SMBs: The Key to Closing the Innovation Gap Intellectual Property Management and the Internationalization Strategies of SMBs/SMEs G S Jaiya, Director,

SMBs: The Key to Closing the Innovation Gap Intellectual Property Management and the Internationalization Strategies of SMBs/SMEs G S Jaiya, Director, SMEs Division World Intellectual Property Organization

SIMULTANEOUS REVOLUTIONS
NEW COMPETITORS NEW RULES OF COMPETITION NEW POLITICAL AGENDAS INDUSTRY STRUCTURE CHANGES THE BUSINESS NEW TECHNOLOGIES NEW REGULATORY ENVIRONMENT NEW EMPLOYEES AND NEW VALUES EVER INCREASING CUSTOMER EXPECTATIONS

Defining Competitiveness
The degree to which a nation can, under free and fair market conditions, produce goods and services that will meet the test of international markets while simultaneously maintaining or expanding the real income of its citizens.

Competitiveness: A Link to National Goals
Human Resources Trade Policy Decreased Budget Deficit Stronger National Security Capital Improved Domestic Performance Improved Competitiveness in World Market More and Better Jobs Technology New Competition Reduced Trade Deficit Increased Standard of Living

Who Makes This Happen? Governments do not compete, companies do.
Governments cannot legislate success. Governments provide the infrastructure and/or the environment for companies to compete. Fiscal and monetary policy Education system Protection of intellectual property rights Other factors that are prerequisites to compete within a specific industry. Governments do not compete, companies do.

How is Competitive Advantage Gained?
Providing value to the customer. What is a good strategy for this? Produce quality products and services through effective leadership of skilled employees using advanced methods through the innovative use of technology. Boils down to: Work smarter not harder.

The Diamond of National Advantage
Chance Firm Strategy, Structure and Rivalry Factor Conditions Demand Conditions Related and Supporting Industries Government

Factor Conditions: The prerequisites to compete in a specific industry Transportation Communications Logistics Personnel training as a product of education system Etc.

Demand Conditions: The sophistication of the customer’s demand. More sophisticated demands means more difficult competition which forces the company to compete more effectively.

Related and Supporting Industries: Home-based suppliers who are also successful competitors on the international level.

Firm Strategy, Structure and Rivalry: How companies are created, structured and managed and how they compete in the domestic market. Varies from country to country, based on a number of different factors.

Role of the Government: Serve as an enabler, challenger and catalyst to companies so that they can compete successfully. Role of Companies: Create pressure within the company for innovation and welcome the challenge to compete against the best in the industry.

Easy to read, practical, business friendly guides

Distribution of IP PANORAMA CD
To member states of WIPO To the partners of SMEs division

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

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

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

Value Extraction Ability to extract value will depend on Industry
Product component, product, service, software, etc. Firm’s location in Value Chain Is the firm selling the new product? component of new product? Value proposition Is the product relevant to the firm’s value proposition IP rights acquired

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

Profitability & Growth
Caught in the Box Does mainstream R&D within the core business as any other actor in that business Files patent applications focused on details/components of existing products Creates (i) profitability within the core business at the expense of growth or (ii) growth at the expense of profitability, but creates usually only little profitable growth (if any) Profitability Core Business Mainstream R&D Growth

Profitability & Growth
Breaking down the Walls Creates innovations related to core business Files patent applications focused on concepts of next generation products, systems, technologies & new materials Expands the core business and creates profitable growth in the expansion area Innovations Profitability Core Business Mainstream R&D Growth Extended Core Business

Profitable Growth Break-Through Innovations New Business Profitability
Thinking outside the Box Creates break-through innovations focusing on customer needs (total customer solutions) and connecting core business with other businesses Files patent applications focused on strategic new product and service concepts and emerging technologies Creates considerable profitable growth in new businesses Profitability Core Business Mainstream R&D Growth Extended Core Business

Make, Buy or Collaborate Strategy
High Collaboration with 3rd party (e.g. technology provider) Company’s own internal core competence Buy as standard component (”off-the-shelf”) Collaboration with 3rd party (e.g. supplier) Uniqueness of Technology Low Low Uniqueness of Product Feature High

Types of IP Rights Trademarks (Brands) Geographical Indications
Industrial Designs Patents and Utility Models Copyright and Related Rights Trade Secrets New Varieties of Plants Unfair Competition

