1. The Role of Intellectual Property in a Knowledge-based Society and the Importance of SMEs
G S Jaiya, Director, SMEs Division
World Intellectual Property Organization

3. Easy to read, practical, business friendly guides

4. 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

5. 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

6. 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

7. Competition and Cooperation in the Knowledge Economy
Property: Right to Exclude/use/enjoy
Share/leverage
Physical vs. Intellectual Property
One to one vs. one to many
Physical manifestation/link to carrier/medium or fixation
Nature of competing/substitute products: Functional, equivalent, class, set, related goods

8. Levels of Product Core Benefit or Service Augmented Product
Installation
Packaging
Brand
Name
Features
Delivery
& Credit
After-
Sale
Service
Core
Benefit or
Service
Quality
Level
Design
Warranty
Actual
Product
Core
Product

9. Selling Products Selling Interconnected Systems
Customers who care about products “on their own terms”: is this the right product for me?
Build the “best” product
Best designed
Lowest cost
Most reliable
Selling Interconnected Systems
Customers who care about the total system experience: will this connect with the rest of my world?
Control the architecture Or
Influence the architecture and build the best products within it

10. SME Competitiveness (I)
In a knowledge-based economy, competitiveness of enterprises, including SMEs, is increasingly based on ability to provide high-value-added products at a competitive price
Globalization and trade liberalization has made it crucial for most enterprises, including SMEs, to become internationally competitive even when operating wholly in the domestic market

11. SMEs Competitiveness (II)
To become and remain competitive, SMEs need a coherent business strategy to constantly improve their efficiency, reduce production costs and enhance the reputation of their products by:
Investing in research and development
Acquiring new technology
Improving management practices
Developing creative and appealing designs
Effectively marketing their products

12. SMEs Competitiveness (III)
For this, SMEs must make significant investments of time and resources
Without intellectual property protection there is a strong risk that investments in R&D, product differentiation and marketing may be stolen/copied
Intellectual property rights enable SMEs to have exclusivity over the exploitation of their innovative new or original products, their creative designs and their brands. The exclusivity creates an appropriate incentive for investing in improving their competitiveness

13. Everything Depends on 5 Key Choices:
Choosing the right business to be in
Creating the right strategy
Building the right systems
Designing the right organization
Getting the right people

14. A business is a combination of ...
Technology in the product or service,
Technology used to make the product or provide the service,
Features of the product or service, and
Customer needs met by the product or service,
… that creates a potential or real economic relationship between a buyer and a seller.

15. Business Strategy is ...
the group of dynamic, integrated decisions that position the business in its competitive environment
R&D Strategy
Basic and applied research
Product/process innovation
Lead or follow
Marketing Strategy
Product/market definition
Pricing
Distribution
Promotion
Customer support
Objectives
Growth
Profitability
Diversification
Innovation
Market share
Working environment
Corporate citizenship
Production Strategy
Facilities
Integration
Capacity
Quality
Production technology
Operations control
People management
Financial Strategy
Capital structure
Cash flow
Legal Strategy
Intellectual property protection
Corporate

16. Strategy Sets a Dynamic Loop in Motion
R&D Strategy
Execution
People
Systems
Organizational structures
Marketing Strategy
Production Strategy
Results
Legal Strategy
Financial Strategy

17. Ideas, Creativity and Innovation
Creativity The ability to make or otherwise bring into existence something new, whether a new solution to a problem, a new method or device, or a new artistic object or form.
Innovation 1 : The introduction of something new 2 : A new idea, method, or device
Creativity = Idea + Action
Innovation = Creativity + Productivity
Innovation = Idea + Action + Productivity

18. 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
Technology strategy
Product strategy
Core competency
Resource alignment
Articulates the ways in which the opportunities created by the firm’s capabilities can be exploited.

19. 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?

