This is the first post of a series dealing with the role of IP in corporate governance in the wake of the launch of the KingIV report in South Africa by the Institute of Directors earlier this week. The conference had well over 1000 business leaders based in Gauteng and a stellar line-up of speakers. I was not one of them 🙂 but I was at a firm breakfast seminar this morning commenting on the report.
This post explores the relationship between the KingIV Report on sustainable governance and IP, the next traverses a three step approach to IP management, followed by a case study illustrating the need for a deft touch on IP enforcement where brands cater for social good, and the power of measurement.
Professor Mervyn King, the name that is inextricably linked to the KingIV report on sustainable governance, started off his presentation at the launch this week with a slide that I often use to start off my own presentation on intellectual property and innovation. I am sure he would be pretty bashful about using my favourite slide. That’s not true of course, but the fact that he used that particular slide, my slide, is.
He used it to illustrate, in his wise demeanour, that the value over time in companies has shifted from physical assets to intangible ones. This illustrated too, the evolution of the King reports (I-IV) and the shift in emphasis of governance over time from profits and outputs, to outcomes i.e. intangibles.
His particular example was the business of Ben & Jerrys which he introduced as a pioneer in using business as a force for good. I am familiar with their ice cream and subsequently looked that business and came across a book published in 1994 entitled “Ben & Jerry’s: The Inside Scoop” which focusses on “how two real guys built a business with a social conscious and a sense of humour.”
1994 was of course also a critical date for South Africa and the wise Prof reflected upon that, stating that the evolution of King was is indeed an unintended and positive by-product of our grappling with our unique circumstances as a nation at that time, and since then. A nation with so much diversity and disparity. He explained that this is the reason why KingIV is also a pioneer, worldwide and why he sits on so many international boards, on governance. I am sure that there are many more reasons.
The use of that particular slide by me is significantly less profound but hopefully no less remarkable. You see the link between intangibles and intellectual property is in fact tangible. Intellectual property in its legal forms as patents, trade marks, designs, copyright and knowhow are the only legal way in which intangibles are protected and nurtured. Proper governance under KingIV will therefore mean proper IP governance.
So, despite the phrase “intellectual property” not featuring once in the entire KingIV report, adhering to KingIV naturally means adherence to sound policies on IP management and governance. The better this governance, the better care of the intangibles and potentially, the higher value of the business.
It is worth mentioning here, that the ISO standard on brand evaluation published in 2010 (ISO10668), advocates a three step approach to brand evaluation. Brands are of course, the touch and feel of a business, that distinguish it from others and through which repeat customers are retained.
The Apple brand speaks to innovation and tremendous customer experience, whereas the Oakbay and Enron and now Eskom conjure up completely different images. Those brands also have three different brand values. Apple dominates the world, whereas Oakbay, Enron and sadly now Eskom do not.
The first step of the three step approach to brand valuation entails a thorough examination of the legal position of the brand i.e. legal governance of intellectual property used to protect a brand. The second and third steps, by the way, entail measuring the behavioural and financial aspects of a brand. I am no accountant but these are very King-like attributes to me.
An example of where a simple trade mark opposition had a direct effect on a listing value in an IPO was that of Skype. Their litigation (including routine oppositions) with BSkyB in Europe had to be disclosed in the listing documents as a material risk, directly affecting its value.
But this stage I am hoping that you are with me, that IP governance and KingIV outcome based reporting, and brand valuation are in fact, three peas in the same pod. I will go as far as to say so is innovation. The normal use of that slide is to draw parallels between IP governance in the creation of opportunities to innovate, create jobs and grow. Intellectual property therefore potentially underpins it all.
Next up, a three step approach to effective IP management.