Intangible Assets Rapid Maturation Of Ideas!

Michael D. Moberly     April 26, 2013    ‘A blog where attention span matters’.

As noted repeatedly in this blog and by numerous intangible asset strategist colleagues, there is no other time in business governance history when, globally speaking, larger percentages, i.e., 80+%, of most company’s value, sources of revenue, and ‘building blocks’ for growth and profitability are more rooted in – evolve directly from intangible assets, i.e., intellectual property, structural, relationship, intellectual/human, and strategic capital, proprietary know how, brand, and reputation, etc.

So, today it has become an indisputable economic fact – global business reality that the primary sources of most company’s value and revenue have shifted from tangible (physical) assets, e.g., property, equipment, inventory, etc., to intangible (non-physical) assets.  In other words, the global business landscape is being less shaped and influenced by the development, production, and/or flow of physical (tangible) goods and services than it is by the flow of ideas, information, and other forms of intangible assets.

One consequence is that in today’s tightly wound and increasingly compressed transnational R&D environments, product cycles, and business transactions,  ideas can mature very rapidly as ‘value add’ and revenue producing competitive advantages or intangible assets.  But, if those assets are ineffectively managed, i.e., protected, preserved, and monitored, etc., they can easily meld into open (public domain) sources or otherwise be vulnerable to myriad forms of compromise.  The reality then becomes, once such assets enter, inadvertently or otherwise, the public – global domain, conventional intellectual property (law) protections carry little, if any deterrent affects and becomes akin to ‘the genie getting out of its bottle prematurely’.  Trying to get ‘the intangible asset genies’ back into their managerial and legal cocoon becomes a frustrating, time consuming, legally challenging, and costly experience.  Should such risks materialize, the rightful (intangible) asset holder (developer, owner) should be prepared to expect the assets to be, at best, only partially recoverable, and, at worse, irrevocably lost.

The long held American adage ‘talk is cheap’ no longer has relevance, at least in my view, in the current go fast, go hard, go global business transaction environment.  Unfortunately though, this adage remains somewhat indicative of a broader attitude which a significant percentage of business decision makers still hold regarding the value of information-based (intangible) assets.  That is, information is frequently considered to be valuable only if, or when, some specific action can be taken as a result.  In this context, it’s important to recognize that mere ‘ideas’ can mature very rapidly today, and, ‘in the right hands’ can be quickly converted to ‘contributory value and sources of revenue for a business.

Somewhat unfortunately, the consistently expanding and seemingly insatiable (nanosecond) demand for information and communication connectivity represents a growing influence about how large percentages of business decision makers conceive and use information-based assets, that is, in contexts that are primarily oriented toward short-term application versus a long term and/or strategic use and contributory value.

One result, often falling under business decision makers’ radar, influenced in part by the presumed speed in which we prefer ‘things to happen’, is that information-based assets, i.e., ideas and intellectual capital have become more than mere tools to manage other assets, they are now stand alone commodities with varying cycles of contributory value and relevance to the owners.  (Branscombe, Anne Wells. Who Owns Information? From Privacy to Public Access. Basic Books 1994)

The real ‘back story’ in my view, is that (ideas) intangible assets can advance an organization or company economically, competitively, and strategically only so long as the assets’ control, use, ownership, and contributory value is monitored and preserved.  In other words, there is effective stewardship, oversight, and management (of the assets) in place.  Similarly, it’s important to recognize that the contributory value of intangible assets and intellectual property seldom remain constant (static), rather it can change or fluctuate, sometimes quite rapidly for various reasons which is the rationale that value preservation, asset monitoring, and risk mitigation measure be sufficiently flexible to reflect the assets’ status, value cycle(s), defensibility, and sustainability.

Again, when risks to information-based intangible assets materialize, they can impact a company in many ways, e.g.,

  • undermine competitive advantages, strategic planning, new business/product rollouts, etc.
  • erode anticipated (profit) margins
  • create time consuming distractions that disrupt and/or impede a projects’ momentum,
  • entangle assets in costly and lengthy legal disputes
  • cause investors to change their exit strategies and/or deter future rounds of investment

A good thing is, more management teams are recognizing the importance, through blogs like this and those of my colleagues, of taking steps to safeguard and preserve the standalone and contributory value and competitive advantages their intangible assets produce, the more profitable and sustainable their decisions and transactions will be.  A downside is, there remain percentages of management teams who sometimes…

  • are too quick, in my view, to adopt a lawyer-law centric vs. a asset management, stewardship, and oversight approach for enforcing intangible asset rights, in part because they may be unfamiliar with their options, the broad nature of asset risks, and business – strategic needs, or
  • mistakenly assume computer/IT security is synonymous with intangible asset preservation, that is to say, all (valuable) intangible assets exist in electronic ‘bits and bytes’ formats and can be adequately protected by conventional firewalls and passwords.
  • mistakenly assume intangible asset safeguards will impede the flow and accessibility of intangible (information) assets necessary for business operation minimums.
  • mistakenly place too much trust and faith in all employees, business partners, and others who have knowledge and/or access to their company’s intangible assets or ‘crown operating – profit making jewels’.

It remains essential then, that decision makers have a clear understanding where the value of their firm, which they have fiduciary responsibilities, lie and the form and context which that value manifests itself, i.e., intangible assets, competitive advantages, intellectual capital, etc., and ultimately perhaps, as intellectual property.

Though frequently characterized as being cliché, the emergence of the still relatively new global business economy dominated by intangible, rather than tangible assets, is prompting increasing numbers of business decision makers and boards to rethink the way they make decisions, manage, and value their companies and the intangible assets they produce and/or acquire.

What’s exactly ‘new’ about the new (knowledge – intangible asset dominated global) economies remains somewhat debatable, say’s Dr. Baruch Lev of New York University. But, one important feature about the 21st century is crystal clear, he confirms, intangible assets are playing an increasingly important and integral role in most company’s value and wealth creation potential.

Lev goes on to say that economic activity today consists increasingly of exchanges of ideas, information, expertise, and know how, which are, of course, intangible assets.  Thus, company profitability is more often driven by its collective competencies and capabilities (again, intangible assets) than by control over or use of physical resources or tangible assets.

Each blog post is researched and written by me with the genuine intent it serves as a useful and respectful medium to elevate awareness and appreciation for intangible assets throughout the global business community.   Most of my posts focus on issues related to identifying, unraveling, and sustaining control, use, ownership, and monitoring asset value, materiality, and risk.  As such, my blog posts are not intended to be quick bites of  unsubstantiated commentary or information piggy-backed to other sources.  Comments regarding my blog posts are encouraged and respected. Should any reader elect to utilize all or a portion of my posts, attribution is expected and always appreciated. While visiting my blog readers are encouraged to browse other topics (posts) which may be relevant to their circumstance or business transaction.  I always welcome your inquiry at 314-440-3593 or [email protected]



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