Integrating Business and

Intellectual Property Strategy

Dr. Guriqbal Singh Jaiya

Director
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
 Performance ns
tio
a
e ct Performance Gap
p
Ex
e n t
m
mp rove
us I
ti nuo
Con

Time

Customer Expectation Dilemma

 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 Product Augmented
Product

Installation

Packaging
Brand Features
Name Core
Benefit After-
Delivery
Sale
& Credit or
Service
Quality Service Design
Level

Warranty

Actual Core
Product Product
 Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 CosmeticsFast-food
 Outlets
 Intangible
Dominant

Tangible

Dominant Fast-food
Outlets 
Advertising
Agencies

Airlines 
Investment
Management 
Consulting
Teaching
Selling Products Selling Interconnected
• Customers who Systems
care about products • Customers who care
about the total system
“on their own
experience: will this
terms”: is this the connect with the rest of
right product for my world?
me? • Control the architecture
• Build the “best” Or
product • Influence the architecture
– Best designed and build the best
– Lowest cost products within it
– Most reliable
 The challenge

Selling
Performance products

Selling (parts of)

interconnected
systems

Time
 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
$
• Viable
Expansion • Market acceptance
• Legal Entity • Heading to IPO or M&A
• High Growth
• Bright Idea • Founders = Mgt
• Head Count
• Experimental Team Start-Up • Multiple Cycles
• Research • Minimal Revenue
• Support Functions
• Business Plan • Slow Growth
• Administration
• Proof of Concept Seed
• Marketing
Idea / Concept • Revenue Growth

Time
 The Needs of Each Stage
•Recruitment
•Business
•Corporate and
Development
Secretarial
•A & P
$ •Financial
•Market Access
•Training
•PR and Marketing
•Networking
•Business Expansion
•Business Plan Development
•Prototype/ POC •International support and
•Project Management Mkt. Access
•Business Premises Start-Up •Diversification strategies
•Project Management and support
•Management Training •Recruitment
Seed •Training and Incentives
Idea / Concept
Time

IP Management Needed in all stages

 Understanding the business/role of IP
Patent Manufacturing 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
 IP Environment
Disruptive
Other Competitors Established Leader
Technologies

Suppliers You Customers

Converging Complimentors
Technologies
 IP Deployment Continuum
Concerns MAD Opportunity

| | | | | | | | | | |

• IP risk balance • Balanced IP risk • IP risk balance

favors target • Goal: Confirm favors You
• Goal: Design MAD • Goal: Identify
Freedom value generation
opportunities
Sources and Conversions of Value
Conversion
Sources of Value
Mechanisms

• Innovations • Sale
• Complementary • Out-license

$
Business Assets • Joint Venture
– Purchasing • Strategic Alliance
– Manufacturing • Integrate with
– Distribution Current Business
– Sales • Create New Business
• Donate
• Barter/Trade
 Aligning Capabilities
Vision
Strategic Framework

Strategies IP Objectives/Roles:

Value
Creation
Innovation Cash Value
Strategies
Value
Extraction

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; 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)
Introduction to IP Management 1

• Legal • Accounting
• Technical • Tax
• Business • Insurance
• Export • Security
• Financial • Automation
• Relationships • 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. 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
 Bringing it All Together
Example No. 2
• 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
 Bringing it All Together
Example No. 3
• 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
 Bringing it All Together
Example No. 4

® 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:
Patents / Trademarks/ GIs
Utility Models/Trade secrets Ind. Designs/Patents/Copyright
Industrial All IP Rights
Patents / Designs/
Utility models Trademarks/GIs
Invention
Commercialization
Marketing
Financing Product Design Exporting

Literary / artistic Licensing

creation

Copyright/Related 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”
Maturity
emerges

Incremental
Innovation
 New Ideas to Activity
Stage 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?
The path from new ideas through validation to a new technology:

Intellectual Capital
Value Creation Value Extraction

Intellectual
Assets
Human SGDP
Capital
New
Intellectual
Property
.
Technologies
The Industry Life Cycle as an S curve

Performance
Maturity

Discontinuity
Takeoff

Ferment

Time
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 Responses
1. 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
Knowledge &
Know-How

INTELLECTUAL
Intellectual Assets CAPITAL

Intellectual
Property
 The Components of Intellectual Capital: A Spectrum of
Knowledge Assets

