The Importance of Intellectual Property
for
Business Development and Growth
Dr. Guriqbal Singh Jaiya
Director
Small and Medium-Sized Enterprises Division
World Intellectual Property Organization
www.wipo.int/sme
SMEs Website
IP for Business Series
• Making a Mark
(Trademarks)
• Looking Good
(Designs)
• Inventing the
Future (Patents)
• Creative
Expression
(Copyright and
Related Rights)
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: 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
Levels of Product
Augmented
Product
Installation
Packaging
Brand
Name
Delivery
& Credit
Quality
Level
Core
Benefit
or
Service
Features
AfterSale
Service
Design
Warranty
Actual
Product
Core
Product
THE PRODUCT LIFE CYCLE
• A reminder that most
products do not live
for ever
• A conceptual
framework only
• Difficult to measure
where a product is in
its life cycle
Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 CosmeticsFast-food
 Outlets

Tangible
Dominant

Intangible
Dominant

Fast-food
Outlets
Advertising
Agencies
Airlines
Investment
Management
Consulting
Teaching




What is innovation?
• Innovation is the process and outcome of creating
something new, which is also of value.
• Innovation involves the whole process from
opportunity identification, ideation or invention to
development, prototyping, production marketing
and sales, while entrepreneurship only needs to
involve commercialization (Schumpeter).
What is innovation?
• Today it is said to involve the capacity to
quickly adapt by adopting new innovations
(products, processes, strategies, organization,
etc)
• Also, traditionally the focus has been on new
products or processes, but recently new
business models have come into focus, i.e. the
way a firm delivers value and secures profits.
What is innovation?
• Schumpeter argued that innovation
comes about through new combinations
made by an entrepreneur, resulting in
–
–
–
–
–
a new product,
a new process,
opening of new market,
new way of organizing the business
new sources of supply
Dimensions of innovation
There are several types of innovation
– Process, product/service, strategy,
which can vary in degree of newness:
– Incremental to radical,
and impact:
continuous to discontinuous
Drivers for innovation
– Financial pressures to reduce costs, increase efficiency, do
more with less, etc
– Increased competition
– Shorter product life cycles
– Value migration
– Stricter regulation
– Industry and community needs for sustainable development
– Increased demend for accountability
– Demographic, social and maket changes
– Rising customer expectations regarding service and quality
– Changing economy
– Greater availability of potentially useful technologies coupled
with a need to exceed the competition in these technologies
What is innovation?
• Gary Hamel argued that today’s market
place is hostile to incumbents, who
now needs to conduct radical business
innovation:
– Radically reconceiving products and
services, not just developing new products
and services
– Redefining market space
– Redrawing industry boundaries
New conditions for innovation
• Small start-up entrepreneurs increasingly
depend on large firms:
–
–
–
–
–
as suppliers or customers
for venture finance,
for exit opportunites,
for knowledge (production, markets and R&D)
and for opening new markets.
New conditions for innovation
• Large firms increasingly depend on small
start-ups
– for NPD,
– as suppliers of new knowledge (which they cannot
develop themselves),
– or organizational renewal, for experimentation with
busienss models,
– for opening new markets, etc
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.
Complementary Resources
Manufacturing Distribution
Finance
Core
technological
know-how
Service
Complementary
technologies
Marketing
Other
Other
Bargaining power of owners of complementary resources
depends upon whether complementary resources are generic or
specialized.
The eleven modes of cooperation
agreements: illustration of their anchor points
Common
Research
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
THE CHAIN MODEL
VALUE CROSSES ONE SINGLE CHAIN :
DESIGN
INDUSTRY
HOW TO TURN
 TECHNOLOGY
TECHNOLOGY
 INNOVATION
INTO ART
 QUALITY/PRICE
RETAIL
IN ORDER
TO TRANSMIT
TO CONSUMERS
A UNIQUE IMAGE
New Business Models Emerge
Then…
Now…
CRO’s
Product
Development
Product
Development
Cycle
Tool
Companies
One Integrated
Company
CRM’s
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
Commercialization Model
• Strategic Investment is the Foundation of a
Successful Commercialization Model
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
• Experimental
Start-Up
• 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
•Business Plan
Development
•International support and
•Prototype/ POC
Mkt. Access
•Project Management
Start-Up
•Diversification strategies
•Business Premises
and support
•Project Management
•Recruitment
•Management Training
•Training and Incentives
Seed
Idea / Concept
Time
IP Management Needed in all stages
The firm with a product
meeting a market demand
the firm
product
=
demand
the market
The firm with uncertain
future market demand
the firm
time
?
