Over the last 40 years, the global economy has evolved to one that values and prioritizes innovation. Intangible assets today account for 90% of the S&P 500's total market value, up from 17% in 1975. Every business today views innovation as critical, and so now the question for companies is how do you optimize conversion of that innovation into an asset class that can then be leveraged to make companies more valuable? Enter intellectual property. On this episode of “On Aon,” host Sheena Singh speaks with Lewis Lee, CEO of Aon’s Intellectual Property Solutions about Aon's ground-breaking work identifying, valuing and protecting intellectual property (IP)—and finding ways to convert that IP into non-dilutive capital.
Over the last 40 years, the global economy has evolved to one that values and prioritizes innovation. Intangible assets today account for 90% of the S&P 500's total market value, up from 17% in 1975. Every business today views innovation as critical, and so now the question for companies is how do you optimize conversion of that innovation into an asset class that can then be leveraged to make companies more valuable? Enter intellectual property.
On this episode of “On Aon,” host Sheena Singh speaks with Lewis Lee, CEO of Aon’s Intellectual Property Solutions about Aon's ground-breaking work identifying, valuing and protecting intellectual property (IP)—and finding ways to convert that IP into non-dilutive capital.
Additional Resources:
An overview of Aon’s IP Solutions and IP Liability Insurance
Insights and thought leadership content from Aon's IP Solutions team
Business Insider: How Aon is redefining the value of intellectual property
Deanna Emery, a Lead Data Scientist at Aon, shares more information on Aon’s work building out diversity solutions for inventors and creators
Press release: Aon's New Quality of Intellectual Property Solution Helps Companies Realize Full Value of their IP Portfolio
Tweetables:
“We live in an incredible economy that is innovation-driven.” — Lewis Lee
“Today every business is under disruption because of the technology revolution, and that’s great.” — Lewis Lee
“IP is the real classification of how you take innovation and make it into something tangible.” — Lewis Lee
“The more diverse your inventorship teams are, the better the assets you have coming out the other side.” — Lewis Lee
Voiceover:
Welcome to On Aon. A podcast featuring conversations between colleagues on well, Aon. This week we hear from Lewis Lee about Aon's work, unlocking the full value of intellectual property. And now this week's host Sheena Singh.
Sheena Singh:
Hi, everyone. My name is Sheena Singh. I've been a colleague at Aon for nearly five years. I'm a senior vice president for Aon's national health care industry vertical, part of our health solutions practice. But I actually work across all solutions lines with our health care industry vertical. Cross-risk, re-insurance and data analytics and retirement. So I'm really excited today. I get a chance to talk to Lewis Lee. He's been at Aon since 2018, and he's serving as our CEO of Aon's intellectual property solutions team. Really excited to have you here, Lewis. Really great to know that you have unique insight into this topic that I'm actually just learning a lot more about now, intellectual property.
Sheena Singh:
I know you're a leading expert on understanding intellectual property. Specifically, as an asset class. So thanks for being here today, Lewis. I just wanted to start with a quick warmup question, then we'll get right into it. And everyone here and the audience can learn more about intellectual property and what Aon does for it. So tell me Lewis, what about the work that you're doing in regards to intellectual property most inspires you?
Lewis Lee:
Well, Sheena. Thank you so much for having me on, and I really appreciate the opportunity, it's delightful to be here and I'm actually really excited to talk about something I'm passionate about, innovation, intellectual property. I've had the privilege throughout my career to work with very innovative people, very innovative companies. As an IP attorney, prior to joining Aon, I spent almost 30 years just working in the intellectual property space as an attorney, getting to learn something new every day. In fact, I had some really cool clients. If you happen to be a gamer, I wrote the very first patents for Xbox gaming. If you love reading books on Kindle, I wrote the very first patents for the Kindle. And if you talk to your echo device or Alexa, I've had the privilege of working on the very first patents of those as well.