20. Effective Business Strategies address three key challenges:
Markets
How will we create value?
Technologies
How will we capture
value in the face of
Competition?
How will we build
the organizational
capabilities
necessary to
deliver it? 9 3 3

21. Effective Strategies answer three key questions:
How will we
Create value?
How will we
Deliver value?
How will we
Capture value? 8

22. From Three to 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?

23. 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? 55 39

24. 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? 61

25. Types of Complementary Assets
COMPETENCIES
Things you can do
Competitive manufacturing
Sales and service expertise
Other
Core technological know-how in innovation
Complementary technologies
Distribution channels
Customer relationships
Other
Things you own
RESOURCES
Brand name

26. Types of Complementary Assets
Things you can do
Manufacturing capabilities
Sales and service expertise
Things you own
Brand
Distribution channels
Customer relationships
COMPETENCIES
RESOURCES 63

27. Uniqueness & Complementary Assets over the Life Cycle:
Maturity
Takeoff
Ferment 80 52

28. The ‘Commercialisation Pipeline’
Do it yourself
Assign IP
Commercialization Decision
Idea
Invention IP
Out-license IP
Partner
Etc

29. How are commercialisation strategies actually chosen?
Ability to exclude incumbants1
Complementary asset environment1
Others
Go where the easy money is
Past Experience
Internal constraints & politics
Business network of the entrepreneur
Risk adversity
Market forces
etc

30. Build, Buy, Partner: Benefits and Tradeoffs
Pros
Cons
Build
Most product control
Own the IP
Most profit opportunity
Longest time to market
Risk in market shifts
High development costs
Highest switching costs
Cost & Risk
Buy
Shorten time to market
Own the IP
Acquisition costs
Integration costs
Partner
Shortest Time to Market
Conserves Resources
Try before you Buy
Lowest Switching Costs
Credibility and access
Build: In house development
Buy: Acquisition of technology
Partnering: Resale of existing technology In part a buy decision; but you don’t own the Intellectual Property.
Alliance partnering where you engage in light integration and joint go-to-market and selling strategies
Buy or Partner only relevant if the technology exists.
BEA example as why building can be risky—bet on CORBA, did not win in market.
If industry standards are in flux and you are not a standard setter: partnering or buying may be a better strategy
Informix/Illustra example of why Buying can be problem—market shifted-need for object database not as planned.
HP/Canon –OEM partnering for laser jets
In house development: offers the highest level architecture control and go-to-market strategy control but also highest exposure to competitive risks or changes in customer preferences due to the time to market issues.
Buy model: technology acquisition. Initial time to market can be shortened with either resale or acquire. Costs of acquisition are of course higher than resale but may not be higher than product development. Product risks are less if you are diligent about acquiring proven technology. Once acquired, must make sure it works seamlessly with current product, spend time to develop into current product. Afterwards the risks and level of control are the same as the build model for continued investment in the product.
Resale model inherits aspects of technology acquisition and in partnering.
In a resale model the costs and technolgoy risks are much less and switching costs are moderate., but the trade off is in level of control of the product. Also, in resale mode, have to ensure sales knows how to sell, develop contracts, sales support plan, coordinate with other vendor.
Alliance partnering is the low cost, low risk, and shortest time to market model. It also has the least control factor. Try before you buy. Fast speed to market, take advantage of partner’s development efforts, partner keeps the selling, sell as add-on, sales doesn’t have to learn product, can refer to current vendor who sells and supports.
However, must do due diligence on company/product, since have least control over product/business.
How to overcome “ religious” objections to partnering as company grows—Time is $$$$$, position in terms of revenue growth, revenues sooner, catching market as it emerges and grows. (Leaders get premium pricing, lower costs of sales, analyst attention, market awareness).
Least Control
Integration Costs
Shared gross margins -
Least Profit Opportunity
Time to Market & Control & Profit

31. Which horse to pick? Build Buy Partner Leadership Core Business
Time to Market
Reduce
Risk

32. 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

33. Eleven Modes of Collaboration Agreements: Illustration of Their Anchor Points
Research
contract
Common
purchase
Subcontracting
Engineering
Patent
licence
production
Trademark
Consortium
(common
marketing)
Distribution
agreements
Ways
of...
designing
supplying
producing
marketing
delivering
Know-how transfer
contract