WHAT IS A TRADEMARK? Any sign, or any combination of signs, capable of distinguishing the goods or services of one undertaking from those of other undertakings, shall be capable of constituting a trademark. Words including personal names, letters, numerals, figurative elements (logos), combination of colors, sounds, smells, etc Visually perceptible; 2D or 3D (shape)

What can be a Trade Mark A trade mark is not limited to a sign or words Can be: Words Letters Numerals Drawings Shapes Colours Logo Audible sounds

Business (Idea) point of view:
Industrial Designs Business (Idea) point of view: Make your product appealing to consumers Customize products in order to target different customers (e.g. Swatch) Develop the brand (e.g. Apple ’s « Think Different » strategy; i Pod)

Example: Ring-pull Cans
Patents Example: Ring-pull Cans The inventor licensed the system to Coca-Cola at 1/10 of a penny per can. During the period of validity of the patent the inventor obtained 148,000 UK pounds a day on royalties.

Copyright Works Films Literary Dramatic Sound Recording Artistic Music

What are Related Rights? There are three kinds of “related rights”:
of performers Actors Musicians Singers Dancers … or generally people who perform in their performances; Rights of producers of sound recordings (also called phonograms) in their recordings (cassette recordings, compact discs, etc.); Rights of broadcasting organizations in their radio and television programs and in Internet broadcasts such as ‘podcasts’.

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

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

What’s the Difference? A product A commodity A brand

Would you Buy? A Libyan watch? Japanese coffee? A Kenyan car?

Your answer in all these cases is very probably “NO”
Reason? NO REPUTATION Reputation is the Soul of a Brand

How 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!

A Brand is More Than a Product
Organizational associations Symbols Brand Personality Country of origin Scope Attributes Uses Quality/value Functional benefits Product Brand/customer relationships User Imagery Self-expressive benefits Emotional benefits 39

The physical goods/service continuum
Note: Insert figure 7.2 – The physical goods/service continuum 40

Continuum of Evaluation for Different Types of Products
Clothing Jewelry Furniture Houses Automobiles Restaurant meals Vacations Haircuts Child care Television repair Legal services Root canals Auto repair Medical diagnosis Most Goods Most Services Easy to evaluate Difficult to evaluate High in search High in experience High in credence

Modern 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 patents True value is no longer in bricks and mortar

Brand Equity as a Percent of Firm Tangible Assets
Industry Brand Equity Apparel 61 Tobacco 46 Food Products 37 Chemicals Electric machinery 22 Transportation 20 Primary metals 01 43

Global Brand Scoreboard
The Value of Brands Global Brand Scoreboard 1. Coca-cola 67.52$ billion 2. Microsoft 59.95$ billion 3. IBM $ billion 4. GE $ billion 5. 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. 44

What 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 Association A 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, London A brand is something that resides in the minds of consumer. 45

differentiates it from
What is a Brand? Symbol Term Identifies product/service of seller and differentiates it from competitors Design Name Combination Sign Keller, Kevin Lane. Strategic Brand Management: Building, Measuring, and Managing Brand Equity 46

KEY CHARACTERISTICS OF A BRAND
To be effective, a brand needs the following: consistency to reduce buyers’ level of perceived risk to offer a range of functional and emotional attributes which are of value to buyers

Names 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.

A 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.

Brand/Trademark Trademark: Legal concept Brand: Marketing concept
Registration of a brand adds value as it protects its other inherent assets Brand profile and positioning may vary over time, but trademark protection remains the same

Trust is to Business What Trademark is to Brand
Brand Equity built on the foundation of a protected Trademark Brand/Trademark can: (a) be disposed off separately from other company assets (Free-standing Institutions); and (b) give rights that can be legally protected

Centrality of Knowledge
KNOWLEDGE underpins PERFORMANCE

But... Wolfgang Stofer, Director of BMW’s Treasury Department:
“Whenever the technology becomes commoditized, we buy it from third parties”.

Role 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.

