Integrating Business and Intellectual Property Strategy Dr. Guriqbal Singh Jaiya Director Small and...

Integrating Business and Intellectual Property Strategy

Dr. Guriqbal Singh JaiyaDirector

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

Customer Expectation

Dilemma

Time

Perf

orm

an

ce

Expectation

s

Continuo

us Improv

ement

Performance Gap

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 ProductLevels of Product

BrandName

QualityLevel

Packaging

Design

Features

Delivery& Credit

Installation

Warranty

After-Sale

Service

CoreBenefit

orService

CoreBenefit

orService

ActualProduct

ActualProduct

CoreProduct

CoreProduct

AugmentedProduct

AugmentedProduct

Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Selling Products• Customers who

care about products “on their own terms”: is this 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

Time

Sellingproducts

Selling (parts of)interconnected

systems

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

Pre-IPO

Expansion

Start-Up

Seed

Idea / Concept

TimeTime

$

• Bright Idea• Experimental• Research• Business Plan• Proof of Concept

• Legal Entity• Founders = Mgt Team• Minimal Revenue• Slow Growth • Support Functions

• Administration• Marketing• Revenue Growth

• High Growth• Head Count • Multiple Cycles

• Viable• Market acceptance• Heading to IPO or M&A

The Process/Steps of Innovation

Understanding the Process of Innovation

Expansion

Start-Up

SeedIdea / Concept

TimeTime

$

•Business Plan•Prototype/ POC•Project Management•Business Premises•Project Management•Management Training

•Corporate and Secretarial •Financial •Training •PR and Marketing•Networking •Business Development

•Recruitment•Business Development•A & P•Market Access

•International support and Mkt. Access •Diversification strategies and support •Recruitment•Training and Incentives

The Needs of Each Stage

IP Management Needed in all stages

Understanding the business/role of IP

ManufacturingPatent 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

Suppliers

Established Leader

Complimentors

Customers

Other CompetitorsDisruptive

Technologies

Converging Technologies

You

IP Environment

IP Deployment Continuum

• IP risk balance favors target

• Goal: Design Freedom

Concerns OpportunityMAD

• 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

ConversionMechanisms

• Sale• Out-license• Joint Venture• Strategic Alliance• Integrate with Current Business• Create New Business• Donate• Barter/Trade

$$

Aligning Capabilities

VisionVision VisionVision

StrategiesStrategies StrategiesStrategies

InnovationInnovationStrategiesStrategies

InnovationInnovationStrategiesStrategies

Value Creation

Value Creation

Value Extraction

Value Extraction

IP Objectives/Roles:

Strategic Framework

Cash Value

Positioning Value

Where does Intellectual Property fit into this?

An Aspect of Good Management• People Management – because IP is generated by people

and used by people

• 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; someof 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. 1Example 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


• 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


• 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

® 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:

Literary / artisticcreation

Invention

Financing Product Design

CommercializationMarketing

Licensing

Exporting

Patents / Utility Models/Trade secrets

Copyright/Related Rights

Patents / Utility models

Industrial Designs/

Trademarks/GIs

Trademarks/ GIsInd. Designs/Patents/Copyright

All IP Rights

All IP Rights

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

IncrementalInnovation

New Ideas to ActivityStage Gated Development Process (SGDP)

• Idea, Feasibility, Proof of Concept, Prototyping, Scale-up, 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?

Intellectual Capital

HumanCapital

IntellectualAssets

Value Creation Value Extraction

IntellectualProperty

The path from new ideas through validation to a new technology:

New . Technologies

SGDP

The Industry Life Cycle as an S curve

Performance

Time

Ferment

Takeoff

Maturity

Discontinuity

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 175K in 1992 to 366K in 2004

• The rush to monetize IP is on – Royalties increased from $500M to $100B 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 Responses1. 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

Intellectual Property

Intellectual Assets

Knowledge & Know-How

INTELLECTUALCAPITAL

When legally protected these are Intellectual PropertyWhen codified these are Intellectual Assets

Most

Tangible

Least

The Components of Intellectual Capital: A Spectrum of Knowledge Assets

Patents

Trademarks

Publishing Rights

Brand logosdesigns

Copyrights

InformationDatabases

IndustrialDesign

SoftwarePlatforms

TradeSecrets

ConfidentialInformation

Technology

Structural Capital

Know-How

Customer Capital

UnpatentedResearch

Knowledge Providing

Value

Human Capital

Culture

Source: PricewaterhouseCoopers

© Frank Lynn & Associates, IDC

What are They Buying?

