Integrating Business and Intellectual Property Strategy Dr. Guriqbal Singh Jaiya Director Small and Medium-Sized Enterprises Division World Intellectual Property Organization www. wipo. int/sme
Spotlight is on knowledge in today’s economy • Knowledge, Weightless, Information, Digital or Service Economy • Factors of production: Land, Labor, Capital, Intangibles (Knowledge) • Knowledge as useful Information (or Service) • Information as a “Public Good” • Information as Property
Market-oriented Economy • Playing Field: Unfair competition; free riding • National Legal Systems: Diversity (bilateral/regional/ international treaties or agreements) • Adding Value : Meeting or exceeding market needs or expectations • Market research: Consumers’ needs, competing products or substitutes, gaps • Technological innovation as an element of marketing
The challenge of adding value in today’s economy • Raw materials/Inputs: Processing (Value addition) = Value added output/component; product; sale; Profit • Value addition: Cheaper, Faster, Better: Functional/technological or aesthetic/non-technological; Rational/Emotional (More for Less) • Price; access/availability; consistency • Individual, Enterprise (legal person), Chains, Networks; consortia; Open Innovation (Industry-Government. Academia) • Ownership vs. access to knowledge • Value Addition, Value Delivery and Value Extraction
Performance ec p ti ta Ex s uou in t Con ns o Performance Gap t n eme prov m I Time Customer Expectation Dilemma
Tangible and Intangible Assets • Intangibles differ from tangibles in two ways that “change the rules of the game”, (if not the game itself): – Value in context – Multiple simultaneous value streams
Levels of Product Augmented Product Installation Packaging Brand Name Delivery & Credit Quality Level Core Benefit or Service Features Design Warranty Actual Product Core Product After. Sale Service
Tangibility Spectrum Salt Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets Tangible Dominant Intangible Dominant Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching
Selling Products • Customers who care about products “on their own terms”: is the right product for me? • Build the “best” product – Best designed – Lowest cost – Most reliable Selling Interconnected Systems • Customers who care about the total system experience: will this connect with the rest of my world? • Control the architecture Or • Influence the architecture and build the best products within it
The challenge Performance Selling products Selling (parts of) interconnected systems Time
Strategic Entrepreneurship and Innovation • Entrepreneurship is concerned with: – The discovery of profitable opportunities – The exploitation of profitable opportunities • Firms that encourage entrepreneurship are: – Risk takers – Committed to innovation – Proactive in creating opportunities rather than waiting to respond to opportunities created by others
Understanding the Process of Innovation The Process/Steps of Innovation Pre-IPO $ Expansion • Legal Entity • Viable • Market acceptance • Heading to IPO or M&A • High Growth • Founders = Mgt Team • Bright Idea • Head Count • Minimal Revenue Start-Up • Experimental • Multiple Cycles • Slow Growth • Research • Support Functions • Business Plan • Administration Seed • Proof of Concept • Marketing • Revenue Growth Idea / Concept Time
The Needs of Each Stage • Recruitment • Business • Corporate and Development Secretarial • A & P • Financial • Market Access • Training • PR and Marketing • Networking Expansion • Business Development • International support and $ • Business Plan • Prototype/ POC • Project Management • Business Premises • Project Management • Management Training Start-Up Seed Mkt. Access • Diversification strategies and support • Recruitment • Training and Incentives Idea / Concept Time IP Management Needed in all stages
Understanding the business/role of IP Patent Manufacturing Distribution Sales Brand • Understand the value chain of the business and industry • Understand how profits are generated – primary product – spare parts and related products – service and maintenance • What are the important features of the IP? How does it add value to the business? • What are the important features of the industry other than IP? – – other important intangible and tangible assets in the value chain competitive structure of the industry customer characteristics and purchasing criteria substitute products or services
IP Environment Other Competitors Established Leader Disruptive Technologies Suppliers You Customers Converging Technologies Complimentors
IP Deployment Continuum Concerns | • IP risk balance favors target • Goal: Design Freedom | MAD | | Opportunity | • Balanced IP risk • Goal: Confirm MAD | | • IP risk balance favors You • Goal: Identify value generation opportunities
Sources and Conversions of Value Sources of Value • Innovations • Complementary Business Assets – Purchasing – Manufacturing – Distribution – Sales Conversion Mechanisms • Sale • Out-license • Joint Venture • Strategic Alliance • Integrate with Current Business • Create New Business • Donate • Barter/Trade $
Aligning Capabilities Vision Strategic Framework IP Objectives/Roles: Strategies Innovation Strategies Value Creation Cash Value Extraction Positioning Value Where does Intellectual Property fit into this?