When legally protected these are Intellectual Property

When codified these are Intellectual Assets
Trade
Copyrights Secrets Knowledge
Trademarks Know-How
Providing
Information Confidential Value
Publishing Customer
Databases Information
Rights Capital
Patents Human
Industrial Technology Capital
Brand logos Unpatented
Design
designs Research
Software Structural Culture
Platforms Capital

Most Least
Tangible
Source: PricewaterhouseCoopers
 What are They Buying?
Whole Product Offering
Pre-Sales
Support
Co
ns
ul

e
ar
tin
ftw
g Post-
The
So
Product Sales
re Support
In Serv

a
te ic

dw
gr e

r
at s

Ha
io
n

Transactional
Support

Source: IDC, High Performance Partnering Workshops

© Frank Lynn & Associates, IDC
 Elements of the whole product
• Consulting services • LAN products
• System hardware • WAN connectivity
products
• System software
• Systems integration
• Development tools services
• Server applications • Training services
• Application development/ • Maintenance/support
modification services services
• PC/client hardware – Server hardware
• Desktop applications – Client hardware
– Software
– Network
Source: IDC, High Performance Partnering Workshops
© IDC
Focus on Policy Formulation:

Enterprise Policy
Governance Board / CEO

Business
Strategy General Managers
Management

Operations Functional Managers

Management
Performance
Vision-directed and Values-driven:
How will technology advances drive your business?
Market Research
Politics
Technology Assessment
Regulations
Competitive Analysis World of Scenario World of
Economics
Strategic Benchmarking Facts Options Possibilities Technology
Customer Analysis
Critical Assumption Evaluation Environment
Business Performance
Discontinuity Analysis
In search of
Enterprise Values Business Vision potential strategic
Case inflection points
Strength-Weakness-Opportunity-Threat Analysis

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.
 “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 Hamel
consultant, 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?
 Corporate Strategy:
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
Articulates the ways in which the
• Technology strategy
opportunities created by the firm’s
• Product strategy capabilities can be exploited.
• Core competency
• Resource alignment
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?
Effective Business Strategies
address three key challenges:
Markets

How will we create value?

Technologies

How will we build

the organizational How will we capture
capabilities value in the face of
necessary to Competition?
deliver it?
Effective strategies answer three
key questions:

How will we
Create value?

How will we How will we

Deliver value? Capture value?
 And answer seven critical questions:
• 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?
 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

Intellectual Capital (unique) Complementary Business

Assets (differentiated)
Value Creation Value Extraction

Manufacturing Facilities

Distribution Capabilities
Intellectual

Sales Force
Assets
Human
Capital
Intellectual
Property

Structural Capital (generic)

Intellectual Property Tuned To A Company’s Business

Intellectual Capital Complementary Business Assets

(Unique Assets) (Differentiated Assets)
Value Creation Value Extraction

Intellectual Assets ?%

Distribution Capabilities
Manufacturing Facilities
Human
Capital Intellectual Property

Sales Force
(Lead Time)

Trade Secrets
Trademarks

Know-How
Copyrights
Patents

$
Structural Capital
(Generic Assets)

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
Beverage Companies

Intellectual Capital Complementary Business Assets

(Unique Assets) (Differentiated Assets)
Value Creation Value Extraction

Intellectual Assets

Distribution Capabilities
Manufacturing Facilities
Human
Capital Intellectual Property

Sales Force
(Lead Time)

Trade Secrets
Trademarks

Know-How
Copyrights

$
Patents

Structural Capital
(Generic Assets)

• 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
Paper Companies

Intellectual Capital Complementary Business Assets

(Unique Assets) (Differentiated Assets)
Value Creation Value Extraction

Intellectual Assets

Distribution Capabilities
Manufacturing Facilities
Human
Capital Intellectual Property

Sales Force
(Lead Time)

Trade Secrets
Trademarks

Know-How
Copyrights

$
Patents

Structural Capital
(Generic Assets)

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

• Some value in Patents
Intellectual Property Tuned To A Company’s Business
Software Companies

Intellectual Capital Complementary Business Assets

(Unique Assets) (Differentiated Assets)
Value Creation Value Extraction

Intellectual Assets

Distribution Capabilities
Manufacturing Facilities
Human
Capital Intellectual Property

Sales Force
(Lead Time)

Trade Secrets
Trademarks

Know-How
Copyrights

$
Patents

Structural Capital
(Generic Assets)

