Tuesday December 20, 2016

Building a Viable Business Around Intellectual Property
By Mark Blaxill, Executive Director of XLP Capital The author is the co-author of Boston Consulting Group’s first patent application, and is the co-author of The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property.

In the modern economy, the most important source of competitive advantage—in most cases the only source—is something that too few business leaders understand. It is IP—intellectual property—the indispensable but unheralded key to understanding businesses, markets and economies in the modern era. Today, IP is rapidly becoming the new foundation of businesses and markets.

Today’s corporate leaders must prioritize their efforts to understand IP and use it strategically. Businesses which have successfully harnessed their intangible assets are among the world’s most profitable companies.

Take Gillette, for example, a business often (and mistakenly) described as capturing a consumer with a cheap platform, the razor, and then making money on the repeat purchase of the blade. Gillette has many competitors all over the world, all of them willing to sell an inexpensive razor and blade combination. What makes Gillette’s success remarkable is its ability to sustain its competitive performance advantage over time.

How do they do this? Quite simply, Gillette is able to create and defend a blanket of protection surrounding its shaving innovations, thereby controlling critical technologies – such as new blade exposure angles, tighter blade spacing, and better debris wash-through.

Another successful approach to IP and innovation has come from consumer products giant, Procter & Gamble (P&G). For years, P&G focused exclusively on internal technology development, but starting over a decade ago, P&G adopted its Connect and Develop approach to innovation: actively in-licensing world class technology in its core products while also forcing internal innovations to out-license if P&G can’t use the technology within three to five years. This open licensing policy has had unexpected competitive benefits for P&G product developers, who are pushing themselves ever harder as they watch the three and five year timers tick. Connect and Develop has transformed P&G’s R&D function into a vital innovation network, teeming with transactions and embracing commercial opportunities whenever and wherever they presented themselves.

Some of Singapore’s leading companies are taking heed of the importance of IP strategy and finding ways to protect and leverage their own innovations. Local company Masai Group International has developed some of the world’s most innovative walking shoe technology, Masai Barefoot Technology, shoes designed to “simulate the challenge of walking barefoot on soft earth”. Masai has long struggled with the challange of protecting its technology from copycats (CEO Andy Chaw calls defending his IP “a constant battle”), but now, thanks to a loan from DBS Bank, Masai will have new resources to defend its patents from infringement, invest in R&D and promote its brand. The loan was a result of the IP Financing Scheme administered by the Intellectual Property Office of Singapore, which allows IP-rich Singapore companies raise money using their patents, trademarks or copyrights as collateral. A Singapore furniture manufacturer, Koda, has built IP-based growth strategies by actively franchising and licensing their subsidiary brand – Commune – into overseas markets like China. With the assistance of a business consultancy firm, Commune was able to identify gaps in its IP management policies and went on to protect their IP in key markets before franchising and licensing its brand. In the meantime, Asia as a region has forged ahead with the largest number of IP filings. Asia’s trade mark and patent filings account for 52 and 60 per cent, respectively, of international filings in 2014. Locally, IP investments in Singapore are also reaching an all-time high, with trade mark and patent filings up 5 and 9 per cent, respectively, in 2015.

In today’s knowledge-oriented economy, Singapore’s leading companies need to recognise that innovation without protection is philanthropy. Trek 2000 is a Singapore company that serves as a cautionary tale. The company is credited as the inventor of the ThumbDrive®, however that was all they got as they showcased the world’s first and smallest USB flash drive at a computer expo while their patent was still pending. When the invention loses its “novelty” factor, it can no longer be protected. CEO Henn Tan calls that the company’s “single biggest mistake”. Trek 2000 has since gone on to grow their IP portfolio and has over 600 patents in its name.

This principle applies both to companies seeking to build a sustainable competitive advantage in their core businesses and at the country level for a nation seeking to build its global competitiveness. There is no longer an effective business strategy that does not include an IP strategy.

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