Intangible Assets Are Targets of Competitor/Business Intelligence and Data Mining

By;  Michael D. Moberly

I’ve never met a business decision maker yet who doesn’t claim to have engaged in competitor (business) intelligence. Such statements are often prefaced or followed by some blend of rationalizing the relevance – importance of competitor intelligence that range from (a.) everybody does it, to (b.) you’re foolish if you don’t.

While there is scant data that goes to the accuracy of those positions, my many years of work and research in this arena leads me to being confident that a significant percentage of businesses regularly, if not consistently, engage in some form of, or their own version of competitive-business intelligence collection and analysis.

When I use the word ‘businesses’ here, I’m not referring only to the Fortune 500′s, but literally to thousands of SME’s (small, medium enterprises) and SMM’s (small, medium multinationals) as well.  And, while their collection techniques and analysis may not be quite as sophisticated, analytical, or strategically oriented as those conducted by large corporations or the countless private (independent) competitive intelligence firms operating globally, they still usually provide SME and SMM decision makers with useable insights (reasonable prognostications) about the plans, intentions, and capabilities of their competitors.  In other words, what they’re doing now, what they have already done, or, are about to do!

The product of competitve/business intelligence initiatives can, and often is, applied in either a defensive or offensive mode.  Simply stated, the product can be used to (a.) undermine, (b.) erode, (c.) stifle, and/or otherwise (d.) maneuver ahead of a competitors’ initiatives, competitive advantages, market position, or strategic planning.

In my judgment, there are two starting points for any company management team that wishes to counter or mitigate the very real and generally adverse effects of sophisticated and persistent competitor/business intelligence and/or data mining operations:

• The first is to fully understand and identify each intangible asset and its contributory value. This begins by recognizing that intangible assets comprise 65+% of most company’s value, sources of revenue, and building blocks for growth and sustainability.
• The second is recognizing that competitive advantages are intangible assets, and it’s those assets which are really being targeted for analysis and understanding.

True, some companies actually mount well intended initiatives to try to counter and/or mitigate the effects of persistent competitive intelligence. On numerous occasions though, I have been the recipient of arrogantly phrased and dismissive statements from management team members who readily acknowledge the challenges of operating in today’s increasingly competitive and globally predatorial business (transaction) environment.  But, such statements are often offered in conjunction with a brazen assumption that a (their) company can innovate, market new products and services, and execute transactions faster than competitive and economic adversaries can undermine those initiatives or compromise the (intangible) assets that are in play.

The short answer to such assertions lies in three realities which every management team needs to recognize:

1.  Any business advancement and/or transaction strategy that does not factor the speed and predatorial nature of today’s extraordinarilsophisticated data mining (scanning) technologies that enable – facilitate business/competitor intelligence, information brokering, and economic (industrial) espionage operations to function faster and at earlier stages is short-sighted and will inevitably lead to:

• elevated (unnecessary) risk
• lower probability for transaction success, and
• unrecoverable loss of intangible assets value.

2. Competitor/business intelligence (and data mining) operations are not directed solely to the Fortune 1000?s.  Rather they can and  consistently target (scan) every company’s innovation, strategic alliances, and transactions, etc.

3.  The key reason for the elevated risk is that steadily rising percentages of company value, sources of revenue, innovation, and competitive advantages lie in intellectual capital, proprietary know how, reputation, goodwill, image, and brand, etc., all of which are intangible assets.

Thus, in today’s increasingly high stakes global business arena, trying to stay ahead of industry – sector competitors by assuming one company can move faster than their economic – competitive advantage adversaries can learn about, undermine, and/or counter innovation, transactions, and/or commercialization capabilities represents an increasingly risky position.

Management teams’ that continue to advocate – make such assertions often adopt the position – rationale, particularly in the technology sector, that most of their ‘at risk’ or targeted assets will quickly become obsolete, i.e., their functionality, commercial value, and consumer demand is increasingly abbreviated anyway, therefore, any potential economic – competitive advantage  illicitly gleaned through competitive intelligence data mining, or economic espionage will be short lived and ultimately have minimal adverse impact on the victim company.

Such assertions run parallel, in my view, to the challenges companies face insofar as the necessity – fiduciary responsibilities to sustain control, use, ownership, and monitor the value and materiality of its intangible assets throughout their respective functionality – life – value cycle.

So, from a fiduciary responsibility perspective such rationales closely resemble permissive neglect, in my view.

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Organizational Resiliency: Defensive Foundations

By; Michael D. Moberly

Organizational resilience should not be conceived or characterized as simply an ‘insurance’ measure that provides a company with ’coverage’ if or when adverse events occur or risks actually materialize.  Rather, management teams and boards would be prudent, in today’s risk laden global business environment, to frame – adjust their organizational resilience plan so that it serves as a strategic path for moving a company, operationally speaking, from a defensive and reactive posture to having a succession – series of highly proactive responses/actions to address risks and adverse events, one aspect of which is focused on improving (exploiting) or at least sustaining, a company’s competitive position during the duress event.

