In this week’s video I explain why intangible assets are important for your IP strategy.
Archive for the 'Trade Secrets' Category
For 10,000 years, business leverage has come from three asset categories, shown below in chronological order of appearance:
- Muscle power: human or animal
- Tangible stuff: raw material, buildings, inventory, machines, etc.
- Intangible stuff: Patents, trademarks, copyrights, trade secrets and other intellectual property
For most of history, business power was heavily weighted on the first two categories. First the strongest caveman and biggest horses had the advantage. Later the fastest ships and largest factories got the jump on lesser competitors. For a small business it sounded like this: “We have the largest inventory in the tri-county area.”
But, as revealed in a study by IP attorney Kenneth Krosin, intangible assets became a powerful force in the latter third of the 20th century. Krosin discovered that at the end of the 1970s, corporate balance sheets were represented by 80% tangible assets and 20% intangible. But in 30 years, by 1997, the ratio of assets had essentially inverted to 73% intangible and the rest tangible.
Here’s what small businesses should take away from the breathtaking explosion of IP revealed by the Krosin study:
• The power of IP is no longer the wholly-owned franchise of big business.
• For centuries intellectual property provided only a marginal advantage even for big business, but has become a two-edged sword – one edge provides opportunity for those who leverage intangible assets more and tangible less, and the other edge delivers disruption for those who don’t.
• Exciting Internet resources and other digital innovations are converging and coalescing in front of our eyes to make intangible assets a much more powerful lever for all businesses.
• IP in the form of digital assets has evolved from two-dimensional tools, like websites, to add the third dimension of a virtual marketplace in cyberspace, aka The Cloud.
• Just because a small businesses may never reach 73% intangible assets doesn’t mean it shouldn’t have an IP strategy.
• Your IP strategy should include acquired intangible assets, like software, as well as the kind that you create, like a business process you maintain as a trade secret.
In The Age of the Customer, a small business must have an IP strategy that’s born from the acknowledgement that it is integral to the performance of virtually every talent and task in your business, and required to maintain marketplace viability.
What does your IP strategy look like?
Listen to my latest segment on The Small Business Advocate Show® where I talk about the history of business assets, how intellectual property has become the greatest business lever of all the asset classes and why you need an IP strategy. Click below to listen.
One of the tolls the Great Recession has taken on small business owners has been the tendency to allow ourselves to be overcome with doubt about our abilities as managers and leaders. But perhaps even more painful is doubt about who we are and what we stand for as entrepreneurs.
- When nothing seems to be working, “How could I let this happen?”
- When sales aren’t coming in fast enough, “Why can’t I fix this?”
- When there isn’t enough cash to fund the operation, “This is my fault.”
- Waking up at 2am, “Who am I fooling? What made me think I could actually be a real business owner?”
For small business owners there is a paradox inside of the emotion of doubt: If we never had doubts about our entrepreneurial intentions, excellence would not be possible. Doubt is part of the crucible effect that helps us create a stronger entrepreneurial alloy as we forge self-analysis with vision, planning and execution. Paradoxically, doubt, like fear, can be an immobilizer if we allow it to become personal. Consequently, small business owners must leverage doubt as a motivator.
Recently, on my small business radio program, The Small Business Advocate Show, I talked with Brain Trust member, John Dini. John is a world-class business coach and mentor to hundreds of small business CEOs in his work with The Alternative Board organization. In our discussion, John talked about how doubt has gained some traction among business owners as a result of the tough economy. Take a few minutes to listen to this interview. Listen Live! Download, Too!
Also, a while back I wrote a poem titled “Victory over Doubt.” You might benefit from reading it today.
And, as always, be sure to leave your own thoughts.
The British playwright, William Archer (1856-1924), once remarked to a friend about how a “perfect plot” had played out to him and “evolved” in a dream one night. He saw “the whole thing, from beginning to end,” and when he awoke, put pen to paper.
Small business owners know about this kind of dream. It begins with what I call the founding dream, which is the first time an unconscious entrepreneurial inclination pops upon our consciousness radar screen.
At first a founding dream may be barely perceptible. And when one is remembered for the first time upon waking, the awareness is often more troubling than remarkable: What does this mean? What do I do with this?