An Aspect of Good Management • People Management – used by people because IP is generated by people and • Knowledge Management – because a lot of knowledge is informal and may or may not crystallise as recognisable category of IP • IT Strategic Planning – because a lot of IP is IT-related; some of the more complex IP issues arise in IT context • Contract Management – because IP is often created (or improved) in context of a contract (eg, supply contract or joint venture relationship) • Asset Management – because IP is an asset, albeit intangible; it has a value • Risk Management – because there are risks to an organisation flowing from its actions, or failure to act, in relation to IP (including risk of lost opportunity)
Introduction to IP Management 1 • • • Legal Technical Business Export Financial Relationships • • • Accounting Tax Insurance Security Automation Personnel
Introduction to IP Management 2 • • Trademarks (Brands) Geographical Indications Industrial Designs Patents and Utility Models Copyright and Related Rights Trade Secrets New Varieties of Plants Unfair Competition
Bringing it All Together Example No. 1 • Decades ago, Coca-Cola decided to keep its soft drink formula a secret • The formula is only know to a few people within the company • Kept in the vault of a bank in Atlanta • Those who know the secret formula have signed non-disclosure agreements • It is rumored that they are not allowed to travel together • If it had patented its formula, the whole world would be making Coca-Cola
Bringing it All Together Example No. 2 • Patent for stud and tube coupling system (the way bricks hold together) • But: Today the patents have long expired and the company tries hard to keep out competitors by using designs, trademarks and copyright
Bringing it All Together Example No. 3 • Patent for the fountain pen that could store ink • Utility Model for the grip and pipette for injection of ink • Industrial Design: smart design with the grip in the shape of an arrow • Trademark: provided on the product and the packaging to distinguish it from other pens Source: Japanese Patent Office
Bringing it All Together Example No. 4 ® Registered Trade Mark ‘TM’ Unregistered Registered Design Copyright: Labels & Artwork Patents: Several dozen!
Basic Message 1 IP adds value at every stage of the value chain from creative/innovative idea to putting a new, better, and cheaper, product/service on the market: Trademarks/ GIs Ind. Designs/Patents/Copyright Patents / Utility Models/Trade secrets Patents / Utility models Industrial Designs/ Trademarks/GIs Invention Commercialization Marketing Financing Literary / artistic creation Copyright/Related Rights Product Design Licensing All IP Rights Exporting
Basic Message 2 • IP Strategy should be an integral part of the overall business strategy of an Enterprise • The IP strategy of an Enterprise is influenced by its creative/innovative capacity, financial resources, field of technology, competitive environment, etc. • BUT: Ignoring the IP system altogether is in itself an IP strategy, which may eventually prove very costly or even fatal
A Key Framework: The industry life cycle Era of Ferment/ Discontinuity “Dominant design” emerges Maturity Incremental Innovation
New Ideas to Activity Stage Gated Development Process (SGDP) • Idea, Feasibility, Proof of Concept, Prototyping, Scaleup, Market Launch. • Milestones, Hurdles, Probabilities of Success. • How do the new ideas develop? • How are they moulded into the required solution? • How do you bring them to market? • Do you do it alone or do you need help? • Just about every development on the face of the earth today results from a team effort!!
Developing New Technology? The path from new ideas through validation to a new technology: Intellectual Capital Value Creation Human Capital Value Extraction Intellectual Assets Intellectual Property SGDP New . Technologies
The Industry Life Cycle as an S curve Performance Maturity Discontinuity Takeoff Ferment Time
Uniqueness and Appropriability are very important: If a particular innovation, or the knowledge on which it rests, can be completely “appropriated” then the innovating firm may be able to maintain a unique position. This is a tremendous source of bargaining power.