Real and marketable asset Higher profit margin (Price Premium) Incremental cash flow Reduces cash flow sustainability risk

Accelerates speed of cash flow Increases bonding and customer loyalty Increased market share Entry barrier Limits growth of competitors

Requires lower investment levels Better negotiating position with trade and other suppliers Facilitates higher product availability (better distribution coverage) Dealers order what customers explicitly request

Extends products’ life cycle Allows lower cost brand extensions Can be the basis for international expansion Provides legal protection; Licensing; Franchising; Merchandising Buffer to survive market or product problems

Value of Brands is a key determinant of enterprise value and stock market capitalization Financial markets reward consistently focussed brand strategies Brand management a vital ingredient for success in corporate strategy

1961 Coca Cola original vintage advertisement.
Features a Valentine's Day 60

Innovative branding - with a sense of humour
Mouse characters started to have themes Bio 2002 in Toronto

Bio 2003 Washington DC

Bio 2004 San Francisco

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

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

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

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.

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

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

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

“Technology-Push Linear Model of Innovation”
Basic Research Applied Research Invention Development Production Marketing

The 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: Research Development (up-scaling, testing) Production Marketing Sale Use/Consume Experience with a product results in feedback and leads to incrementally or radically improved innovations.

New/Improved Product Development
Stages in a New/Improved Product Development process: Ideas Generation Ideas Screening Concept Development and Testing Business Analysis Beta Testing and Market Testing Technical Implementation Commercialization

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

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.

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?

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

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

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?

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

‘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

‘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

Open Innovation Defined
“Open Innovation is a paradigm that assumes that firms can and should use external and internal ideas, and internal and external paths to market. ... Open Innovation combines internal and external ideas into architectures and systems whose requirements are defined by a business model. The business model utilizes both external and internal ideas to create value, while defining internal mechanisms to claim some portion of that value.” Chesbrough, Henry (2003a) Open Innovation, Boston: Harvard Business School Press.

Open Innovation Types of Collaborations Party licensing a patent
Parties forming a joint venture Parties jointly developing a product Party accepting an idea submission Free exchange of information in a network Open Source Acquisitions Alliances Government / Industry Collaboration University Research/licensing Users developing add on to products

Closed Innovation Advantages Disadvantages Simpler
Sole Control of Process Capture entire benefit of successes IP ownership clear Fewer competing interests Disadvantages Bear entire risk of failure Must invest to develop skills in new technologies Does not leverage other perspectives Tendency to stay with loser projects longer

Open Innovation Advantages Disadvantages Access to more ideas
Hedges your innovation risks Access to different skills Ability to concentrate on core business Potentially lower costs Potentially faster time to market Potentially more successes Disadvantages More complex Time for structuring deal Requires sophisticated management of IP Requires careful allocation of innovation risks More lawyer involvement

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

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

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

Supply Chain for Innovation in SMEs
Preconditions Awareness Intermediaries Profitability Public support Innovation Awareness & Audits Outsourced RTD Investment in human capital Seed capital In-house innovation Proof of concept Market Productive investment Market pressure Risk shared innovation IPR protection Tools Financial schemes Technology & technical centres IPR supports Clusters SME – Universities interface

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

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

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

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)

Internationalization Strategies of SMEs
Exporting International niche marketing (marketing a differentiated product or service overseas using the full Range of market entry and marketing mix options available) Domestically delivered or developed niche services (to potential visitors) Direct marketing (incl. e-commerce) Participating in an international supply chain of an MNE (piggybacking)

Factors affecting SME internationalization
(a) Competition and customer factors Small size means: lack of management resources to spend on researching new markets lack of contacts necessary to quickly develop effective distribution

Factors affecting SME internationalization Contd…
(a) Competition and customer factors (Contd…) lack of sufficient financial resources to enable competing with the promotional spend of their competitors necessary to achieve significant market share and to withstand a ’price war’

(a) Competition and customer factors (contd…) can offer customers more personal service (from owner or managers) faster decision making

(b) Company factors Small size means: adaptability and flexibility high speed of response very focused management

Disadvantages of being an SME: lack of adequate planning skills inability to devote sufficient time and finances to the R&D of new business opportunities maybe insufficient knowledge of culture, market structure and business practices of other markets; therefore higher risk

Influence of Networks in SME Internationalization
Research shows that one of the most important influences in SME internationalization is participation in networks

The internationalization of SMEs is influenced by formal and informal network relationships type of influence: driven, facilitated, and inhibited influence on what: the pace and pattern of international market growth market selection choice of entry mode

