#202 from R&D Innovator Volume 5, Number 2          February 1996

A Model for Intellectual Assets Management:  Taking the Process from R&D to Business
by Phillip W. Barnett

Mr. Barnett is an intellectual assets manager for the polyurethanes and epoxy products businesses at The Dow Chemical Company, Freeport, Texas.  Phone 409-238-4582.  mailto:pwbarnett@dow.com.

How does a company re-discover a collection of almost 30,000 impressively titled patents in countries all over the world, the subject and commercial significance of which is a small-circled secret?  Why does a company file product trademark registrations in 80 countries instead of 50 or 30?  Why does a company file for international patent protection in 55 countries versus 10 or 15, generating millions in entitled cost and administration for years to come?  These are all characteristics of companies which tend to defer intellectual asset management to R&D and their cohort patent attorney and then hope for the best.  Only four years ago, those characteristics could be used to describe the reality of Dow.  

However, Dow uses a very powerful and successful matrix management organization that easily leverages the strengths of each business, function, and geography.  R&D is, in fact, considered one of the "hard" functions (like sales, manufacturing, and legal versus “soft” functions like human resources, communications, and public relations) in that matrix.  But Dow’s legacy of success from its physical assets, sheer scale, and massive integration made it difficult sometimes to convince management that companies can better manage intellectual assets for value at the business level.

Value-based management, though, teaches that every component of a successful enterprise must create value, or risk elimination from the asset base.  Riding on the fresh wind of value based management and work-process analysis/optimization, a small group of  innovators from R&D, patent, and business designed an integrated work process model for just that, Intellectual Assets Management.  The initial goal was to ensure protection for valuable ideas and discoveries, but then align the huge patent portfolio and process to Dow's business units.   This created the groundwork for teaching individual businesses new ways to leverage their portfolios for maximum tangible value.  Of course, patents aren't the only form of intellectual assets,  but this was the starting point.   

Technology enterprise is not excluded. The team structured a cyclic, six-step process which would fit reasonably within the framework of management team operations, widespread at Dow.  Here's a snapshot of the six steps, which you’ll find after the fact, will best operate in both series and parallel fashion, depending on the stage of the business and its growth initiatives.

PORTFOLIO:  Articulate the assets.  Include patents, trademarks, know-how, work processes, or what ever intangibles fit the business’ profile.  Segment and align intellectual assets as you would define markets. 

CLASSIFICATION: Establish business ownership, then decide how the portfolios are being used by the business by category.  Strengthen and protect the strategic ones and seek alternative value (e.g.. license, donation, or sale) for the others before ultimate abandonment or expiration.  Monitor and measure inputs and outputs for turnover measurements.

STRATEGY:  Test the portfolio against a written business strategy.  Be sure to integrate short-  and long-term strategic thrusts to assure utility and fit.  The key is to leverage the intellectual assets you have and identify intellectual assets you need in order to fulfill strategic objectives.

COMPETITIVE ASSESSMENT: Analyze the competition to identify offensive and defensive actions.  This helps the business understand the magnitude of the portfolio's competitive advantage and what intellectual asset options it might pursue to fulfill strategy.

VALUATION:  Agree on and use a uniform valuation method.  Try to reduce the portfolios to a value estimate agreed upon across the business.  This is difficult since R&D tends to overvalue and commercial tends to undervalue.  Use "high road/ low road",  probability or risk functions, or what ever makes sense to the majority.  This agreement will drive priority and option selection.

PROCUREMENT:  With the utility and competitive advantage of the portfolios measured and understood across functions, the businesses are now able to pursue the lowest cost, highest value procurement mechanism for those new assets judged to be necessary to fulfill short- and long-term business strategy.

Success is in the details.  The work process on paper looks simple, but needs a lot of understanding and connection across the matrix, not to mention work process re-design.  Since 1993, it's been up and running at Dow, and now accounts for major changes in performance, perception, and thinking across the company.  Businesses that have really taken it to heart (e.g. the Insite* technologies, epoxy, and polyurethane businesses) are actively developing and acquiring technology to fulfill strategies.  Patent portfolio turnover is above industry standards (especially in the chemicals and hydrocarbons businesses), where it was well below, only a few years ago.  The corporation is actively seeking to acquire process technology which it otherwise would have felt obligated to develop.  The bottom line is value creation, which must be measured, accounted for, communicated, recognized, and celebrated as a product of both physical and intangible kinds of business assets.

*Trademark of the Dow Chemical Company.