Sources of Appropriability Intellectual property protection – Patents • Finite length • – The right to prohibit “producing” Copyrights • The right to prohibit “copying” Secrecy – Trade secrets & non compete clauses – “Tacit” vs. codified knowledge Speed – lead time – learning-curve advantages
Intellectual Property – An Untapped Asset • IP is the most underutilized asset in business – Unrecognized on most balance sheets – Typically, an “afterthought” in business • IP is one of the single largest opportunities for companies to increase strategic business value – Create new business opportunities – Create barrier to entry for competitors • IP represents a significant, untapped opportunity for revenue generation – Patent Royalties in 2002 estimated at $100 Billion – Qualcomm – 27% of revenues from patent licensing in FY 2004
Intellectual Property – An Unrealized Threat • IP represents a significant business risk – Over 2 Million effective patents today – Patents filed increased from 175 K in 1992 to 366 K in 2004 • The rush to monetize IP is on – Royalties increased from $500 M to $100 B in the 90’s – Number of lawsuits doubled, cost tripled from 1992 to 2002 • Many businesses are starting to act – Boeing, IBM, Lucent, Adobe, Microsoft, P&G, TI – Infrastructure companies are forming
Typical Responses 1. Integrated, Active IP Strategy – Active patent filing strategy – Use IP to achieve business objectives – Active effort to identify and mitigate IP Risks 2. Have An Active Patent Filing Strategy – Do actively capture ideas – Still don’t coordinate filing objectives with business objectives 3. Have A Strategy, But Passive Versus Active – View IP as event driven rather than business process – Wait for submissions vs. engineering development of IP 4. No Defined IP Strategy – Do not have an IP Strategy – Do not link their IP Strategy to their business strategy
Definitions • Intellectual Capital: Knowledge that can be used to create value. • Intellectual Assets: Codified knowledge that can be used to create value. • Intellectual Property: Legally protected intellectual capital.
Definitions • Knowledge Management/ Intellectual Capital Management: the process by which an organisation or society generates wealth from its knowledge or intellectual capital. • Intellectual Asset Management: the above process for codified assets. • Intellectual Property Management: the above process for legally protected assets.
A View of Intellectual Capital Knowledge & Know-How Intellectual Assets Intellectual Property INTELLECTUAL CAPITAL
The Components of Intellectual Capital: A Spectrum of Knowledge Assets When legally protected these are Intellectual Property When codified these are Intellectual Assets Trademarks Patents Publishing Rights Brand logos designs Copyrights Trade Secrets Information Databases Confidential Information Industrial Design Software Platforms Technology Structural Capital Most Customer Capital Unpatented Research Knowledge Providing Value Human Capital Culture Least Tangible Source: Pricewaterhouse. Coopers Know-How
What are They Buying? Whole Product Offering So ftw ar e Pre-Sales Support Co ns ult Post. Sales e ar Support w rd Ha n io at s gr e te ic In Serv The Product Transactional Support Source: IDC, High Performance Partnering Workshops © Frank Lynn & Associates, IDC ing
Elements of the whole product • • • Consulting services System hardware System software Development tools Server applications Application development/ modification services • PC/client hardware • Desktop applications Source: IDC, High Performance Partnering Workshops © IDC • LAN products • WAN connectivity products • Systems integration services • Training services • Maintenance/support services – – Server hardware Client hardware Software Network
Focus on Policy Formulation: Enterprise Governance Business Management Operations Management Policy Strategy Board / CEO General Managers Functional Managers Performance
Vision-directed and Values-driven: How will technology advances drive your business? Market Research Technology Assessment Competitive Analysis Strategic Benchmarking Customer Analysis Business Performance Enterprise World of Facts Scenario Options World of Possibilities Critical Assumption Evaluation Discontinuity Analysis Values Business Case Vision Politics Regulations Economics Technology Environment In search of potential strategic inflection points Strength-Weakness-Opportunity-Threat Analysis The management of a business enterprise requires the strategic navigation of the macro-economic environment of the business. It demands that all executives understand the performance levels, trends, risks, opportunities, and threats that define the external context of business operations. It also demands that executives know how external change will influence the direction of their past business choices and what flexibility they have in decision-making to make choices that drive the business toward its agreed-upon vision and exercises the desired values for cultural behavior.