Participation and position in a networks and relationships within current markets more important than market and cultural characteristics major partners often guide foreign market selection and provide the mechanism for market entry. Thus, network relationships also influence the pattern of investment networks present SMEs with new market opportunities and established organizations as potential partners, thus accelerating and shaping their internationalization efforts

Pattern of internationalization: (1) intent to internationalize (2) an initial relationship with a larger firm (3) development of a network of formal and informal contacts, providing market knowledge and potential access/mode of entry (4) increased visibility for the small firm in international markets

Pattern of internationalization: (5) desiring increased autonomy and control over their market development activities. either: - diversify from its core product areas - proactively pursue new markets and/or - establish its own sales and marketing offices overseas or: - control by major network partner limits its product and market diversification opportunities; growth restricted to initial set of relationships

Reasons for Failure of SMEs to Successfully Internationalize
Failure to effectively scan the international environment Overdependence on one product Imitability of the product ( IP protection) Failure to respond to worldwide changes in customer needs Failure to plan financial resources Failure to manage and resource both market and operations expansion Challenges in enforcing IP rights in foreign jurisdictions

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

Commercialisation of IP
License Strategic Alliance Co-Development Co-Marketing Sk IP $ $

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

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

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

KNOWLEDGE AGE Universities and high schools become the raw material of economic development as coal mines were the raw material of the industrial age !

3 M’s of ENTREPRENEURSHIP
MONEY MARKETING MANAGEMENT

Entrepreneurship 1 Entrepreneurship 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.

Entrepreneurship 2 Entrepreneurship, 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.

Entrepreneurship 3 Entrepreneurs have: A passion for what they do
The creativity and ability to innovate A sense of independence and self- reliance (Usually) a high level of self confidence A willingness and capability (though not necessarily capacity or preference) for taking risks

Entrepreneurship 4 A tolerance for organizational bureaucracies
Entrepreneurs do not (usually) have: A tolerance for organizational bureaucracies A penchant for following rules A structured approach to developing and implementing ideas The foresight to plan a course of action once the idea is implemented and established

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)

“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

Competitive Advantage
An advantage over competitors gained by offering consumers greater value than competitors offer.

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

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

Basic Competitive Strategies: Value Disciplines Operational excellence Superior value via price and convenience Customer intimacy Superior value by means of building strong relationships with buyers and satisfying needs Product leadership Superior value via product innovation

CORE COMPETENCES Definition
Hammel and Prahalad defined core competence as a central value - creating capability of an organization/enterprise.

CORE COMPETENCES Core 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

CORE COMPETENCES Core competences are distinctive capabilities that lead a company to a competitive advantage. Features of an enterprise that cannot be readily reproduced by a competitor.

CORE COMPETENCES Core 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.

The Five Generic Competitive Strategies
141

Low-Cost Provider Strategies
Keys to Success Make achievement of meaningful lower costs than rivals the theme of firm’s strategy Include features and services in product offering that buyers consider essential Find approaches to achieve a cost advantage in ways difficult for rivals to copy or match Low-cost leadership means low overall costs, not just low manufacturing or production costs!

Differentiation Strategies
Incorporate differentiating features that cause buyers to prefer firm’s product over brands of rivals Find ways to differentiate that create value for buyers and are not easily matched or cheaply copied by rivals Not spending more to achieve differentiation than the price premium that can be charged Objective Keys to Success

Where to Find Differentiation Opportunities in the Value Chain
Purchasing and procurement activities Product R&D and product design activities Production process / technology-related activities Manufacturing / production activities Distribution-related activities Marketing, sales, and customer service activities Internally Performed Activities, Costs, & Margins Margins of Suppliers Buyer/User Value Chains Activities, Costs, & Margins of Forward Channel Allies & Strategic Partners 144

How to Achieve a Differentiation-Based Advantage
Approach 1 Incorporate product features/attributes that lower buyer’s overall costs of using product Approach 2 Incorporate features/attributes that raise the performance a buyer gets out of the product Approach 3 Incorporate features/attributes that enhance buyer satisfaction in non-economic or intangible ways Approach 4 Compete on the basis of superior capabilities 145

