intellectual property management for enhancing the competitiveness of smes and other creative...
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Intellectual Property Intellectual Property ManagementManagement for for Enhancing theEnhancing the
Competitiveness ofCompetitiveness of SMEs SMEs and and Other Creative CommunitiesOther Creative Communities
G S Jaiya, Director, SMEs Division
World Intellectual Property Organization
Easy to read, practical, business friendly guides
http://www.wipo.int/sme/en/multimedia/
Distribution of IP PANORAMA CD
• To member statesof WIPO
• To the partner 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
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
Levels of ProductLevels of Product
BrandName
QualityLevel
Packaging
Design
Features
Delivery& Credit
Installation
Warranty
After-Sale
Service
CoreBenefit
orService
CoreBenefit
orService
ActualProduct
ActualProduct
CoreProduct
CoreProduct
AugmentedProduct
AugmentedProduct
Selling Products• 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 $650 higher!
A Brand is More Than a Product
Product
Scope
Attributes
Uses
Quality/value
Functional benefits
Organizational associations
Brand
Personality
Symbols
Self-expressive
benefitsEmotional benefits
User Imagery
Country of origin
Brand
Brand/customer relationships
The physical goods/service continuum
Continuum of Evaluation for Different Types of Products
Clo
t hin
g
Jew
elry
Fur
n itu
re
Hou
ses
Aut
omob
iles
Res
tau
rant
mea
ls
Vac
a tio
ns
Ha i
r cut
s
Ch i
ld c
a re
Tel
evis
ion
repa
ir
Leg
a l s
ervi
ces
Roo
t c a
nals
Aut
o re
pair
Med
ical
dia
gno
sis
Difficult to evaluateEasy to evaluate
High in search High in experience High in credence
MostGoods
MostServices
Modern Value is in Brands
• 74% of the value of the New York Stock Exchange and 72% of that of the London Stock Exchange is in brands, management know-how and patents
True value is no longer in bricks and mortar
Brand Equity as a Percent of Firm Tangible Assets
Industry Brand Equity
Apparel 61
Tobacco 46
Food Products 37
Chemicals 34
Electric machinery 22
Transportation 20
Primary metals 01
The Value of BrandsGlobal Brand Scoreboard
1. Coca-cola 67.52$ billion
2. Microsoft 59.95$ billion
3. IBM 53.37$ billion
4. GE 46.99$ billion
5. Intel 35.58$ billion
(German survey January 17, 2006)
What is a Brand?
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.
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
What is a Brand?
Name
Term
Sign
Symbo
l
Design
Combination
Identifies product/service
of seller anddifferentiates it from
competitors
Keller, Kevin Lane. Strategic Brand Management: Building, Measuring, and Managing Brand Equity. 1998.
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.
Role of Brands: For the Company
•Real and marketable asset
•Higher profit margin (Price Premium)
•Incremental cash flow
•Reduces cash flow sustainability risk
Role of Brands: For the Company
•Accelerates speed of cash flow
•Increases bonding and customer loyalty
•Increased market share
•Entry barrier
•Limits growth of competitors
Role of Brands: For the Company
•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
Role of Brands: For the Company
•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
Role of Brands: For the Company
•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
Innovative branding - with a sense of humour
• Mouse characters started to have themes
• Bio 2002 in Toronto
Innovative branding - with a sense of humour
• Bio 2003 Washington DC
Innovative branding - with a sense of humour
• 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
Marketing Strategy• Product/market definition• Pricing• Distribution• Promotion• Customer support
Marketing Strategy• Product/market definition• Pricing• Distribution• Promotion• Customer support
Production Strategy• Facilities• Integration• Capacity• Quality• Production
technology• Operations control• People management
Production Strategy• Facilities• Integration• Capacity• Quality• Production
technology• Operations control• People management
Financial Strategy• Capital structure• Cash flow
Financial Strategy• Capital structure• Cash flow
R&D Strategy• Basic and applied research• Product/process innovation• Lead or follow
R&D Strategy• Basic and applied research• Product/process innovation• Lead or follow
Objectives• Growth• Profitability• Diversification• Innovation• Market share• Working environment• Corporate citizenship
Objectives• Growth• Profitability• Diversification• Innovation• Market share• Working environment• Corporate citizenshipLegal Strategy
• Intellectual property protection
• Corporate
Legal Strategy• Intellectual property
protection• Corporate
Marketing StrategyMarketing Strategy
Production Strategy
Production Strategy
Financial Strategy
Financial Strategy
R&D StrategyR&D Strategy
Legal StrategyLegal Strategy
Execution• People• Systems• Organizational
structures
Execution• People• Systems• Organizational
structures
ResultsResults
Strategy Sets a Dynamic Loop in Motion
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
Basic Research
Applied Research
Invention
Development
Production
Marketing
“Technology-Push Linear Model of Innovation”
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
• CreativityThe 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.
