Transcript SJVE 2004 - Ideation International Inc.

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
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The Global Business
Environment
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Global Economic Growth
1991 – 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
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Profits Are Being Caught In A
Squeeze
$
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Methods to Increase Value
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Economic Value Added
Market Value Added = Present Value of Future EVA™
Market
Value
Share Price
x
Shares
Outstanding
+
Debt
Market
Value
Added
Capital
E
V
A
E
V
A
E
V
A
E
V
A
E
V
A
E
V
A
E
V
A
E
V
A
E
V
A
E
V
A
EVA™ = NOPAT – Capital Charge
EVA IS a trademark of Stern Stewart
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An Alternative View of Value
Baruch Lev’s and Feng Gu’s Model
Economic Performance = α(Physical Assets) +
β(Financial Assets) +
δ(Intangible Assets)
Physical
Assets
Financial
Assets
Economic
Performanc
e
Intangible
Assets
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Correlation with Shareholder Return
What Drives Stock
Performance ?
0.6
0.5
0.4
0.3
0.2
0.1
0
Operating Cash
Flow Growth
Earnings
Growth
IntangibleDriven Earnings
Growth
From Intangible Assets Measurement, Drivers, Usefulness; Feng Gu and Baruch Lev; April 2001
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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
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Value Management and
Return on Intangible Assets
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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
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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
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Value Management Strengths
Structured process defines project goals well
and carries through to implementation
Clearly identifies “good” value options


1
2
is the most preferred option
is commonly chosen option
FAST is a robust analytical tool
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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
2
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ITRIZ and Return on
Intangible Assets
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Cornerstone Relationship of
I-TRIZ
Ideality
No Innovation
Innovation Scale
Incremental
Improvement
Nearly Ideal
Solutions
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The I-TRIZ Process
Define the
Problem
(ISQ)
Factor 1
Factor 3
Problem
Formulation
Factor 2
Factor 4
Prioritize
Directions
for
Innovation
Develop
Concepts
Evaluate
Concepts
Artificial Intelligence Engine
Factor 5
[Useful] Factor 1
produces
[Useful] Factor 2
[Useful] Factor 1
produces
[Harmful] Factor 4
[Useful] Factor 3
counteracts [Useful] Factor 1
[Useful] Factor 3
produces
[Harmful] Factor 4
[Harmful] Factor 4 produces
[Harmful] Factor 5
• Knowledge base of over
3MM patents
• Generates potential
resolution of
contradictions
• System of Operators
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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
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I-TRIZ Weaknesses
Weaker in up front problem definition
Weaker in valuation and implementation
of solutions
May be overkill when incremental solution
is desired
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Value Management/ITRIZ
and Return on Intangible
Assets
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Combined Value Management
/I-TRIZ Methodology
Value Management Process
PreEvent
Collect
Information
Identify
AlterNatives
Analyze
&
Screen
Prepare
Proposal
Present
Proposal
Approva
l&
Funding
High Impact Solution Concepts
FAST
Diagram
Add
Design
Element
s
Add
Harmful
Effects
Add Cost
Element
s
Develop
Directio
n
Develop
Concept
s
I-TRIZ Process
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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
1
opportunities (increased Function with
reduced Cost)
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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
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