Types of Differentiation Themes
Unique taste – Dr. Pepper Multiple features – Microsoft Windows and Office Wide selection and one-stop shopping – Home Depot, Amazon.com Superior service -- FedEx, Ritz-Carlton Spare parts availability – Caterpillar Engineering design and performance – Mercedes, BMW Prestige – Rolex Product reliability – Johnson & Johnson Quality manufacture – Michelin, Toyota Technological leadership – 3M Corporation Top-of-line image – Ralph Lauren, Starbucks, Chanel 146

Sustaining Differentiation: Keys to Competitive Advantage
Most appealing approaches to differentiation Those hardest for rivals to match or imitate Those buyers will find most appealing Best choices to gain a longer-lasting, more profitable competitive edge New product innovation Technical superiority Product quality and reliability Comprehensive customer service Unique competitive capabilities 147

Best-Cost Provider Strategies
Combine a strategic emphasis on low-cost with a strategic emphasis on differentiation Make an upscale product at a lower cost Give customers more value for the money Deliver superior value by meeting or exceeding buyer expectations on product attributes and beating their price expectations Be the low-cost provider of a product with good-to-excellent product attributes, then use cost advantage to under price comparable brands Objectives 148

Focus / Niche Strategies
Involve concentrated attention on a narrow piece of the total market Serve niche buyers better than rivals Choose a market niche where buyers have distinctive preferences, special requirements, or unique needs Develop unique capabilities to serve needs of target buyer segment Objective Keys to Success 149

Examples of Focus Strategies
Animal Planet and History Channel Cable TV Google Internet search engines Porsche Sports cars Cannondale Top-of-the line mountain bikes Enterprise Rent-a-Car Provides rental cars to repair garage customers Bandag Specialist in truck tire recapping 150

Focus / Niche Strategies and Competitive Advantage
Achieve lower costs than rivals in serving a well-defined buyer segment – Focused low-cost strategy Approach 1 Offer a product appealing to unique preferences of a well-defined buyer segment – Focused differentiation strategy Approach 2 Which hat is unique? 151

The Evolution of Marketing
Transactional Marketing Relationship Marketing Collaborative Marketing Time frame 1950s 1980s Beyond 2000 View of value The company offering in an exchange The customer relationship in the long run Co-created experiences View of market Place where value is exchanged Market is where various offerings appear Market is a forum where value is co-created through dialogue Role of customer Passive buyers to be targeted with offerings Portfolio of relationships to be cultivated Prosumers-active participants in value co-creation Role of firm Define and create value for consumers Attract, develop and retain profitable customers Engage customers in defining and co-creating unique value Nature of customer interaction Survey customers to elicit needs and solicit feedback Observe customers and learn adaptively Active dialogue with customers and communities Adapted from Prahalad and Ramaswamy 2004

Example 1 Patent for the fountain pen that could store ink
Utility Model for the grip and pipette for injection of ink Industrial Design: smart design with the grip in the shape of an arrow Trademark: provided on the product and the packaging to distinguish it from other pens Source: Japanese Patent Office

Example 2 Decades ago, Coca-Cola decided to keep its soft drink formula a secret The formula is only know to a few people within the company Kept in the vault of a bank in Atlanta Those who know the secret formula have signed non-disclosure agreements It is rumored that they are not allowed to travel together If it had patented its formula, the whole world would be making Coca-Cola

Example 3 Patent 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 copyright Reverse engineering would have been easy

The Interaction of Intangible and Tangible Assets to Create Earnings
Intellectual Capital (unique) Complementary Business Assets (differentiated) Value Creation Value Extraction Manufacturing Facilities Distribution Capabilities Sales Force Human Capital Intellectual Assets $ Intellectual Property Discuss in detail with an example: car manufacturer Structural Capital (generic)

Intellectual Property Tuned To A Company’s Business
Intellectual Capital (Unique Assets) Complementary Business Assets (Differentiated Assets) Value Creation Value Extraction Intellectual Assets ?% Human Capital (Lead Time) Intellectual Property $ Sales Force Manufacturing Facilities Distribution Capabilities Patents Trademarks Copyrights Trade Secrets Know-How Structural Capital (Generic Assets) IP Value Is Created When Leveraged Through Complementary Assets When Companies Have Different Complementary Asset Strengths They Will Need Different Intellectual Property (Materials, Process, Use)

