Presentation on theme: "How Market Smarts Can Protect Property Rights"— Presentation transcript:
1 How Market Smarts Can Protect Property Rights Bharat Anand and Alexander Galetovic, Harvard Business Review, 2004SoHyun ShinMEIE881 ST: Advanced Technology ManagementPOSMIT Lab.(POSTECH Strategic Management of Information and Technology)
2 Contents 1 Introduction 2 Six Market Strategies - Nip It in the bud - Prescribe a sedative- Dig a Honey Pit- Make a Bundle- Move the Goalposts- Let the Dogs Out3Conclusion4Discussion Issues
3 PROTECTING INNOVATION IntroductionPROTECTING INNOVATIONThe LAW is often not the best defense against theft of intellectual property.Far more effective in such cases are MARKET-BASED strategies that KEEP PIRATES IN PORT.
4 Six Market Strategies for Protecting Intellectual Property Companies facing threats to their intellectual property have a range of alternatives, from defending their core assets to embracing the businesses that threaten those assetsThe choice of strategies depends on the nature and intensity of the threat and the strength of a company’s resources1Nip Itin the Bud2Prescribe a sedative3Dig a Honey Pit4Make a Bundle5Move the Goalposts6Let the Dogs OutPreemptDeny accessOut-innovationThreatenTo retaliateCreateSynergies(Among related businesses)Marry assetsTo complementary productsPreserveThe core withAdd-onsExpand into rivals’businessesReallocateResources toAdjacentNarrow yourOwn businessDefend Core AssetsEmbrace the ThreatsMarket Strategies
5 1. Nip it in the bud What? How? Preempting Overwhelming Prevent misappropriationHow?Preempting CompetitorsOverwhelming CompetitorsExcluding CompetitorsPreemptingBeing first to market so that you can capture profit of monopoly scaleIntel preempts rivals by tightly managing its relationships with external constituencies (Customers, Users, and Suppliers)OverwhelmingCapital One, the credit card issuer, overwhelms its rivals with a blizzard of new productKeep Their Intellectual Property Out Of Sight From The StartFor companies that lack Intel’s or Capital One’s resources and core strengthsCoke’s recipe has never been deconstructed or revealed
6 2. Prescribe a sedative What? How? Lower The Competitive Intensity Cross-licensing Agreements“SEDATING” EFFECT on an underground market in weakly protected intellectual propertyCompanies do not sue one another for infringement because they know they are likely to infringe the infringer’s patents sometime in the future
7 3. Dig a Honey PitWhat?Entangle key assetHow?Creating synergies among related businessesCreate Synergies Among Related BusinessesCompany’s economic viability is usually tied to one or a few key propertiesBy forging synergies between such properties and adjacent ones company can protect its profits from rivals and poachersHit television shows leads audiences to the next program and cross promote other shows on the same network
8 4. Make a BundleWhat?Combine secure with insecure productsHow?Marrying asset to complementary productsPreserving the core with add-onsMarry Assets: (Enhanced value of the package )In situations where it’s difficult to establish property rights to an asset, it can be wise to marry that asset to a complementary productExcel, Word (stand alone software applications) can be easily copied and disseminated, but the Microsoft itself enhances the value of the package so it makes more likely that a would-be copyist will pay for itAdd-onsProvides additional functions or customization for a core applicationIn the book industry, publishers sometimes insert a CD or sort of things in the back cover of their books.
9 5. Move the Goalposts What? How? Redefine Boundaries: Redefine the firm’s boundariesHow?ExpandingNarrowingRedefine Boundaries:Challenge for companies how to get a piece of COMPLEMENTSUnlike the increasing piracy rates in music industry, not all music-related businesses are vulnerableFor example, blank CDs, computers with a CD burner , and portable MP3 players.
10 6. Let the Dogs Out What? How? Relinquish Your Core AssetsHow?Reallocate resources to adjacent businessReallocate Resources To Adjacent BusinessesFor companies that have moved the goalposts and now encompass more viable businessesIt may pay to disregard the decline in their coreSeveral of music companies viewed the online customer as a threat, they tried to charge as much for downloads as they did for CDS, even though the costs of online delivery are minimalBy contrast, Apple wasn’t afraid to set prices low enough to change music –buying habits
11 Conclusion Six Market Strategies Summary Nip It in the bud Prescribe a sedativeDig a Honey PitMake a BundleMove the GoalpostsLet the Dogs OutSummaryDefine the business you’re in as expansively as possible. Greater value may lie in adjacent businesses.Do not be deterred by internal resistance. Sister divisions in adjacent businesses are operating under different economic incentives.Do not be afraid to surrender your core asset. Doing so may be your salvation.
12 Discussion Issues 1If your company would enter a new market, what do you think about the most appropriate strategy for protecting a technology and achieving a success among six strategies described in this paper? Nip It in the bud (the most “Defend core asset)I think that a company ,which will enter a new market, have to defend their core asset not embrace the threat. For nipping the bud (for blocking other competitors who want to enter a new market), you can dominate the new market (dominant design), thus you can success in the new market.
13 Discussion Issues 2Give an real example for 4th Strategy (Make a Bundle). IBMThe threat is not to the company’s operating system business but to its hardware business. In response IBM has seen fit to invest $1 billion in the future development of the operating system known as Linux, though it has become the paradigmatic “pirated” good since entering the public domain. That $1 billion does not seem to have been wasted. IBM has built a business around selling products and services for Linux; in the fourth quarter of 2002 alone, it sold $160 million worth of Linux servers.