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Awhile back, I developed a free tool for evaluating IP using IC concepts. A number of people have asked me to bring it back so I am providing it here (see terms of use below). Let me know what you think. Maybe we’ll automate it again….

Background

Most companies develop intellectual property for their own use. In this situation, the ultimate success and value of a specific piece of IP ends up depending on the success of the business supporting it. This QuickScan allows you to test the strength of the business resources that your organization intends to use to exploit your IP. It examines the four elements of intangible capital that are necessary for any business:

IP Mangement QuickScan

The tool was designed for a four-point scale: 1-Below Average, 2-Above Average, 3-Average, 4-Best. Once you score your IP, use the scoring table below to interpret your results.

Human Capital

• How would you rate the management team’s understanding of what it will take to commercialize this technology?
• How would you rate the management team’s knowledge of the industry related to this technology?
• How would you rate the employees’ competencies related to production/delivery of this technology?
• How would you rate the employees’ competencies necessary to renew and continue to build this technology?
• How would you rate the employees’ competencies necessary to support customers of this technology?

Structural Capital

• How would you rate the company’s ability to create an effective process for producing the technology?
• How would you rate the company’s ability to create marketing processes appropriate for creating demand for this technology?
• How would you rate the company’s ability to create sales processes appropriate for selling this technology?
• How would you rate the company’s knowledge base related to this technology?
• How would you rate the company’s access to related technologies that it will need to commercialize this technology?

Relationship Capital

• How would you rate the company’s understanding of the target market for the technology?
• How would you rate the fit between this technology and the company’s existing customers?
• How would you rate the company’s access to the right prospect group for this technology?
• How would you rate the company’s access to the right partners to produce and deliver this technology?
• How would you rate the company’s brand as consistent with this technology?

Strategic Capital

• How would you rate the fit between this technology and the company’s existing business model?
• How would you rate the company’s ability to create an appropriate business model for this technology?
• How would you rate the opportunity in the marketplace (strong opportunity usually means fewer incumbent competitors)?
• How would you rate the outlook for the market need that this technology is addressing?
• How would you rate the level of freedom from regulation in the market for this technology?

As mentioned above, this was designed for a four-point scale: 1-Below Average, 2-Above Average, 3-Average, 4-Best. This scoring sheet has some ideas on how to interpret your results.

This is obviously a tool used as a first level analysis of your IP. Our ICounts Graphs platform provides a much more robust analysis. If you are interested in understanding the Graphs or any of our other methodologies, we’ll put you in touch with one of our ICountants.

Terms of Use: I developed this approach initially for IPR Plaza, Amsterdam, Netherlands as a free on-line tool (which is no longer available). I make it available here under a Creative Commons Attribution-NonCommercial-ShareAlike license 

Intangible Capital. Intellectual Capital. Intangible Assets. Intellectual Property. These phrases get used a lot and many people think they are the same thing. This post is intended to help you understand the difference. Our objective is to provide clarity to our terms and correlation to the impact IC has on business results.

The study of intangibles emerged as a field in the 1990’s to explain the significant shift in our economy and businesses as knowledge became the key competitive advantage in the global market. This shift reversed the historical pattern of tangibles accounting for 80% of total corporate value to the exact opposite today with the value of the average company today being 82% intangible. How to describe this critical asset class? The field is still emerging and as such, there can be confusion about the meaning and usage of different words and phrases.

The terms intangible capital, intellectual capital, intangibles and intangible assets are often used interchangeably. Although we prefer the phrase “intangible capital” because it has a more precise definition (see below), “intangibles” is also frequently used. Below, for your reference, are some definitions of these and related terms:

INTANGIBLES / INTANGIBLE ASSETS

Strictly speaking, the definition of “intangible” comes from the field of accounting. Intangibles are organizational resources that do not appear on the balance sheet. On average, more than 80% of the value of today’s public corporations is intangible.

This phrase is both our friend and our enemy. It orients people that we are talking about assets and resources that are not tangible. But it also feeds into the broad misconception that intangibles are unknowable and unmeasurable. Nothing could be further from the truth (which is why we wrote Intangible Capital).

Why do we not find a different word? Well, as tempting as that sounds, it wouldn’t solve the problem. Accounting standards and norms are critical foundations of our economy. We have to find ways of orienting people within their own experience. So when talking about intangibles, let’s start with what people know and help them learn and expand their understanding from this base.

INTANGIBLE CAPITAL (IC)

This is a phrase and a concept that comes out of the study of intangibles in an organization. It takes people beyond the strict definitions found in accounting and takes a fresh look at what is going on. Basically, the rise of the importance of intangibles is part of the story of the end of the industrial economy and the rise of the new economy based on information technology and the internet. In this new economy, knowledge, connections and collaboration are the key assets driving growth and performance. To paraphrase Baruch Lev, there is no tangible asset today that is more than a commodity. The unique, the valuable part of business comes from how tangibles are used, how work is done, how the future is innovated.