Source: IDC, High Performance Partnering Workshops

Whole Product Offering

Post-Sales

Support

Transactional Support

Pre-Sales Support

Integration

Services

Softw

are

Consulting

Hardware

TheProduct

Elements of the whole product

• Consulting services • System hardware• System software• Development tools • Server applications• Application development/

modification services• PC/client hardware• Desktop applications

• LAN products• WAN connectivity

products• Systems integration

services• Training services• Maintenance/support

services– Server hardware– Client hardware– Software– Network

© IDC

Source: IDC, High Performance Partnering Workshops

Focus on Policy Formulation:

BusinessManagement

EnterpriseGovernance

Policy

Performance

Strategy

OperationsManagement

Board / CEO

Functional Managers

General Managers

Vision-directed and Values-driven:

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.

World ofFacts

ScenarioOptions

World ofPossibilities

Values VisionBusinessCase

PoliticsRegulationsEconomicsTechnologyEnvironment

Market ResearchTechnology Assessment

Competitive AnalysisStrategic Benchmarking

Customer AnalysisBusiness Performance Critical Assumption Evaluation

Discontinuity Analysis

Strength-Weakness-Opportunity-Threat Analysis

EnterpriseIn search of

potential strategic inflection points

How will technology advances drive your business?

“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 Hamelconsultant, 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?

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• Technology strategy • Product strategy• Core competency• Resource alignment

Corporate Strategy:

Articulates the ways in which the opportunities created by the firm’s capabilities can be exploited.

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?

Technologies

Markets

How will we create value?

How will we capture value in the face of

Competition?

How will we build the organizational

capabilitiesnecessary to

deliver it?

Effective Business Strategies address three key challenges:

Effective strategies answer three key questions:

How will we Create value?

How will weCapture value?

How will weDeliver value?

• How will we create value?– 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?

And answer seven critical questions:

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

$$

Structural Capital (generic)Structural Capital (generic)

Complementary BusinessAssets (differentiated)

Intellectual Capital (unique)


Sal

es F

orce

Sal

es F

orce

Dis

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n C

apab

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istr

ibut

ion

Cap

abili

ties

Man

ufac

turin

g F

acili

ties

Man

ufac

turin

g F

acili

ties

HumanCapitalHumanCapital

IntellectualIntellectualAssetsAssets

IntellectualIntellectualAssetsAssets

IntellectualProperty

Structural Capital (Generic Assets)

Intellectual Assets

$

Complementary Business Assets (Differentiated Assets)

Dis

trib

uti

on

Cap

ab

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ies

Sale

s F

orc

e

Man

ufa

ctu

rin

g F

acilit

ies

Intellectual Capital(Unique Assets)


HumanCapital

(Lead Time)

1. IP Value Is Created When Leveraged Through Complementary Assets

2. When Companies Have Different Complementary Asset Strengths They Will Need Different Intellectual Property (Materials, Process, Use)

Intellectual Property Tuned To A Company’s Business

Kn

ow

-How


Tra

de S

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ts

Cop

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gh

ts

Tra

dem

ark

s

Pate

nts

?%


Intellectual Assets

$


Dis

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Sale

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HumanCapital

(Lead Time)

•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 Beverage Companies

Kn

ow

-How


Tra

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ts

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ts

Tra

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s

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Intellectual Assets

$


Dis

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ies

Sale

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HumanCapital

(Lead Time)

•Most value is in Trademark, Know-How, Manufacturing and Sales•Some value in Patents

Intellectual Property Tuned To A Company’s Business Paper Companies

Kn

ow

-How


Tra

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ts

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ts

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Intellectual Assets

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HumanCapital

(Lead Time)

•Most value is in Human Creativity, Trademark, Copyright, and Distribution

Intellectual Property Tuned To A Company’s Business Software Companies

Kn

ow

-How


Tra

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ts

Cop

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Intellectual Assets

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HumanCapital

(Lead Time)