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

Intellectual Property Tuned To A Company’s Business
Pharmaceutical Companies

Intellectual Capital Complementary Business Assets

(Unique Assets) (Differentiated Assets)
Value Creation Value Extraction

Intellectual Assets

Distribution Capabilities
Manufacturing Facilities
Human
Capital Intellectual Property

Sales Force
(Lead Time)

Trade Secrets
Trademarks

Know-How
Copyrights

$
Patents

Structural Capital
(Generic Assets)

• Most value is in Human Creativity, Patents, and Trademarks

• Some value in Know-How, and Sales
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 Things you can do
manufacturing Sa
se les COMPETENCIES
ex rvic and
Other pe e
rt i
se

Core
technological Complementary technologies
Distribution
channels
know-how in
innovation

Customer Other
relationships
Things you own Brand
name
RESOURCES
Types of Complementary Assets

Complementary assets can be:

Generic
there is adequate and competitive supply

Specialized
sourcing will create unilateral dependence

Co-specialized
both supplier and innovator are dependent
Types of Complementary Assets
• Things you can do
– Manufacturing capabilities COMPETENCIES
– Sales and service expertise

• Things you own

– Brand name RESOURCES

– Distribution channels
– Customer relationships
 Complementary Assets

Manufacturing Distribution

Finance Service
Core
technological
know-how
Complementary
Marketing technologies

Other Other

Bargaining power of owners of complementary

resources depends upon whether complementary
resources are generic or specialized.
Uniqueness & Complementary Assets

over the Life Cycle

Complementary
Uniqueness Assets

Maturity

Takeoff

Ferment
Uniqueness & Complementary
Assets over the Life Cycle:
Complementary
Uniqueness Assets

Maturity

Takeoff

Ferment
Managing discontinuities means
managing complementary assets:
Maturity

Performance

Discontinuity
Takeoff

Which of my complementary
assets are useful?
Ferment

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

Common Trademark
Research Engineering Patent licence
Consortium Distribution
contract licence (common agreements
Common marketing)
Research Common
purchase Subcontracting production
contract

Ways supplying producing marketing delivering

of... designing
Know-how transfer
contract

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

 Cooperations modes and value chain
Link of R&D Logistic Produc- Marke- Distri-
the
supply tion ting bution
chain
• Exchanges of • Common • Subcontracting • Trademark • Reciprocal
existing purchases agreements licence distribution
knowledge agreements
• Access to the • Common • Consortium (access to
• Organisation specific manufacturing (common existing
Coope- of a common resources of agreements marketing) distribution Services
ration research the country networks)
• After sale
(raw • Implementatio • Joint
modes • Setting up of materials, n of advertising • Lobbying
a common subventions, engineering
project capital cost, contracts • Relations
(design, compared
engineering) advantages) • Patent license

• Production
consortium

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

New Business Models Emerge
Then… Now…

CRO’s CRM’s

Product
Product Development
Development
Cycle

Tool Testing
Companies Services

One Integrated Many Distributed

Company Companies
 New Regional Model Emerge
Then… Now…
Region D
Region A
Region B
Manufacturing
Region C
Research
Trials/Testing
Services
Region G

Development
Region E Region F

Self-contained Specialized,
regional clusters networked regions
Build, Buy, Partner: Benefits and Tradeoffs

Pros Cons

Most product control Longest time to market

Risk in market shifts
Build Own the IP
Most profit opportunity High development costs
Cost & Risk

Highest switching costs

Shorten time to market Acquisition costs

Buy Own the IP Integration costs

Shortest Time to Market Least Control

Conserves Resources Integration Costs
Try before you Buy
Partner Lowest Switching Costs
Shared gross margins -
Least Profit Opportunity
Credibility and access

Time to Market & Control & Profit

Why Build: Technology Leadership
• Pioneer in the field • Core business
• Patentable technology • Have time or can build
• Need to own the in increments
intellectual property • Have in-house
expertise
 Why Buy: Core to business
• Core to business • Shortage of in-
• Need intellectual house expertise
property • Acquire market
• Time critical leadership
 Why Partner: Speed
• Fastest Time to Market • Customize for Specific
• Reduce Risk Markets
• Leap Frog Competition • Customers buy best of
breed
 Which horse to pick?
Build Buy Partner

