Find It. Use It.

It's a good bet your company possesses intellectual property it isn't exploiting. Here's how to identify those assets and turn them into new business.

1 | 2 | 3 | 4 | 5 NEXT

Think of your company as a couch, with rich deposits of coins, pens, keys, and jewelry buried beneath the cushions and deep inside the cracks. Think of Andrew J. Sherman as a couch cleaner eager to shake out those cushions, excavate those cracks, and dig right down to the springs to bring to light anything of value.

Sherman, a partner in the Washington, D.C., office of the law firm Dickstein Shapiro and general counsel for the Entrepreneurs' Organization, is a jovial, bearlike fellow with a stock of stories larger than Scheherezade's. Most of his tales are about intellectual asset management, which roughly speaking means making the best possible use of everything a business knows. So for example, Sherman tells how Procter & Gamble (NYSE:PG), disappointed by the queasy reception for its fat substitute, Olestra, gave the substance new life as a cleanser for contaminated soil. He describes how Duke Energy (NYSE:DUK) licensed to other utilities a safety device it invented to prevent workers from falling off transmission towers. And he recalls the time his firm audited the intellectual property portfolio of a big-name IT company and found the company was using only 200 of its 800 patents.

All Sherman's stories share the same punch line: "…and they realized they could cash in on something they'd taken for granted."

Mention "intellectual asset" in a corporate word association game and most players will snap back with "patent" or "trademark." But the category is much broader, extending to such things as customer information, software code, databases, business models, brands, homegrown processes, and employee expertise. Sherman likes to quote Baruch Lev, a professor of accounting and finance at New York University's Stern School of Business, who once calculated that approximately 85 percent of a company's value resides in such intangibles. Unfortunately, many of those assets go unexploited because they are hard to inventory, manage, or even recognize. "What drives me nuts personally and professionally is to think about all that good stuff being wasted," says Sherman, shaking his shaggy head. "All that innovation. All that intellectual capital. It's just sitting there collecting strategic dust."

The problem of unexploited intangibles came to prominence in the late 1990s. One-to-one marketing had transformed customer data into coin of the realm, the U.S. Patent and Trademark Office began protecting business models, and the buzzword brigade huffed loudly about "knowledge management" and "human capital." At the height of the Information Economy, "thing-ness" had grown passé.

Then in 1999, Harvard Business School Press released Kevin G. Rivette and David Kline's Rembrandts in the Attic: Unlocking the Hidden Value of Patents. That provocative title--which Sherman borrows freely, using proper attribution of course--emerged as a metaphor for the whole field of intellectual asset management. Inspired by companies like Dow Chemical (NYSE:DOW), which according to Rembrandts used the results of an intellectual property audit to raise its patent licensing fivefold to $125 million, CEOs began rifling their organizations for treasure. Some found valuables that had come aboard, largely unnoticed, during mergers and acquisitions. Others unearthed dormant data that could be revived by technology.

The Rembrandts phenomenon at first chiefly preoccupied large corporations with commodious attics. But small businesses can conceal forgotten Rembrandts, too, or at least harbor works by lesser masters, says Sherman. He estimates that 75 percent of companies of all sizes seeking to grow organically can do so by better exploiting their intangibles. "The opportunity may be something you do really well for yourself that others can benefit from," he says. "Or maybe it's something that didn't work for you but instead of abandoning it, you take it another step and see if it has an application in other industries."

Entrepreneurial companies will naturally approach such opportunities as they would any other, committing resources based on expected returns. But at least part of what they need, by definition, already exists in-house, and so the required investment may be low. Sherman calls this strategy "capital-efficient growth" because it minimizes the need for R&D and new employees.

1 | 2 | 3 | 4 | 5 NEXT

Try a RISK-FREE Issue of Inc. Today!

Renew | Contact Us | Current Issue

Select Services