The Importance of Intellectual Property for

Business Development and Growth

Dr. Guriqbal Singh JaiyaDirector

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 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

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

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

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 ResourcesComplementary Resources

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

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)

THE CHAIN MODEL

DESIGN INDUSTRY RETAIL

VALUE CROSSES ONE SINGLE CHAIN :

TECHNOLOGY

INNOVATION

QUALITY/PRICE

HOW TO TURN

TECHNOLOGY

INTO ART

IN ORDER

TO TRANSMIT

TO CONSUMERS

A UNIQUE IMAGE

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

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

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

The firm with a product meeting a market demand

product

the firm

=

demand

the market

The firm with uncertain future market demand

the firm

=

the market

?time

drivers of change:populationtastes and fashionseconomic conditionstechnologypolitics and regulations

The firm adapted to changes in market demand

the firm

=

the market

the firm

=

the market

time

The firm facing competitive activity

the firm

=

the market

competitors

the firm

=

the market

time

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

• 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

A form of organizational culture that:-

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 andProduct/Service)

3. Access to Resources (Land. Labor, Capital, Knowledge

And the fit amongst these three elements(Business Model)

““Frantrepreneur”Frantrepreneur”

(fran*tre*pre*neur) (fran*tre*pre*neur) n.n.  

One possessing the desire to be a One possessing the desire to be a business owner -- without the desire to business owner -- without the desire to recreate the wheel -- by following a recreate the wheel -- by following a proven system for the benefit of personal proven system for the benefit of personal and professional goals.and professional goals.

What is a Franchisee?What is a Franchisee?

The The Frantrepreneur MentalityFrantrepreneur Mentality

““I’m in I’m in business business forfor myself, but not myself, but not byby myself”. myself”.

““I have the opportunity I have the opportunity to learn from the success to learn from the success

and failure of others.”and failure of others.”

““I want a ‘bottled’ process for I want a ‘bottled’ process for success that I can use in developing success that I can use in developing

my own successful business.”my own successful business.”

"Why would I spend years and the "Why would I spend years and the investment required to establish a investment required to establish a successful brandsuccessful brand when I could buy a when I could buy a franchise which provides immediate franchise which provides immediate access to a successful business system and access to a successful business system and a brand name which others already have a brand name which others already have made successful?"made successful?"

““Why would I work Why would I work for someone else for someone else when I can work for when I can work for myself and reap the myself and reap the rewards of my rewards of my efforts?"efforts?"

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

• 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

Competitive Strategies

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

Differentiation

High

High Low

Low

NicheOutstanding success

Disaster Lowest cost

PRICING OBJECTIVES

PRICINGOBJECTIVES

ENVIRONMENTALANALYSIS

CORPORATEOBJECTIVES

PROFITORIENTATED

VOLUME ORIENTATED

COSTORIENTATED

COMPETITIONORIENTATED

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

• Make achievement of meaningful lower coststhan rivals the theme of firm’s strategy

• Include features and services in productoffering that buyers consider essential

• Find approaches to achieve a cost advantagein ways difficult for rivals to copy or match

Keys to SuccessKeys to Success

Low-cost leadership means low overall costs, not just low manufacturing or production costs!

• Incorporate differentiating features that cause buyers to prefer firm’s product over brands of rivals

• Find ways to differentiate that create value for buyers and are not easily matched or cheaply copied by rivals

• Not spending more to achieve differentiationthan the price premium that can be charged

ObjectiveObjective

Keys to SuccessKeys to Success

Differentiation Strategies

Where to Find DifferentiationOpportunities 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 activitiesInternallyPerformedActivities, Costs, &Margins

Activities, Costs, &

Margins ofSuppliers

Buyer/UserValue

Chains

Activities, Costs,& Margins of

Forward ChannelAllies &

Strategic Partners

How to Achieve aDifferentiation-Based Advantage

Approach 1

Incorporate features/attributes that raise theperformance a buyer gets out of the product

Approach 2

Incorporate features/attributes that enhance buyer satisfaction in non-economic or intangible ways

Approach 3

Compete on the basis of superior capabilitiesApproach 4

Incorporate product features/attributes thatlower buyer’s overall costs of using product

• 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

Types of Differentiation Themes

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

• 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-to-excellent product attributes, then use cost advantage to under price comparable brands

Objectives

Focus / Niche Strategies• Involve concentrated attention on a narrow piece of the

total market

–

Serve niche buyers better than rivals

• Choose a market niche where buyers have distinctive preferences, special requirements, or unique needs

• Develop unique capabilities to serve needs of target buyer segment

Objective

Keys to Success

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 Strategiesand Competitive Advantage

• Achieve lower costs than rivals inserving a well-defined buyer segment –

Focused low-cost strategy

• Offer a product appealing to uniquepreferences of a well-defined buyer segment – Focused differentiation strategy

Approach 1

Approach 2Which hat is

unique?

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)

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:

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

Basic Message 3 (More for Less)

• Own Use

• Licensing

• Franchising

• Merchandising (Mickey Mouse, Hello Kitty)