Locking down a company’s intangible jewels


Stuart Kennedy
Contributor

Protecting the intangible assets inside an organisation has become even more important than locking the factory gates at night as the world shifts to valuing intangibles like patents more than tangibles like plant and equipment.

In the episode of the Verizon Age of Trust podcast series titled “Thriving in a Post COVID-19 World” InnovationAus publisher Corrie McLeod talks to Michael Masterson, Managing Director, of intangible asset specialist advisory firm EverEdge Global and Nathan Strong, Client Partner, Defence and Security, at Verizon about how to protect a company’s intangible jewels.

In the last two decades a silent revolution has gone on inside the books of many companies. Whereas once the value of a company was mostly reported in terms of things that existed in the physical world, these days intangible assets are the most valued.

Company valuations have shifted from something you can “kick with your toe”, as Mr Masterson describes tangible assets in the podcast, to intangible assets that won’t hurt your toes if kicked, but could destroy your business if not properly realised and protected.

Nathan Strong Michael Masterton Corrie McLeod
Intangible assets of the digital world: Nathan Strong, Corrie McLeod and Michael Masterton

The big shift to intangibles forming the guts of a company’s value began in the seventies. In 1975, over 80 per cent of the value in companies on the US S&P 500 stock index was in tangible assets. Most of the intangibles were booked as goodwill and not regarded as important.

Then came a change by US companies on where their goods were made. Increasingly manufacturing was moved offshore into cheaper labour markets, predominately China.

American companies didn’t just send over the plant and equipment to make products, they also sent the methods. They sent the ‘what’ and the ‘how’.

Companies in the those offshoring zones didn’t just humbly supply Western customers with products at cheaper manufacturing costs, they learned either through technology transfer arrangements, osmosis or straight out in intellectual property theft how to make high value Western technology goods themselves.

 

No longer content to be mere offshore suppliers to the US they began to play the big game.

“What you start to see is that yesterday’s supplier is now today’s competitor, says Mr Masterson in the podcast.

These days over 90 percent of the value in the S&P 500 is intangible whether that’s well defined intellectual property such as patents or just what a company describes as the “secret sauce” that makes its products and/or services better than competitors.

That is a huge amount of value to protect from all sorts of threats and leads to how vital the concept of “zero trust” in digital business relationships has become.

The meaning of the term has become somewhat clouded by marketing but as Mr Strong says in the podcast, what’s really strong in the concept is in the title.

“Fundamentally, we are not trusting whatever we’re trying to collaborate with, or who,” says Mr Strong in the podcast.

Once an organisation has defined its intangible assets then it can begin looking at and classifying the data streams around those assets.

This is an area where government tends to do a better job than industry. “Government takes it very seriously and they treat your data seriously as well. They take that reputational risk, the political risk very seriously,” says Mr Strong in the podcast.

Singapore as a nation has decided it wants to become the leading intangible asset valued nation in the world and both business and government in Singapore take intellectual property protection extremely seriously.

Australia must do the same if it wants to realise its ambition of becoming an innovation nation. Zero trust security techniques and being mindful of protecting intangible assets have become priorities for the Australian economy.

We can’t make money from our ideas if we cannot adequately protect them and it’s an area where the country must lift its game.

“This is the due diligence piece we see missing in VC and most investment. There is no due diligence done on the strength of the intangible assets and a strong intangible asset will enable you to gain market share which is a proxy for profit.” Says Mr Masterson in the podcast.

Do you know more? Contact James Riley via Email or Signal.

Leave a Comment

Your email address will not be published.

Related stories