Increasing Intangible Asset Value with Value Management and I-TRIZ

1
Increasing Intangible Asset Value with Value
Management and I-TRIZ

• By
• David C. Bonner, President COO
• Peter P. Hanik, Senior Vice President
• Ideation International Incorporated

2
The Global Business Environment
3
Global Economic Growth1991 2001 (Average
Annual Increase in Real GDP)
United States 3.3
South Korea 5.9
Ireland 7.1
Japan 1.2
Singapore 6.9
Mexico 3.1
China 9.8
India 5.4
Source The Economist, World in Figures, 2004
4
Profits Are Being Caught In A Squeeze

5
Methods to Increase Value
6
Economic Value Added
Market Value Added Present Value of Future EVA
Market Value Share Price x Shares Outstanding
Debt
Market Value Added
EVA
EVA
EVA
EVA
EVA
EVA
EVA
EVA
EVA
EVA
Capital
EVA NOPAT Capital Charge
EVA IS a trademark of Stern Stewart
7
An Alternative View of ValueBaruch Levs and
Feng Gus Model
a(Physical Assets) ß(Financial Assets)
d(Intangible Assets)
Economic Performance
Physical Assets
Financial Assets
Economic Performance
Intangible Assets
8
What Drives Stock Performance ?
Correlation with Shareholder Return
From Intangible Assets Measurement, Drivers,
Usefulness Feng Gu and Baruch Lev April 2001
9
Implications

• Companies must focus on Intangible Assets if they
  are to generate long term value
• Cost reduction projects alone are a necessary but
  not sufficient condition for success
• Any problem solving methodology (Value
  Management, TRIZ, Six Sigma, etc.) must increase
  intangible asset value
• Innovation is the key to success

10
Value Management and Return on Intangible Assets
11
Cornerstone Relationship of Value Management
Function
Value
Cost
Good Value Options
1
2
3
4
Poor Value Options
1
2
3
4
Caution
Source J. J. Kaufman, Value Management Creating
Competitive Advantage. pp4-6, Crisp Publications
1998
12
The Value Management Process
Source J. J. Kaufman Associates, Inc.
(http//www.valuemanagement.com/aboutvm.html)

• Pre-Event define project
• Collect Information organize using FAST
  diagrams
• Identify Alternatives brainstorming techniques
• Analyze and Screen economic evaluation of best
  alternatives
• Prepare Proposals Develop a plan of attack
• Present Proposal Plan/Approval Funding
  Acquire management approval and funding

13
Value Management Strengths

• Structured process defines project goals well and
  carries through to implementation
• Clearly identifies good value options
• is the most preferred option
• is commonly chosen option
• FAST is a robust analytical tool

14
Value Management Weaknesses

• Relies on traditional, psychologically based
  brainstorming techniques
• Many are drawn to as the preferred option
• Often accused of preferring cost reduction over
  function improvement
• Not well connected to intellectual property

15
ITRIZ and Return on Intangible Assets
16
Cornerstone Relationship of I-TRIZ
Ideality
No Innovation
Innovation Scale
Nearly Ideal Solutions
Incremental Improvement
17
The I-TRIZ Process
Define the Problem (ISQ)
Problem Formulation
Prioritize Directions for Innovation
Develop Concepts
Evaluate Concepts

• Artificial Intelligence Engine
• Knowledge base of over 3MM patents
• Generates potential resolution of contradictions
• System of Operators

18
I-TRIZ Strengths

• I-TRIZ is System for Innovation
• Broad knowledge base (3MM patents)
• Problem Formulator relates useful functions to
  harmful functions
• Harmful functions not restricted to cost
• Breakthrough solutions

19
I-TRIZ Weaknesses

• Weaker in up front problem definition
• Weaker in valuation and implementation of
  solutions
• May be overkill when incremental solution is
  desired

20
Value Management/ITRIZ and Return on Intangible
Assets
21
Combined Value Management /I-TRIZ Methodology
Value Management Process
Pre-Event
Collect Infor- mation
Identify Alter- Natives
Analyze Screen
Prepare Proposal
Present Proposal
Approval Funding
High Impact Solution Concepts
FAST Diagram
Add Design Elements
Add Harmful Effects
Add Cost Elements
Develop Direction
Develop Concepts
I-TRIZ Process
22
Advantages of Combined Value Management / I-TRIZ
Process

• Starts with FAST Diagram
• Value Engineers very familiar with FAST
• Expands FAST Diagram for use in I-TRIZ
• Adds design elements, harmful effects, cost
• Structured innovation in Identify Alternatives
  step of Value Management
• Near exhaustive set of broadly based alternatives
• More opportunities (increased Function with
  reduced Cost)

23
Conclusions

• Value Management and I-TRIZ are not competitive
  methods
• I-TRIZ can enable the brainstorming step in Value
  Management
• FAST diagrams accelerate the I-TRIZ process
• Synergistic Benefits Produce Enhanced Intangible
  Asset Value Increased Shareholder Value

24
(No Transcript)