Seminar6-Group3 Aminreza Pournorouz PSD

1. How much know-how should LEGO Group share with its tool suppliers? How practical is it in reality to prevent spillovers?

LEGO has invested and focused on improving speed and precision of their manufacturing process. LEGO selects tools suppliers on the basis of innovation strength (patent position and reputation). This means LEGO’s suppliers are leaders of innovation in their own sector. Suppliers’ strength in technology helps LEGO to bring their innovative manufacturing process into to reality. It would be impossible without strong suppliers. To achieve the goal, LEGO needs to describe objectives and strategy of manufacturing process development, and suppliers need to share their technology possibilities and limits. To sum up, to obtain a notable outcome both parties should share lots of information. There is a little chance to concurrently be too protective and built a successful partnership. Therefore, building mutual trust is very important.

Preventing knowledge spillovers is difficult. Employees who leave the company (LEGO or supplier) will carry knowledge in their heads. Emerging market, multi- geography presence of LEGO, suppliers and competitors makes are challenging. It can be very expensive and complicated to setup isolated factories and product lines with access restriction and also enforce suppliers and employee to sign complicated legal terms (like Apple).

2. How much of LEGO Group’s process innovations are actually detectable? In other words, when looking at the product, do you think you would be able to see how they made it?

The major difference between Apple and LEGO is the product. LEGO toys are simply plastic the value is the idea behind toys (you build it yourself) and how to make the piece of plastic in a competitive price and sufficient volume. On the hand if you disassemble an iPhone you can find (or guess) the supplier of most of the key components.

3. What is you recommendation aboutAs argued in Q1 Trade secret protection is complicated, costly and vulnerable. Patent mgmt. is costly and after 18 months competitors can imitate the innovation with minor changes and scape the license fees. So, the 20 years patent protection seems fragile. Along the same line, Trade secret and patent strategies may create obstacle toward suppliers.

Although publication reveal the innovation it does not have a major down-side comparing with Patent and it is almost free. In addition, it provides the same level of protection (competitor cannot patent it and impact LEGO manufacturing).

To sum up, Publication is the most practical, simple and cheap and future proof strategy to protect the innovation.

Page 1 of 1