Professional services firms have more intellectual property than they may think. On this episode, we discuss how to monetize and productize your intellectual property by speaking with Adriaan Bouten, Founder of dPrism.
TRANSCRIPT
Greg Alexander [00:00:15] Welcome to the Boutique with Collective 54 a podcast for founders and leaders of boutique professional services firms. For those that aren’t familiar with us, Collective 54 is the first mastermind community to help you grow, scale and exit your firm bigger and faster. My name is Greg Alexander. I’m the founder, and I’ll be your host today. And on this episode, we’re going to talk to Adrian Bouten. And today’s topic is going to be about intellectual property. So, Adrian, it’s good to see you. Would you please provide a proper introduction to the audience?
Adrian Bouten [00:00:49] Thanks, Greg. My name is Adrian Bouten. I’m the CEO and founder of Digital Prism Advisors. We help our clients with digital growth and digital transformation.
Greg Alexander [00:01:00] OK, very good. How are things in beautiful Charleston, South Carolina right now?
Adrian Bouten [00:01:05] Nice and sunny just came back from a morning walk and go, it’s 75 and sunny and in March. I’ll take that any day.
Greg Alexander [00:01:13] Yeah, no question. You can hear it in my voice. I’m from Boston and March in Boston is not pretty. So I’m looking forward. I’m going to be there for Easter weekend, so I’m looking forward to it. OK, let’s jump into it. There’s a lot of confusion around this concept of intellectual property and comparing it to intellectual capital. And sometimes boutique owners either don’t think they have any or they think they have some, and it’s really not. So I want to just maybe start with an overview of what it is. So boutique owners are in the knowledge space, so they’re generating knowledge that has some value. Some of it is protected through intellectual property such as patents, copyrights and trademarks, and some of it is not protected but still valuable. That’s intellectual capital. So for example, if you’re able to charge more for your services and somebody down the street, the person’s paying you because of that additional intellectual capital that you have. And the reason why it’s important is someday when you go to sell your firm, part of your valuation is going to be tied to whether or not you have a little or a lot of this. You will literally be a number will get assigned to it as you go through the valuation. So Adrian, I wanted to just get your your thoughts on this to start out with maybe a little bit about your firm. Do you have do you do you find yourself in the category of IP or IC?
Adrian Bouten [00:02:37] I find those to be in both. There is a lot of intellectual capital in methodologies and artifacts, but those are not protected. But we also have digital maturity assessment that is trademarked. We have been running for the last six years.
Greg Alexander [00:02:57] OK, great. And this let’s start there because for those that haven’t been through this process before, tell me why you decided to get that trademarked and what was the process?
Adrian Bouten [00:03:13] So the process was lengthy, but let me first hand why we trademarked it. The digital maturity assessment that we have prospects and clients complete is a methodology that helps us quickly understand where they were. That company currently is on a scale of one to five and digital maturity in different aspects. And it quickly helps us understand what they should be thinking about doing. How do they get to the next level of maturity? And it’s a whole methodology that way, and that’s more of an intellectual capital until we trademarked it and said, this is unique to us. We want to make sure that nobody can copy us on what we do here. And that’s how why we made that made it IP.
Greg Alexander [00:04:01] Yeah, which is a great story and a great example, because that it solidifies the fact that you are different and somebody was willing to trademark what it is you’re doing, which is a validation point. So the process of getting a trademark, was it long? Was it expensive? Was it easy? Tell us a little bit about that.
Adrian Bouten [00:04:21] It was longer than it should have been because we did it wrong as far we went through our general law firm and asked them to handle it, and they weren’t paying it because it’s not a. Not a good billing scenario for lawyers. So we ended up finding a stand alone trademark attorney that does nothing but and that about various mostly and it was inexpensive, took only a few months.
Greg Alexander [00:04:52] OK, so that’s the advice then, is to hire an attorney that this is what they do.
Adrian Bouten [00:04:58] This is what they do. And that’s probably true for most attorney type specialty things that you need. But it went very smoothly once we had that individual doing it.
Greg Alexander [00:05:09] OK. And this digital maturity offering, do you charge clients for it or is it a giveaway?
Adrian Bouten [00:05:18] It’s a giveaway because it’s a initial assessment. And then we go in business, a specialty consulting engagement. After that, we are talking about following it up with a more in-depth assessment that doesn’t involve consulting. That would be a charge for assessment of a few thousand dollars. So we don’t have anything in between to give away. And the Ford specialty consulting engagement.
