The value of a company’s intellectual property often overshadows the value of its tangible assets. According to an October 22, 2005 article in The Economist, as much as 75% of the value of publicly traded companies in 2004 was based upon intellectual property. That is nearly double what it was in 1980. Today it is closer to 85%. Where is your company’s value? Is it protected?
Creation: Whether you realize it or not, you and your company create new intellectual property every day. Every project you begin – every transaction you enter into – involves some form of your intellectual property. The key to greater business success through intellectual property comes from learning to identify and protect the most valuable parts of the intellectual property you create, strategically combine your intellectual property with desirable business goals, and identify and advance the greatest potential value among your intellectual property.
Jeffrey Immett, CEO of General Electric said, “The only source of profit, the only reason to invest in companies in the future is their ability to innovate and their ability to differentiate.” This is true for investing in someone else’s company or in your own. In today’s business market, unless the money you spend is directed toward an organized plan to distinguish your company from its competition in new and creative ways, your money could be better invested. James Brian Quinn, Professor of Management at Dartmouth College said, “Intellect and innovation are the sources of virtually all economic value, growth and strategic edge today.”
Innovation: Competitive differentiation and innovation are what sell products and services and convert those products and services from commodities into unique valuables. Your marketing efforts, research and development, customer service, new product releases, and most of what you do each day should be part of a strategy designed to impress upon your customers the reason they should spend their money at your company and not on another. Each intellectual asset you fail to identify and evaluate, however, is one more lost opportunity to innovate and differentiate your company from the competition; one more lost potential for growth and strategic advantage.
Success: Successful companies follow successful company practices. Unsuccessful companies follow unsuccessful company practices. If a company follows unsuccessful company practices long enough, it will become an unsuccessful company regardless of its history. If a company follows successful company practices long enough, it will become a successful company. Learn and follow successful company practices relating to your intellectual assets.
Among these successful company practices is establishing a strategy and procedures for identifying, evaluating and tracking intellectual assets. Companies that learn to identify and understand their intellectual assets have greater control over their futures, find greater market success, and feel more confident in business than companies that do not.
Value: The value of intellectual assets to a company is undisputed. In addition to innovative intellectual assets providing potential for distinguishing a company from its competitors, properly protected intellectual assets may prevent others from using the innovation outright, may provide for additional company revenue through licensing the use of the innovation, or may allow strategic bargaining with other companies.
Procedure: Here are a few suggestions for capturing missed value in intellectual assets.
- Determine Your Baseline: Perform or have a competent IP Coach® perform an intellectual property audit of your company to identify what intellectual assets you currently have in your company, and what policies, procedures and protections you have in place for your intellectual property.
Insight: Knowing your assets tells you where to start and how to reduce costs.
- Own Your Assets: Establish agreements with your employees and contractors to ensure you own the intellectual assets created in or for your company. Resolve ownership of any missed intellectual property previously created. Document and follow policies and procedures for ensuring all future intellectual assets are yours.
Insight: Most contractors will agree to you owning intellectual property involved in work they do for you if you get an agreement up front. If you wait until after the work is created or after they’ve begun, however, it is much more difficult.
- Track and Document: Establish procedures for identifying and documenting new intellectual assets created. If you do not have a handle on what you are creating that could be of future value, its potential will never be seen in your profits.
Insight: Have key employees carry a notebook properly configured to record thoughts and ideas with procedures for transferring those ideas to a more permanent medium. Many truly brilliant innovations come when you are thinking about something else. If they’re not documented, they can’t become reality.
- Evaluate Potential: Look beyond current use for the asset to how it can be used in other existing or future projects. Have a procedure for gathering new ideas.
Insight: Follow a regular schedule for evaluating new ideas (monthly or quarterly), and follow it. Does the idea have potential? How could it be used?
- Decide Asset Fate: Once its potential is evaluated, decide whether to use the asset only for its current project, schedule it for further development, or document and save it for future potential projects. Keep a list of each category of project fate.
Insight: If you keep similar potential and future projects together in an organized list, they are out of your mind and are easier to take advantage of and address later.
Determination: It is never too late to begin. Because your company is generating new intellectual assets every week, deciding now to take action will be an improvement on where you would have been had you continued to wait. Without procedures and policies for capturing the value, however, potential asset value beyond its immediate use is stunted. Greater success and greater company valuation is inherent within every company. Find it!