A groundbreaking report recently released by the Ocean Tomo group has quantified the effects of intangible assets on our current markets. It showed that more than 80% of the market capitalization of S&P® 500 companies simply cannot be accounted for by tangible, bricks-and-mortar type assets.
Until the late 1970s, comfortably more than 80% of publicly listed companies’ market capitalization (i.e. the total value of their issued shares) was accounted for by things you could see, feel, and touch – physical, tangible assets.
But this has changed dramatically in less than a generation: intangible assets are changing the face of businesses all over the globe and need to be managed as vigorously, if not more so, than other company assets. Some studies state that 90% of the value of public companies is contained in their intangible assets, which is why it’s so important to have the most up to date information on how to manage these valuable assets.
When combined with traditional business practices this provides explosive results, and this blog aims to speak directly to entrepreneurs and help them extract maximum value from their intangibles.
My aim is to show a new generation of entrepreneurs how to pull the 80% (intangibles) value lever as opposed to the 20% (tangibles) lever that contemporary management theorems have focused on. I’ve included benchmarks, cheat sheets, and templates as used by some of the most strident global IP players and IP attorneys, and I’ve ensured that I’ve translated these into a new vision that entrepreneurs and CEOs of startups can easily and quickly apply to their own ideas and enterprises.
There are numerous examples of this that we will delve into on this blog. And when you consider that IBM makes more than $1.5 billion a year purely by licensing some of its unused intellectual property to other companies (at a 90% profit margin!), then it becomes clear that these concepts may have considerable value that should be transcribed into the vocabulary of startups everywhere. In effect this means that IBM makes the same from licensing their IP than they would have made from $15 billion in sales, due to the high profit margin from IP licensing.
The converse is also true: mismanagement of IP can and will be a greater risk in this new economy. Research in Motion, the makers of Blackberry handsets, were nearly brought to their knees by an unknown company wielding nothing more than a handful of patents. Their mystery competitor didn’t produce handsets, software, communications hardware or any other product that competed with RIM’s technologies. In fact, they produced nothing except a few patent documents. But it cost RIM more than $600 million in damages to simply continue making their phones.
The list goes on and there’s a reason for this – the realization that ideas, if harnessed correctly, have extreme value. Make sure you learn more about IP – it’s as valuable, if not more so, than the physical assets of your business.