Lewis Lee:
It's really fun to watch innovation happen over the course of this timeframe. And we live in an incredible economy that it's innovation driven. In fact, if you look back over kind of human history, we were in this society of kind of an agrarian economy for most of human history. Then we got into this little industrial, where for the first time you could start making wealth from your ideas and assets. And then it started rocketing in the last 40 years to this innovation driven economy. And today, every business is under disruption, every business. It doesn't matter which one you're in today, because of the technology revolution that's going on, everything's under disruption and that's great, there's lots of new opportunity. We can solve a lot of problems.
Lewis Lee:
So it's really fun to be involved in this. As I move to your question specifically, you say, "What inspires me? What gets me to get up at work every day?" We feel like we're on a mission. We're on a mission to change the world. I feel like quoting Elwood Blues here, that we're on a mission from God to do exactly what we're doing to make this IP asset class a very noble and usable asset class to the world around us. Companies today kind of know it's valuable, but they don't really know how to use it. And so helping our clients create better enterprise value and take risk off their table through this asset class is really important, but even at a bigger societal level. America has always been one of these very innovative countries. In fact, I don't know if you know, but IP is actually in our US Constitution. So our founding fathers thought it was important enough that we put it in.
Lewis Lee:
So it's always been this innovative culture that we are going to solve some of the world's toughest problems today, whatever problems you're thinking that are out there and our challenges today, whether it's climate change or whatever is going to be solved through innovation. And so having a way to align incentives at the societal level, that we give some intellectual credit and thought and wonder to that, that's what intellectual property does. It's the asset class that allows you to create this innovation and partake in the riches of that.
Sheena Singh:
Yeah. That's great, Lewis. I mean, you sound really passionate about it. That's definitely coming through and it's really exciting to actually make this a little bit more real because I think that a lot of people wonder how to value something that is intangible like you're talking about. So when we think about intellectual property sort of being undervalued under protected and underappreciated, why is that? Why do you recommend to companies that they really understand their own IP portfolio and its value?
Lewis Lee:
It's really interesting. It's probably a problem of how to identify and unlock that value. People know that IP is valuable. They know that innovation is valuable, but they can't really quite put a finger on it. In fact, if you listen to most CEOs, they'll say, "Innovation is critical to my business. We innovate, we innovate or we die. And innovation this, and innovation that." What they really mean is, we're spending money to understand new problems and new ways. And I think I've got some IP to cover that, but this is what I'm doing. What snuck up on us over the last 40 years is that this world was predominantly a tangible based world. And so businesses and business schools and executives and boards have learned how to manage in a tangible based world. If most of your assets values in land, plant, and equipment and how you do things like that. That's really interesting.
Lewis Lee:
Today, over 85% of the value, for example, in the S&P 500 companies is based in intangible assets. One of the most symbolic moves is ... In last September, ExxonMobil, think about ExxonMobil. This classic company, it has been around for over 100 years was in the Dow industrial average for 92 years as the most valuable company from decade to decade, to decade, was pushed out of the Dow by Salesforce.com. Now I emphasize the dot com because Salesforce just came into being in the 2000 timeframe. So it's been around for a little over 20 years, and now it's one of the 30 most valued companies in the United States. That creation of intangible asset value is critical to today. And people just didn't know how to do that. So how do you unlock it? It really comes down to how do you measure it? There aren't any gaps standards, and if you can't measure it, it's really hard to manage. It's really hard to set KPIs and to do this or that with it, that's starting to change. And that's been one of our missions at IP Solutions is that we're creating technologies and teams and talents and processes to be able to assess and value intellectual property.
Lewis Lee:
So today, we can actually assess and value the intellectual property portfolio covering quantum computing, for example, at Microsoft. That wasn't something we could do before. Now we can do that and we can do it in a reasonable timeframe with high repeatability. So as we move through this life, being able to value measure and help companies, companies will be equipped to manage it. And that's really the big advances that we're having today and why we're able to hopefully help our clients become much more successful at creating that shareholder value that they all long to do.
Sheena Singh:
Yeah. No, that makes a lot of sense. And when you talked about innovation and really companies understanding how to articulate their innovation and make it a marketable asset. Ultimately. What do you think from your perspective is that connection between innovation and intellectual property?