“Strategy doesn’t come from a calendar -driven process; it isn’t the product of a systematic search for ways of earning above average profits; strategy comes from viewing the world in new ways. Strategy starts with an ability to think in new and unconventional ways. ” Gary Hamel consultant, academic and author
Why have a strategy? 1. To make choices
Reasons to have a strategy: 2. To be able to change it
What is a “strategy” anyway?
Corporate Strategy: What is it? • A defining statement containing the intent and direction of the corporation, & delineating the strategic plans to achieve its objective. • A living guideline, that focuses and directs efforts of the corporation. • Constantly tested and modified as required. • Not to be circumvented without deliberate modification. Balances and integrates the following elements: • Vision of strategic direction for long-term strength • Market direction and needs • Competitive effects Articulates the ways in which the • Technology strategy opportunities created by the firm’s • Product strategy capabilities can be exploited. • Core competency • Resource alignment
Basic Strategic Considerations: Key Inputs to Strategy: • Customer inputs – what is working and not working. • Market place analysis – growing needs, emerging applications and significant trends. • Competitive influences and barriers to entry. • Internal competency assessment regarding skills and ability. • Corporate business process benchmarking. • Business strategic inflection point analysis. • Resources available for commitment. Key Outputs of Strategic Dialog: • Business strategy – goals and objectives of the organization. • Technology strategy – technologies to acquire or develop. • Marketing strategy – Why, where and how to focus on customers? • Product strategy – features and functions to be developed. • Intellectual property strategy – How will IPR contribute to strategy?
Effective Business Strategies address three key challenges: Markets How will we create value? Technologies How will we build the organizational capabilities necessary to deliver it? How will we capture value in the face of Competition?
Effective strategies answer three key questions: How will we Create value? How will we Deliver value? Capture value?
• And answer seven critical How will we create value? questions: – How will the technology evolve? – How will the market change? • How will we capture value? – How should we design the business model? – Where should we compete in the value chain? – How should we compete if standards are important? • How will we deliver value? – How do we manage the core business and growth simultaneously? – How do we use our strategy to drive real resource allocation?
Creating Value: • Understand how technologies will evolve – (Both your own and those on which you rely) • Understand how customer needs will evolve • Develop world class products and services that meet customer needs
Factors Driving IP Value • Time Savings (know how) • Cost Savings (formula) • Risk • Profits Advantage (patent)
Intellectual Property Profit Sources Premium Sales Price Cost Savings Volume Synergy New Revenue Streams
IP Requires Old Economy Assets IP commercialization and the realization of value is not possible without complementary assets.
The Interaction of Intangible and Tangible Assets to Create Earnings Intellectual Assets Intellectual Property Structural Capital (generic) Sales Force Human Capital Value Extraction Distribution Capabilities Value Creation Complementary Business Assets (differentiated) Manufacturing Facilities Intellectual Capital (unique) $
Intellectual Property Tuned To A Company’s Business Complementary Business Assets Intellectual Capital (Unique Assets) ? % Sales Force Distribution Capabilities Know-How Trade Secrets Copyrights Intellectual Property Manufacturing Facilities Intellectual Assets Patents Human Capital (Lead Time) Value Extraction Trademarks Value Creation (Differentiated Assets) $ Structural Capital (Generic Assets) 1. 2. IP Value Is Created When Leveraged Through Complementary Assets When Companies Have Different Complementary Asset Strengths They Will Need Different Intellectual Property (Materials, Process, Use)
