By taking inventory of a company’s key intangible assets…and consistently monitoring for fluctuations in value and vulnerability to risk, business management teams will be positioned to recognize, in a timely manner…
- erosion – undermining of asset value and competitive advantages through misappropriation, infringement, counterfeiting, and mismanagement.
- changes in asset materiality and/or obsolescence.
If it can’t be measured, it can’t be managed…an adage widely attributed to Peter Drucker, which, in my view today, carries a different sort – level of relevance than when it was initially uttered.
Whereas, when Drucker uttered this still very substantive phrase… economies were hardly global, and the overwhelmingly dominant assets used to produce goods and services were tangible (physical), with little interest paid to the intangible asset side of a business.
Still, today, there are various professional services which remain driven – overseen by…statutes, standards, and guidelines, from which, there is little tolerance – variance to addressing – assessing all things intangible. As such, they remain largely committed to conventional asset valuation practices.
So, as noted here numerous times, it is now…
- a globally universal, irrefutable, and irreversible economic fact today that, 80+% of most company’s – organization’s value, sources of revenue, competitiveness, brand, growth potential, and sustainability lie in – derive from non-physical intangible assets, realities which naysayers and the cynics of intangible assets are unable to refute.
Prudent and forward looking-thinking management teams and business decisions makers…would be hard pressed to describe another period in business governance history when achieving operational familiarity with and assessing the contributory role and value of intellectual, structural, and relationship capital (intangible assets) to be more essential to growth, sustainability, competitiveness, and value.
But, intangible asset assessments – valuations must be much more than mere…snap-shots-in-time. Instead, prudent management teams are obliged to have continual intangible asset inventory – assessment – valuation processes in place…
- along with a keen awareness for the array of circumstances (internal and/or marketspace) which can favorably – unfavorably influence asset value, competitiveness, and the emergence of risk, anyone of which, should it materialize, affect the assets’ stability, sustainability, and value, etc.
Anyone of which, if ignored or neglected…can likely be a prelude to a company’s intangible asset values being undermined, stifled, or worse, irreversibly going to zero!
By consistently monitoring – inventorying the contributory and collaborative role and value of…key intangible asset deliverables, permits company strategic planners and management teams to be more responsive to…
- utilizing – exploiting their intangible assets.
- being in sync with the ever expanding fiduciary responsibilities associated with intangible assets, i.e., Stone v Ritter.
- strengthening, managing, and sustaining value and competitiveness of key intangible assets.
- allocating – directing asset safeguard resources more efficiently and
effectively commensurate with assets’ respective life, contributory value, and functionality cycle.
- addressing the inevitable challenges, disputes, and asset targeting
engaged in by global cadres of ultra-sophisticated state sponsored, independent, and legacy free competitive advantage adversaries.
Here’s an interesting perspective offered by Ashok Jain…a former principal in the IP (intellectual property) valuation services unit of Deloitte. Mr. Jain suggests that interactions he has had with large U.S. companies lead him to draw this conclusion…
- most profess a fairly high-minded level of IP prowess, but, relatively few can answer substantive questions about the management of their IP, (and, I might add, probably their intangible assets, as well) e.g.,
- does your company maintain an inventory of its patents?
- which patents (IP in general) are core to business operations and strategic plan?
- is your company exploiting its IP and other intangible assets to generate the greatest possible value?
Colleagues of mine in the IP and intangible asset services arena can readily point to numerous…management teams, c-suites, and boards who have achieved very impressive (national, international) reputations (credit for) being the originator, facilitator, and/or enabler related to the creation and use of new ideas, which in numerous instances, eventually become issued intellectual property.
Respectfully, I’m sure, Mr. Jain reports…that a percentage of these executives are not consistently inclined to exercise either a willingness or ability to accept – assume a personal (hands on) role relative to the management (stewardship, oversight) of those new ideas.
Instead, it’s reported that numerous idea – thought leaders are likely to…delegate such responsibilities and further development – execution of new ideas to either legal counsel or the CTO (chief technology officer) side of their business.
One possible explanation for their reluctance…Jain explains, is that the technical and legal units of a company are frequently portrayed as and/or assumed to be ‘cost centers, not profit centers’.
Such characterizations tend to give credence to the view…that there is less (insufficient) interest among management teams and boards regarding the business (return on investment) aspects of utilizing – exploiting intangible assets.
