What’s the world’s oldest profession?…well, it’s certainly not prostitution as many comedically suggest.
Of course, the word ‘poaching’, in this post’s context…remains akin to the poaching engaged in medieval European contexts, wherein a ‘poacher’ was one who knowingly trespassed on another’s property to trap and hunt game.
The word poaching today obviously manifests in a slightly different contexts…that is, it’s about…
- encroaching on another’s personal and/or business property for the purpose of being in sufficient proximity to learn (access and acquire) the proprietary intangible assets belonging to another business and/or competitor, i.e., the intellectual, structural, and/or relationship capital that individually or collectively constitute their (trade – operating) secrets. https://kpstrat.com/wp-admin/post.php?post=154
For a vast majority of businesses today, their trade – operating secrets lie in – emerge from the...intellectual, structural, and/or relationship capital a business has developed which, when individually or collectively applied, contribute to its competitiveness, value, revenue generation, resilience, sustainability, and market sector dominance, etc.
Why is this level of importance being attached to intangible assets…its because today, and for the foreseeable future….
- its an irreversible economic fact that 80+% of most company’s value, sources of revenue, competitiveness, future wealth creation, and sustainability lie in or emerge directly from intangible (non-physical) assets.
So, the type of poaching I am referring to here – now, can occur in an array of circumstances and timing…e.g., during-the-course of a (faux) business meeting or transaction, wherein an economic – competitive advantage ally, or adversary, purposefully seeks otherwise proprietary insights, knowledge, perspective, and experiential know how, etc., belonging to a sector competitor and at virtually no cost, aside from the various risks that may materialize should their acts – behaviors be exposed.
Business intelligence – competitive information poaching today…is, of course a global phenomenon with few, if any, conventional (sector, country) boundaries or limitations. A significant outcome to targeting and obtaining specific business operating secrets of competitor’s, in most circumstances, can occur relatively quickly by individuals well versed in (a.) where to look, and (b.) what to look for via myriad of online sources.
Today, there is little or no need for economic – competitive advantage adversaries to…engage in conventional and expensive (trial and error) research and development methodologies as a requisite to delivering information to benefit an adversary. https://kpstrat.com/wp-admin/post.php?post=1530
In most business transactions today, intangible assets are thoroughly embedded…and, as such, are integral components relative to a deal’s viability and sustainability, and achieving the projected returns.
Therefore, through my lens as an intangible asset strategist and risk specialist, it’s inevitable that valuable – competitive advantage intangible assets will be in play…i.e., shared, transferred, bought, or sold, relative to a prospective buyers’ rationale for initiating a transaction or new project. True, in some instances, particular-intangibles will morph, be tweaked, and/or otherwise come to be applied, in new – different ways compared to how they originally existed or were previously used.
As most experienced business persons know, some all too well…generally, there is risk in commencing – engaging in any transaction, i.e., negotiation, collaboration, etc.. In part, that’s because proprietary competitive advantage information (intangible assets) will inevitably be shared, sometimes inadvertently, sometimes based on enthusiastic pride by the holder regarding their development, and not-infrequently, absent a relevant and timely NDA (non-disclosure agreement) executed at the very earliest stages of asset development particularly pre- negotiation. https://kpstrat.com/wp-admin/post.php?post=221
Too, risk exposure for the owner – seller of the intangible assets in play…may materialize when the (proprietary) intangibles come to be used by the receiving party for purposes outside or beyond the terms of the contractual (transaction – contractual) relationship. In other words, the information will be used by the receiving party (possibly a poacher) to benefit them economically or competitively to the detriment of the other party.
Unfortunately, some company management teams will dismiss or relegate ‘intangible asset poaching’ as constituting just another inevitable cost of doing business…i.e., a new (additional) transaction cost of conducting business in an increasingly competitive, global, aggressive, and predatorial business transaction environment wherein increasing percentages of transaction value and projected sources of revenue evolve directly from valuable, revenue producing, and competitive advantage laden intangible assets.
I am reminded of a well-known (still operating) computer manufacturer…several years ago, whose vice-president of operations announced, upon building multiple new assembly sites in a southeast Asian country, that he estimated, quite correctly as it turned out, that 25+% of the company’s proprietary information and intellectual property (proprietary intangible assets) associated with – necessary for manufacturing at these specific sites would likely be irrevocably lost (infringed, misappropriated) during this venture’s projected life cycle.
Under these circumstances and in this locale…this company’s VP Operations had inadvertently relegated the probability that proprietary – competitive advantage intangible assets would be ‘poached’ to a necessary, perhaps obligatory, cost of doing business for this company which is clearly ‘intangible asset intensive and dependent’ for its sustainability.
The consequences (criticality) attendant to business intangible asset poaching…i.e., risk materialization, can obviously be significant and long lasting, if not irrevocable and terminal. Insofar as remedies or risk mitigation are concerned, the option of a business today pursuing isolationist strategies, i.e., not sharing or transferring business information outside the U.S., is likely neither feasible nor practical, especially in the present go fast, go hard, go global, go black business environment.
On the other hand, when entrepreneurs, management teams, and boards…representing intangible asset intensive – dependent firms exercise prudence with respect to distinguishing which intangibles are the real drivers, and what-which assets will – will not be shared or transferred, etc., in most instances, is an increasingly essential task – fiduciary responsibility. The goal of course, is, at the end of the day, control, use, ownership, value, and materiality of key intangible assets before, during, and after transaction negotiations are concluded, the assets remain intact for the rightful originator and owner.
(This paper was inspired by the fine work of Clemons and Hitt in their paper titled ‘Poaching and Misappropriation of Information: Transaction Risks of Information Exchange.)
Michael D. Moberly March 7, 2018 St. Louis [email protected] ‘The Business Intangible Asset Blog’ since May 2006, https://pstrat.com/blog where one’s attention span, intangible assets, and solutions converge!
Readers are invited to explore other posts, papers, and books which I have published at https://kpstrat.com/blog