But if the mind and the spirit are receptive, a founding dream “evolves” into more than a blip on the radar. Subsequent dreams become less impressionistic and more real. Animated dreams come next. Your nocturnal entrepreneurial visions play out with an actual cast of characters - sometimes in Technicolor.
Now you’re well aware of, and more comfortable with, your small business dreams and you start to do a little day dreaming. Day dreaming is the first step in the due diligence process - the research. You start asking lots of questions: What if….? How do I…? Where does this…? Who can…? When should…?
Ultimately, as the answers to these questions are revealed and accumulate, you begin to make your entrepreneurial dream become reality; you actually start living the dream of owning your own business. At this point the start-up dreams will stop. Since you’re now living your dream, why dream about it, right?!
Your founding dream now has a name, address, phone number and a tax ID number. It has “evolved” into the “perfect plot” for your small business.
Forgive me, because I know you’ve heard me say this many times before, but we’re not in Kansas anymore, Toto. We’re in the 21st century, and things here are different. And nowhere is this truth more evident than in the world of intellectual property (IP). You know: patents, trademarks, service marks, licensing, copyrights and trade secrets.
One of the cool things about 21st century IP is how easy it is for small businesses to create and leverage it. Unfortunately, too many small business owners get the idea that they don’t own intellectual property because they don’t have a big brand trademark like Nike’s swoosh, or they don’t have patented inventions, like Research In Motion’s Blackberry. But that’s like thinking you can’t cook a delicious steak on the grill at home because you don’t own a restaurant.
The truth is small businesses - including yours - create intellectual property all the time, just not always the flashy kind. One of the best examples of small business IP is a trade secret. This is anything that you’ve developed or discovered that gives your business a competitive advantage. It could be a delivery system or an inventory management scheme. It could be as simple as a finely-tuned payroll-to-revenue ratio, or as elaborate as a customer relationship management program that you’ve created for the way you want to track sales development and customer service.
Either way, it was created by you, your business is leveraging it and, therefore, it’s an asset that belongs to you - which means you should recognize that it has value and should take the necessary steps to protect it.
Recently, I talked about how to value and protect your trade secrets on my small business radio program, The Small Business Advocate Show, with Brain Trust member and intellectual property attorney, David Dawsey. David’s firm is Gallagher and Dawsey, based in Columbus, Ohio. I think you will benefit by taking a few minutes to listen to what this expert has to say. And be sure to leave your thoughts on this topic.
Around the turn of the century, I ran across a study that was conducted to look at changes in the way businesses leveraged assets to execute their business model between the 1970s and the 1990s. Reading the results of that survey was an “Aha!” moment for me, and it contributed significantly to my thinking about how we would do business in the 21st century.
Study author and intellectual property attorney, Kenneth Krosin, found that in the late 1970s, corporate assets amounted to about 70% fixed assets, like buildings, equipment, tools, fixtures, inventory, etc., and about 30% intangible assets, a/k/a intellectual property (IP), such as patents, trademarks, licensing and trade secrets. But the big news in this study was that by the end of the 20th century, those asset category percentages had essentially inverted. By 1999, businesses were leveraging around 70% IP, and only 30% were assets that had serial numbers, stock numbers or an address.
Welcome to the Digital/Information Age.
In the speeches I deliver to small business owners around the country every year, I describe the findings of the Krosin study so I can poll the audience about how they’re leveraging IP. My unscientific findings show that, while most small businesses are not quite leveraging IP to fixed assets at a 70:30 ratio like the big businesses in the Krosin study, most are leveraging IP more every year and fixed assets less.
Besides the types of intellectual property - patents, etc., - there are two categories of IP: 1) the kind that someone else creates, for example, the patented software you license to use on your computer; and 2) the kind that a business creates for itself, like a delivery scheme developed internally that reduces fuel costs, which is often employed as a trade secret.
In the 21st century, it doesn’t really matter who creates the IP your small business is leveraging, as long as you’re continually finding new ways to do so. I believe that any small business that isn’t leveraging IP more and tangible assets less is headed for extinction.
I’m happy to report that Kenneth Krosin (foley.com) has become a member of my Brain Trust and has joined me several times on my small business radio program, The Small Business Advocate Show, to talk about IP and small business. I think you’ll enjoy my most recent interview on this topic with Ken. And don’t forget to leave a comment.