34. New Business Models Emerge
Then…
One Integrated Company
Now…
Many Distributed Companies
Product Development Cycle
Product Development
Tool Companies
Testing Services
CRO’s
CRM’s

35. New Regional Model Emerge
Then…
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

36. New developments in innovation raise 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.

37. ‘Closed Innovation: Single Track’1 2 3
“Ideas &
“Current Market Place”
Investigations” 4 5
Research
Development
Commercialization
Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West

38. ‘Open Innovation: Three Lane Highway’
“External Ideas &
Investigations”
“External Technologies 1
Insourcing gate 2 3
“Ideas &
“Current Market Place”
Investigations”
Outsourcing gate
“New Market Place”
Technology spin-offs
“Other firm’s Market Place” 4
licensing 5
Research
Development
Commercialization
Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West

39. Open Innovation Interfaces and Boundaries
Cultural differences
Successful partnerships have researchers in companies working with researchers in the public research organizations (PROs) and research universities
Communication channels, working relationships
Creating a company culture where external contributions are accepted
Functional organizations with specific responsibility to manage the external technology and research function
Example of Hewlett-Packard University Relations
Work pace, expectations
Since private R & D labs work more quickly, a company may establish a small-firm channel to take advantage of the speed difference
MIT Industrial Liaison Program manages university research to meet the expectations of corporate sponsors

40. Impact of Open Innovation
Historically, internal R&D was a strategic asset
Nowadays, companies commercialize both their own ideas/inventions as well as those from others; for example, of other companies, public research organizations (PROs) and research universities
Industries embracing open innovation view public research organizations (PROs) and research universities as a source of graduates and applied research
Researchers in companies have shifted to advanced technologies and product development

41. 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

42. From a network IN an organization ….
To the network IS the organization
Hierarchy
Matrix
Network

43. 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

44. Building an IP Strategy
Deliver Revenue
Biz Strategy
Build Your Portfolio
Strategic Patenting/Branding
Purchase Patents/Brands
Deploy Your Portfolio
Design Freedom
Manage Competition
Enter new Markets
Deliver Revenue
Protecting Inventions/Recognition
Manage Competition
Design Freedom
Markets Development

45. A Hierarchy of IP/IC Management
Visionary
(Drive Growth)
Integrated
(Manage for Growth)
Profit Center
(Manage for Profitability)
Cost Control
(Control Costs, Improve Productivity)
There is no best place to be: it depends on your needs
Defensive
(Build Portfolio, Protect Markets and Technology)

46. Commercialisation of IP
Exploiting IP Assets
Commercialisation of IP
License
Strategic Alliance
Co-Development
Co-Marketing
Passive
Partnership

47. Passive features of a license
Licensor grants exploitation rights to a licensee
Licensee pays royalties and other remuneration to the Licensor
Licensor is passive
Has no further exploitation rights
Licensor has no need to actively do anything
Licensor passively sits by and collects royalties
Licensor IP $
Licensee

48. Strategic Alliance
Strategic Partner
Strategic Partner
In a strategic alliance both parties contribute to their joint venture their respective resources and capability
Aim is to add greater value to their respective positions
By doing so, to
Increase their financial return
To access the capability of their partner which they themselves lack
To acquire skills that they themselves may lack

49. Co-Development Agreements Co-Marketing Agreements
Partners collaborate scientifically to further develop the IP
Take the IP further along the development path
Licensor increase the value of the IP as a result of the collaboration
Co-Marketing Agreement
Partners co-market the products of their alliance
One may manufacture only, and the other may sell products only
They may sell products competitively in the same territory
Or, they may sell in different territories
Licensor retains some marketing rights, achieving greater financial upside

50. Entrepreneurial Success
1. People (Entrepreneur /Entrepreneurial Team)
2. Opportunity (Marriage of Market and
Product/Service)
3. Access to Resources (Land. Labor, Capital, Knowledge
And the fit amongst these three elements
(Business Model)

51. “Competitive strategy is about being different
“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

52. 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

53. Competitive Strategies
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