5 Spotlight 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
6 Market-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
7 The challenge of adding value in today’s economy Raw materials/Inputs: Processing (Value addition) = Value added output/component; product; sale; ProfitValue addition: 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
8 Levels of Product Core Benefit or Service Augmented Product InstallationPackagingBrandNameFeaturesDelivery& CreditAfter-SaleServiceCoreBenefitorServiceQualityLevelDesignWarrantyCoreProductActualProduct
9 THE PRODUCT LIFE CYCLEA reminder that most products do not live for everA conceptual framework onlyDifficult to measure where a product is in its life cycle
11 What is innovation?Innovation is the process and outcome of creating something new, which is also of value.Innovation involves the whole process from opportunity identification, ideation or invention to development, prototyping, production marketing and sales, while entrepreneurship only needs to involve commercialization (Schumpeter).
12 What is innovation?Today it is said to involve the capacity to quickly adapt by adopting new innovations (products, processes, strategies, organization, etc)Also, traditionally the focus has been on new products or processes, but recently new business models have come into focus, i.e. the way a firm delivers value and secures profits.
13 What is innovation?Schumpeter argued that innovation comes about through new combinations made by an entrepreneur, resulting ina new product,a new process,opening of new market,new way of organizing the businessnew sources of supply
14 Dimensions of innovation There are several types of innovationProcess, product/service, strategy,which can vary in degree of newness:Incremental to radical,and impact:continuous to discontinuous
15 Drivers for innovation Financial pressures to reduce costs, increase efficiency, do more with less, etcIncreased competitionShorter product life cyclesValue migrationStricter regulationIndustry and community needs for sustainable developmentIncreased demend for accountabilityDemographic, social and maket changesRising customer expectations regarding service and qualityChanging economyGreater availability of potentially useful technologies coupled with a need to exceed the competition in these technologies
16 What is innovation?Gary Hamel argued that today’s market place is hostile to incumbents, who now needs to conduct radical business innovation:Radically reconceiving products and services, not just developing new products and servicesRedefining market spaceRedrawing industry boundaries
17 New conditions for innovation Small start-up entrepreneurs increasingly depend on large firms:as suppliers or customersfor venture finance,for exit opportunites,for knowledge (production, markets and R&D)and for opening new markets.
18 New conditions for innovation Large firms increasingly depend on small start-upsfor NPD,as suppliers of new knowledge (which they cannot develop themselves),or organizational renewal, for experimentation with busienss models,for opening new markets, etc
19 New developments in innovation raises 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.
20 Complementary Resources DistributionManufacturingFinanceServiceCoretechnological know-howComplementarytechnologiesMarketingOtherOtherBargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized.
21 The eleven modes of cooperation agreements: illustration of their anchor points ResearchcontractCommonpurchaseSubcontractingEngineeringPatentlicenceproductionTrademarkConsortium(commonmarketing)DistributionagreementsWaysof...designingsupplyingproducingmarketingdeliveringKnow-how transfercontractSource: S. Urban, S. Vendemini, CESAG, Strasbourg
22 Cooperations modes and value chain Distri-butionReciprocal distribution agreements (access to existing distribution networks)Marke-tingTrademark licenceConsortium (common marketing)Joint advertisingProduc-tionSubcontracting agreementsCommon manufacturing agreementsImplementation of engineering contractsPatent licenseProduction consortiumLogisticsupplyCommon purchasesAccess to the specific resources of the country (raw materials, subventions, capital cost, compared advantages)Link of the chainCoope-rationmodesR&DExchanges of existing knowledgeOrganisation of a common researchSetting up of a common project (design, engineering)ServicesAfter saleLobbyingRelationsSource: S. Urban, S. Vendemini, CESAG, Strasbourg
23 THE CHAIN MODEL VALUE CROSSES ONE SINGLE CHAIN : DESIGN INDUSTRY RETAILHOW TO TURNTECHNOLOGYINTO ARTTECHNOLOGYINNOVATIONQUALITY/PRICEIN ORDERTO TRANSMITTO CONSUMERSA UNIQUE IMAGE
24 New Business Models Emerge Then…One Integrated CompanyNow…Many Distributed CompaniesProduct Development CycleProduct DevelopmentTool CompaniesTesting ServicesCRO’sCRM’s
25 New Regional Model Emerge Then…ManufacturingResearchDevelopmentTrials/TestingServicesSelf-contained regional clustersRegion ARegion ERegion BRegion FRegion DRegion CRegion GNow…Specialized, networked regions
26 Commercialization Model Strategic Investment is the Foundation of a Successful Commercialization Model
27 Strategic Entrepreneurship and Innovation Entrepreneurship is concerned with:The discovery of profitable opportunitiesThe exploitation of profitable opportunitiesFirms that encourage entrepreneurship are:Risk takersCommitted to innovationProactive in creating opportunities rather than waiting to respond to opportunities created by others
28 Understanding the Process of Innovation The Process/Steps of InnovationPre-IPOTime$ViableMarket acceptanceHeading to IPO or M&AExpansionLegal EntityFounders = Mgt TeamMinimal RevenueSlow GrowthHigh GrowthHead CountMultiple CyclesBright IdeaExperimentalResearchBusiness PlanProof of ConceptStart-UpSupport FunctionsAdministrationMarketingRevenue GrowthSeedIdea / Concept
29 IP Management Needed in all stages The Needs of Each StageRecruitmentBusiness DevelopmentA & PMarket AccessCorporate and SecretarialFinancialTrainingPR and MarketingNetworkingBusiness DevelopmentTime$ExpansionBusiness PlanPrototype/ POCProject ManagementBusiness PremisesManagement TrainingInternational support and Mkt. AccessDiversification strategies and supportRecruitmentTraining and IncentivesStart-UpSeedIdea / ConceptIP Management Needed in all stages
