Structural Capital Risks

Structural Capital includes the huge range of knowledge that stays in your organization when everyone goes home at night (as such, it’s one of the answers to human capital risk of knowledge walking out the door).

Structural capital can take many forms. At one end of the spectrum is the formally recorded, legally protected knowledge in intellectual property (IP). Next is the knowledge included in software and formal process. Farther along, there is all the other knowledge residing in manuals, instructions, intranets and other written resources. Finally, at the other end of the spectrum from IP is the shared knowledge that is manifested in work patterns and culture which are shared and understood in the organization—but not necessarily written down.

The key risks associated with structural capital include the: Read more

Program today: You Say IP, I Say IPR

Accountants document on the balance sheet that which: (a) is a diminishing fraction of enterprise value; (b) excludes the innovations and business processes comprising intellectual properties (and rights) that create above-average profits; and (c) is of passing interest to risk and financial executives concerned with cash flow.

Are the rules and language of accounting a hindrance to the creation and monetization of intellectual properties, or irrelevant?

Join me Friday, 6 August, at 12h00 EDT for the Mission Intangible Monthly Briefing as I interview

Dr. Roya Ghafele, Lecturer at Oxford University and expert on IP perceptions, and formerly an economist at both the UN World Intellectual Property Organization and Organization for Economic Cooperation and Development and

Jim Singer, partner at the Pepper Hamilton law firm, a member of the firm’s intellectual property practice group who publishes the IP Spotlight blog, and is formerly an electrical engineer with an iconic oil firm.

For more information and to register.

If you are general counsel, IP counsel, chief financial officer, a risk officer, an IP executive, a manager of strategic partnerships, a reputation executive (marketing, PR), a board member of any public company, or have a financial interest in any publicly traded security, you won’t want to miss this event.

IP and IC — the same thing or not?

Intellectual property (IP) is a term that is usually used to refer to specific types of structural capital that enjoy special legal status. These include patents, trademarks, copyrights, and trade secrets. Each of these categories has a specific body of law associated with it. Patents have to be approved by a national authority. Other categories do not require registration but are still protected under the law.

Legal protection can create a significant competitive advantage, depending on the circumstances. This legal definition and protection can also create opportunities for licensing IP rights outside the corporation. This strategy is getting a lot more attention today from organizations, consultants and software companies.

However, legal protection processes can be expensive and legal protection in itself is not a guarantee of competitive advantage. So, while you want to consult a good attorney to get the intricacies of the law correct, you should also try to also seek the advice of someone that has a good grasp of the strategic role of IP. You want to make sure that you file for protection when it makes sense. This decision involves a cost-benefit analysis. Some of the factors to consider include the cost of filing, the risk of disclosing your invention (disclosure is the only way to identify the idea that your want to protect), the competitive benefit of having a protected idea and the monetary benefit of being able to enforce and/or license your rights to other. Once you win a right, there are the practical and logistical challenges of managing the rights you obtain.

But these special legal systems are not the only way to “protect” your intangible capital. Our friend, Jackie Hutter (she calls herself a “recovering patent attorney”), pointed out to us that contracts are actually one of the most important ways of protecting your intangible capital. Good management of contractual relationships can have a big influence in customer and partner relationships (relationship capital) as well as key employee relationships (human capital) and acquired knowledge (structural capital).

One of the main ways that intangible capital gets protected is through its association with a strong business model. This goes for IP as much as for other kinds of intangibles.
In fact, the power of each of the components of your intangible capital is increased when they are combined with other knowledge components. Intangibles are a great example of the saying that “the value of the whole is greater than the sum of the parts.”

While someone could steal or imitate specific aspects of your business, it is hard to duplicate the whole system. This is a major way that most companies attain and retain competitive advantage—and protect their IP. This is important to keep in mind because many in the IP community will try to tell you that the only intangibles of any value are IP assets. We strongly disagree, which is why we have taken so much time to explain all the elements of intangible capital.

We actually created a pretty big controversy when we drafted this content for our book. When we started out, we intended to define all structural knowledge as intellectual property. When we consulted colleagues in the business and legal communities on the draft, we got some strong support and some equally strong pushback. The conversation spilled over to Twitter and Mary’s blog which had a record number of comments on a post called, “What’s the right definition of intellectual property?”  The message that we wanted to communicate is that all intangibles are important and legal protection is just one of the strategies to protect your intangibles. However, it became clear to us that insistence on this definition was going to distract a lot of people from the core messages of this book. So we backed down.

