A client and I were discussing IPR and valuation recently over a pint. The gist of it was this: in technology businesses a lot of know-how is created over the years. Some gets used regularly, some gets lost a little bit, some is made deliberately and plenty comes about accidentally. Frankly this applies to any processes that add to productivity, protect margin and enhance customer value, not just biotech or technology innovations.
In business valuation, the basic valuation is a complex mix of profitability, profit strength, timing and market interest. Profit strength is about margin and sustainability and there are a number of ways to look at it - evidence can be seen in the stability of results, customer defection rates, product portfolio management and product development capability, etc.
Buyers can be very attracted to visible business strengths - for example easily controllable income flows (this can be model related or through contracts). Intellectual property comes in many shapes and sizes; when it is technical know how, if it can be shown to be commercially valuable, then for the right buyer, the price will go up.
A big problem for CEO's is to know exactly what the lab has got in its kit bag. Another risk is that, when know how is not fully recorded, it gets lost if key people go.
So here is the upshot: An IPR matrix. We thought it would be great to do this and let the lab or IT development team show their value. Maybe you could encourage collection through bonuses. It's a simple idea.
Step 1: get the team to list all their unprotected intellectual property and know how.
Step 2: table it out and in column two, link it to the products or processes that are impacted, live or canned (indicate this, so that great technology is not lost as products that it has powered but that are retired don't mean it is lost)
Step 3: describe what it does, and the key benefits
Step 4: where the files are kept and crucially
Step 5: any protection actually in place - patents, designs, trade marks
Step 6: finally go through and assess on a 1 - 10 scale, its commercial power (potential or known)
If you haven't got this in place or something similar, do it now rather than leaving it to chance when you're ready to exit. Make it a key document during your routine product portfolio planning review.
I'd be keen to hear any thoughts, and shares of other "know-how" recording systems you all have in place. Paper or wiki, locked away or shared.
Great idea !
ReplyDeleteJust workshopping it a bit - how about another column for the key people who have the knowledge (maybe in their heads).
How about another matrix with people - then listing all of their key projects / knowledge - and how it is captured. De-risking , succession planning.
Great stuff!
Thanks for your comment Andrew. What a great idea too. Let's throw both in the kit bag and exchange notes in a month.
ReplyDeleteIt's a good point. Recording tech know-how in a re-usable, valuable way is often overlooked by innovative businesses as they sprint up the growth curve. One business I worked with had an impressive patent portfolio - however, the inventions were near impossible to implement and exploit without access to a massive underlying body of know-how. Due diligence was tricky,as was the valuation, and realistically the investors knew their only option was to make sure they retained, at whatever cost, the innovators in whose heads the know-how resided!
ReplyDeleteRealistically, the practical solution is not to impose an additional and probably unwelcome exercise on the hardpressed R&D staff to brain dump their expertise - who's going to enthuse about that? Rather, put comprehensive work-flow processes in place to properly record and document the innovation process on a community and on-going basis. This should tick all the right boxes for IP protection and evaluation. Not only that, it will make a growing business less dependent on individual innovators, save repeating technological iterations needlessly (yep, we're all got our islands!), and impress would-be investors.
That's a very good point. We did wonder about the enthusiasm part - but I reckon with the right incentives in place you could overcome this. You are right about workflow - getting the process right in the first place, and yet there are so few clients that have had this so some cupboard searching must be needed too.
ReplyDeleteI wonder if this idea has merit also as a once a year tidy up - workflow to capture the generation, matrix to update the commercial uses as time passes?
Thanks for your useful comment, Nicola.