Greg Alexander [00:05:47] OK, got it. And the and the reason why it’s it’s worth it to you to give it away is because if the client takes the time to go through it, it’s revealed some gaps and that would lead to consulting projects, right? That’s correct. Yeah, OK. And has it been kind of quote unquote productized or does it still require labor on your behalf to perform it?
Adrian Bouten [00:06:09] We just finished product touting it. It is now we’re in testing trial testing. They’re going to release it this month, where it can be taken by somebody to automatically get the results. We get notification that somebody is taking it so we can follow up to its proper sales perspective.
Greg Alexander [00:06:26] Fantastic. So audience, this is a great example, right? So you have this consulting company. They had this ability to assess an organization which most consulting companies have some form of assessment in their domain. It got turned into a maturity model, which then got trademarked and was monetized because it led to consulting work after the assessment was taking. Because it’s trademarked now, it’s protected, meaning people can’t can’t steal it from the prism and it’s not created value. And someday down the road, if this firm decides to sell itself, they’ll sit across the table from a potential acquirer and be able to point to, you know, this client originated from that assessment. This client originated from that assessment and so on, and you’ll be able to tie dollar dollar values of those client engagements back to this individual tool. And that’s a demonstration and proof in the eyes of a potential acquirer that this isn’t a body shop. There’s real intellectual capital into intellectual property that people are willing to pay for. And that’s really the big distinction here is that if you’re a body shop and you and you don’t have any of these methodologies, tools, systems and they’re not monetized, then it’s tough to sell that firm. If you can sell it, you going to sell it at a discount, which is what we don’t want to do. OK, the next question I have for you, Adrian, is because you have this intellectual property and plenty of intellectual capital behind that that you use for consulting engagements. Is that reflected in your rates and would would clients specifically attribute what they’re paying you to the methodologies or tools your eyes see?
Adrian Bouten [00:08:14] So yes, it is reflected in the rates, but the client never sees our rates. We do everything. Fixed price, OK? So it’s more of a qualification that we know what we’re talking about. Once we do the assessment and have the conversation around it, that is in the client visible rates.
Greg Alexander [00:08:34] Yeah, OK. So I’m going to leap to a conclusion there, but can correct me if I’m wrong. So you’re selling on fixed bed, which is great so you can get away from the hourly rate card thing, which is not where we want to be. And you put a proposal on the table that’s fixed bed and said, Mr. Client, you pay me, you’re going to get x y z. The client’s going to say, Well, how are you going to deliver x y z? And then you walk them through your your methodology that’s going to deliver. And therefore they have confidence that you can actually execute the project and you win versus the guy down the street. Is that correct?
Adrian Bouten [00:09:03] That’s correct. Right. We actually quite often go down to the level of, let’s say we are talking about a 12 week engagement. We laid out week by week, what are we going to do? What are they going to see and what’s the value?
Greg Alexander [00:09:16] Yeah. Another great example of how intellectual capital is used and monetized. In this case, it’s not. It’s monetized, but you’ve got to you have to really know what you’re doing in the monetization. Meaning because he has it, he’s able to charge fixed bed and fixed bids are a lot more profitable than hourly work. And that’s a subtle thing, but it’s a very important thing to distinguish. And if he didn’t have the methodology, the clients would ask questions like, What are you going to be doing? Why does it take 12 weeks? Who’s going to be on the team? You know, they’re going to try to negotiate down on an on an hourly rate basis, which is not where anybody wants to be. And because of the IC, Adrian’s able to avoid that. OK, let’s go to the next level of this. Some firms are quote unquote tech enabling themselves, and they’re taking these methods that you have, which you are deploying through consulting engagements. And you probably have now for many, many times over and over. And they’re turning him into software tools of some kind and they’re lacing licensing them to the client, either as part of the engagement or as kind of a leave behind. It’s a lot of work to pull that off. If done correctly, it can be very lucrative. But if done incorrectly, can be very costly. Have you considered that?
Adrian Bouten [00:10:33] I have. I don’t feel I’m at the scale yet. To be able to do that because that takes an investment, but you’re talking about here, Greg. Yeah. And but I definitely am planning to do that.
Greg Alexander [00:10:47] You are. And what is it about that that you find attractive?
Adrian Bouten [00:10:54] Number one, profitability because it makes it more efficient and more profitable to do the engagement for our clients? Yeah. Right. And scalability. Yeah.
Greg Alexander [00:11:06] You make it once and then you sell it delivered a thousand times without any labor. Right?
Adrian Bouten [00:11:10] That’s right.
Adrian Bouten [00:11:11] Yeah.
Adrian Bouten [00:11:11] Totally.