=
the market
drivers of change:
population
tastes and fashions
economic conditions
technology
politics and regulations
The firm adapted to changes
in market demand
the firm
the firm
time
=
the market
=
the market
The firm facing competitive
activity
competitors
the firm
the firm
=
the market
time
=
the market
MARKET ORIENTATION
• a corporate philosophy
• the implementation of the marketing
concept
• an ideal
• a policy statement
• a corporate state of mind
MARKET ORIENTATION
• a faith
• an organizational culture
• a concept of stages of development
and degree of maturity that parallels
the economic development of the
national market
MARKET ORIENTATION
A form of organizational culture that:-
• places the highest priority on the
profitable creation and maintenance of
superior customer value while
considering the interests of other key
stakeholders
• provides norms for behaviour regarding
the organizational development of and
responsiveness to market information
Different orientations of business:
• Product orientation
• Cost orientation
• Capacity orientation
• No-commitment orientation
• Competitor orientation
• Market orientation
Entrepreneurship 1
Entrepreneurship drives innovation,
competitiveness, job creation and economic
growth.
It allows new/innovative ideas to turn into
successful ventures in high-tech sectors
and/or can unlock the personal potential of
disadvantaged people to create jobs for
themselves and find a better place in society.
Entrepreneurship 2
Entrepreneurship, in small business or
large, focuses on "what may be" or
"what can be".
One is practicing entrepreneurship by
looking for what is needed, what is
missing, what is changing, and what
consumers will buy during the coming
years.
Entrepreneurship 3
Entrepreneurs have:
–
–
–
–
–
A passion for what they do
The creativity and ability to innovate
A sense of independence and self- reliance
(Usually) a high level of self confidence
A willingness and capability (though not
necessarily capacity or preference) for
taking risks
Entrepreneurship 4
Entrepreneurs do not (usually) have:
– A tolerance for organizational bureaucracies
– A penchant for following rules
– A structured approach to developing and
implementing ideas
– The foresight to plan a course of action once
the idea is implemented and established
Entrepreneurial Success
1. People (Entrepreneur /Entrepreneurial
Team)
2. Opportunity (Marriage of Market and
Product/Service)
3. Access to Resources (Land. Labor,
Capital, Knowledge
And the fit amongst these three elements
(Business Model)
What is a Franchisee?
“Frantrepreneur”
(fran*tre*pre*neur) n.
One possessing the desire to be a
business owner -- without the desire to
recreate the wheel -- by following a
proven system for the benefit of personal
and professional goals.
The Frantrepreneur Mentality
“I’m in
business for
myself, but not
by myself”.
“Why would I work
for someone else
when I can work for
myself and reap the
rewards of my
efforts?"
“I have the opportunity
to learn from the success
and failure of others.”
“I want a ‘bottled’ process for
success that I can use in developing
my own successful business.”
"Why would I spend years and the
investment required to establish a
successful brand when I could buy a
franchise which provides immediate
access to a successful business system and
a brand name which others already have
made successful?"
Entry Strategies
• New Business
– Develop a new product or service
– Develop a similar product or service
– Competitive approaches
• Existing Business
– Buying a business
– Franchise
– Joint venture – customer or supplier
“Competitive strategy is about being
different. It means deliberately choosing to
perform activities differently or to perform
different activities than rivals to deliver a
unique mix of value.”
Michael E. Porter
Definition
• Competitive Advantage
–An advantage over competitors
gained by offering consumers
greater value than competitors
offer.
Competitive Strategies
• How does an organization improve their
competitive performance?
• Must establish a competitive advantage in 3
areas:
– Uniqueness: of resources & processes (Bill Gates
knowledge of IBM)
– Value: where products/services warrant a
higher-than-average price or exceptionally low
– Difficult to imitate: when products/services are
hard to mimic or duplicate
Competitive Strategies
• Basic Competitive Strategies: Porter
– Overall cost leadership
• Lowest production and distribution costs
– Differentiation
• Creating a highly differentiated product
line and marketing program
– Focus
• Effort is focused on serving a few market
segments
Competitive Strategies
• Basic Competitive Strategies: Value Disciplines
– Operational excellence
• Superior value via price and convenience
– Customer intimacy
• Superior value by means of building
strong
relationships with buyers and satisfying
needs
– Product leadership
• Superior value via product innovation
CORE COMPETENCES
Definition
Hammel and Prahalad defined
core competence as a central
value - creating capability of an
organization/enterprise.
CORE COMPETENCES
• Core competences are activities or
processes that critically underpin an
organisation competitive advantage.
• They create and sustain the ability to meet
the critical success factors of particular
customer groups better than providers in
ways that are difficult to imitate
CORE COMPETENCES
• Core competences are distinctive
capabilities that lead a company to
a competitive advantage.
• Features of an enterprise that
cannot be readily reproduced by a
competitor.
CORE COMPETENCES
Core competences can vary through
the time depending on the strategy
adapted by the companies and the
identification of the core
competencies is the first step for a
company to decide which business
opportunities to pursue.
