SMBs: The Key to Closing the Innovation Gap Intellectual Property Management and the Internationalization Strategies of SMBs/SMEs G S Jaiya, Director,
Presentation on theme: "Intellectual Property Management for Enhancing the Competitiveness of SMEs and Other Creative Communities G S Jaiya, Director, SMEs Division World Intellectual."— Presentation transcript:
1Intellectual Property Management for Enhancing the Competitiveness of SMEs and Other Creative CommunitiesG S Jaiya, Director, SMEs DivisionWorld Intellectual Property Organization
5Distribution of IP PANORAMA CD To member states of WIPOTo the partner of SMEs division
6Spotlight is on knowledge in today’s economy Knowledge, Weightless, Information, Digital or Service EconomyFactors of production: Land, Labor, Capital, Intangibles (Knowledge)Knowledge as useful Information (or Service)Information as a “Public Good”Information as Property
7Market-oriented Economy Playing Field: Unfair competition; free ridingNational Legal Systems: Diversity (bilateral/regional/ international treaties or agreements)Adding Value : Meeting or exceeding market needs or expectationsMarket research: Consumers’ needs, competing products or substitutes, gapsTechnological innovation as an element of marketing
8The challenge of adding value in today’s economy Raw materials/Inputs: Processing (Value addition) = Value added output/component; product; sale; ProfitValue addition: Cheaper, Faster, Better: Functional/technological or aesthetic/non-technological; Rational/Emotional (More for Less)Price; access/availability; consistencyIndividual, Enterprise (legal person), Chains, Networks; consortia; Open Innovation (Industry-Government-Academia)Ownership vs. access to knowledgeValue Addition, Value Delivery and Value Extraction
9Competition and Cooperation in the Knowledge Economy Property: Right to Exclude/use/enjoyShare/leveragePhysical vs. Intellectual PropertyOne to one vs. one to manyPhysical manifestation/link to carrier/medium or fixationNature of competing/substitute products: Functional, equivalent, class, set, related goods
10Levels of Product Core Benefit or Service Augmented Product InstallationPackagingBrandNameFeaturesDelivery& CreditAfter-SaleServiceCoreBenefitorServiceQualityLevelDesignWarrantyActualProductCoreProduct
11Selling Products Selling Interconnected Systems Customers who care about products “on their own terms”: is this the right product for me?Build the “best” productBest designedLowest costMost reliableSelling Interconnected SystemsCustomers who care about the total system experience: will this connect with the rest of my world?Control the architectureOrInfluence the architecture and build the best products within it
12What’s the Difference?A productA commodityA brand
13Would you Buy?A Libyan watch?Japanese coffee?A Kenyan car?
14Your answer in all these cases is very probably “NO” Reason?NO REPUTATIONReputation isthe Soul of a Brand
15How Important is Branding? The NUMMI plant in California produces two nearly identical models called the Toyota Corolla and the Chevrolet Prizm.Toyota sold 230,000 Corollas compared to sales of 52,000 Prizms.And Toyota’s net price is $650 higher!
16A Brand is More Than a Product Organizational associationsSymbolsBrandPersonalityCountry of originScopeAttributesUsesQuality/valueFunctional benefitsProductBrand/customer relationshipsUser ImagerySelf-expressive benefitsEmotional benefits16
18Continuum of Evaluation for Different Types of Products ClothingJewelryFurnitureHousesAutomobilesRestaurant mealsVacationsHaircutsChild careTelevision repairLegal servicesRoot canalsAuto repairMedical diagnosisMostGoodsMostServicesEasy to evaluateDifficult to evaluateHigh in searchHigh in experienceHigh in credence
19Modern Value is in Brands 74% of the value of the New York Stock Exchange and 72% of that of the London Stock Exchange is in brands, management know-how and patentsTrue value is no longer in bricks and mortar
20Brand Equity as a Percent of Firm Tangible Assets Industry Brand EquityApparel 61Tobacco 46Food Products 37ChemicalsElectric machinery 22Transportation 20Primary metals 0120
21Global Brand Scoreboard The Value of BrandsGlobal Brand Scoreboard1. Coca-cola 67.52$ billion2. Microsoft 59.95$ billion3. IBM $ billion4. GE $ billion5. Intel $ billion(German survey January 17, 2006)This gives an idea of how trademarks can become valuable business assets and why it is important to protect them.21
22What is a Brand?A brand is a “name, term, sign, symbol, or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition.”Source: American Marketing AssociationA product is something that is made in a factory; a brand is something that is bought by a customer. A product can be copied by a competitor, a brand is unique. A product can be quickly outdated; a successful brand is timeless.Source: Stephen King, WPP Group, LondonA brand is something that resides in the minds of consumer.22
23differentiates it from What is a Brand?SymbolTermIdentifiesproduct/serviceof seller anddifferentiates it fromcompetitorsDesignNameCombinationSignKeller, Kevin Lane. Strategic Brand Management: Building, Measuring, and Managing Brand Equity23
24KEY CHARACTERISTICS OF A BRAND To be effective, a brand needs the following:consistencyto reduce buyers’ level of perceived riskto offer a range of functional and emotional attributes which are of value to buyers
25Names are Important in Branding Donald Trump’s family name is Drumpf. But he can’t call it Drumpf Towers.Alan Alda’s name was Alphonso D’Abruzzo.Chinese gooseberry was renamed kiwifruit.Paradise Island in the Bahamas used to be Hog Island.