•Most value is in Human Creativity, Patents, and Trademarks•Some value in Know-How, and Sales

Intellectual Property Tuned To A Company’s Business Pharmaceutical Companies

Kn

ow

-How


Tra

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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

Sales and

service

expertise

Brand name

Distribution channels

Customer relationships

Complementary technologies

COMPETENCIES

Things you can do

Things you ownRESOURCES

Core technological know-how in innovation

Other

Other


Complementary assets can be:

Generic

there is adequate and competitive supply

Specialized

sourcing will create unilateral dependence

Co-specializedboth supplier and innovator are dependent


• Things you can do– Manufacturing capabilities– Sales and service expertise

• Things you own– Brand name– Distribution channels– Customer relationships

COMPETENCIES

RESOURCES

Complementary AssetsComplementary Assets

Bargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized.

Manufacturing Distribution

Service

Complementarytechnologies

OtherOther

Marketing

FinanceCore

technological know-how

Uniqueness & Complementary Assets

over the Life Cycle

Ferment

Takeoff

Maturity

UniquenessComplementary

Assets

Uniqueness & Complementary Assets over the Life Cycle:

Ferment

Takeoff

Maturity

UniquenessComplementary

Assets

Managing discontinuities means managing complementary assets:

Performance

Time

Ferment

Takeoff

Maturity

Discontinuity

Which of my complementary assets are useful?

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?

Waysof... designing

supplying producing marketing delivering

Know-how transfercontract

Source: S. Urban, S. Vendemini, CESAG, Strasbourg

The eleven modes of cooperation agreements: illustration of their anchor points

Researchcontract

CommonResearch

CommonpurchaseSubcontracting

Engineeringcontract

Patentlicence

Commonproduction

Trademarklicence

Consortium(common

marketing)

Distributionagreements

Services•After sale

•Lobbying

•Relations

Source: S. Urban, S. Vendemini, CESAG, Strasbourg

Cooperations modes and value chainCooperations modes and value chain

Distri-bution

•Reciprocal distribution agreements (access to existing distribution networks)

Marke-ting

•Trademark licence

•Consortium (common marketing)

•Joint advertising

Produc-tion

•Subcontracting agreements

•Common manufacturing agreements

•Implementation of engineering contracts

•Patent license

•Production consortium

Logistic

supply•Common purchases

•Access to the specific resources of the country (raw materials, subventions, capital cost, compared advantages)

Link of the chain

Coope-rationmodes

R&D

•Exchanges of existing knowledge

•Organisation of a common research

•Setting up of a common project (design, engineering)

New Business Models EmergeThen…

One Integrated Company

Now…

Many Distributed Companies

Product Development

Cycle

Product Developmen

t

Tool Compani

es

Testing Services

CRO’s CRM’s

New Regional Model EmergeThen…

Manufacturing

Research

Development

Trials/Testing

Services

Self-contained regional clusters

Region A

Region E

Region B

Region F

Region D

Region C

Region G

Now…

Specialized, networked regions

Build, Buy, Partner: Benefits and Tradeoffs

BuildBuild

BuyBuy

PartnerPartner

Time to Market & Control & Profit

Cos

t &

Ris

k

Most product controlOwn the IPMost profit opportunity

Longest time to marketRisk in market shiftsHigh development costsHighest switching costs

Pros Cons

Shorten time to marketOwn the IP

Acquisition costsIntegration costs

Least ControlIntegration CostsShared gross margins -Least Profit Opportunity

Shortest Time to Market Conserves ResourcesTry before you BuyLowest Switching CostsCredibility and access

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

• Core to business• Need intellectual

property• Time critical

• Shortage of in-house 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 Buy Partner

