become a breeding ground of sorts, to costly, time consuming, and momentum stifling exposures and legal challenges that will erode and/or undermine security intangibles’ value, performance, and/or a company’s competitive advantages, reputation, image, and goodwill, etc.
  • providing a durable foundation for aligning security intangibles’ utilization and exploitation with (a.) continuity-contingency planning, (b.) organizational resilience, (c.) risk management, and (d.) a company’s strategic business objectives.
  • contributing to building a relevant and company specific operational culture attuned to security intangibles’ and the various ways they contribute value.
  • treating the procurement and deployment of security products, systems, and/or services as genuine business decisions and not solely legal, accounting, or compliance processes.
  • creating segues for converging security intangibles to achieve more timely awareness and thus opportunities to mitigate or restrict potential cascading affects of risks or threats that have materialized.
  • providing an effective foundation for introducing knowledge management initiatives and balanced scorecard approaches to a company.

Security intangibles’ produced by security products, services, and/or systems…

  • can be enterprise wide or circumstance specific blends, combinations, and/or collections of outcomes that enhance processes (structural capital), relationships (relationship capital), and guide activities, initiatives, and decision making which collectively create differentiators, competitive advantages, and additional (company) value.  Michael D. Moberly.
  • can be economically sustainable competitive advantages anchored in – evolving from features and capabilities of security products, services, and/or systems that set a company apart from its competitors by generating additional and sustainable revenue, user goodwill, sense of care, reputation, and image.     Michael D. Moberly
  • often emerge from the unique and sometimes times proprietary knowledge related to security products are deployed and used and the additional value that surfaces coupled with the unique understanding of how that knowledge can be used to extract the most value and competitive advantages to benefit users.  This is a significant adaption by Michael D. Moberly of work published in McKinsey Quarterly, 2004.
  • may not always be the result of a planned action or the product of specific capital allocation decisions.  Adapted from Brookings Institution – Understanding Intangible Sources of Value by Michael D. Moberly

Security intangibles should become permanent fixtures on security product R&D, marketing, and sales dashboards because…

  • most company’s value, sources of revenue, and ‘building blocks’ for growth, profitability and sustainability today directly evolve from – lie in intangible assets.
  • slight advances in technology, minor improvements in production, and/or small refinements in business processes through better utilization of intangible assets can afford companies tremendous competitive advantages over their market rivals. Christopher R.J. Pace adapted by Michael D. Moberly
  • the contributory value delivered by most intangible assets can, if left unmanaged, un-monitored, and unmeasured become perishable and certainly very costly and time consuming to regenerate if compromised, lost, or undermined, particularly when considered it’s adverse effects among users and/or consumers.  Too, when either occurs, economic – competitive advantage hemorrhaging can commence immediately and seldom ‘can the environments’ goodwill and reputation genie be put back into its bottle absent time, costs, and probably litigation that will adversely affect both goodwill, reputation, and revenue streams.

 

 

 

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