This week on the Wednesday Edition of Talk Business With Howard on Blog Talk Radio, the guest is Andrew J. Sherman. Andrew is the author of the business book, Harvesting Intangible Assets: Uncover Hidden Revenue In Your Company’s Intellectual Property.
Andrew, thank you for writing this guest blog post and for being on the radio show. Looking forward to a most interesting business conversation with you! -Howard-
Harvesting Intangible Assets In Your Business by Andrew J. Sherman
“There would be no advantage to be gained by sowing a field of wheat if the harvest did not return more than was sown.”
—Napolean Hill
Harvesting Intangible Assets begins with the observation that we began as an agrarian economy, evolved to an industrial economy and then shifted to an information-based economy, but in many ways, we are still agrarians. Our new crops are knowledge, systems, channels, processes, know-how, brands, relationships and intellectual property and we must care for these resources and drivers of shareholder value in the same way that our farming ancestors tend to their fields.
In order to grow in a slow economy and a resource-constrained environment, entrepreneurs as well as leaders of more established companies need to deploy capital-efficient growth strategies to drive shareholder value. Trillions of dollars worth of unharvested intangible assets are sitting on the vines of fortune 1000 companies, universities, government labs and even non-profits and they must be harvested on a timely basis and brought to the marketplace or they will rot and be wasted. We are not operating in an economy where valuable assets can be discarded just because leaders are distracted or shareholder value is being ignored.
Today, companies of all sizes and in all industries across our great nation and around the world are “asleep at the switch” in cultivating, managing, and harvesting critical intangible assets to the detriment of shareholder value and in clear violation of their fiduciary obligations to shareholders, as well as to employees, customers, and society overall at a time when our global economy cannot afford for valuable intellectual asset crops to go to waste or rot on the vine..
Why has it taken leaders of companies, government and universities so long to find systems to properly harvest intangibles or recognize the many opportunities that sit just below the strategic surface? Why do so few have effective intellectual asset management (IAM) systems, internal incubators, meaningful R&D budgets, authorized skunkworks operations, corporate venture capital, or customer-driven innovation systems? How can we possibly remain competitive in a global marketplace if we allocate so little time, so few resources, and such low priority to uncovering and fostering innovation and creativity? How long can the significant gaps and disconnects between the universities and government laboratories that are investing time in R&D and the larger and smaller companies that have the knowledge and resources to bring products and services to the marketplace continue to exist as billions in research remain underutilized each year? When do we stop talking about the problem and begin solving it? How do we build better communication channels and brands linking sources of capital, sources of innovation, and sources of knowledge in business and market building?
At the company level, how can we better train leaders and managers to more effectively harvest their intangible assets to uncover new opportunities and drive strategies to maximize shareholder value? How do we avoid the waste of critical R&D assets when leadership, priorities, or markets shift? How can we encourage company executives and board members to recognize opportunities that sit right in front of them that they just can’t seem to see because they are blinded by short-term fire-fighting priorities and quarter-to-quarter strategic thinking? How do we better foster and reward innovation and creativity internally and externally at all levels in the company?
Harvesting Intangible Assets brings us back to our agrarian roots, but today’s crop is intellectual capital. What is old is new and effective again. Today’s CEO must build an organization focused on the farming of intellectual assets to uncover hidden revenue opportunities that will make their way to a profitable marketplace in nontraditional channels. Managing the company as an intangible asset farm means that strategic plans will need to be rewritten, mission and values restated, organization charts reexamined, and budgeting and resource allocation decisions revamped. In short, company leaders must be committed to reforming and transforming their companies in the ways that IBM, 3M, Google, and Apple retooled their business models and strategic priorities to drive shareholder value by harvesting intellectual property.
We all need to reconnect with our agrarian roots in the way we build our companies, the way we govern our organizations, and the way we live our lives. The discipline, work ethic, husbandry, stewardship, determination, selflessness, and grit of the world’s farmers offer lessons, insights, and values that can make us stronger, more competitive, and better innovators as a society. The cycle of planning, planting, caring, feeding, harvesting, and distributing crops offers a regimen that can guide the innovative process for companies of all sizes and in all industries, as well as in the way we manage our personal affairs.
Farmers learn from an early age how to plant seeds that will yield valuable crops, how to instill discipline in the caring and feeding of those crops, how to weather a storm, and how to establish long-term meaningful and mutually beneficial channel partner relationships and the patience to know that every good harvest is the product of rigor and old-fashioned hard work. They know how to assess whether a market is fertile or barren and would never attempt to grow corn in the desert. They know that a field of crops has no value unless or until it is harvested and brought to the marketplace. There is no “overnight success” or “flash in the pan”—it is a long-term process that requires planning, sweat, prudence, and patience. Instead of living quarter to quarter and robbing shareholders of the long-term horizon that effective innovation truly requires, farmers live from harvest to harvest, from season to season, and from decade to decade in keeping their lands fertile for long-term productivity.
Harvesting Intangible Assets was written to be the roadmap, the operations manual, the strategic playbook, and the beacon beam from the lighthouse to lead the way to this transformation and return to our roots. In it, I share my insights, strategies, best practices, and lessons learned from working with some of the world’s leading companies, as well as hundreds of small and emerging companies, as a legal and strategic adviser in the areas of intellectual capital harvesting. I have seen the good, the bad, and the ugly. I have seen companies harvest opportunities to create new markets and profit centers and have seen others let valuable assets collect dust and rot to the core.
Our inability to properly harvest our intellectual capital crops has reached a crisis level, with trillions of dollars in shareholder value being wasted. The U.S. Patent and Trademark Office estimates that the intellectual property in the United States alone is worth more than $5 trillion—about two times the annual federal budget—but very few companies are properly harvesting the value for the benefit of their shareholders. Most have simply knowingly or unknowingly failed to commercialize opportunities, resulting in a stale or rotted crop. Others have adapted “scorched earth” policies aimed at confronting and litigating with direct and indirect competitors; these may represent an effective short-term capital-raising exercise but in the long term are likely to be counterproductive, permanently burn potential alliance bridges, and leave the Earth unable to be replanted for many decades. Unless and until we are focused on planting seeds and nurturing the crop of intellectual capital, we will never be competitive in the global marketplace.
Andrew J. Sherman is a Partner in the Washington, D.C. office of Jones Day. Mr. Sherman is a recognized international authority on the legal and strategic issues affecting small and growing companies. Mr. Sherman is an Adjunct Professor in the Masters of Business Administration (MBA) program at the University of Maryland and Georgetown University where he has taught courses on business growth, capital formation and entrepreneurship. Mr. Sherman is the author of twenty-three (23) books on the legal and strategic aspects of business growth and capital formation. Mr. Sherman can be reached at 202-879-3686 or e-mail ajsherman@jonesday.com.
Join Andrew and me on Wednesday, January 16, 2013, at 11 AM/Eastern Time on Blog Talk Radio when we have a conversation about Andrew’s book, Harvesting Intangible Assets. If you can’t listen in to the live broadcast, bookmark this page and revisit to listen to the replay which will be featured at the top of the page.