26A Brand Must be More Than a Name A brand must trigger words or associations (features and benefits).A brand should depict a process (McDonald’s, Amazon).A great brand triggers emotions (Harley-Davidson).A great brand represents a promise of value (Sony).The ultimate brand builders are your employees and operations, i.e., your performance, not your marketing communications.
27Brand/Trademark Trademark: Legal concept Brand: Marketing concept Registration of a brand adds value as it protects its other inherent assetsBrand profile and positioning may vary over time, but trademark protection remains the same
28Trust is to Business What Trademark is to Brand Brand Equity built on the foundation of a protected TrademarkBrand/Trademark can:(a) be disposed off separately from other company assets (Free-standing Institutions); and(b) give rights that can be legally protected
29Centrality of Knowledge KNOWLEDGE underpins PERFORMANCE
30But... Wolfgang Stofer, Director of BMW’s Treasury Department: “Whenever the technology becomes commoditized, we buy it from third parties”.
31Role of Brands: For the Company In a highly competitive world where manufacturers are losing their pricing power, branding is seen as a way of clawing back some of the lost influence.
32Role of Brands: For the Company Real and marketable assetHigher profit margin (Price Premium)Incremental cash flowReduces cash flow sustainability risk
33Role of Brands: For the Company Accelerates speed of cash flowIncreases bonding and customer loyaltyIncreased market shareEntry barrierLimits growth of competitors
34Role of Brands: For the Company Requires lower investment levelsBetter negotiating position with trade and other suppliersFacilitates higher product availability (better distribution coverage)Dealers order what customers explicitly request
35Role of Brands: For the Company Extends products’ life cycleAllows lower cost brand extensionsCan be the basis for international expansionProvides legal protection;Licensing; Franchising; MerchandisingBuffer to survive market or product problems
36Role of Brands: For the Company Value of Brands is a key determinant of enterprise value and stock market capitalizationFinancial markets reward consistently focussed brand strategiesBrand management a vital ingredient for success in corporate strategy
371961 Coca Cola original vintage advertisement. Features a Valentine's Day37
38Innovative branding - with a sense of humour Mouse characters started to have themesBio 2002 in Toronto
39Innovative branding - with a sense of humour Bio 2003 Washington DC
40Innovative branding - with a sense of humour Bio 2004 San Francisco
41SME 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 priceGlobalization and trade liberalization has made it crucial for most enterprises, including SMEs, to become internationally competitive even when operating wholly in the domestic market
42SMEs 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 developmentAcquiring new technologyImproving management practicesDeveloping creative and appealing designsEffectively marketing their products
43Everything Depends on 5 Key Choices: Choosing the right business to be inCreating the right strategyBuilding the right systemsDesigning the right organizationGetting the right people
44A 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, andCustomer needs met by the product or service,… that creates a potential or real economic relationship between a buyer and a seller.
