We’ve worked with hundreds of organisations to help them commercialise their 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 commercialisation endeavours 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 your entire business. Your intangible asset position is likely to be not a single asset (like “a patent” or “our data” but a constellation of different intangible assets where the whole is greater than the sum of its parts. For example: you might have software for an internet platform (internet assets), which generates data, with a brand (another asset) and content delivered via the software to users (network effects and user relationships – two other assets.
What does your intangible asset position give you?
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 if develops 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. Conversely, if a company has a weak intangible asset position, even if it has a successful product its weak intangible assets will mean it’s product is quickly copied, driving down market share which will ultimately result in a lower return on investment to its shareholders.
A good example of a very strong intangible asset position (which you can read about here) is New Zealand company Fletcher Building, which has built a near monopoly for it’s plasterboard product Gib. Unsurprisingly GIB generates eye wateringly high margins for Fletcher Building.
Or the other hand for a negative 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 strong Intangible Asset positions, 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. There are few effective barriers to competition so success is copies resulting in a race to bottom on margins.
If these companies invested more in creating a defendable point of difference, it is likely margins would increase and 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 you take a more measured view of how your business manages and utilises its Intangible Assets. Then, when your organisation innovates, invests in new R&D, develops a new brand or acquires a company, your 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:
- The likelihood of receiving broad and strong intangible asset protection: This will directly impact both the commercial potential of the idea and the commercialisation options available.
- Whether your company has Freedom to Operate (FTO) In other words, is your 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.
- The state of the market: 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 ensures companies are 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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