Innovation is arguably the most important means of staying competitive in the marketplace. One way to keep that competitive advantage is to protect the intellectual property (IP) behind these innovations so as to prevent competitors from using them.

‘Intangible’ assets, including patents and trademarks, now account for over 80% of a company's value, a vast change from 20% in the 1970s. And for start-up companies, amassing IP during early stages of development, that figure is likely to be around 90%. In a world where so much of a company’s value is tied to its IP, the management of IP must therefore become a core competence for any aspiring business.

Given the breadth and variation of IP tools, IP is often perceived as complex and opaque, even to seasoned executives. To assist businesses, I have formulated an IP strategy framework to illustrate how IP can be used effectively to support business goals, based on a given competitive environment.

The competitive environment can be categorised using two key factors: predictability and malleability. Predictability defines how accurately and how far into the future a company can forecast factors such as market demand, expectations and competition. Malleability is defined as the extent to which a company and its competitors have the power to influence those factors.

These variables are used to broadly define four strategic styles in which an appropriate IP strategy can then be applied to suit a distinct environment. While the styles touched on here are necessarily brief, a more comprehensive article can be found by searching “Davies Collison IP Matrix”.

 

A business environment that is highly predictable and cannot be changed easily requires a classical management style based on causal logic. IP management emphasis should be on identifying and protecting incremental innovation that provides an edge over the competition.

A classical business environment is likely to have well established product lines and sales channels, and may prefer to wait until new technologies have been proven in the marketplace before following the trend, however such companies should be aware of competitors' IP and exercise caution before committing significant resources to follow the trend.

 

If the competitive environment is unpredictable due to factors such as global competition, disruptive innovation and economic uncertainty, short planning cycles in view of fast moving competitive intelligence, allow a company to react quickly to change.

Actively monitoring the patent landscape and trade mark filings of the industry and competitors can provide a company with superior competitive intelligence is definitely key. A 'bracketing' patent filing strategy can also be useful, where you are the first to place your bets on products or key features that are likely to be valued by the market, while raising a legal barrier for your competitors. Additional strategies for this environment are explored further online.

 

Malleable business environments, like the software industry, can be seen in new high-growth industries where barriers to entry are low and demand is unpredictable, so that a company could radically shift the course of industry through innovation.

The shaping strategy involves greater emphasis on building innovation that defines attractive new products, markets, platforms and standards. However, one cannot change an industry if others are not willing to follow the lead; owning IP allows the company to develop favourable partnerships and licensing relationships.

 

Contrary to the classical approach, visionary innovations tend to be trend setters rather than trend adopters, and for many, such as start up companies, much value of the business resides in its IP, which will most likely be tapped to attract investment funding to meet the resources required for commercialisation.

Smart use of IP could also reduce some of the risks involved in bringing visionary innovations to the market. A common pitfall by entrepreneurs includes mis-timing of any public disclosure, rendering patent protection invalid and allowing competitors to use the disclosed information without recourse.

 

As mentioned, this very brief outline of the IP Matrix presents a simple way of considering how IP can be used to complement a business strategy. A business should constantly review the competitive environment in which it operates, and from that, the best advice is to speak with your patent or trade mark attorney from the outset.

 

This is an abridged version of this article. For the full article please go to www.davies.com.au