45Business Strategy is ...the group of dynamic, integrated decisions that position the business in its competitive environmentR&D StrategyBasic and applied researchProduct/process innovationLead or followMarketing StrategyProduct/market definitionPricingDistributionPromotionCustomer supportObjectivesGrowthProfitabilityDiversificationInnovationMarket shareWorking environmentCorporate citizenshipProduction StrategyFacilitiesIntegrationCapacityQualityProduction technologyOperations controlPeople managementFinancial StrategyCapital structureCash flowLegal StrategyIntellectual property protectionCorporate
46Strategy Sets a Dynamic Loop in Motion R&D StrategyExecutionPeopleSystemsOrganizational structuresMarketing StrategyProduction StrategyResultsLegal StrategyFinancial Strategy
47SMEs Competitiveness (III) For this, SMEs must make significant investments of time and resourcesWithout intellectual property protection there is a strong risk that investments in R&D, product differentiation and marketing may be stolen/copiedIntellectual 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
48“Technology-Push Linear Model of Innovation” Basic ResearchApplied ResearchInventionDevelopmentProductionMarketing
49The Innovation Process An innovation starts as an idea/concept that is evaluated, refined and developed before it is applied or acted upon.Innovations may be inspired by reality (known problem). The innovation (new or improved product development) process, which leads to useful technology, requires:ResearchDevelopment (up-scaling, testing)ProductionMarketingSaleUse/ConsumeExperience with a product results in feedback and leads to incrementally or radically improved innovations.
50New/Improved Product Development Stages in a New/Improved Product Development process:Ideas GenerationIdeas ScreeningConcept Development and TestingBusiness AnalysisBeta Testing and Market TestingTechnical ImplementationCommercialization
51Ideas, 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 deviceCreativity = Idea + Action (Individual)Innovation = Creativity + Productivity (Groups/teams)Innovation = Idea + Action + Productivity
52Corporate 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 strengthMarket direction and needsCompetitive effectsTechnology strategyProduct strategyCore competencyResource alignmentArticulates the ways in which the opportunities created by the firm’s capabilities can be exploited.
53Basic 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?
54Effective Business Strategies address three key challenges: MarketsHow will we create value?TechnologiesHow will we capturevalue in the face ofCompetition?How will we buildthe organizationalcapabilitiesnecessary todeliver it?933
55Effective Strategies answer three key questions: How will weCreate value?How will weDeliver value?How will weCapture value?8
56From 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?
57Three key ideas: Uniqueness Controlling the knowledge generated by an innovationComplementary assetsControlling the assets that maximize the profits from innovatingUnderstanding the dynamics of the value chainShould we buy our suppliers? Distributors?Should we outsource our manufacturing… distribution… sales… capability?5539
58What 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
59Types of Complementary Assets COMPETENCIESThings you can doCompetitive manufacturingSales and service expertiseOtherCore technological know-how in innovationComplementary technologiesDistribution channelsCustomer relationshipsOtherThings you ownRESOURCESBrand name
60Types of Complementary Assets Things you can doManufacturing capabilitiesSales and service expertiseThings you ownBrandDistribution channelsCustomer relationshipsCOMPETENCIESRESOURCES63
61Uniqueness & Complementary Assets over the Life Cycle: MaturityTakeoffFerment8052
62The ‘Commercialisation Pipeline’ Do it yourselfAssign IPCommercialization DecisionIdeaInventionIPOut-license IPPartnerEtc
63How are commercialisation strategies actually chosen? Ability to exclude incumbants1Complementary asset environment1OthersGo where the easy money isPast ExperienceInternal constraints & politicsBusiness network of the entrepreneurRisk adversityMarket forcesetc
64Build, Buy, Partner: Benefits and Tradeoffs ProsConsBuildMost product controlOwn the IPMost profit opportunityLongest time to marketRisk in market shiftsHigh development costsHighest switching costsCost & RiskBuyShorten time to marketOwn the IPAcquisition costsIntegration costsPartnerShortest Time to MarketConserves ResourcesTry before you BuyLowest Switching CostsCredibility and accessBuild: In house developmentBuy: Acquisition of technologyPartnering: 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 strategiesBuy 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 strategyInformix/Illustra example of why Buying can be problem—market shifted-need for object database not as planned.HP/Canon –OEM partnering for laser jetsIn 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 ControlIntegration CostsShared gross margins -Least Profit OpportunityTime to Market & Control & Profit
65Which horse to pick? Build Buy Partner Leadership Core Business Time to MarketReduceRisk
66The 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
67Eleven Modes of Collaboration Agreements: Illustration of Their Anchor Points ResearchcontractCommonpurchaseSubcontractingEngineeringPatentlicenceproductionTrademarkConsortium(commonmarketing)DistributionagreementsWaysof...designingsupplyingproducingmarketingdeliveringKnow-how transfercontract
68New Business Models Emerge Then…One Integrated CompanyNow…Many Distributed CompaniesProduct Development CycleProduct DevelopmentTool CompaniesTesting ServicesCRO’sCRM’s
69New Regional Model Emerge Then…ManufacturingResearchDevelopmentTrials/TestingServicesSelf-contained regional clustersRegion ARegion ERegion BRegion FRegion DRegion CRegion GNow…Specialized, networked regions
70New developments in innovation raise new issues and problems Greater emphasis on commercializing scientific discoveries, particularly in IT and the bio-sciencesSpeed and potential value of scientific progress leads to emphasis on solid and well-designed portfolios of research projectsUniversites as active drivers of innovation: Academic entrepreneurship and the entrepreneurial universityUniversity-industry partnershipsIncreased search for radical innovation and top-line growth.