Intellectual Property Tuned To A Company’s Business Beverage Companies Complementary Business Assets Intellectual Capital (Unique Assets) Sales Force Distribution Capabilities Know-How Trade Secrets Copyrights Intellectual Property Manufacturing Facilities Intellectual Assets Patents Human Capital (Lead Time) Value Extraction Trademarks Value Creation (Differentiated Assets) $ Structural Capital (Generic Assets) • Line Shows the Percentage of Company Value (Market Capitalization) That is Protected By This Asset • Most value is in Trademark, Trade Secret, Distribution and Sales
Intellectual Property Tuned To A Company’s Business Paper Companies Complementary Business Assets Intellectual Capital (Unique Assets) Sales Force Distribution Capabilities Know-How Trade Secrets Copyrights Intellectual Property Manufacturing Facilities Intellectual Assets Patents Human Capital (Lead Time) Value Extraction Trademarks Value Creation (Differentiated Assets) Structural Capital (Generic Assets) • Most value is in Trademark, Know-How, Manufacturing and Sales • Some value in Patents $
Intellectual Property Tuned To A Company’s Business Software Companies Complementary Business Assets Intellectual Capital (Unique Assets) Sales Force Distribution Capabilities Know-How Trade Secrets Copyrights Intellectual Property Manufacturing Facilities Intellectual Assets Patents Human Capital (Lead Time) Value Extraction Trademarks Value Creation (Differentiated Assets) Structural Capital (Generic Assets) • Most value is in Human Creativity, Trademark, Copyright, and Distribution $
Intellectual Property Tuned To A Company’s Business Pharmaceutical Companies Complementary Business Assets Intellectual Capital (Unique Assets) Structural Capital (Generic Assets) • Most value is in Human Creativity, Patents, and Trademarks • Some value in Know-How, and Sales Force Distribution Capabilities Know-How Trade Secrets Copyrights Intellectual Property Manufacturing Facilities Intellectual Assets Patents Human Capital (Lead Time) Value Extraction Trademarks Value Creation (Differentiated Assets) $
How shall we capture value? • Uniqueness • Complementary Assets • Structure of the Value Chain
Three key ideas: • Uniqueness – Controlling the knowledge generated by an innovation • Complementary assets – Controlling the assets that maximize the profits from innovating • Understanding the dynamics of the value chain – Should we buy our suppliers? Distributors? – Should we outsource our manufacturing… distribution… sales… capability?
What are Complementary Assets? • Those assets that allow a firm to make money, even if the innovation is not unique: • The answer to the question: – If our innovations were instantly available to our competitors, would we still make money? Why?
In the best case, complementary assets should be tightly held Complementary assets that are tightly held are not easily available to entrants or to most competitors
Types of Complementary Assets Competitive manufacturing Other Distribution channels RESOURCES Sa se les ex rvi an pe ce d rti se Core technological know-how in innovation Brand name COMPETENCIES Complementary technologies Other Customer relationships Things you own Things you can do
Types of Complementary Assets Complementary assets can be: Generic there is adequate and competitive supply Specialized sourcing will create unilateral dependence Co-specialized
Types of Complementary Assets • Things you can do – – Manufacturing capabilities Sales and service expertise • Things you own – Brand name – – Distribution channels Customer relationships COMPETENCIES RESOURCES
Complementary Assets Manufacturing Distribution Finance Core technological know-how Marketing Other Service Complementary technologies Other Bargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized.
Uniqueness & Complementary Assets over the Life Cycle Uniqueness Maturity Takeoff Ferment Complementary Assets
Uniqueness & Complementary Assets over the Life Cycle: Uniqueness Maturity Takeoff Ferment Complementary Assets
Managing discontinuities means managing complementary assets: Maturity Performance Discontinuity Takeoff Which of my complementary assets are useful? Ferment Time
Key Questions: • When should an entrepreneurial firm develop it’s own: – – Manufacturing Distribution Sales …. . capabilities? • When should a mature firm outsource it’s: – – Manufacturing Distribution Sales …. . capabilities?
