An intangible source of value creation
Companies can no longer afford to ignore their intangible assets which are key to business growth
Whether you know it as intellectual property (IP) or “secret sauce”, intangible assets are an important driver of value in many businesses today. While intangible assets accounted for just 17% of a firm’s value in 1975, this proportion had grown to 84% by 2017, according to Vijey Ananda, Partnership Director, Asia, at business consultancy Everedge.
“Intangible assets are real assets. They have real value and they are the key drivers of margins and market share in any business. Whether you’re a small or big company, it’s your intangible assets that really drive performance and company value,” said Mr Ananda, who was speaking at a workshop held on Nov 27 titled Bring your Business to the Next Level with Intangible Assets, which was organised by SBF and the Intellectual Property Office of Singapore (IPOS).
While most people think of patents and trademarks when they talk about intangible assets, it also incorporates trade secrets, customer data, systems and processes, software code and even website domain names. Landing rights, for instance, is an intangible asset for a company like Singapore Airlines, said Mr Ananda. “You can’t touch them, you can’t feel them, but without them, you can’t operate an airline.”
Technology companies, in particular, have been able to leverage their intangible assets, such as patents, to grow their businesses. In 2012, photo-sharing app Instagram had zero revenue and about US$50,000 in assets on the balance sheet. Yet, they were acquired for US$1 billion by Facebook that year primarily due to the value of their intangible assets.
Beyond recognising the value of intangible assets, firms must craft an effective strategy for managing, protecting, and commercialising them. Said Mr Ananda: “This strategy needs to be dynamic because things change.”
A working IP strategy
One company that is using its intellectual property to fuel expansion is vehicle leasing group Goldbell Group. The group is developing technology-based mobility solutions as a new growth business. In recent years, it has launched autonomous vehicle products, a multi-storey automated facility for heavy vehicles, and an accelerator for mobility-related startups.
Speaking at the workshop, Kelvin Tay, Director of Future Mobility at Goldbell, gave a breakdown of his company’s IP Strategy. The process starts with sourcing for suitable IP that can be acquired to help Goldbell enhance its future mobility businesses.
“It takes a long time to create your own IP, so we wanted to first look at what is available in the market. If it is, we don’t have to reinvent the wheel. Having a pipeline of IP is very important,” he said, adding that Goldbell leverages its accelerator to tap on potential sources of IP.
The next step in the strategy involves accurately assessing the value of potential IP to be acquired or licensed. If acquisition is not possible, then Goldbell turns to the “last resort” of creating its own IP, and then protecting them as trade secrets or patents.
IP tools to help businesses
The Intellectual Property Office of Singapore (IPOS) provides local companies with a suite of tools related to their IP assets. These include helping businesses understand and manage their intangible assets, develop an IP strategy, as well as patent search and analysis services.
One example is an online diagnostic tool developed by IPOS International called illuminate® for enterprise which helps users get a quick overview of their company’s IP, the health of their intangible assets, as well as any management gaps and risks.
Meanwhile, publicly-available IP data can also be a source of competitive intelligence for companies. One such source is the information contained in patents filed by companies with bodies such as IPOS. For instance, Samsung announced that it would be launching its new foldable smart phone earlier this year, yet the consumer electronics giant had already revealed the technology behind this product in a patent filed in 2014.
“Imagine if you were a competitor and had that first-hand information five years earlier. If you keep watching your competitors’ patent activity, you will be able to have an indication of what is coming out,” said Regina Lum, an IP Strategist with IPOS International, the expertise and enterprise engagement arm of IPOS.
Patents can serve provide information that help companies decide what markets to penetrate or what technologies to focus on, and also to uncover industry trends, she added.
Using its analytics tools, for instance, IPOS can determine which countries have the highest patents in a certain technology, and in which industry segments this technology is being applied. Said Ms Lum: “So you could see where the different companies are operating in this space, and you can identify which areas are less crowded. This can help you decide if you should buy into technology or if you should pursue R&D.”