Lewis Lee:
Well, innovation is the thing that happens when you start putting them talent together and you put a little capital behind it and you start thinking up new ideas. That's really what innovation is all about. Just thinking up new ideas, thinking up new approaches, new ways to do that. Intellectual property is the legal way that you convert that raw innovation into something that can be categorized as an asset class. In fact, I always say innovation alone is not enough, it's innovation plus protection. Plus that conversion process is what creates prosperity. And it works at the individual level, it works at the corporate level. It actually works at the societal level.
Lewis Lee:
In fact, we have very strong IP laws here, United States, because we want to have innovation built on top of each other. There are multiple types of IP, there's patents. For example, I'm sure you're all aware of recommendation engines that Amazon puts out. So if, you go to the Amazon site and you decide to buy a book, the next thing you know, you're getting asked, if you want to buy a toaster. Now, why would you want to buy a toaster when you bought a book? Because they have a bunch of engines in the background going, "Because Sheena really likes this book. We found out that lots of other people like this book also bought toasters. So we think Sheena might like to buy a toaster."
Lewis Lee:
Those engines can be patented. We can say, "Hey, I'm looking at behavioral and how people interact with my website, I'm going to get a patent around that." We can also take some of that code and all those algorithms, we can call those ... Those are protected by copyrights, so that we know how that software is getting protected. The fact that you went to an Amazon site, that Amazon brand is protected by trademarks and some of the algorithms themselves, and how they weight those things are protected by trade secrets. So now we know they have this ability to get value because nobody knows exactly how they're running those algorithms.
Lewis Lee:
And in the background, there's still people at Amazon thinking of new ways to do algorithms. And so they have this fifth category called know-how, which is learning how to build better answers or learning how not to build better answers. These are really where IP is the real classification of how you take innovation and make it into something tangible.
Sheena Singh:
Thanks, Lewis. You really made that easy for me to understand, and I'm sure the audience also very much appreciates that. I didn't really think about all of those parts coming together to kind of articulate that value, but it's helpful to know. I also think about this in the health care space. There's obviously, a lot of healthcare startups out there that are trying to really make their value more tangible and they have all of these different products that they're putting out there. So when we think about these new companies that are just starting up, what should they be doing to make sure that intellectual properties included in their overall business strategy that they've articulated that value?
Lewis Lee:
Sheena, that's a fantastic question. Let's take your health care company just as an example. So we've got a brand new health tech company starting up, and what typically happens is, they're going to go get some friends and family money, or maybe some early investors or seed capital. And so they're going to raise some seed capital. They're going to start innovating. Now, in an old world, if you were trying to build tangible assets for your value, maybe you would go buy a building to host all that or something like that. Today, you don't do that. What you're building in terms of asset value is that innovation and converting that innovation into assets that can be valued.
Lewis Lee:
So very early on, this health tech company should move this IP function into its strategic center. So as it's thinking about what I'm going to do, if I'm going to be attacking a new cure for cancer, then I'm going to be not only trying to figure out what products are going to help that, but also what IP I'm going to have to cover that product and that solution when I get done. Because when they get to that next round, for example, and they get to their series A, or their series B, they're going to have to point to something to say, "Yeah, we have created value here already. Not only do we create this technology, but we also have this IP covering it."
Lewis Lee:
In fact, there's a deck out there that people used to use for growth stage companies. They call it The 12 Magic Slides and they would say, "Here's the big market that we're trying to address, the total accessible market. Here's my solution. Here's my team to carry it out." I always said, "Slides six and seven of The 12 Magic Slides should be covering IP." Because that's really what investors have invested in your company for. They think creating something that's remarkable and that you have the intellectual property for that. And if, you're not doing that strategically from day one, you're going to leave money on the table and your company's not going to be as valuable.
Lewis Lee:
We've actually watched the life cycle of a company all the way from beginning all the way to exit. So if, your health care company gets to the very end and it's going to exit either in an IPO or strategically acquired, if they've done a great job of closely integrating their IP development with all the innovation they're doing along the way, they actually get a higher valuation at the end than they would otherwise. And so who wouldn't want to make their business more valuable for themselves and also for their shareholders along the way?