The eleven modes of cooperation agreements: illustration of their anchor points Common Research contract Ways of. . . Engineering contract Common purchase Subcontracting supplying designing Trademark licence Patent Consortium Distribution licence (common agreements marketing) Common production producing Source: S. Urban, S. Vendemini, CESAG, Strasbourg marketing delivering Know-how transfer contract
Cooperations modes and value chain Link of the chain R&D • Exchanges of existing knowledge Cooperation modes • Organisation of a common research • Setting up of a common project (design, engineering) Logistic supply • Common purchases Production Marketing Distribution • Subcontracting agreements • Trademark licence • Reciprocal distribution agreements (access to existing distribution networks) • Access to the • Common specific manufacturing resources of agreements the country (raw • Implementatio materials, n of subventions, engineering capital cost, contracts compared advantages) • Patent license • Production consortium Source: S. Urban, S. Vendemini, CESAG, Strasbourg • Consortium (common marketing) • Joint advertising Services • After sale • Lobbying • Relations
New Business Models Emerge Then… Now… CRM’s CRO’s Product Development Cycle Tool Companies One Integrated Company Testing Services Many Distributed Companies
New Regional Model Emerge Then… Now… Region D Region A Region B Manufacturing Region C Research Trials/Testing Services Development Self-contained regional clusters Region G Region E Region F Specialized, networked regions
Build, Buy, Partner: Benefits and Tradeoffs Cost & Risk Pros Cons Most product control Own the IP Most profit opportunity Shorten time to market Own the IP Build Buy Partner Longest time to market Risk in market shifts High development costs Highest switching costs Acquisition costs Integration costs Shortest Time to Market Conserves Resources Try before you Buy Lowest Switching Costs Credibility and access Least Control Integration Costs Shared gross margins Least Profit Opportunity Time to Market & Control & Profit
Why Build: Technology Leadership • Pioneer in the field • Patentable technology • Need to own the intellectual property • Core business • Have time or can build in increments • Have in-house expertise
Why Buy: Core to business • Need intellectual property • Time critical • Shortage of inhouse expertise • Acquire market leadership
Why Partner: Speed • Fastest Time to Market • Reduce Risk • Leap Frog Competition • Customize for Specific Markets • Customers buy best of breed
Which horse to pick? Build Leadership Buy Core Business Partner Time to Market Reduce Risk
Decreasing knowledge of the market Familiarity Matrix: Optimum Strategies for Technological Innovation: Finding others who know more about the markets or the technology Venture Capital or Educational Acquisition Venture capital, or Educational Acquisition, or University Relationship Internal Development, Acquisition, or Joint Venture Internal Venture or Acquisition or License Venture Capital or Educational Acquisition Internal Development Internal project, or Acquisition, or License Joint Venture, Strategic Alliance or University Relationship Joint Venture Decreasing knowledge of the technology
New developments in innovation raises new issues and problems • Greater emphasis on commercializing scientific discoveries, particularly in IT and the bio-sciences • Speed and potential value of scientific progress leads to emphasis on solid and well-designed portfolios of research projects • Universites as active drivers of innovation: Academic entrepreneurship and the entrepreneurial university • University-industry partnerships • Increased search for radical innovation and top-line growth.
Commercialization Model • Strategic Investment is the Foundation of a Successful Commercialization Model
‘Opening up’ of industrial research process Worldwide search and Value creation: evaluation of technology products, Prand knowledge processes etc co e-c m om ‘Open innovation’ pe fs pe tit of Research Campus, with o tit inrs iv e Un R& ive co rsi D op w era ty-i ith tio ndu n str y Public-private partnership tech High. SMEs ’s Firm own arch e res lab “Exploring wider range of knowledge areas” the In ast • Venturing fir • ‘Incubator’ • Technology transfer and support, … Developing technological core competences within the company X “More focus and resources for firm’s own competences” R&D Lab of company X , ms sp w Ne elf X its Firm Joint ventures Lice tech nsing nol ogi es Creating more value faster X Firm Nothing
Gilead Sciences Hepsera out -license Glaxo. Smith Kline Institute for Medical Research Gateway Fund Vistide outlicense (joint venture) Pfizer Cambridge Founders Biotechnology came out of macrolide Pfizer templates (funding) Biotica Northern Venture Managers (funding) Challenge Fund Wellcome Trust Lorantis Babraham Technix Cambridge Crytallographic Data Centre (Cambridge University) Daniolabs Cambridge University Babraham Bioscience Inst Technologies Ltd Babraham Bioincubator Addenbrooke’s Hospital Neurodegeneration Consortium (funding) Astex Genzyme Domantis partnership antibodies license Cambridge Antibody Technology Eli Lilly virtual screening collaboration validation Wyeth Abbott arthritis collaboration licensing Amgen licensing (Cambridge University administered) Astra. Zeneca