71‘Closed Innovation: Single Track’ 123“Ideas &“Current Market Place”Investigations”45ResearchDevelopmentCommercializationBased upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
72‘Open Innovation: Three Lane Highway’ “External Ideas &Investigations”“External Technologies1Insourcing gate23“Ideas &“Current Market Place”Investigations”Outsourcing gate“New Market Place”Technology spin-offs“Other firm’s Market Place”4licensing5ResearchDevelopmentCommercializationBased upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
73Open Innovation Interfaces and Boundaries Cultural differencesSuccessful partnerships have researchers in companies working with researchers in the public research organizations (PROs) and research universitiesCommunication channels, working relationshipsCreating a company culture where external contributions are acceptedFunctional organizations with specific responsibility to manage the external technology and research functionExample of Hewlett-Packard University RelationsWork pace, expectationsSince private R & D labs work more quickly, a company may establish a small-firm channel to take advantage of the speed differenceMIT Industrial Liaison Program manages university research to meet the expectations of corporate sponsors
74Impact of Open Innovation Historically, internal R&D was a strategic assetNowadays, companies commercialize both their own ideas/inventions as well as those from others; for example, of other companies, public research organizations (PROs) and research universitiesIndustries embracing open innovation view public research organizations (PROs) and research universities as a source of graduates and applied researchResearchers in companies have shifted to advanced technologies and product development
75A Network View of Innovation Depending on a firm’s strengths, different firms play different roles in open innovation value chainSome firms generate innovationsSome integrate the innovations of othersSome have a fully integrated modelAn open innovation system is a networked system
76Supply Chain for Innovation in SMEs PreconditionsAwarenessIntermediariesProfitabilityPublic supportInnovationAwareness& AuditsOutsourced RTDInvestment in human capitalSeed capitalIn-house innovationProof of conceptMarketProductive investmentMarket pressureRisk shared innovationIPR protectionToolsFinancial schemesTechnology & technical centresIPR supportsClustersSME – Universities interface
77From a network IN an organization …. To the network IS the organizationHierarchyMatrixNetwork
78TYPES OF NETWORKSTask 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
79Building an IP Strategy Deliver RevenueBiz StrategyBuild Your PortfolioStrategic Patenting/BrandingPurchase Patents/BrandsDeploy Your PortfolioDesign FreedomManage CompetitionEnter new MarketsDeliver RevenueProtecting Inventions/RecognitionManage CompetitionDesign FreedomMarkets Development
80A 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 needsDefensive(Build Portfolio, Protect Markets and Technology)
81Commercialisation of IP Exploiting IP AssetsCommercialisation of IPLicenseStrategic AllianceCo-DevelopmentCo-MarketingPassivePartnership
82Commercialisation of IP LicenseStrategic AllianceCo-DevelopmentCo-MarketingSkIP$$
83Passive features of a license Licensor grants exploitation rights to a licenseeLicensee pays royalties and other remuneration to the LicensorLicensor is passiveHas no further exploitation rightsLicensor has no need to actively do anythingLicensor passively sits by and collects royaltiesLicensorIP$Licensee
84Strategic AllianceStrategic PartnerStrategic PartnerIn a strategic alliance both parties contribute to their joint venture their respective resources and capabilityAim is to add greater value to their respective positionsBy doing so, toIncrease their financial returnTo access the capability of their partner which they themselves lackTo acquire skills that they themselves may lack
85Co-Development Agreements Co-Marketing Agreements Partners collaborate scientifically to further develop the IPTake the IP further along the development pathLicensor increase the value of the IP as a result of the collaborationCo-Marketing AgreementPartners co-market the products of their allianceOne may manufacture only, and the other may sell products onlyThey may sell products competitively in the same territoryOr, they may sell in different territoriesLicensor retains some marketing rights, achieving greater financial upside
86KNOWLEDGE AGEUniversities and high schools become the raw material of economic development as coal mines were the raw material of the industrial age !
