In this week’s video I explain why intangible assets are important for your IP strategy.
Archive for the 'Trademarks and Service Marks' 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?
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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.
Mistakes are worth contemplating, and yet we often don’t. The reason, I think, is because it hurts a little to focus on them. It’s not fun to see ourselves that way. Mistakes are definitely not ego food.
But there is something very important to remember about mistakes: Not focusing on them can ultimately be more painful.
Sixteenth century French Renaissance writer, Michel de Montaigne, wrote, “Those things are dearest to us that have cost us the most.” Think he’s talking about mistakes? I do. Do you think of your mistakes as “dear”?
If you don’t contemplate your mistakes and learn from them, you are subjecting yourself to double jeopardy. Because today you will not only make the new mistakes we are all destined to make as we go through life, but you’re also doomed to repeat the old ones you should have learned from yesterday.
Whether your mistakes are valuable or expensive depends on whether you contemplate and learn from them, or deny them and keep on paying for them. I think paying for a mistake once is “dear” enough, don’t you?
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.