Organizational resilience today, and certainly for the foreseeable future, is much more than mere defensive steps to protect a company, rather OR must also include proactive measures for actually improving a company’s competitive position throughout the duress event.  This, of course, requires company management teams and boards to recognize that materialized risks or adverse events may, for resilient companies, present valuable and exploitable competitive advantage opportunities, presuming other industry sector companies and/or competitors are experiencing similar risk events simultaneously.

So, what are the ‘building blocks’ to organizational resilience?  Goble, Fields, and Cocchiara of IBM’s ‘improving business resilience through a resilient infrastructure’ unit point to:

1. Recovery -elevates awareness to the onset of particular risks and/or adverse events which in turn enables a company to return to an acceptable state of operational normalcy and performance in an acceptable time period.

2. Hardening -is the use of strategies to make a company’s key infrastructure harder, i.e., more challenging, more difficult, and ultimately, less susceptible to certain risks and adverse events.  Hardening increases the efforts (resources, time, etc.) that adversaries must expend to actually execute a particular (man made) risk, threat, or adverse event by literally denying or, at minimum, limiting access to the infrastructure itself.  Companies should be mindful that excessive (extreme) use of infrastructure hardening tactics, can create a ‘fortress mentality’ (imagery) whereby partners, stakeholders, and valuable contributors to the company’s value-supply chain may find offensive and withdraw.

3. Redundancy – ensuring the company infrastructure has a sufficient number of ’redundancies’ (i.e., back-ups, duplications) designed/built into it relative to meeting its mission critical priorities.

4. Accessibility – the ability of a company as a whole, i.e., its employees and value-supply chain partners and stakeholders to retain the ability to access (from anywhere) the relevant and necessary (company) infrastructure, including communication systems.

5. Diversification – the goal is straightforward; create an infrastructure that can be fully operational while being physically distributed and is still capable of being effectively managed during periods of duress.  The premise of operational diversity is straightforward, don’t allow all of a company’s eggs to remain in a single basket.

6. Information Technology Autonomics – self-managing and self-regulating IT systems and infrastructure that is not vulnerable to succumbing to anticipated-projected risks and adverse events.

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Risk Tolerance: Where Does Your Company Stand?

By; Michael D. Moberly

In my relatively small niche/corner of the intangible asset business world, it’s quite routine to engage experienced and seemingly successful management teams and risk managers who cavalierly express the view that it’s impossible to eliminate all (business) risk.  My response to such perspectives is usually to politely hedge a little by suggesting it is possible!  However, and here comes the hedging part, the resources a company would have to devote and the ultra-restrictive environment a ‘risk free’ business would necessitate, i.e., no external interactions or emanations are just two examples. I know of no company that would agree to such aggressive tactics because they could no longer be viable nor profitable and their intellectual, relationship, and structual capital (intangible assets) would be of little, or no value.

My experience also suggests most company’s ‘tolerance for risk’ (a.) varies, (b.) is largely subjective, (c.) is often influenced by industry sector and the products and/or services being produced, (d.) management team, c-suite, and board perceptions/beliefs about business risks (usually evolving from prior experiences and/or anecdotes), and (e.) locations of and interactions with a company’s primary markets, i.e., customers/clients, supply chains, and other stakeholders.

According to Dr. Marc Siegel, there are ways to measure and assess a company’s tolerance for risk which is dependent on their…

1. Experience, e.g., the confidence level held by a company’s management team achieved by their familiarity with current and over-the-horizon risks, coupled with their perceived ability to effectively manage (prevent and/or mitigate) such risks.

2. Resiliency – e.g., if or when a significant (business) risk or disruption occurs, are there policies and practices in place to (a.)mitigate/minimize the criticality posed by the risk, and (b.) rapidly return the company to a state of operational and financial/revenue normalcy in a reasonable time frame, in other words,  its resiliency. Achieving company resiliency also includes minimizing the vulnerability, fragility and/or loss of  intangible assets, particularly competitive advantages, for the duration of the risk event.

One question I often pose to management teams focuses on how they presumably achieved concensus to accept or tolerate a certain level of risk relative to a specific transaction, new venture, strategic alliance, etc.? The answer I tend to get when I pose such a question is the proverbial ‘risk is an inherent feature of doing business and all successful business persons are inherently risk takers’. I analyze risk a little differently in terms of why management teams, boards, and c-suites may be inclined to tolerate certain (business) risks and not others. It’s usually because the…

• level of risk is generally subjectively measured/assessed to be low in terms of vulnerability and probability, but the cost of mitigation through risk transfer, etc., may exceed potential (prospective) benefits, making self-insurance and elevated risk tolerance appear to be the prudent option.  Such circumstances often arise with risks that are assessed as having a low priority in terms of probability and vulnerability, but extraordinarily high in criticality.
• asymmetric nature of business risks, i.e., their magnitude, frequency, criticality, and cascading potential, should they materialize, coupled with the type of products and services a company produces, is beyond the capabilities of most to consistently prevent or mitigate.
• company’s anticipated/projected business opportunities associated with assuming a certain level of risk, outweigh risk exposures to the point that a management team can justify/rationalize proceeding with a particular transaction or initiative and therefore assume a substantial portion of the risk..

(This post was inspired by the work of Dr. Marc Siegel and his work related to organizational resilience on behalf of ASIS International.)

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