Understanding your intangible asset position

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We’ve worked with hundreds of organizations commercializing technology: from inventors in garages to Fortune 100 companies, from venture-backed start-ups to publicly funded research institutes. We’ve seen triumphant successes and dismal failures. Surprisingly for such a diverse data set the beginning point of both successful and unsuccessful commercialization is remarkably consistent: it all starts with understanding your intangible asset position.

What is an intangible asset position?

An intangible asset position is the strength or weakness of the intangible assets that a company owns or controls surrounding a product, a service, a technology, or an entire business. An intangible asset position influences two key things.  Firstly, opportunity size, which is the amount of money that can be made from the asset, and secondly, the options that are available to make that money from that asset.

Successful product + strong intangible asset position = utopia

In the long-run, a business will only thrive it can develop a successful product, technology or service with a strong intangible asset position.  This is because a strong intangible asset position helps drive a higher market share. In turn, market share drives revenue and/or margins, which then drives profitability and return on investment. If a company has a weak intangible asset position, it will ultimately result in a lower return on investment to its shareholders.

To give an example, think about the raft of meal delivery or electric scooter companies that have sprung up over the last several years.  None of the businesses in these sectors have really developed their intangible assets, so all they have left to compete on is price. As a result, consumers tend to swap between services based on what voucher they currently have or which provider is closest to hand.

If these companies invested more in creating a defendable point of difference, it is more likely the cost of acquisition per client would decrease as customers would stick around for longer.

What this highlights is that there’s a direct correlation between the strength of a company’s intangible assets and the amount of money it can make, the profits that it can generate and the return on investment that shareholders will enjoy from that particular business.

So what should companies do?

In the first instance, companies need to increase awareness and understanding of the intangible assets they hold, beginning with answering:

  • What intangible assets do we own?
  • What is the extent and nature of the intangible asset risks we face?
  • What is the impact of our intangible assets on the company’s performance?
  • How can we unlock our company’s intangible asset value?

Addressing these questions will help companies take a more measured view of how a business manages and utilizes its intangible assets.

Then, when the organization innovates, invests in new R&D, develops a new brand or acquires a company, its management team can objectively assess the intangible asset position of this new initiative.

Taking the time to assess your intangible asset position will provide a host of critical insights, including:

  1. The likelihood of receiving broad and strong intangible asset protection
    1. Which will directly impact on both the commercial potential of the idea and the commercialization options available.
  2. Whether the company has Freedom to Operate (FTO)
    1. In other words, is the company likely to be sued if it uses this new technology or innovation? To bust one particular myth – unfortunately having a patent does not mean you have FTO – you can infringe a third party’s intangible assets rights, even if you have a patent on its own technology.
  3. The state of the market
    1. Providing incredibly valuable market intelligence such as the state of technology development in your market or industry: who is doing what, when they were doing it, where are they now. It generates a list of people working on what you are working on: your potential competitors, collaborators, strategic partners, co-developers, licensees and licensors.

The combination of these factors provides critical early insights into whether a project is likely to be commercially successful. Understanding these factors will leave companies better prepared to make a host of flow-on decisions, as a strong intangible asset position justifies greater investment, more aggressive expansion plans, more extensive protection and makes strategies like licensing or intangible asset sale viable. Conversely, a weak intangible asset position might cause a company to redirect R&D, take a different strategy or even discontinue the initiative altogether to focus on other projects.

If companies don’t understand their intangible asset position, it can lead to substantial strategic errors, poor financial performance, depressed investment returns, unacceptable risk exposure and in a significant number of cases, catastrophic failure.  Correctly identified, protected, valued and leveraged, intangible assets can dramatically enhance competitive edge, unleash company financial performance and materially boost investment returns.

So, if there’s one lesson it’s this: intangible assets are a critical business asset and managing these properly is a prerequisite for every successful business.

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