Sheena Singh:
Yeah, absolutely. That's really the key here is how do you monetize that intellectual property and articulate the value? So can you talk a little bit about how Aon helps support that for clients?
Lewis Lee:
Yeah. One of the cool ways we're doing now, is we're innovating some new ways to help companies unlock that value. So let's take that chain I was just talking about, and we were going through these areas. We get up to a series B, it's a growth stage company or health tech company. And they have some IP now. Traditionally, what they would have to do is, they would go back to a private equity group or an advanced venture capital group and say, "Hey, I need the next a hundred million dollars to grow." And you go, "Wow, next a hundred million." And they'd have to sell equity to get there. I'm going to value my company at X and we're going to sell 20% of it. And this business is going to come on and take that investment.
Lewis Lee:
We thought there might be a better way. And the only way to do that is to unlock the value that's already in the IP they have up until that point. So all that money that they spent getting them to a series B point, they now have this intellectual property and they have some revenues. If they have some revenues and a valuable portfolio, we can put this into a lending situation, into debt capital. And so this is non-dilutive for their company and their founders and for the early shareholders. So they don't get diluted down just during the growth stage. They just need more money to scale the operation. That shouldn't come with selling parts of your company that should come with just getting some capital. But since it's mostly IP backed, traditional banks aren't going to lend you like that.
Lewis Lee:
So we found this beautiful niche that we come in and value the IP and unlock that value. We have a lender that comes and provides capital for that. And then we have some insurance carriers that wrap that loan against the risk of a default. We call that collateral protection insurance. You guys maybe have heard of the acronym CPI. We use that all the time in lending. So it's an IP backed, CPI wrapped package that allows this company, you're a health tech company to get non-dilutive capital to grow through the next phase. It allows lenders to get a good return, a fair return, and it allows the insurance markets to participate in this intangible asset class. That's getting bigger and stronger and faster. So it's really a win-win win for all parties. And we have pioneered at Aon that whole ... What sounds like a very sophisticated interaction amongst multiple parties to create an entirely new class of funding in growth capital.
Sheena Singh:
Well, it sounds like you guys stay busy. It always sounds like a lot of moving parts, but something that ultimately brings value to those companies. I mean, from what I can tell, this is a fairly new area that I think is still being developed over time, going from that rotation of tangible assets to intangible assets and articulating the value. What do you think from your perspective has taken so long for this type of solution to come to market? Because it sounds fairly new to me, but also really exciting, especially because innovation keeps moving at such a fast pace.
Lewis Lee:
Well, as a society started moving from this industrial age to an innovation driven economy, that's global in nature. You might've remembered a book from Thomas Friedman called, The World Is Flat. And innovation is happening all over the world and it's happening extraordinarily fast, all over the world. Because of that, we started to see this rotation in intangible assets starting in about 1975. It was really just a blip on the screen until then. And this started growing out, about 1987, '88. It actually became the majority asset of an enterprise. So we crossed over that 50% mark. And today, it's north of 85% of the companies valued in that.
Lewis Lee:
One of the challenges we had is, how do you measure that value? There's no gap standards to doing it. So we kind of knew this asset class was growing and most CEOs know that it's valuable, but they didn't have a way to, to really understand that value. The ability of what Aon is bringing to market now, with our technologies and our analyst teams and the pieces that we've got. We can add that ability to measure the value and assess the quality of these assets in a timeframe that allows business to transact. So whether it's a transaction, whether it's a loan, whether it's a buy or a sell or a lease or a rent. We can actually, now value in that timeframe. That's allowed this class to become more liquid, if you will.
Sheena Singh:
Well, great. I have one more question for you. And this is something that I'm really passionate about, being a part of some business resource groups at Aon, and really focusing on inclusion and diversity, which I know is a priority for Aon. When we think about women making up roughly 50% of the workforce, they actually only account for 10% of the inventors on patents. So what is Aon doing to help promote increased inventorship among women and what's happening in the markets helps support that?