Leadership Core Time to Reduce

Business Market Risk
 Familiarity Matrix: Optimum Strategies for
Technological Innovation: Finding others who
know more about the markets or the technology
Decreasing knowledge of the market

Venture capital,
Joint Venture
or Educational
Venture Capital or Acquisition, or
Educational University
Acquisition Relationship
Internal
Internal Venture
Development,
Acquisition, Venture or Capital or
or Joint Acquisition Educational
Venture or License Acquisition
Joint Venture,
Internal Internal
Strategic
Development project, or Alliance or
Acquisition, University
or License Relationship

Decreasing knowledge of the technology

 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
Worldwide search and Value creation:
evaluation of technology products,
Prand knowledge processes etc
co e-c
m om ‘Open innovation’
pe p fs
tit et Research Campus, with - of
o it
rs i v in
Un e , sp
co iver R& •Venturing ms
op sit D fir
er y -i w •‘Incubator’ w
a ti nd ith Ne lf
on us •Technology transfer and support, … X itse
try Firm

Public-private Developing
partnership technological core Joint ventures

tech
competences
High- within the
Lice
SMEs tech nsing
company X nol
ogi
’s es
Firm
own arch
e
res
lab “More focus and resources for
“Exploring wider range of firm’s own competences” Creating more value faster
knowledge areas”

t he Firm
X
In R&D Lab of company X Nothing
ast
 Hepsera
out-license
Gilead GlaxoSmith
Sciences Kline Gateway Fund Institute for Medical
Research
Vistide out-
license (joint venture)
Pfizer Cambridge Addenbrooke’s
Founders Neurodegeneration
came out of
Biotechnology Hospital
Consortium
macrolide Pfizer
templates (funding)

Biotica Northern Venture Daniolabs

Managers Cambridge
(funding) University
Challenge Fund
Babraham Bioscience Inst
Technologies Ltd Wellcome Trust (Cambridge
University
Lorantis (funding) Domantis administered)
Babraham Bioincubator Genzyme
partnership
Babraham Technix antibodies Abbott
Astex license
Cambridge Antibody arthritis
Technology collaboration
Cambridge Eli Lilly
Crytallographic Data virtual screening validation licensing
Centre collaboration
Wyeth Amgen AstraZeneca
(Cambridge University)
licensing
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
 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

Sell Divest
New Revenue
Shorter Product Spin off
Life Cycle Sources
Market License
Revenues
Market Market
Revenues Revenues

Internal &
Internal
External
Development Internal
Shared
Development
Increasing Development
costs Decreasing
costs

Costs Golden Past Past Present Present Future

 ‘Closed innovation single track’

1
2

“Ideas & 3 “Current Market Place”

Investigations”

4
5

Research Development Commercialisation

Based upon ‘Open Innovation: Researching a New Paradigm’

(2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
 ‘Open innovation three lane highway’
“External Ideas &
Investigations”
“External Technologies

1
Insourcing gate
2

“Ideas & 3 “Current Market Place”

Investigations” Outsourcing gate
Technology “New Market Place”
spin-offs

4 licensing “Other firm’s Market Place”

5

Research Development Commercialisation

Based upon ‘Open Innovation: Researching a New Paradigm’

(2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
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 ?
Phase 1 Phase 2 Phase 3
1896-1997 1997-2003 2004-

Raufoss

RA HARA HARA

Nammo Nammo
Fission Reintegration ?

Integrated company 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
Bioengineering Revitalise Food-
River Tourism
(e.g. Douro)
Functional
Foods
Vehicle Processing
Systems
Biofuels
Food Biocluster Knowledge
Intermediaries
Bio-imaging

Food Biotechnology ICT New Media KIBS Automotive Tourism

Wine
Tourism

Culinary DANFORS
Tourism

Guidance Systems
Oenotechnology

Branding
Firm Level Innovation Biographies
EURODITE, 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
Hierarchy of IP Value
Biz Strategy
Driver

Deliver Revenue

Potential Return
Build Markets and Relationships

Design Freedom

Manage Competition

Protecting Inventions
 Building an IP Strategy
Build Your Portfolio
Biz
Strategy
– Strategic Patenting
– Purchase Patents
Deliver Revenue

Markets Development

Design Freedom Deploy Your Portfolio

– Design Freedom
Manage Competition – Manage Competition
– Enter new Markets
Protecting Inventions/Recognition – Deliver Revenue
A Hierarchy of IP/IC Management
Visionary
(Drive Growth)

Integrated
(Manage for Growth)

Profit Center
(Manage for Profitability)

Cost Control
(Control Costs, Improve Productivity)

Defensive
(Build Portfolio, Protect Markets and Technology)
 IP Culture - Levels of companies

Penthouse
Total
Integration Penthouse Integration
Third floor
Third Floor Profit
Profit Generation
Second floor
Savings Second Floor Cost Savings
Ground floor
Defensive Ground Floor Defensive
Basement
Unprotected Basement Unprotected
 0 - Unprotected level

How businesses behave at the various levels ?