Leadership Core Business

Time to Market

Reduce Risk

Familiarity Matrix: Optimum Strategies forTechnological Innovation: Finding others who

know more about the markets or the technology

Decreasing knowledge of the technologyDe

cre

asin

g k

no

wle

dg

e o

f th

e m

ark

et

Internal Development, Acquisition, or Joint Venture

Joint Venture

Internal Development

Venture Capital or Educational Acquisition

Internal Venture or Acquisition or License

Internal project, or Acquisition, or License

Venture capital, or Educational Acquisition, or University Relationship

Venture Capital or Educational Acquisition

Joint Venture, Strategic Alliance or University Relationship

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

R&D Lab of company XFirm X

Developing technological core competences within the company X

University-industry

cooperation

Firm’s

own

research

lab

Public-private partnership

High-tech

SMEs

Pre-competitive R&D with

competitors

Value creation: products, processes etc

Worldwide search and evaluation of technology and knowledge

New firms, s

pin-offs

Firm X itself

Joint ventures

Licensing technologies

‘Open innovation’ Research Campus, with•Venturing

•‘Incubator’

•Technology transfer and support, …

“Exploring wider range of knowledge areas”

Creating more value faster“More focus and resources for firm’s own competences”

NothingIn the

past

Addenbrooke’s Hospital

Cambridge Biotechnology

Northern Venture Managers Cambridge

University

Pfizer

Lorantis

Cambridge Antibody Technology

Domantis

Abbott

Eli Lilly

Astex

Daniolabs

Neurodegeneration Consortium

Gateway Fund

Biotica

Babraham Bioincubator

Babraham Technix

Babraham Bioscience Inst Technologies Ltd Wellcome Trust

Wyeth Amgen AstraZeneca

Cambridge Crytallographic Data Centre

GlaxoSmithKline

Gilead Sciences

(joint venture)

(Cambridge University administered)

Institute for Medical Research

Challenge Fund

Founders came out of Pfizermacrolide

templates

Vistide out-license

Hepsera out-license

virtual screening collaboration

(Cambridge University)

(funding)

partnership

arthritis collaboration

(funding)

licensing

licensing

Genzyme

antibodies license

validation

(funding)

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

http://www.openinnovation.net/Book/NewParadigm/index.html

http://www.openinnovation.net/Book/NewParadigm/index.html

http://www.amazon.com/exec/obidos/redirect?link_code=ur2&tag=openinnovatio-20&camp=1789&creative=9325&path=http%3A//www.amazon.com/gp/product/0199290725

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

Costs

Market

RevenuesMarket

Revenues

Market

Revenues

Internal

Development Internal

Development

Internal &

External

Shared

Development

Sell Divest

Spin off

License

Shorter ProductLife Cycle

Increasingcosts Decreasing

costs

New RevenueSources

Golden Past Past Present Present Future

‘Closed innovation single track’

“Ideas & “Current Market Place”

Research Development Commercialisation

Investigations”

Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West

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‘Open innovation three lane highway’

“Ideas & “Current Market Place”

Research Development Commercialisation

Investigations”“New Market Place”

“Other firm’s Market Place”

“External Ideas &

Investigations”

licensing

“External Technologies

Technology spin-offs

Insourcing gate

Outsourcing gate

Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West

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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 co-workers, 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 ?

RA

Phase 11896-1997

Raufoss

HARA

Phase 21997-2003

Nammo

Fission

Phase 32004-

HARA

Nammo

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. 20th c.• The 787 - Dreamliner - 21st 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 WP3 Food Biotechnology ICT New Media KIBS Automotive Tourism

Branding

Culinary Tourism

Wine Tourism

DANFORS

Revitalise Food-River Tourism (e.g. Douro)

Oenotechnology Guidance Systems

Knowledge Intermediaries

Food Biocluster

Functional Foods

Vehicle Processing Systems

Biofuels

Bioengineering

Bio-imaging

Firm Level Innovation BiographiesEURODITE, Toulouse Targets for Innovation Investigation Research in Aquitaine, France integrates the wine industry and biotechnology

to develop the new field of Oenotechnology In Emilia-Romagna, Italy meat industry the Food and ICT industries have

collaborated to produce Biosensors for testing the maturity of Parma ham The German automotive industry is actively engaged in innovative activity

with a number of farms and agricultural research institutes in Brandenburg to develop Biofuels

In Bavaria, bioscientific knowledge on milk-based Lactobacteria are the subject of research collaborations with the brewing and fermentation industries

In Bornholm and North Jutland, Denmark the Agro-Food and Tourism industries are collaborating on innovatory Culinary Tourism activities also involving the delineation of Food Cultures involving anthropological research