30 The firm with a product meeting a market demand =demandthe market
31 The firm with uncertain future market demand time?=drivers of change:populationtastes and fashionseconomic conditionstechnologypolitics and regulationsthe market
32 The firm adapted to changes in market demand time==the marketthe market
34 MARKET ORIENTATION a corporate philosophy the implementation of the marketing conceptan ideala policy statementa corporate state of mind
35 MARKET ORIENTATION a faith an organizational culture a concept of stages of development and degree of maturity that parallels the economic development of the national market
36 MARKET ORIENTATION A form of organizational culture that:- places the highest priority on the profitable creation and maintenance of superior customer value while considering the interests of other key stakeholdersprovides norms for behaviour regarding the organizational development of and responsiveness to market information
37 Different orientations of business: Product orientationCost orientationCapacity orientationNo-commitment orientationCompetitor orientationMarket orientation
38 Entrepreneurship 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.
39 Entrepreneurship 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.
40 Entrepreneurship 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
41 Entrepreneurship 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
42 Entrepreneurial 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)
43 (fran*tre*pre*neur) n. What is a Franchisee?“Frantrepreneur”(fran*tre*pre*neur) n. One possessing the desire to be a business owner -- without the desire to recreate the wheel -- by following a proven system for the benefit of personal and professional goals.
44 The Frantrepreneur Mentality “I have the opportunity to learn from the success and failure of others.”“I’m in business for myself, but not by myself”.“I want a ‘bottled’ process for success that I can use in developing my own successful business.”“Why would I work for someone else when I can work for myself and reap the rewards of my efforts?""Why would I spend years and the investment required to establish a successful brand when I could buy a franchise which provides immediate access to a successful business system and a brand name which others already have made successful?"
45 Entry Strategies New Business Existing Business Develop a new product or serviceDevelop a similar product or serviceCompetitive approachesExisting BusinessBuying a businessFranchiseJoint venture – customer or supplier
46 “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
47 Definition Competitive Advantage An advantage over competitors gained by offering consumers greater value than competitors offer.
48 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 lowDifficult to imitate: when products/services are hard to mimic or duplicate
49 Competitive 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
50 Competitive 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
51 CORE COMPETENCES Definition Hammel and Prahalad defined core competence as a central value - creating capability of an organization/enterprise.
52 CORE 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
53 CORE 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.
54 CORE 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.
59 PRICING STRATEGIES Product Line Pricing: image pricing/price bundling/premium pricing/complementary pricingDynamic Pricing Strategies:multi-tiered price or channel pricing
60 Low-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!
61 Differentiation 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
62 Where 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 Partners
63 How 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 capabilities
64 Types 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, Chanel
65 Sustaining 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 capabilities
66 Best-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 brandsObjectives
67 Focus / 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 Success
68 Examples 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 recapping
69 Focus / Niche Strategies and Competitive Advantage Achieve lower costs than rivals in serving a well-defined buyer segment –Focused low-cost strategyApproach 1Approach 2Offer a product appealing to unique preferences of a well-defined buyer segment – Focused differentiation strategyWhich hat is unique?
70 An Aspect of Good Management People Management – because IP is generated by people and used by peopleKnowledge Management – because a lot of knowledge is informal and may or may not crystallise as recognisable category of IPIT Strategic Planning – because a lot of IP is IT-related; some of the more complex IP issues arise in IT contextContract Management – because IP is often created (or improved) in context of a contract (eg, supply contract or joint venture relationship)Asset Management – because IP is an asset, albeit intangible; it has a valueRisk Management – because there are risks to an organisation flowing from its actions, or failure to act, in relation to IP (including risk of lost opportunity)Philip Crisp etc, could ask for any other suggestions from the audience herewith permission of P Crisp, AGS, 2003
71 Introduction to IP Management 1 LegalTechnicalBusinessExportFinancialRelationshipsAccountingTaxInsuranceSecurityAutomationPersonnel
72 Introduction to IP Management 2 Trademarks (Brands)Geographical IndicationsIndustrial DesignsPatents and Utility ModelsCopyright and Related RightsTrade SecretsNew Varieties of PlantsUnfair Competition
73 Basic 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
74 Basic Message 2IP Strategy should be an integral part of the overall business strategy of an EnterpriseThe 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
75 Basic Message 3 (More for Less) Own UseLicensingFranchisingMerchandising (Mickey Mouse, Hello Kitty)