Penthouse
Integration They rely on confidentiality,
Third
Profit
access to complementary
Second assets and lead time
Savings
advantages
Ground
Defensive
Basement
Unprotected
 1 - Defensive level

Activities of the company focus on:

Penthouse
Integration
- Creating awareness of the role of
intellectual property
Third
Profit
- Obtaining intellectual property
Second
Savings
- Maintaining IP rights
Ground
Defensive - Respecting IP rights (esp. Patents)
Basement of others (Freedom to Operate)
Unprotected
- Willingness to enforce patents, when
necessary
 2 - Cost Savings Level

Penthouse The activities of the company :

Integration
Third
Profit
Focus on how to reduce costs of
Second filing/maintaining intellectual
Savings
property portfolio
Ground
Defensive
Basement
Unprotected
 3 - Profit Generation Level

The activities of the company focus on:

Penthouse
Integration - Making intellectual property a profit center
Third
Profit - Utilizing the intellectual property portfolio
Second as a corporate asset
Savings
Ground - Extracting value directly from intellectual
Defensive property portfolio
Basement
Unprotected - Non-core, non-strategic IP having tactical
value
 3 - IP for Profit Level

Company activities:

Penthouse - Considers intellectual property at all levels of

Integration organization
Third
Profit - Organises high profile campaign against
Second infringers
Savings
Ground - Develops active patent/trademark
Defensive licensing program
Basement
- Makes more good sense oriented R&D efforts
Unprotected

- begins/improves active screening/watches

for patent infringement
 3 - IP for Profit Level

Penthouse - Establishes an enforcement program, it

Integration ensures that no one infringes your patents
Third - Requires constant policing and monitoring
Profit of the market in order to challenge infringing
Second products
Savings
- Enforcement function includes method of
Ground
Defensive
negotiation so company can suppress
infringement without having to engage in
Basement litigation
Unprotected
- In tough cases, is prepared to litigate against
infringers
 3 - IP for Profit Level

Licensing
Penthouse
Integration - Starts/increases proactive licensing
Third program
Profit
- Finds opportunities to generate revenue
Second without sacrificing competitive advantage
Savings
Ground - Begins by licensing non-core
Defensive
technologies or technologies outside
Basement current field of products
Unprotected
- Finds appropriate licensees (potential
infringers)
 4 - IP Integration level

The company:
Penthouse
Integration - Sets long term patent strategy
Third
- Aligns IP strategy with itscorporate
Profit
strategy
Second
Savings - Makes competitive assessment
Ground - Focuses on strategic value extraction
Defensive
Basement - Develops a performance measurement
Unprotected and reporting system
- Ensures that patent strategy drives
research
 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
 Organization of an IP Department
TOP MANAGEMENT
CEO

technical marketing commercial legal

dpt dpt dpt dpt

Intellectual property
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
 Organization of an IP Department
TOP MANAGEMENT
CEO

Technical
technical marketing commercial legal
Intellectual
dpt
dpt dpt Dpt dpt
Property
Dept
Other Departments
 Organization of IP Department

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
 Organization of IP Department

Directorate IP Secretariat

strategies patents trade marks

Licensing +
litigation
professional professional
documentation
administrative administrative

Internal structure of IP dept

Organization of IP Department
Use of patents

Offensive attitude
Is it core yes
Business?
compulsory
licences at
no favorable conditions

yes Coop. agreements

Obligation to licence?

no

Licence at market Licence at

conditions disadvantageous
conditions
below
conditions
market

Decision process in large companies

 Organization of IP Department
Use of patents

Offensive attitude

compulsory
licences at
favorable conditions

Coop. agreements

yes
Licence at
Obligation to licence? conditions below
market

Decision process in a small company