IP Management for Superior Shareholder Returns
Ron Carson
Vice President of Marketing
Innovation Asset Group
Intellectual Property is a strategic business asset and in many cases is the most valuable asset a company owns. Many times in this blog and in our newsletter we have discussed the strategic importance of IP and numerous perspectives from which to view it.
We have looked at the strategic importance of IP from the perspective of the IP Value Chain. We have looked at the importance of IP using various innovation metrics as a proxy for IP, including the S&P Global Innovation Index . We have discussed the importance of portfolio management, and related it to stock price appreciation in the Ocean Tomo patent index. We have looked at it in the context of under-reported royalties related to IP causing revenue to literally leak out of corporations. We've discussed the fact that countries from China to the Barbados have national IP strategies.
And at the moment, we're preparing to release a study that quantifies the potential cost savings to a company through the implementation of a comprehensive IP strategy and management infrastructure. (Contact us if you'd like to know more about the study when it becomes available.)
I recently came across an excerpt of a study done by the folks over at Steel City Re. Over the course of several years, they have correlated superior IP management at companies with above average return to shareholders. I haven't looked at the details of the study, but it seems that it should be a powerful tool for IP departments to help justify budgets, resources and head-count with executive management.
For every chief IP counsel, officer, strategist or attorney currently getting squeezed between the demands of properly managing their IP portfolio and ongoing budget cuts, the research over at Steel City Re may help steer the conversation away from IP as a cost center to IP as the basis for superior shareholder returns.
"Steel City Re has amassed a significant amount of empirical data from this index showing that superior managers of corporate intangible assets (reputation) reward shareholders with above average equity returns. The data, viewed retrospectively, show that companies whose index rankings place them in the top 25% of the 2,483 companies studied during the 28 month period from Dec 2005 to Feb 2008 rewarded their shareholders with an average (portfolio) return of 18% which is about three times the market return of 6%. Moreover, companies whose IA management was very good and who continued to improve, delivered outstanding returns.
Among the companies whose average index ranking was in the top 25%, those whose index rankings did not decline during the 28 month period, numbering 290, rewarded their shareholders with an average (portfolio) return of 50% which is about three times the group average.
Companies whose index rankings declined, numbering 331, rewarded shareholders with average (portfolio) returns of -6%.
In an ongoing series of studies, our data consistently show that superior stewards of intangible assets reward their shareholders with returns that are on the order of three times greater than their peers."
The next time your corporate budget committee treats the IP department as a mere cost center and asks you to absorb yet another round of budget cuts and head count reductions, remind your executives that they have an obligation to shareholders to equip the IP department with adequate resources and the solutions they need to help manage the company to superior shareholder returns.
Vice President of Marketing
Innovation Asset Group
Intellectual Property is a strategic business asset and in many cases is the most valuable asset a company owns. Many times in this blog and in our newsletter we have discussed the strategic importance of IP and numerous perspectives from which to view it.
We have looked at the strategic importance of IP from the perspective of the IP Value Chain. We have looked at the importance of IP using various innovation metrics as a proxy for IP, including the S&P Global Innovation Index . We have discussed the importance of portfolio management, and related it to stock price appreciation in the Ocean Tomo patent index. We have looked at it in the context of under-reported royalties related to IP causing revenue to literally leak out of corporations. We've discussed the fact that countries from China to the Barbados have national IP strategies.
And at the moment, we're preparing to release a study that quantifies the potential cost savings to a company through the implementation of a comprehensive IP strategy and management infrastructure. (Contact us if you'd like to know more about the study when it becomes available.)
I recently came across an excerpt of a study done by the folks over at Steel City Re. Over the course of several years, they have correlated superior IP management at companies with above average return to shareholders. I haven't looked at the details of the study, but it seems that it should be a powerful tool for IP departments to help justify budgets, resources and head-count with executive management.
For every chief IP counsel, officer, strategist or attorney currently getting squeezed between the demands of properly managing their IP portfolio and ongoing budget cuts, the research over at Steel City Re may help steer the conversation away from IP as a cost center to IP as the basis for superior shareholder returns.
"Steel City Re has amassed a significant amount of empirical data from this index showing that superior managers of corporate intangible assets (reputation) reward shareholders with above average equity returns. The data, viewed retrospectively, show that companies whose index rankings place them in the top 25% of the 2,483 companies studied during the 28 month period from Dec 2005 to Feb 2008 rewarded their shareholders with an average (portfolio) return of 18% which is about three times the market return of 6%. Moreover, companies whose IA management was very good and who continued to improve, delivered outstanding returns.
Among the companies whose average index ranking was in the top 25%, those whose index rankings did not decline during the 28 month period, numbering 290, rewarded their shareholders with an average (portfolio) return of 50% which is about three times the group average.
Companies whose index rankings declined, numbering 331, rewarded shareholders with average (portfolio) returns of -6%.
In an ongoing series of studies, our data consistently show that superior stewards of intangible assets reward their shareholders with returns that are on the order of three times greater than their peers."
The next time your corporate budget committee treats the IP department as a mere cost center and asks you to absorb yet another round of budget cuts and head count reductions, remind your executives that they have an obligation to shareholders to equip the IP department with adequate resources and the solutions they need to help manage the company to superior shareholder returns.
Labels: intellectual property, IP management, IP Portfolio Management, IP ROI, IP strategy, patent value
posted by Ron Carson at
6:08 AM
5 Comments:
Ron, I fight this very battle. I cannot honestly say that I am the only target, just one of many asked to reduce costs, cut back, budget, etc.
As I see it, the problem is that many of the C-Level folks continue to perceive IP as a necessary cost center. It takes both access to the right people and education to switch their perceptions of IP as a potential profit center. In my experience many do not want to take the time or have the time to get educated...and often times even getting access to them is difficult as they are busily working towards next quarter's numbers.
The good news in my situation is that after two years of attempting to organize a committee...finally I will be involved with the COO and his top level business reports in a monthly meeting. This meeting is not a result of my attempts but is intended to set forth the strategic agendas of each of the business units, i.e., exactly what I would have wanted anyway.
It took a lot of string pulling to get an invite there, but I have high hopes that this is the access that I have been working for and now I have the ability to educate them without them actually knowing it.
Scott
http://www.linkedin.com/in/scottbgarrison
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Wow!! Thanks for sharing this informative blog with us. You provided some really excellent points in your article. Have a wonderful upcoming weekend and keep up the posts.
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