The field of IC has identified four main categories of knowledge intangibles, each of which has a different character. It is important to understand individual intangibles as well as how they work together as a whole:

• Human Capital - This includes all the talent, competencies and experience of your employees and managers. This is the intangible capital that “goes home at night.” More on human capital
• Relationship Capital – This includes all key external relationships that drive your business, with customers, suppliers, partners, outsourcing and financing partners, to name a few. This kind of capital also includes organizational brand and reputation. Due to the growing importance of networks in organizational structures, this is also sometimes called Network Capital. More on relationship capital
• Structural Capital – This includes all knowledge that stays behind when your employees go home at the end of the day. There is significant structural capital in today’s organizations including recorded knowledge, processes, software and intellectual property. More on structural capital
• Strategic Capital – This is a category that is not always included in academic definitions of IC. However, in our experience, this category of knowledge is the necessary complement to the others. It includes all the knowledge you have of your market and the business model that you have created to connect with market needs. The driving force behind Strategic Capital is purpose. It also includes culture. Culture and purpose are the glue that holds the rest of IC together. More on strategic capital

INTELLECTUAL CAPITAL / INTELLECTUAL PROPERTY

Some people use the phrase intellectual capital instead of intangible capital.

We prefer to use “intangible capital” rather than “intellectual capital” for two reasons: 1-intellectual sounds too elitest–intangibles are real and practical so let’s not make them sound inaccessible and 2-people often confuse intellectual capital with intellectual property.

Intellectual property is a specific type of intangible asset that can be protected legally through copyrights, trademarks and patents. It is a subset of Structural Capital. Many people think that intellectual and intangible capital is primarily intellectual property. Hopefully, this discussion helps you understand that there's much more to the picture!

The Intellectual Property Business Congress 2013 is kicking off tonight in Boston. I’m excited to have it in my home town. I’m also excited and honored to be on a panel on Tuesday discussing how to use intangible capital to enhance the value of IC.

In preparation for that discussion, I thought I would share the tool that I co-developed awhile back with the IPR Plaza folks in Europe to help IP professionals create a quick scan of IC for IP, that is, the supporting infrastructure their companies have in place to commercialize specific pieces of IP.

The tool fills in a gap in the field of IP management, which in my experience carries four connotations and fields of study:

• Managing IP : managing the legal aspects of IP
• Transfer Pricing: financial management of IP sharing
• Commercializing IP: external transactions such as licensing, sale
• IP Business Model: creation and management of a business based on IP

A lot of attention in the IP world is given to licensing and sales. This is because it’s sexy and it can be an immediate source of cash. But the truth is that whether you are a buyer or a seller, the highest value for IP comes when it is put to work inside a viable business model with all the necessary supporting IC.

The work we do with consultants, CEO’s and business leaders helps them think about how to exploit their IC. The 20 questions below are the basis of the IPR Plaza tool and are the themes we will be discussing on Tuesday. They are designed as a checklist for IP professionals when they are focused on maximizing the value of a specific piece of IP:

Human Capital

1. How would you rate the management team’s understanding of what it will take to commercialize this technology?
2. How would you rate the management team’s knowledge of the industry related to this technology?
3. How would you rate the employees’ competencies related to production/delivery of this technology?
4. How would you rate the employees’ competencies necessary to renew and continue to build this technology?
5. How would you rate the employees’ competencies necessary to support customers of this technology?

Structural Capital

1. How would you rate the company’s ability to create an effective process for producing the technology?
2. How would you rate the company’s ability to create marketing processes appropriate for creating demand for this technology?
3. How would you rate the company’s ability to create sales processes appropriate for selling this technology?
4. How would you rate the company’s knowledge base related to this technology?
5. How would you rate the company’s access to related technologies that it will need to commercialize this technology?

Relationship Capital

1. How would you rate the company’s understanding of the target market for the technology?
2. How would you rate the fit between this technology and the company’s existing customers?
3. How would you rate the company’s access to the right prospect group for this technology?
4. How would you rate the company’s access to the right partners to produce and deliver this technology?
5. How would you rate the company’s brand as consistent with this technology?

Strategic Capital

1. How would you rate the fit between this technology and the company’s existing business model?
2. How would you rate the company’s ability to create an appropriate business model for this technology?
3. How would you rate the opportunity in the marketplace (strong opportunity usually means fewer incumbent competitors)?
4. How would you rate the outlook for the market need that this technology is addressing?
5. How would you rate the level of freedom from regulation in the market for this technology?

We suggest rating each question on a 5-point scale. At IPR Plaza, you'll get suggestions based on your score. (Please note, IPR Plaza is in the process of updating their website and to keep access to the tool up in the meantime, you have to click through several screens but the scoring info is still there).

If you’re at IPCB this week, stop by to join the conversation. If not, join the conversation on line or take the quick scan at IPR Plaza. Either way, I look forward to hearing from you!