Lewis Lee:
Sheena, it's a great question. And kind of a real shame when you hear that, isn't it? I mean, what a stat. Our group is actually, quite passionate in trying to shed light on this and raise awareness. We've got a number of people in our group working on diversity in invention. One thing that we know for a fact, and we can empirically prove it, is that the more diverse your inventorship teams are, the better the assets you have coming out the other side. In fact, usually the better the innovation and the stronger that you have, your intellectual property assets as a result. And so even on a personal level, I used to direct a lot of forward invention sessions, where we'd gathered a lot of people into a room and think about the future three, five, seven years out, what it's going to be.
Lewis Lee:
We spend a lot of time making sure we knew which people were in the room and diversity was helping, not just even gender diversity, but ethnic diversity and where people were raised and where people went to school and how they thought about the world and whether they were technology guys. Or whether they were marketing people that, the different types of folks you get in the room really matters. One of the things we're doing right now at Aon is, we're building algorithms to try to figure out gender diversity for portfolios. So if, you go and you want to say, "Hey, how's the gender diversity looking at Facebook or Google, or at anybody?" We can actually run those metrics that you just quoted, roughly 10%. Is it nine and a half, is it 14?
Lewis Lee:
And raising that awareness, working with these companies to first of all, shed light that this is a challenge, and this is a problem. Solutions are a little bit more difficult, but we're working on how do you bring that to bear as well? And if, we can help companies start to frame how they think about innovation, this is getting back to the strategic part. If you look at it strategically and creating IP assets strategically, they should care about who are those inventors that are getting in there. If you want to create the most valuable assets you can, given the assets, given the dollars you're doing to create this innovation, then you should pay attention to how you create a diverse inventorship teams.
Sheena Singh:
Yeah. No, that makes a lot of sense. I think it's really important that ultimately, as you're thinking about these companies and the products that they have, how are they supporting and supplying diverse solutions to the population that's going to be diverse ultimately as well? So it makes a lot of sense that we want to make sure that we have all of those innovative and diverse minds coming together to think about the value that they can bring to different patents and inventions. So I really appreciate that. And I know, Aon also has a focus on innovation and partnerships with suppliers and the companies that we partner with on a tech side as well, to make sure that we're ultimately getting the best ideas and the most innovative ideas coming from a diverse group. So thanks, Lewis.
Sheena Singh:
Really appreciate you telling us more about intellectual property, especially what Aon is doing to help support companies in this space. I think it's great to know that we have you as a colleague that we can come to for this type of information. I'm going to pivot a little bit and talk about, a little bit more about you. If you could have invented anything, that's come out in the last five years, an idea, or a product, what would that thing be that you would be really interested in having started?
Lewis Lee:
Wow, that's such a great question. I always wanted to invent teleportation from the Star Trek years. We still have so much to invent, that we're not even close to.
Sheena Singh:
Why aren't we there yet?
Lewis Lee:
I mean, we have the roadmap. We've had the roadmap for 50 years now, and we still aren't even close.
Sheena Singh:
Who has the intellectual property for that, by the way, because we need to find it?
Lewis Lee:
It's probably all done. I really am excited about what we're doing. This is such an important piece of work that we're doing. That's what excites me. I think, if we're successful in bringing to bear and liquefying this extraordinarily valuable market, then we will have done something very meaningful in our careers. That's what gets me out of bed every day.
Sheena Singh:
That's great to hear. Well for me, it would be TikTok, but we all can't come up with the best ideas.
Lewis Lee:
I love TikTok and so does my daughters, but apparently I'm not very good at it because you have to be able to dance, is what I've been told.
Sheena Singh:
Yeah. There's a lot of TikToks you can watch to learn those dances. So I think you'll get there. Your daughter can help you out with that.
Voiceover:
This has been a conversation On Aon and our intellectual property solutions. Thank you for listening. If you enjoyed this week's episode tune in, in two weeks for a discussion of Aon's cyber solutions. To learn more about Aon, its colleagues, solutions and news, check out our show notes and visit our website at Aon.com.
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