The Five Generic Competitive Strategies
Relative costs and differentiation
Relative costs
High
High
Niche
Outstanding
success
Differentiation
Disaster
Low
Lowest
cost
Low
PRICING OBJECTIVES
CORPORATE
OBJECTIVES
ENVIRONMENTAL
ANALYSIS
PRICING
OBJECTIVES
PROFIT
ORIENTATED
VOLUME
ORIENTATED
COST
ORIENTATED
COMPETITION
ORIENTATED
PRICING STRATEGIES
• Segmented/Differential:
• random/periodic/second market discounting
• Exploiting Competitive Position:
• price signalling/penetration/experience
curve/geographic pricing
PRICING STRATEGIES
• Product Line Pricing:
• image pricing/price bundling/premium
pricing/complementary pricing
• Dynamic Pricing Strategies:
• multi-tiered price or channel pricing
Low-Cost Provider Strategies
Keys to Success
• Make achievement of meaningful lower costs
than rivals the theme of firm’s strategy
• Include features and services in product
offering that buyers consider essential
• Find approaches to achieve a cost advantage
in ways difficult for rivals to copy or match
Low-cost leadership means low overall costs, not
just low manufacturing or production costs!
Differentiation Strategies
Objective
• Incorporate differentiating features that cause buyers
to prefer firm’s product over brands of rivals
Keys to Success
• Find ways to differentiate that create value for buyers
and are not easily matched or cheaply copied by
rivals
• Not spending more to achieve differentiation
than the price premium that can be charged
Where to Find Differentiation
Opportunities in the Value Chain
• Purchasing and procurement activities
• Product R&D and product design activities
• Production process / technology-related activities
• Manufacturing / production activities
• Distribution-related activities
• Marketing, sales, and customer service activities
Activities,
Costs, &
Margins of
Suppliers
Internally
Performed
Activities,
Costs, &
Margins
Activities, Costs,
& Margins of
Forward Channel
Allies &
Strategic Partners
Buyer/User
Value
Chains
How to Achieve a
Differentiation-Based Advantage
Approach 1
Incorporate product features/attributes that
lower buyer’s overall costs of using product
Approach 2
Incorporate features/attributes that raise the
performance a buyer gets out of the product
Approach 3
Incorporate features/attributes that enhance buyer
satisfaction in non-economic or intangible ways
Approach 4
Compete on the basis of superior capabilities
Types of Differentiation Themes
• Unique taste – Dr. Pepper
• Multiple features – Microsoft Windows and Office
• Wide selection and one-stop shopping – Home Depot,
Amazon.com
• Superior service -- FedEx, Ritz-Carlton
• Spare parts availability – Caterpillar
• Engineering design and performance – Mercedes, BMW
• Prestige – Rolex
• Product reliability – Johnson & Johnson
• Quality manufacture – Michelin, Toyota
• Technological leadership – 3M Corporation
• Top-of-line image – Ralph Lauren, Starbucks, Chanel
Sustaining Differentiation:
Keys to Competitive Advantage
• Most appealing approaches to differentiation
– Those hardest for rivals to match or imitate
– Those buyers will find most appealing
• Best choices to gain a longer-lasting, more profitable
competitive edge
– New product innovation
– Technical superiority
– Product quality and reliability
– Comprehensive customer service
– Unique competitive capabilities
Best-Cost Provider Strategies
• Combine a strategic emphasis on low-cost with a
strategic emphasis on differentiation
– Make an upscale product at a lower cost
– Give customers more value for the money
Objectives
• Deliver superior value by meeting or exceeding buyer
expectations on product attributes and beating their price
expectations
• Be the low-cost provider of a product with good-toexcellent product attributes, then use cost advantage to
under price comparable brands
Focus / Niche Strategies
• Involve concentrated attention on a narrow piece of the
total market
Objective
–
Serve niche buyers better than rivals
Keys to Success
• Choose a market niche where buyers have distinctive
preferences, special requirements, or unique needs
• Develop unique capabilities to serve needs of target
buyer segment
Examples of Focus Strategies
• Animal Planet and History Channel
– Cable TV
• Google
– Internet search engines
• Porsche
– Sports cars
• Cannondale
– Top-of-the line mountain bikes
• Enterprise Rent-a-Car
– Provides rental cars to repair garage customers
• Bandag
– Specialist in truck tire recapping
Focus / Niche Strategies
and Competitive Advantage
Approach 1
• Achieve lower costs than rivals in
serving a well-defined buyer segment –
Focused low-cost strategy
Approach 2
Which
hat is
unique?
• Offer a product appealing to unique
preferences of a well-defined buyer segment
– Focused differentiation strategy
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; 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)
with permission of
P Crisp, AGS, 2003
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
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
Invention
Commercialization
Marketing
Financing
Literary / artistic
creation
Copyright/Related Rights
All IP Rights
Industrial Designs/
Trademarks/GIs
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
Basic Message 3 (More for Less)
• Own Use
• Licensing
• Franchising
• Merchandising (Mickey
Mouse, Hello Kitty)