Greg Alexander [00:11:12] Yeah. Which is the big, big benefit. OK. Another area of intellectual capital and intellectual property I want to talk to you about today is this concept of certification. So you you go and you do a project for a client. Part of that project is you’re transferring knowledge and skills to that client so that when you do eventually leave, they can run or implement and whatever it is that you developed. Sometimes that requires some type of training or skills transfer, and a way to systematize that is to certify the client. Have you begun to experiment with that at all?
Adrian Bouten [00:11:48] I have not. That is not something I’ve gotten into, which again, it’s something we’ve talked about as an option. But no, I have not.
Greg Alexander [00:11:58] Yeah, that’s an interesting one. Sometimes clients ask for it, sometimes they don’t. What I find in my old business is. We would leave the engagement in like a year later, they would call us up. Something didn’t go right and then say, Hey, can you come back and train my team? And then we would position certification to them as part of the training initiative to say, OK, so let’s make sure this doesn’t happen again. We’re going to train your team there and have to prove to us that they can do X Y Z and they’ll do that through their certification. So audience members, this is an interesting thing to consider. Take some investment for sure, but it can generate a recurring revenue stream for you because most times certifications, people need to be recertified on some frequency. Like, for example, imagine if you’re an attorney, you know you’ve got to maintain continuing to maintain your license, same thing with accounting, etc. So that’s another idea.
Adrian Bouten [00:12:47] And go ahead along the same lines. What we are planning on doing, probably in 2023, is to give the client a portal. To do self-assessment on a continuous basis, so that takes the last two things together a little bit. It does. It takes both technology enablement and the certification education training. Was that portal a client of us could choose to do a quarterly cycle? A daily cycle doesn’t make any sense, but they can. Due to self assessment around the organization themselves, and that will be an annual subscription fee.
Greg Alexander [00:13:28] That’s a great idea. That’s tech enabling the certification. That’s the one punch right there. Yeah, that’s a great idea. Have you started exploring the cost in the effort associated with pulling that off? Is that is that easy? Is that difficult?
Adrian Bouten [00:13:45] We ended up with a few hundred thousand dollars of investment needed for that. It’s more it’s six figures, yeah, but doesn’t have to be seven figures.
Greg Alexander [00:13:54] Yeah, OK. That’s that’s good to know. So it might be approachable, you know, at a certain point in scale, sometimes tech enabling services outside of this idea can run into the many millions, and it’s outside of the the capability of a boutique to do it. OK. What are the types of intellectual capital do you have like, for example, sometimes people are collecting data and they ask a consulting firm, You know, how am I benchmarking against XYZ? Have you guys just as a natural course of doing your work? Do you collect data?
Adrian Bouten [00:14:28] We do. And one of the most common things we do with our clients is doing what we call a market assessment and a market map. We collect data. What we do is we go to our clients customer and find out. Not just what they buy from our clients. But from who else do they buy, what adjacent products and services? And that whole methodology helps look from the end customer’s perspective back into our clients and that we then turn into an innovation cycle.
Greg Alexander [00:15:09] Tell me about the innovation cycle
Adrian Bouten [00:15:12] That innovation cycle is we look for whitespace in that market map that is adjacent to our client’s current product or service so that that have the brand right to step in to their. And then we do typically sometimes just because executive teams and sometimes with executive teams plus other select people from around our client, we do workshops as to where we apply successful innovation tools like examples of successful innovations in other industries, etc. and go straight up as our clients. From that, we usually end up with a couple of dozen opportunities, we now or we prioritize it. And then we start working with our client on one or two of those, maybe three.
Greg Alexander [00:16:02] Interesting. So the market map, that’s another great example of intellectual capital and the ability to look into adjacent markets and bring back whitespace whitespace opportunities for clients. That’s a great example of IC. You know, body shops can’t do that kind of thing. They don’t have the method. Their talent is not capable of doing it. That’s a that’s a high skill service, and that’s why Adrian’s company is able to do what they’re able to do. So that’s really the lesson team today is intellectual property. Legally protected property is where we all want to get to. But there’s interim steps along the way which is commercializing monetizing your intellectual capital, and we saw several examples from you today and how to make that happen. And as he continues on his maturity, models, et cetera, et cetera, you know, those will lead to more highly scalable revenue streams. So, Adrian, it was a great episode today. Your examples were outstanding. What I loved about him was is that is that you’re in flight with this, you know, you’re clearly no longer a body shop and you’re on your path to building this highly scalable professional services organization by by, you know, monetizing and protecting all this knowledge that you’ve gained. So I appreciate you very much for being on the show.
Adrian Bouten [00:17:23] Thank you Greg.
Greg Alexander [00:17:24] All right.
Adrian Bouten [00:17:24] Appreciate the opportunity.