873 M’s of ENTREPRENEURSHIP MONEYMARKETINGMANAGEMENT
88Entrepreneurship 1Entrepreneurship drives innovation, competitiveness, job creation and economic growth.It allows new/innovative ideas to turn into successful ventures in high-tech sectors and/or can unlock the personal potential of disadvantaged people to create jobs for themselves and find a better place in society.
89Entrepreneurship 2Entrepreneurship, in small business or large, focuses on "what may be" or "what can be".One is practicing entrepreneurship by looking for what is needed, what is missing, what is changing, and what consumers will buy during the coming years.
90Entrepreneurship 3 Entrepreneurs have: A passion for what they do The creativity and ability to innovateA sense of independence and self- reliance(Usually) a high level of self confidenceA willingness and capability (though not necessarily capacity or preference) for taking risks
91Entrepreneurship 4 A tolerance for organizational bureaucracies Entrepreneurs do not (usually) have:A tolerance for organizational bureaucraciesA penchant for following rulesA structured approach to developing and implementing ideasThe foresight to plan a course of action once the idea is implemented and established
92Entrepreneurial Success 1. People (Entrepreneur /Entrepreneurial Team)2. Opportunity (Marriage of Market andProduct/Service)3. Access to Resources (Land. Labor, Capital, KnowledgeAnd the fit amongst these three elements(Business Model)
93“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
94Competitive Advantage An advantage over competitors gained by offering consumers greater value than competitors offer.
95Competitive 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 lowDifficult to imitate: when products/services are hard to mimic or duplicate
96Competitive Strategies Basic Competitive Strategies: PorterOverall cost leadershipLowest production and distribution costsDifferentiationCreating a highly differentiated product line and marketing programFocusEffort is focused on serving a few market segments
97Competitive Strategies Basic Competitive Strategies: Value DisciplinesOperational excellenceSuperior value via price and convenienceCustomer intimacySuperior value by means of building strong relationships with buyers and satisfying needsProduct leadershipSuperior value via product innovation
98CORE COMPETENCES Definition Hammel and Prahalad defined core competence as a central value - creating capability of an organization/enterprise.
99CORE COMPETENCESCore competences are activities or processes that critically underpin an organisation competitive advantage.They create and sustain the ability to meet the critical success factors of particular customer groups better than providers in ways that are difficult to imitate
100CORE COMPETENCESCore competences are distinctive capabilities that lead a company to a competitive advantage.Features of an enterprise that cannot be readily reproduced by a competitor.
101CORE COMPETENCESCore competences can vary through the time depending on the strategy adapted by the companies and the identification of the core competencies is the first step for a company to decide which business opportunities to pursue.
103Low-Cost Provider Strategies Keys to SuccessMake achievement of meaningful lower costs than rivals the theme of firm’s strategyInclude features and services in product offering that buyers consider essentialFind approaches to achieve a cost advantage in ways difficult for rivals to copy or matchLow-cost leadership means low overall costs, not just low manufacturing or production costs!
