80% of What?

I have often heard that IP represents 80% or more of the value of a business, yet it isn’t being managed in any way proportional to its value.  I have often thought this number curious and the idea that a CEO should therefore devote some greater portion of his time to IP directly than he may already be, at least indirectly.  The error in this logic is that it supposes that IP is some separate part of the business for which a CEO could actually block out his time and do either IP or the rest of the business.  That implied separation of thought, when it happens, is exactly the wrong message an IP strategist wants to send to the CEO and his or her C suite.

The value of IP to an ongoing enterprise is its place in the sum total of people, ideas, and tools used to advance that enterprise.  A CEO needs to manage all of these holistically – i.e. at the same time.  Within this management is a suitable delegation for the details of the tasks, inclusive of IP management, that the CEO would then use, all together, to shape markets for the benefit of the enterprise.  IP has no value to an ongoing enterprise if it is not employed within a suitable framework of associated people, ideas, and tools any more than a single fish in a pool of water creates a thriving ecosystem for sustained life.

At the point of a transaction, it may in fact turn out that 80% or more of the purchase price of an enterprise or its parts will trace back to the purchase of the IP.  That is the only time that number may really matter as an independent entity, and the IP strategist needs to consider whether presenting the idea that number represents to the C suite could do more to foster putting IP into a silo than getting it out of a silo and into a more holistic strategic planning process.

Image credit: Hemera

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