Important vs urgent: Managing intangible asset risk

Jackie Clark
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FinTech

CEOs and managers often struggle to move beyond day-to-day business demands because the focus is “keeping the car on the road” rather than strategic or long term direction.

Paul Adams, Chief Executive Officer, EverEdge Global

CEOs and managers often struggle to move beyond day-to-day business demands because the focus is “keeping the car on the road” rather than strategic or long term direction. As a business owner myself I can understand the sentiment. Unfortunately, sacrificing the important to the urgent only works for so long. Eventually the delayed decisions, short cuts and stop gap measures catch up, then something goes badly wrong; the car ends up at the bottom of a very steep cliff.

Companies need to identify and mitigate risk, and monetise and value their intangible assets. Too often we find ourselves acting as the ambulance at the bottom of that cliff.

Examples we frequently see:

– a contractor, not the company, owns a core piece of an intangible asset that has been developed

– a breakthrough invention has been published somewhere

– a cutting edge technology turns out to be not so cutting

– intellectual property spend growing completely out of control

– companies being sued for the infringement of someone else’s intangible asset

These situations often have significant negative impact on businesses, and the cost of getting the car back on the road is high. Years of R&D are lost, court cases have to be settled or initiated, markets have to be exited, brands and customer relationships are damaged. If you lose a critical trade secret for example, you can’t un-ring the bell and get it back. It is much easier to solve problems before they happen. Proactively developing an intangible asset strategy early-on can prevent the problem, or at least catch the car before it leaves the road.

How then do you get from the bottom of the cliff to avoiding flying off the road in the first place? One way is to understand the issues you are likely to face in advance, so you can drive to the conditions and know the intellectual property issues you are likely to encounter.

Key intangible asset considerations by business evolution:

Initial concept and start-up: Who owns the intangible assets? | How should you protect these critical assets for subsequent commercialisation? | Should the idea be published? | Will you have a sustainable intangible asset position? | Are you going to infringe on third-party intellectual property?

Emerging Business: Have you acknowledged your intangible assets in your accounts? | Have you developed an intangible asset strategy and is it linked with your business and investment plans? | Are you protecting your intangible assets in the contracts you sign with parties such as suppliers, clients and employees?

Expanding business: Are you going to infringe on anyone else’s intangible assets as you move into new markets? | Have you developed a branding and trademark strategy? | Are you controlling and managing your intangible assets as the business expands to minimise costs?

Mature successful business: Have you identified your intangible assets as a profit centre within your business and are you leveraging it to its full potential? | Is your intangible asset strategy linked into your innovation and R&D strategy? | Are you taking intangible assets into account in capital events (IPOs and investments) and other major transactions (M&A activity)?

General Eisenhower was correct when he said “What is important is seldom urgent and what is urgent is seldom important”. Intangible asset considerations can easily fall by the wayside as business gets busy and growth kicks in. Whether you spin-out due to an unforeseen obstacle or your brakes fail due to lack of maintenance, the results are never pretty for drivers (management, employees and directors) or passengers (shareholders). Intangible asset risks by nature are such that they are regarded as either unimportant, or important and not urgent. But, when things go wrong, they become catastrophic quickly.

You can spend a lot of time tracking physical assets, and little time on the intangible assets and value creation that is really helping to drive growth and profitability. Intangible assets are not just where value lies, but are where earnings growth comes from.

The key lesson: if you are not managing your intangible assets like they are important, you are facing an urgent problem.

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