104Differentiation Strategies Incorporate differentiating features that cause buyers to prefer firm’s product over brands of rivalsFind ways to differentiate that create value for buyers and are not easily matched or cheaply copied by rivalsNot spending more to achieve differentiation than the price premium that can be chargedObjectiveKeys to Success
105Where to Find Differentiation Opportunities in the Value Chain Purchasing and procurement activitiesProduct R&D and product design activitiesProduction process / technology-related activitiesManufacturing / production activitiesDistribution-related activitiesMarketing, sales, and customer service activitiesInternallyPerformedActivities,Costs, &MarginsMargins ofSuppliersBuyer/UserValueChainsActivities, Costs,& Margins ofForward ChannelAllies &Strategic Partners105
106How to Achieve a Differentiation-Based Advantage Approach 1Incorporate product features/attributes that lower buyer’s overall costs of using productApproach 2Incorporate features/attributes that raise the performance a buyer gets out of the productApproach 3Incorporate features/attributes that enhance buyer satisfaction in non-economic or intangible waysApproach 4Compete on the basis of superior capabilities106
107Types of Differentiation Themes Unique taste – Dr. PepperMultiple features – Microsoft Windows and OfficeWide selection and one-stop shopping – Home Depot, Amazon.comSuperior service -- FedEx, Ritz-CarltonSpare parts availability – CaterpillarEngineering design and performance – Mercedes, BMWPrestige – RolexProduct reliability – Johnson & JohnsonQuality manufacture – Michelin, ToyotaTechnological leadership – 3M CorporationTop-of-line image – Ralph Lauren, Starbucks, Chanel107
108Sustaining Differentiation: Keys to Competitive Advantage Most appealing approaches to differentiationThose hardest for rivals to match or imitateThose buyers will find most appealingBest choices to gain a longer-lasting, more profitable competitive edgeNew product innovationTechnical superiorityProduct quality and reliabilityComprehensive customer serviceUnique competitive capabilities108
109Best-Cost Provider Strategies Combine a strategic emphasis on low-cost with a strategic emphasis on differentiationMake an upscale product at a lower costGive customers more value for the moneyDeliver superior value by meeting or exceeding buyer expectations on product attributes and beating their price expectationsBe the low-cost provider of a product with good-to-excellent product attributes, then use cost advantage to under price comparable brandsObjectives109
110Focus / Niche Strategies Involve concentrated attention on a narrow piece of the total marketServe niche buyers better than rivalsChoose a market niche where buyers have distinctive preferences, special requirements, or unique needsDevelop unique capabilities to serve needs of target buyer segmentObjectiveKeys to Success110
111Examples of Focus Strategies Animal Planet and History ChannelCable TVGoogleInternet search enginesPorscheSports carsCannondaleTop-of-the line mountain bikesEnterprise Rent-a-CarProvides rental cars to repair garage customersBandagSpecialist in truck tire recapping111
112Focus / Niche Strategies and Competitive Advantage Achieve lower costs than rivals in serving a well-defined buyer segment –Focused low-cost strategyApproach 1Offer a product appealing to unique preferences of a well-defined buyer segment – Focused differentiation strategyApproach 2Which hat is unique?112
113The Evolution of Marketing Transactional MarketingRelationship MarketingCollaborative MarketingTime frame1950s1980sBeyond 2000View of valueThe company offering in an exchangeThe customer relationship in the long runCo-created experiencesView of marketPlace where value is exchangedMarket is where various offerings appearMarket is a forum where value is co-created through dialogueRole of customerPassive buyers to be targeted with offeringsPortfolio of relationships to be cultivatedProsumers-active participants in value co-creationRole of firmDefine and create value for consumersAttract, develop and retain profitable customersEngage customers in defining and co-creating unique valueNature of customer interactionSurvey customers to elicit needs and solicit feedbackObserve customers and learn adaptivelyActive dialogue with customers and communitiesAdapted from Prahalad and Ramaswamy 2004
114Example 1 Patent for the fountain pen that could store ink Utility Model for the grip and pipette for injection of inkIndustrial Design: smart design with the grip in the shape of an arrowTrademark: provided on the product and the packaging to distinguish it from other pensSource: Japanese Patent Office
115Example 2Decades ago, Coca-Cola decided to keep its soft drink formula a secretThe formula is only know to a few people within the companyKept in the vault of a bank in AtlantaThose who know the secret formula have signed non-disclosure agreementsIt is rumored that they are not allowed to travel togetherIf it had patented its formula, the whole world would be making Coca-Cola