Innovation research in Midi-Pyrénées, France focuses on specialised tourism-based vehicle guidance systems integrating knowledge from Aerospace, Automotives and ICT with that from Tourism, Agro-food and Bioscience

In Hordaland (Bergen), Norway Tourism demand to experience Aquaculture processes in organic fish farms has led to interactions between the Agro-Food industry, New Media, ICT and Knowledge-Intensive Services to realise a network facility

In Jura, Switzerland the traditional Watch-making industry is being transformed into a Tourism asset by formation of Agro-Food, Tourism, ICT, New Media and traditional fine-mechanics ‘experience economy’ networks

Protecting Inventions

Manage Competition

Hierarchy of IP Value

Design Freedom

Build Markets and Relationships

Deliver Revenue

Pote

nti

al R

etu

rn

Biz Strategy Driver

Building an IP Strategy

Build Your Portfolio– Strategic Patenting– Purchase Patents

Deploy Your Portfolio– Design Freedom– Manage Competition– Enter new Markets– Deliver RevenueProtecting Inventions/Recognition

Manage Competition

Design Freedom

Markets Development

Deliver Revenue

Biz Strategy

A Hierarchy of IP/IC Management

Cost Control (Control Costs, Improve Productivity)

Profit Center (Manage for Profitability)

Integrated (Manage for Growth)

Visionary (Drive Growth)

Defensive (Build Portfolio, Protect Markets and Technology)

IP Culture - Levels of companies

Ground Floor

Second Floor

Third Floor

Penthouse

Basement

TotalIntegration

Profit Generation

Cost Savings

Defensive

Unprotected

PenthouseIntegration

Third floorProfit

Second floorSavings

Ground floorDefensive

BasementUnprotected

0 - Unprotected level

They rely on confidentiality, access to complementary assets and lead time advantages


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected

How businesses behave at the various levels ?

1 - Defensive level

Activities of the company focus on:

- 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


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected

2 - Cost Savings Level

The activities of the company :

Focus on how to reduce costs of filing/maintaining intellectual property portfolio


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected

3 - Profit Generation Level

The activities of the company focus on:

- 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


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected

3 - IP for Profit Level

Company activities:

- Considers intellectual property at all levels of organization

- Organises high profile campaign against infringers

- Develops active patent/trademark licensing program

- Makes more good sense oriented R&D efforts

- begins/improves active screening/watches for patent infringement


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected


- 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


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected


Licensing

- 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)


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected

4 - IP Integration level

The company:

- Sets long term patent strategy

- Aligns IP strategy with itscorporate strategy

- Makes competitive assessment

- Focuses on strategic value extraction

- Develops a performance measurement and reporting system

- Ensures that patent strategy drives research


ThirdProfit

SecondSavings

GroundDefensive

BasementUnprotected

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

TOP MANAGEMENT

CEO

technicaldpt

marketing dpt

commercialdpt

legaldpt

Intellectual property

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

commercialdpt

TOP MANAGEMENT

CEO

commercialdpt

TOP MANAGEMENT

CEO

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


TOP MANAGEMENT

CEO

Technicaldpt

marketing dpt

legaldpt

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

TOP MANAGEMENT

CEO

commercialDpt

technical dpt


Dept

Other Departments


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



Directorate IP Secretariat

strategies

documentation

patents trade marks

professional

administrative

professional

administrative

Licensing +litigation

Internal structure of IP dept

Use of patents

Is it coreBusiness?

Obligation to licence?

Licence at market conditions

Licence at disadvantageous

conditions

Use of patents

Is it coreBusiness?

Use of patentsUse of patents


Use of patentsUse of patentsUse of patentsUse of patents


Use of patents

Offensive attitude

yes

no

no

Coop. agreements

compulsory licences at

favorable conditions


yes

Decision process in large companies

Obligation to licence?yes








Obligation to licence?yes Coop. agreements
















Licence at disadvantageous

conditions

yes

Licence at conditions

below market

yes


Use of patents




Coop. agreements

Offensive attitude

Licence at conditions below

market

Decision process in a small company

Integrating Business and Intellectual Property Strategy Dr. Guriqbal Singh Jaiya Director Small and...

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