Tse other protection_mechanisms_2014

Protection Mechanisms besides IPR

The Smart Entrepreneur

Protectability

When Intellectual Property Rights are not available or not appropriate, there are other kinds of protection mechanisms, e.g.

1.Trade Secrets2.Complexity and Tacit Knowledge3.Speed to market

Copyright of Bart Clarysse and Sabrina KieferThe Smart Entrepreneur

Secrecy

Protectability


Trade secrets

An idea may be protected as long as the idea or the process remains a secret inside the company

Ways to protect a trade secret:• Confidentiality clauses in employee contracts• Non-disclosure agreements (NDAs) with partners, manufacturers,

investors, etc.• Use simple security measures such as locked file cabinets,

passwords on computers,…• Provide escorts for office visitors• Train employees to refer any sensitive questions to one specific

member of the company• Use code names for ingredients on labels, etc.

• But: secrets can be difficult to enforce• most investors will refuse to sign NDAs

• Famous (successful) example: the Coca-Cola recipe


Patenting vs. Secrecy

Pros of Patenting: Cons of Patenting:

• Powerful protection enforceable in the courts

• Must be applied for• Cost• Cost to enforce• Publication/disclosure of invention

(but this is also often a pro)


Patenting vs. Secrecy

Pros of Secrecy: Cons of Secrecy:

• Cheap in short term• Can (perhaps) keep competitors in

the dark for ever (Coca-cola)• Can also protect info that can’t be

protected with patents

• Once lost, it is lost forever;• Susceptible to independent

discovery/ reverse engineering


Protectability

Complexity and tacit knowledge


Complexity and tacit knowledge

Protection may lie in the fact that a venture is too difficult to imitate.For instance if:

• It is based on a complex idea or relationship of components/technologies• even reverse engineering may not be possible, because a piece of the

knowledge is hidden

• It contains built-in safeguards• e.g. a ‘Black box’ in ICT industries – configuring the product in such a way that

it gets destroyed if someone tries to open or ‘crack’ it

• It consists of interrelated parts of specialist knowledge held by different people/groups

• an intangible or invisible ‘glue’ between all the separate elements makes it hard to copy in a short time.


Complexity, cont.

• It depends on highly developed processes and/or key implementation skills of employees

• e.g.: a business in which a large part of the skill/value resides in analysis or interpretation skills, such as analysis of chemical compounds – requires developed expertise of the people performing the work

• It requires a lot of resources (time, money) and talent to re-create or imitate

• e.g. if other specialists are scarce, and development times are long, and you already have a head start


Protectability

“Speed to Market”


Speed to market

Capture attention and market share quickly before your competitors can react: ‘first mover advantage’ but with speed

• Note: this does not mean simply being first on the market with a particular product:

• You have to find a way to create a sufficient critical mass of users in a short time, before competitors or incumbents catch on

• You do this by finding a way to create a fast ‘pull effect’ to your business

• methods may include ‘open system’ or ‘open source’ and dual licensing strategies • (offer product free for individual use, build user base then charge

royalties for commercial use)• ‘freemium’ pricing model

• or other novel, compelling ways of offering the product.


Speed to market, cont.

• You have to consider whether you have the necessary resources to do this, such as:

• enough capital/cash to ride out an early phase of low revenue (if offering initial product for free)

• compelling value networks (see IE&D Toolbox) facilitating visibility and access to the customer

• customer-friendly solutions to unmet customer problems • Etc.


Speed to market example

Sun Microsystems workstations

Sun was not ‘first to market’ with workstations, but it achieved ‘speed to market’ by introducing the ‘open systems’ approach:

• Building its system architecture from off-the-shelf components that were easy and economical to replace or upgrade

• Basing its new products on existing industry standards to avoid compatibility issues and switching costs for customers

• Thereby promoting easy and fast adoption of their products• Captured the ‘network computing’ space by realising that customers needed ease

of installation, integration and maintenance, while incumbent competitors were focussing on protecting proprietary technologies and components and locking customers into their closed system architectures


Tse other protection_mechanisms_2014

Business

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