So our advice is to leave the term intellectual property to the lawyers. But do not leave the protection of you intangible capital to just a legal strategy. Come to understand   and protect your intangible capital as a system. Remember the lesson of knowledge economics. The highest value knowledge is knowledge that has been operationalized, put to work. The way that this usually occurs is actually through the creation of processes.

Adapted from Intangible Capital: Putting Knowledge to Work in the 21st Century Organization by Mary Adams and Michael Oleksak

Trolls Are Capitalists Too

My work with Intangible Capital intersects with the field and practice of intellectual property (IP). In conversations about IP, especially in my monthly programs at the Intangible Asset Finance Society, trolls are a frequent topic of discussion. In fact, some colleagues from IAFS and I ran a workshop about modeling IP-intensive businesses at the recent ICAP Ocean Tomo event that talked about the line between a research organization and a troll.

But I have never spoken up about my view. I don’t really defend trolls. I see the question in a larger context of the operating assumptions broadly held about business and ownership. Read more

Getting Paid for What You Know: Licensing and Secondary Sales

Yesterday, I talked about selling knowledge products. Another way of getting paid for knowledge is through licensing. This usually applies to situations where there is a very clear technology or knowledge product that has specific legal protection. I’ll discuss intellectual property in more detail in a later post. The important thing to understand at this point is that if your process, service, or product qualifies for legal protection, then you have a whole new way of monetizing your knowledge, through direct sale, licensing and royalty streams. Read more

Maximizing Value of Intangible Capital – My presentation from ICAP Ocean Tomo earlier today

We had a great time with our panel discussion at the ICAP Ocean Tomo track today on Emerging Intangibles Markets. Here are my slides:

After a panel discussion with fellow members of the Intangible Asset Finance Society, Nir Kossovsky and Andy Gibbs, we led the group through a case study of a research and licensing company that had a declining market value. The market viewed it as a troll with low value add. Read more

I will be speaking at the ICAP Ocean Tomo event on March 24-25

ICAP Ocean Tomo will be hosting an IP Think Tank before their latest auction.  I will be speaking and participating in a panel discussion about the Growing Intangible Asset Marketplace — Looking Beyond IP to Other Intangible Assets.  I’ll be sharing my thoughts on emerging intangible capital investment opportunities like processes, networks and teams. I will also provide the IP professionals in the audience  with a way of modeling the ecosystem that monetizes key intellectual property assets. The auction will be held at the Ritz Carlton in San Francisco.

Please let me know if you are planning to be there or if you have any suggestions on folks I should meet while I am in San Francisco. Here’s the Spring Think Tank site.

Defining Intellectual Property: The Rest of the Story

A few weeks ago as we were circulating drafts of our book Intangible Capital: Putting Knowledge to Work in the 21st Century Organization, I posted about the dilemma we were facing of what to call structural capital What is the Right Definition of Intellectual Property.

In the initial draft, we made the case that all structural capital is intellectual property. The aim was to help businesspeople see that all knowledge is valuable and that IP, while important, is not the only kind of knowledge asset and is not the only strategy for protecting knowledge assets. Read more

What’s the Right Definition of Intellectual Property?

We have been circulating review copies of our book. We make the case that structural capital–knowledge captured in the organization–falls into two main categories: process and intellectual property (IP).

And the most controversial part has been our contention that:

All the knowledge that is captured and recorded in your company is IP… Read more

IAFS Call on IP Metrics, Innovation Strategy and Metrics

On Friday (6/5/09) at noon EDT, I’ll be hosting the June call for the Intangible Asset Finance Society. This month, Andy Gibbs, former CEO of Patent Café and now CEO of Andy Gibbs IP CXO, will talk about IP metrics, innovation strategy, and value: you can manage what you can’t measure. The call is free. Recording is available for a small fee. Sign up at IAFS Events.

I’m looking forward to this conversation as Andy takes a very aggressive stance on IP. He feels the intellectual property will become “the core product” in the future. I’m an advocate for the power of seeing IP in the context of an organization’s full intellectual capital. But we share a passion for helping companies understand the power of the intangible. Hope you can join us!

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