• Innovation1 : The introduction of something new2 : A new idea, method, or device
• Creativity = Idea + Action (Individual)• Innovation = Creativity + Productivity (Groups/teams)• Innovation = Idea + Action + Productivity
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
Corporate Strategy:
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?
Technologies
Markets
How will we create value?
How will we capture value in the face of
Competition?
How will we build the organizational
capabilitiesnecessary to
deliver it?
Effective Business Strategies address three key challenges:
Effective Strategies answer three key questions:
How will we Create value?
How will weCapture value?
How will weDeliver value?
• 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?
From Three to Seven Critical Questions
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?
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?
Types of Complementary Assets
Competitive manufacturing Sales and
service
expertise
Brand name
Distribution channels
Customer relationships
Complementary technologies
COMPETENCIES
Things you can do
Things you ownRESOURCES
Core technological know-how in innovation
Other
Other
Types of Complementary Assets
• Things you can do– Manufacturing capabilities– Sales and service expertise
• Things you own– Brand – Distribution channels– Customer relationships
COMPETENCIES
RESOURCES
Uniqueness & Complementary Assets over the Life Cycle:
Ferment
Takeoff
Maturity
UniquenessComplementary
Assets
The ‘Commercialisation Pipeline’
Idea Invention IPCommercialization Decision
Do it yourself
Assign 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
BuildBuild
BuyBuy
PartnerPartner
Time to Market & Control & Profit
Cos
t &
Ris
k
Most product controlOwn the IPMost profit opportunity
Longest time to marketRisk in market shiftsHigh development costsHighest switching costs
Pros Cons
Shorten time to marketOwn the IP
Acquisition costsIntegration costs
Least ControlIntegration CostsShared gross margins -Least Profit Opportunity
Shortest Time to Market Conserves ResourcesTry before you BuyLowest Switching CostsCredibility and access
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
Waysof... designing
supplying producing marketing delivering
Know-how transfercontract
Eleven Modes of Collaboration Agreements: Illustration of Their Anchor Points
Researchcontract
CommonResearch
CommonpurchaseSubcontracting
Engineeringcontract
Patentlicence
Commonproduction
Trademarklicence
Consortium(common
marketing)
Distributionagreements
New Business Models EmergeThen…
One Integrated Company
Now…
Many Distributed Companies
Product Development
Cycle
Product Development
Tool Companie
s
Testing Services
CRO’s CRM’s
New Regional Model EmergeThen…
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’
“Ideas & “Current Market Place”
Research Development Commercialization
Investigations”
Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
1
2
3
4
5
‘Open Innovation: Three Lane Highway’
“Ideas & “Current Market Place”
Research Development Commercialization
Investigations”“New Market Place”
“Other firm’s Market Place”
“External Ideas &
Investigations”
licensing
“External Technologies
Technology spin-offs
Insourcing gate
Outsourcing gate
Based upon ‘Open Innovation: Researching a New Paradigm’ (2006) Henry Chesbrough, Wim Vanhaverbeke & Joel West
1
2
3
4
5
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 SMEsPreconditions • Awareness
• Intermediaries
• Profitability
• Public support
Innovation
Awareness
& Audits
Market pressure
Outsourced RTD
In-house innovation
Risk shared innovation
Seed capital
Proof of concept
IPR protection
Investment in human
capital
Productive investment
Market
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 StrategyBuild Your Portfolio– Strategic Patenting/Branding– Purchase Patents/Brands
Deploy Your Portfolio– Design Freedom– Manage Competition– Enter new Markets– Deliver RevenueProtecting Inventions/Recognition
Manage Competition
Design Freedom
Markets Development
Deliver Revenue
Biz Strategy
A Hierarchy of IP/IC Management
Cost Control (Control Costs, Improve Productivity)
Profit Center (Manage for Profitability)
Integrated (Manage for Growth)
Visionary (Drive Growth)
Defensive (Build Portfolio, Protect Markets and Technology)
Exploiting IP AssetsCommercialisation of IP
License Strategic Alliance
Co-Development Co-Marketing
Passive Partnership
0
1 0
2 0
3 0
4 0
5 0
6 0
7 0
8 0
9 0
1 00
1 2 3 4 5 6 7 8 9 1 0
Commercialisation of IP
License Strategic Alliance
Co-Development Co-Marketing
0
1 0
2 0
3 0
4 0
5 0
6 0
7 0
8 0
9 0
1 00
1 2 3 4 5 6 7 8 9 1 0
$ $
IP
Sk
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
Licensee
IP
$
Strategic Alliance
• 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
Strategic PartnerStrategic Partner
Co-Development AgreementsCo-Marketing Agreements
• Co-Development Agreement– 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 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.