Intellectual Property Tuned To A Company’s Business Beverage Companies
Intellectual Capital (Unique Assets) Complementary Business Assets (Differentiated Assets) Value Creation Value Extraction Intellectual Assets Human Capital (Lead Time) Intellectual Property $ Sales Force Manufacturing Facilities Distribution Capabilities Patents Trademarks Copyrights Trade Secrets Know-How Structural Capital (Generic Assets) Line Shows the Percentage of Company Value (Market Capitalization) That is Protected By This Asset Most value is in Trademark, Trade Secret, Distribution and Sales

Intellectual Property Tuned To A Company’s Business Paper Companies
Intellectual Capital (Unique Assets) Complementary Business Assets (Differentiated Assets) Value Creation Value Extraction Intellectual Assets Human Capital (Lead Time) Intellectual Property $ Sales Force Manufacturing Facilities Distribution Capabilities Patents Trademarks Copyrights Trade Secrets Know-How Structural Capital (Generic Assets) Most value is in Trademark, Know-How, Manufacturing and Sales Some value in Patents

Intellectual Property Tuned To A Company’s Business Software Companies
Intellectual Capital (Unique Assets) Complementary Business Assets (Differentiated Assets) Value Creation Value Extraction Intellectual Assets Human Capital (Lead Time) Intellectual Property $ Sales Force Manufacturing Facilities Distribution Capabilities Patents Trademarks Copyrights Trade Secrets Know-How Structural Capital (Generic Assets) Most value is in Human Creativity, Trademark, Copyright, and Distribution

Intellectual Property Tuned To A Company’s Business Pharmaceutical Companies
Intellectual Capital (Unique Assets) Complementary Business Assets (Differentiated Assets) Value Creation Value Extraction Intellectual Assets Human Capital (Lead Time) Intellectual Property $ Sales Force Manufacturing Facilities Distribution Capabilities Patents Trademarks Copyrights Trade Secrets Know-How Structural Capital (Generic Assets) Most value is in Human Creativity, Patents, and Trademarks Some value in Know-How, and Sales

Introduction to IP Management
Legal Technical Business Export Financial Relationships Accounting Tax Insurance Security Automation Personnel

Understanding the Process of Innovation
The Process/Steps of Innovation Pre-IPO Time $ Viable Market acceptance Heading to IPO or M&A Expansion Legal Entity Founders = Mgt Team Minimal Revenue Slow Growth High Growth Head Count Multiple Cycles Bright Idea Experimental Research Business Plan Proof of Concept Start-Up Support Functions Administration Marketing Revenue Growth Seed Idea / Concept

IP Management Needed in all stages
The Needs of Each Stage Recruitment Business Development A & P Market Access Corporate and Secretarial Financial Training PR and Marketing Networking Business Development Time $ Expansion Business Plan Prototype/ POC Project Management Business Premises Management Training International support and Mkt. Access Diversification strategies and support Recruitment Training and Incentives Start-Up Seed Idea / Concept IP Management Needed in all stages

Basic Message 1 IP 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/Copyright Patents / Utility Models/Trade secrets All IP Rights Patents / Utility models Industrial Designs/ Trademarks/GIs Invention Commercialization Marketing Exporting Financing Product Design Licensing Literary / artistic creation Copyright/Related Rights All IP Rights

Basic Message 2 IP Strategy should be an integral part of the overall business strategy of an Enterprise The IP strategy of an Enterprise is influenced by its creative/innovative capacity, financial resources, field of technology, competitive environment, etc. BUT: Ignoring the IP system altogether is in itself an IP strategy, which may eventually prove very costly or even fatal

Basic Message 3 (More for Less)
Own Use Licensing Franchising Merchandising (Mickey Mouse, Hello Kitty)

SMBs: The Key to Closing the Innovation Gap Intellectual Property Management and the Internationalization Strategies of SMBs/SMEs G S Jaiya, Director,

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SMBs: The Key to Closing the Innovation Gap Intellectual Property Management and the Internationalization Strategies of SMBs/SMEs G S Jaiya, Director,

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Presentation on theme: "SMBs: The Key to Closing the Innovation Gap Intellectual Property Management and the Internationalization Strategies of SMBs/SMEs G S Jaiya, Director,"— Presentation transcript:

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