The New Paradigm for Innovation “Open innovation…assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as they look to advance their technology. ” Henry Chesbrough, Open Innovation: Researching a New Paradigm
The Key is Collaboration “Few if any companies today can hold all the pieces of their own product technology…they simply must collaborate with others if they want to survive and prosper…IP has become much more of a bridge to collaboration” Marshall Phelps, Microsoft
Open Innovation – buying in ideas or products to add to your model Revenues Sell Divest Market Revenues New Revenue Sources Shorter Product Life Cycle License Market Revenues Internal Development Increasing costs Costs Golden Past Spin off Internal & External Shared Development Internal Development Decreasing costs Past Present Future
‘Closed innovation single track’ 1 2 “Ideas & 3 “Current Market Place” Investigations” 4 5 Research Development Commercialisation Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
‘Open innovation three lane highway’ “External Ideas & Investigations” “External Technologies 1 Insourcing gate 2 “Ideas & 3 Investigations” Outsourcing gate Technology spin-offs 4 licensing “Current Market Place” “New Market Place” “Other firm’s Market Place” 5 Research Development Commercialisation Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
IP model enabling “Open Innovation” • R&D on generic technologies • Industry value chains brought together • Partners collaborate and contribute ideas
A Network View of Innovation Depending on a firm’s strengths, different firms play different roles in open innovation value chain • Some firms generate innovations • Some integrate the innovations of others • Some have a fully integrated model An open innovation system is a networked system
From a network IN an organization …. To the network IS the organization Hierarchy Matrix Network
TYPES OF NETWORKS • • Task Networks: involve the exchange of specific job-related resources including information, expertise, professional advice, political access, and material resources. Social Networks: involve relationships characterized by higher levels of closeness and trust than those that are exclusively task-related. They usually consist of people who share a common background or interest. Since people have more leeway in choosing their friends than their coworkers, these networks tend to be less closely determined by formal organizational arrangements and work assignments. Social networks, however, often play a critical role in mobilizing resources, transmitting information, and providing peer coaching. Innovation Networks must combine both! Thanks to H. Ibarra
TYPES OF RELATIONSHIPS • • It is important to cultivate a broad range of network relationships! Long-term, high reciprocity (Strong) ties: Close bonds and reciprocal relationships ensure reliability under conditions of uncertainty. These include peer alliances that function by exchange of favors, ties of trust and loyalty between superiors and subordinates, and career development ties between mentors and proteges. Short-term, instrumental ties: Many important ties such as highly circumscribed job-related connections, are often dissolved when the relationship has served its purpose. Some are with individuals the manager may not even like, but must interact with to get things done. Distant Acquaintances (Weak ties): These types of relationships are important because they function as bridges between the manager and distant social or organizational groups. As a result, they are often sources of unique or novel pieces of information. A networking strategy that does not take these into account leaves a manager open to the risk of developing an inbred network that will not provide information on external opportunities or threats.
Raufoss – Light Metal Industry • From an integrated and closed corporation to dynamic cluster – RA (Raufoss Ammunition Company) 1897 – Gradual growth of civil production in light metal – Gradual growth of global customers (automotive) • From national customers to global customer • From closed innovation to open innovation • Challenges for relations and communications
From RA via Industrial Park to a Dynamic Cluster ? Phase 1 Phase 2 Phase 3 1896 -1997 -2003 2004 - Raufoss RA HARA Nammo Fission Integrated company Reintegration ? Fragmentation Dynamic cluster?
Technology - Aircraft • Boeing Co - The first mass jetliner - the 707. • 98% made in the US 1950’s 60’s. 20 th c. • The 787 - Dreamliner - 21 st c. • 70% outsourced to 900 contractors • Half made by contractors outside the US - primarily Japan and Italy but also China (rudder). • Boeing does the final assembly. • Boeing maintains the overall IP – it’s their innovation. – Without Open Innovation and strong IP the above process could not happen. Boeing Co.
Boeing - the platform Co.
