Google Review

Risky Business Indeed

donkeyThe story is all too familiar.  A company executive suspects some specific intellectual assets of the business (say, a corporate logo, or maybe some in-house software) are under-defended, undervalued, and/or under-exploited.  So the executive sponsors an intellectual asset (IA) audit to help her decide how to shore up these few troublesome assets, only to learn the company may have dozens or even hundreds of potential intellectual assets suffering from various degrees of underutilization or, worse yet, neglect.  Where should this executive begin to fix her newfound IAM problem?  A good first step is to remember the famous quote attributed to David Packard, “More companies die of indigestion than starvation.”

Risk Management

Our overwhelmed executive should prioritize commitment of attention and resources to those assets which promise to best support the ends of the company.  One approach to prioritizing her company’s IAM challenges is to apply basic risk management principles.  Risk can be defined as a function of the probability of an event and its consequences, and is commonly represented in the following formula:

R = P x C

where R = Risk, P = Probability of an event, and C = Cost/consequence of event occurrence.  The event may be an occurrence outside the control of the entity bearing the risk, or it may be an action or activity chosen by an entity (including the choice of inaction) that will influence a consequence. The consequences may include impacts that are either negative or positive.

IAM and Risk

In an earlier post, I summarized the IAM Value Hierarchy as a continuum of IAM maturity levels that an organization may attain.  How mature an organization is in its management of its intellectual assets may dictate how the organization applies risk analysis to its prioritization of business actions.  Below, in no particular order, are some questions that an IA audit team may ask itself to characterize the risk to assets for a company operating at the lower levels of the IAM Value Hierarchy.  Each question is annotated as being either probability-centric (P) or consequence-centric (C).

Defensive Level

(P)  What is the probability a known competitor may sue our company for infringement?

(C)  What is the likely cost to the business if a competitor could exclude us from making, using, or selling our product?

(P)  What is the probability that known entities may infringe upon our exclusive rights?

(C)  What cost (e.g., lost sales) would the company incur from an infringement of its exclusive rights?

(C)  What damages could the company likely pursue in a legal action against an infringer?

(P)  What is the probability the company would prevail in an infringement action?

(C)  What is the likely cost to the company to litigate an infringement action?

Cost Center Level

(C)  What is the range of costs the company could incur to protect a key asset (e.g., successful patent prosecution)?

(P)  What is the probability the unacceptably high-cost scenarios identified in the range above each may come to pass?

(C)  What is the cost to the company to retain a certain employee who is a key contributor to existing intellectual assets of the company?

(P)  What is the probability that loss of that certain key employee will lead to a competitor hiring that employee to gain access to intellectual assets?

(C)  What would be the cost to the company to put into place more robust protection (e.g., trade secret handling discipline) around certain intellectual assets?

Profit Center Level

(P)  What is the probability that a key asset is not being exploited to its full potential?

(C)  What is the estimated opportunity cost to the company for less than full exploitation of that asset?

(P)  What is probability (timeline) the intellectual asset is nearing its peak value in the market?

(P)  What is the probability (timeline) the intellectual asset is nearing obsolescence?

(C)  What is value of the asset if sold at its projected market peak?

(C)  What is the cost to the company if it misses the window to sell the asset at its peak?

I know what you’re thinking:  All of this talk of “probabilities” and “cost estimation” sounds a lot like … (gulp) … math!  But before you add me to your “do not read” list, please check out next week’s post titled “Skip The Math.”

(Originally posted July 7, 2012)