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
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 andProduct/Service)
3. Access to Resources (Land. Labor, Capital, Knowledge
And the fit amongst these three elements(Business Model)
“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
Competitive Strategies
• 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
Competitive Strategies
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
Low-Cost Provider Strategies
• Make achievement of meaningful lower coststhan rivals the theme of firm’s strategy
• Include features and services in productoffering that buyers consider essential
• Find approaches to achieve a cost advantagein ways difficult for rivals to copy or match
Keys to SuccessKeys to Success
Low-cost leadership means low overall costs, not just low manufacturing or production costs!
• 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 differentiationthan the price premium that can be charged
ObjectiveObjective
Keys to SuccessKeys to Success
Differentiation Strategies
Where to Find DifferentiationOpportunities 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 activitiesInternallyPerformedActivities, Costs, &Margins
Activities, Costs, &
Margins ofSuppliers
Buyer/UserValue
Chains
Activities, Costs,& Margins of
Forward ChannelAllies &
Strategic Partners
How to Achieve aDifferentiation-Based Advantage
Approach 1
Incorporate features/attributes that raise theperformance a buyer gets out of the product
Approach 2
Incorporate features/attributes that enhance buyer satisfaction in non-economic or intangible ways
Approach 3
Compete on the basis of superior capabilitiesApproach 4
Incorporate product features/attributes thatlower buyer’s overall costs of using product
• 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
Types of Differentiation Themes
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
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
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
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
Focus / Niche Strategiesand Competitive Advantage
• Achieve lower costs than rivals inserving a well-defined buyer segment –
Focused low-cost strategy
• Offer a product appealing to uniquepreferences of a well-defined buyer segment – Focused differentiation strategy
Approach 1
Approach 2 Which hat is unique?
The Evolution of MarketingTransactional 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 2Example 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 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
The Interaction of Intangible and Tangible Assets to Create Earnings
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Structural Capital (generic)Structural Capital (generic)
Complementary BusinessAssets (differentiated)
Intellectual Capital (unique)
Value Creation Value Extraction
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1. IP Value Is Created When Leveraged Through Complementary Assets2. When Companies Have Different Complementary Asset Strengths
They Will Need Different Intellectual Property (Materials, Process, Use)
Intellectual Property Tuned To A Company’s Business
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•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 Beverage Companies
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•Most value is in Trademark, Know-How, Manufacturing and Sales•Some value in Patents
Intellectual Property Tuned To A Company’s Business
Paper Companies
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Intellectual Property Tuned To A Company’s Business Software Companies
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Intellectual Property Tuned To A Company’s Business Pharmaceutical Companies
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Introduction to IP Management
• Legal
• Technical
• Business
• Export
• Financial
• Relationships
• Accounting
• Tax
• Insurance
• Security
• Automation
• Personnel
Pre-IPO
Expansion
Start-Up
Seed
Idea / Concept
TimeTime
$
• Bright Idea• Experimental• Research• Business Plan• Proof of Concept
• Legal Entity• Founders = Mgt Team• Minimal Revenue• Slow Growth
• Support Functions• Administration• Marketing• Revenue Growth
• High Growth• Head Count • Multiple Cycles
• Viable• Market acceptance• Heading to IPO or M&A
The Process/Steps of Innovation
Understanding the Process of Innovation
Expansion
Start-Up
SeedIdea / Concept
TimeTime
$
•Business Plan•Prototype/ POC•Project Management•Business Premises•Project Management•Management Training
•Corporate and Secretarial •Financial •Training •PR and Marketing•Networking •Business Development
•Recruitment•Business Development•A & P•Market Access
•International support and Mkt. Access •Diversification strategies and support •Recruitment•Training and Incentives
The Needs of Each Stage
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:
Literary / artisticcreation
Invention
Financing Product Design
CommercializationMarketing
Licensing
Exporting
Patents / Utility Models/Trade secrets
Copyright/Related Rights
Patents / Utility models
Industrial Designs/Trademarks/GIs
Trademarks/ GIsInd. Designs/Patents/Copyright
All IP Rights
All IP Rights
Basic Message 2• IP Strategy should be an integral part of the
overall business strategy of an Enterprise
• BUT: Ignoring the IP system altogether is in itself an IP strategy, which may eventually prove very costly or even fatal
• IP Strategy is influenced by the Business Model and Revenue Extraction Model of a business
Basic Message 3 (More for Less)
• Own Use
• Licensing
• Franchising
• Merchandising (Mickey Mouse, Hello Kitty)