While we can argue about the exact amount, without question, intangible assets form the majority of corporate value today. Matters involving IP are therefore predominately business issues, as opposed to legal issues or technical issues. For example, IP in the form of patents or trademarks (or both) frequently serves as a basis of the premium pricing that can be obtained from a differentiated product line. Also, IP directed toward a competitor’s technology can legally limit the ability of a competitor to expand its offerings, thus decreasing its ability to compete. There are many other examples of the business value of IP, all which when strategically obtained and managed can greatly increase the overall financial position of the corporation using IP as a business tool.
Notwithstanding the substantial dollars associated with corporate IP decisions, most organizations leave questions of IP in the hands of their legal and technical teams. Of course, many corporate IP professionals realize that this is an outdated view of IP management and that corporate asset value cannot be properly maximized by maintaining IP issues in the traditional legal/technical silo. These IP managers nonetheless often face considerable difficulty getting their business teams to pay attention to IP issues as they would other issues imbibed with significant financial ramifications.
The question is why an otherwise sophisticated professionals would cede management of a substantial corporate asset to a lawyer or scientist, when they would not do the same for other business decisions. That is, would these same business professionals put lawyers or scientists in charge of product development or pricing decisions? Of course not. Clearly, there needs to be a way to get business managers to “get” IP.
My friend Jordan Hatcher and his senior colleague Andrew Watson at the IP Strategy consultancy IP Value Added have written a great article that addresses the structural impediments in an organization that can prevent the business team from understanding and managing IP as an asset. Significantly, Jordan and Andrew have placed impediments to an asset-based approach to IP management in the context of Insights Discovery (based on Jung’s work in behavioral psychology), which is used to analyze organizational behavior and corporate culture.
The article is very interesting, and I think that those seeking to understand why their business team does not “get” IP will find Jordan and Andrew’s analysis illuminating. The article does a great job describing the traditional (rights-based) approach to IP management and the more modern (asset creation focus) view.
Traditional–IP is a legal issue:
- IP is a handled elsewhere (down the corridor, second on the left, through the door marked “Legal”)
- Lacks board visibility and will struggle in competition with every other business initiative to gain attention
- Too caught up in the process behind acquiring and maintaining rights without focusing on taking risk and getting results for the business out of its IP
Analytical, objective, controlled, planned, balanced, deliberate, questioning and formal.
Modern–IP is managed as a corporate asset:
- What is the end result of acquiring IP within our business (WHY are we getting IP and WHAT are our competitors doing with IP?)
- Asset creation requires risk taking, so what risks are we taking with our IP assets?
- Are we being dynamic, creative and innovative around how IP can be used as a part of the business strategy?
Of course, it is one thing to identify the need for organizational change, but it is wholly another to actually be able to effect the change needed to treat IP as an important corporate asset. In this regard, I agree with Jordan and Andrew that an organization’s CEO will not “get” IP unless someone who commands their attention and respect talks to them about the substance and importance of IP to the value of their business.
To this end (and I can report from experience that this is true), corporate IP managers–who are normally far down the organizational chart from from the CEO–are not likely to be able to have the credibility and forum to effect the degree of re-structuring needed in most companies. Jordan and Andrew indicate that the following persons are best equipped to get the attention of the CEO and others who need to understand and embrace the value of IP to their organization in order to make the necessary change happen:
- non-executive directors
- advisory boards
- investors (funding sources and debt providers)
- his or her direct reports – the C-level management group
Jordan and Andrew also propose IP structures that can result in successful IP value creation through proper management processes. I agree that the actual corporate structure is less important than the person who is put in charge of IP business assets. That is, the person can be a lawyer with a strong business sense or it can be a business person who has been deeply involved in IP matters such that they have obtained a substantial working knowledge of IP issues. What matters more is that the reporting structure and incentives are directed toward maximizing IP as a corporate asset, not merely to keep the costs of IP procurement and management low (as is typically the case in the traditional corporate IP structure).
Corporate IP managers who are experiencing difficulty in convincing their business teams that IP should be at the fore of their business considerations would be well-served by considering Jordan and Andrew’s perspective on organizational impediments that prevent a company from treating IP as a business asset. They are to be commended for this thoughtful article and I look forward to additional substantive analysis of IP management issues from the IP Value Added team.