Some cross-sector ‘platform’ candidate innovation biographies in firms & regions arising from WP 3
Firm Level Innovation Biographies
Hierarchy of IP Value Biz Strategy Driver Build Markets and Relationships Design Freedom Manage Competition Protecting Inventions Potential Return Deliver Revenue
Building an IP Strategy Build Your Portfolio Biz Strategy – Strategic Patenting – Purchase Patents Deliver Revenue Markets Development Design Freedom Manage Competition Protecting Inventions/Recognition Deploy Your Portfolio – – Design Freedom Manage Competition Enter new Markets Deliver Revenue
A Hierarchy of IP/IC Management Visionary (Drive Growth) Integrated (Manage for Growth) Profit Center (Manage for Profitability) Cost Control (Control Costs, Improve Productivity) Defensive (Build Portfolio, Protect Markets and Technology)
IP Culture - Levels of companies Penthouse Integration Penthouse Total Integration Third floor Profit Third Floor Profit Generation Second floor Savings Second Floor Cost Savings Ground floor Defensive Ground Floor Defensive Basement Unprotected
0 - Unprotected level How businesses behave at the various levels ? Penthouse Integration Third Profit Second Savings Ground Defensive Basement Unprotected They rely on confidentiality, access to complementary assets and lead time advantages
1 - Defensive level Activities of the company focus on: Penthouse Integration Third Profit Second Savings Ground Defensive Basement Unprotected - Creating awareness of the role of intellectual property - Obtaining intellectual property - Maintaining IP rights - Respecting IP rights (esp. Patents) of others (Freedom to Operate) - Willingness to enforce patents, when necessary
2 - Cost Savings Level Penthouse Integration Third Profit Second Savings Ground Defensive Basement Unprotected The activities of the company : Focus on how to reduce costs of filing/maintaining intellectual property portfolio
3 - Profit Generation Level The activities of the company focus on: Penthouse Integration Third Profit Second Savings Ground Defensive Basement Unprotected - Making intellectual property a profit center - Utilizing the intellectual property portfolio as a corporate asset - Extracting value directly from intellectual property portfolio - Non-core, non-strategic IP having tactical value
3 - IP for Profit Level Company activities: Penthouse Integration Third Profit Second Savings - Considers intellectual property at all levels of organization - Organises high profile campaign against infringers Ground Defensive - Develops active patent/trademark licensing program Basement Unprotected - Makes more good sense oriented R&D efforts - begins/improves active screening/watches for patent infringement
3 - IP for Profit Level Penthouse Integration Third Profit Second Savings Ground Defensive Basement Unprotected - Establishes an enforcement program, it ensures that no one infringes your patents - Requires constant policing and monitoring of the market in order to challenge infringing products - Enforcement function includes method of negotiation so company can suppress infringement without having to engage in litigation - In tough cases, is prepared to litigate against infringers
3 - IP for Profit Level Licensing Penthouse Integration Third Profit Second Savings Ground Defensive Basement Unprotected - Starts/increases proactive licensing program - Finds opportunities to generate revenue without sacrificing competitive advantage - Begins by licensing non-core technologies or technologies outside current field of products - Finds appropriate licensees (potential infringers)
4 - IP Integration level The company: Penthouse Integration - Sets long term patent strategy Third Profit - Aligns IP strategy with itscorporate strategy Second Savings - Makes competitive assessment Ground Defensive Basement Unprotected - Focuses on strategic value extraction - Develops a performance measurement and reporting system - Ensures that patent strategy drives research
Organization of IP Department Other factors that affect the decision: • Objectives set for the IP Department • Importance of the IP Dept in the company • Strategic placement inside the organigram • Competitive Strategy of the Company • Type of Technology (Mature or Radical) • Type of Market served by the Company
Organization of an IP Department TOP MANAGEMENT CEO technical dpt marketing dpt commercial dpt Intellectual property legal dpt
Organization of an IP Department It is a company having a defensive stance IP department takes • No autonomous decisions • No autonomous strategy It receives guidelines from the department to which it is attached
Organization of an IP Department TOP MANAGEMENT CEO Technical technical dpt marketing dpt commercial Dpt legal Intellectual dpt Property Dept Other Departments
Organization of IP Department It is a company of the multinational type, • leading on the market • having large dimensions The IP department has autonomous decisional power and defines strategies There exists a Director for IP , sometimes at Vice- President level
Organization of IP Department Directorate IP Secretariat trade marks professional administrative Licensing + litigation patents professional strategies administrative documentation Internal structure of IP dept
Organization of IP Department Use of patents Offensive attitude Is it core Business? yes compulsory licences at favorable conditions no Obligation to licence? Coop. agreements yes no Licence at market conditions Licence at disadvantageous conditions below market conditions Decision process in large companies
Organization of IP Department Use of patents Offensive attitude compulsory licences at favorable conditions Coop. agreements Obligation to licence? yes Licence at conditions below market Decision process in a small company
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