Structure in Threes: Economics R&D IP depreciation – appreciation
May 11, 2015 Leave a comment
The financial success both internally and externally for enterprises now has two masters Money and Time. The later appears to be the more dominate master at this moment in time. What this suggests is that optimization around time both internally and externally has become the driving force. Development concepts such as LEAN and AGILE are becoming the dominate philosophy around offering realization.
The current economics model underpinning these concepts that LEAN and AGILE propionates advocate is applied to only the production portion of offering realization. Much time and effort is focused around queue sizing and scheduling of the software development (DEVOPS) portion of offering realization. This is based upon the concept of Lifecycle Value. The assumption is an asset (offering) will depreciate in value over time and that the later its induction to use the less total value can be captured (See Figure 2. Lifecycle Value).
In my belief what is missing from such a model is the ability to account for ideas and conceptualization. Offering Realization actually starts further upstream and while accounting systems today still have problems addressing the value of intellectual property these none the less have value or patents would not be of any value. This issue and how to determine value add as ideas move through the development process from problem identification through design is an area rich in future research potential that I’ve only scratched the surface on years ago (Seitz B. K., CIM Architect Notebook, 1986). In terms of perceived worth people know that solving a problem or a design to address a problem is worth more than identifying the problem. However, accounting systems today do not effectively value or manage such intellectual inventories within a firm.
This profile only considers a standard asset depreciation model. However, as has been commented on prior post there are two major scenarios I’ll label the beer and wine models. Beer typically as a short shelf-life similar to most assets; while wine can have a value increase over time as it matures.