117Example 3Patent 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 copyrightReverse engineering would have been easy
118The Interaction of Intangible and Tangible Assets to Create Earnings Intellectual Capital (unique)Complementary BusinessAssets (differentiated)Value CreationValue ExtractionManufacturing FacilitiesDistribution CapabilitiesSales ForceHumanCapitalIntellectualAssets$IntellectualPropertyDiscuss in detail with an example: car manufacturerStructural Capital (generic)
119Intellectual Property Tuned To A Company’s Business Intellectual Capital(Unique Assets)Complementary Business Assets(Differentiated Assets)Value CreationValue ExtractionIntellectual Assets?%HumanCapital(Lead Time)Intellectual Property$Sales ForceManufacturing FacilitiesDistribution CapabilitiesPatentsTrademarksCopyrightsTrade SecretsKnow-HowStructural Capital(Generic Assets)IP Value Is Created When Leveraged Through Complementary AssetsWhen Companies Have Different Complementary Asset Strengths They Will Need Different Intellectual Property (Materials, Process, Use)
120Intellectual Property Tuned To A Company’s Business Beverage Companies Intellectual Capital(Unique Assets)Complementary Business Assets(Differentiated Assets)Value CreationValue ExtractionIntellectual AssetsHumanCapital(Lead Time)Intellectual Property$Sales ForceManufacturing FacilitiesDistribution CapabilitiesPatentsTrademarksCopyrightsTrade SecretsKnow-HowStructural Capital(Generic Assets)Line Shows the Percentage of Company Value (Market Capitalization) That is Protected By This AssetMost value is in Trademark, Trade Secret, Distribution and Sales
121Intellectual Property Tuned To A Company’s Business Paper Companies Intellectual Capital(Unique Assets)Complementary Business Assets(Differentiated Assets)Value CreationValue ExtractionIntellectual AssetsHumanCapital(Lead Time)Intellectual Property$Sales ForceManufacturing FacilitiesDistribution CapabilitiesPatentsTrademarksCopyrightsTrade SecretsKnow-HowStructural Capital(Generic Assets)Most value is in Trademark, Know-How, Manufacturing and SalesSome value in Patents
122Intellectual Property Tuned To A Company’s Business Software Companies Intellectual Capital(Unique Assets)Complementary Business Assets(Differentiated Assets)Value CreationValue ExtractionIntellectual AssetsHumanCapital(Lead Time)Intellectual Property$Sales ForceManufacturing FacilitiesDistribution CapabilitiesPatentsTrademarksCopyrightsTrade SecretsKnow-HowStructural Capital(Generic Assets)Most value is in Human Creativity, Trademark, Copyright, and Distribution
123Intellectual Property Tuned To A Company’s Business Pharmaceutical Companies Intellectual Capital(Unique Assets)Complementary Business Assets(Differentiated Assets)Value CreationValue ExtractionIntellectual AssetsHumanCapital(Lead Time)Intellectual Property$Sales ForceManufacturing FacilitiesDistribution CapabilitiesPatentsTrademarksCopyrightsTrade SecretsKnow-HowStructural Capital(Generic Assets)Most value is in Human Creativity, Patents, and TrademarksSome value in Know-How, and Sales
124Introduction to IP Management LegalTechnicalBusinessExportFinancialRelationshipsAccountingTaxInsuranceSecurityAutomationPersonnel
125Understanding the Process of Innovation The Process/Steps of InnovationPre-IPOTime$ViableMarket acceptanceHeading to IPO or M&AExpansionLegal EntityFounders = Mgt TeamMinimal RevenueSlow GrowthHigh GrowthHead CountMultiple CyclesBright IdeaExperimentalResearchBusiness PlanProof of ConceptStart-UpSupport FunctionsAdministrationMarketingRevenue GrowthSeedIdea / Concept
126IP Management Needed in all stages The Needs of Each StageRecruitmentBusiness DevelopmentA & PMarket AccessCorporate and SecretarialFinancialTrainingPR and MarketingNetworkingBusiness DevelopmentTime$ExpansionBusiness PlanPrototype/ POCProject ManagementBusiness PremisesManagement TrainingInternational support and Mkt. AccessDiversification strategies and supportRecruitmentTraining and IncentivesStart-UpSeedIdea / ConceptIP Management Needed in all stages
127Basic Message 1IP 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:Trademarks/ GIs Ind. Designs/Patents/CopyrightPatents / Utility Models/Trade secretsAll IP RightsPatents / Utility modelsIndustrial Designs/ Trademarks/GIsInventionCommercialization MarketingExportingFinancingProduct DesignLicensingLiterary / artistic creationCopyright/Related RightsAll IP Rights
128Basic Message 2IP Strategy should be an integral part of the overall business strategy of an EnterpriseBUT: Ignoring the IP system altogether is in itself an IP strategy, which may eventually prove very costly or even fatalIP Strategy is influenced by the Business Model and Revenue Extraction Model of a business
129Basic Message 3 (More for Less) Own UseLicensingFranchisingMerchandising (Mickey Mouse, Hello Kitty)