Jain’s report also suggests, very unfortunately, I might add, that a probably large (but unknown) percentage of companies…
- literally give away or perhaps worse, inadvertently relinquish valuable intangible assets without realizing it.
- do not use their intangible assets as effectively, offensively, or defensively as they could to block competitors, generate new sources of revenue, or favorably leverage the assets to benefit their stakeholders or supply (value) chain.
Question…do these presumably unfavorable perspectives constitute a crisis relative to current practices in the management, stewardship, and oversight of company’s intangible assets, of which IP is one?
Quite possibly it does in my view…inasmuch as it represents another example of management teams, c-suites, and boards not taking their (fiduciary) responsibilities for managing their companies intangible assets as seriously as they should, especially when looking at it through a business – return on investment lens.
Being a strong advocate of utilizing – exploiting intangible assets as I am…yes, I recognize business leadership need to engage their intangible assets in a more business-like manner and…
- not consider those increasingly valuable, competitive, and strategic assets as merely sandboxes in which a little H2O can be periodically added to enable the erection of temporary (sand) castles whose value and relevance will quickly crumble and dissolve into indistinguishable (non-value, non-revenue producing) forms as the moisture evaporates or the tide changes.
This scenario is particularly relevant today, when so many businesses have become intangible asset intensive and dependent!
A bottom line…business leadeship and boards are obliged to recognize, if they don’t already, how their company’s intangibles can be effectively applied and exploited…
- which includes, of course, not overlooking the nuanced ways of using (leveraging, positioning, bundling) these assets as strategic weapons.
Interestingly, this all can occur, sometimes very simply…by ensuring the right parties, with the right expertise (intangible asset specialists) are not just ‘at the proverbial decision table’…
- but there is an attitude of receptivity for what they say.
- this includes seeking practitioners that possess not merely legal – technical expertise about intangible assets, but also
- specific business acumen to practice consistent and effective stewardship, oversight, and management of those key assets, and
- sustain control, use, ownership, and monitor – inventory asset value and materiality.
In other words, the ability to make ‘intangible assets’ execute…i.e., produce the value, revenue generation, competitive, and brand opportunities which, in many instances, they’re capable.
So to, should new product development and design meetings include… intangible asset strategists and risk specialists who can assume specific responsibilities related to sustaining control, use, ownership, and monitoring the value and materiality of key intellectual, structural, and relationship capital assets.
The end game, of course, as always, is to ensure that a company’s investments in… and/or acquisition of intangible assets blend effectively with a company’s strategic and market planning.
There is a growing number of management teams and boards who not only ’get it’, but are ‘getting it right’…and that’s a good thing, obviously!Often though, ‘getting it right’ has been preceded by unnecessary missteps, miscues, and missed opportunities most of which are permanently irreversible.
That said, it remains quite evident in some sectors that intangible assets are still presumed to be…strictly legal – technical functions absent recognition for the (business) fiduciary responsibilities related to intangible asset management, stewardship, and oversight as duly noted in Stone v. Ritter.
This, of course, underlies the reason why…such large percentages of otherwise valuable and competitive intangible assets are, as they say, ‘non-practiced’.
In other words, the value, revenue generation, and competitive advantage potential of many intangible assets…a business has developed often go one way…
- while the R&D, CTO, legal counsel, marketing and new product design groups go another way,
- and never the ‘tween shall meet’.
One result of these circumstances of course…is that, as noted above, is not-insignificant percentages of companies leave valuable intangible assets ‘on the strategic – negotiating table’, i.e., either unrecognized, under-utilized, un-valued, or unused.
That’s why I respectfully remark to business leaders, there remains a significant number of
- ‘Rembrandt’s accessible, available, and useable, but
- they’re not all stored in a company’s attic, rather,
- they’re right in front of us. they merely need to be identified, unraveled, assessed, and put to work!
(This post was inspired and adapted by Michael D. Moberly from article in Chief Executive.Net, titled ‘Taking Intellectual Property Seriously’.)
Reference to book authored by Kevin G. Rivetter and David Kline titled ‘Rembrandt’s In The Attic: Unlocking The Hidden Value of Patents’.
Michael D. Moberly [email protected] St. Louis June 24, 2014 ‘Business Intangible Asset Blog’ since May 2006, 650+ posts, ‘where intangible assets, business, and solutions converge’.
Please explore other relevant blog posts, video, books, and position papers at https://kpstrat.com/blog
As always I welcome readers comments and perspectives.