IP Week @ SG 2016: No business strategy without IP
In the modern economy, the most important source of competitive advantage—in most cases the only source—is something that too few business leaders understand. It is intellectual property, the indispensable but unheralded key to understanding businesses, markets and economies in the modern era. Today, IP is rapidly becoming the new foundation of businesses and markets.
Today’s corporate leaders must prioritise their efforts to understand IP and use it strategically. Businesses which have successfully harnessed their intangible assets are among the world’s most profitable companies.
Take Gillette, for example, a business often (and mistakenly) described as capturing a consumer with a cheap platform, the razor, and then making money on the repeat purchase of the blade. Gillette has many competitors all over the world, all of them willing to sell an inexpensive razor and blade combination. What makes Gillette’s success remarkable is its ability to sustain its competitive performance advantage over time.
How does it do this? Quite simply, Gillette is able to create and defend a blanket of protection surrounding its shaving innovations, thereby controlling critical technologies, such as new blade exposure angles, tighter blade spacing, and better debris wash-through.
The right approach
Another successful approach to IP and innovation has come from consumer products giant, Procter & Gamble (P&G). For years, P&G focused exclusively on internal technology development, but starting over a decade ago, it adopted its ‘connect and develop’ approach to innovation: actively in-licensing world class technology in its core products while also out-licensing internal innovations if P&G can’t use the technology within three to five years.
This open licensing policy has had unexpected competitive benefits for P&G product developers, who are pushing themselves ever harder as they watch the three and five year timers tick.
‘Connect and develop’ has transformed P&G’s research and development (R&D) function into a vital innovation network, teeming with transactions and embracing commercial opportunities whenever and wherever they presented themselves.
“Commune was able to identify gaps in its IP management policies and went on to protect its IP in key markets before franchising and licensing its brand.”
Some of Singapore’s leading companies are taking heed of the importance of IP strategy and finding ways to protect and leverage their own innovations. Local company Masai Group International has developed some of the world’s most innovative walking shoe technology, Masai barefoot technology, shoes designed to “simulate the challenge of walking barefoot on soft earth”.
Masai has long struggled with the challenge of protecting its technology from copycats (CEO Andy Chaw calls defending IP “a constant battle”) but now, thanks to a loan from DBS Bank, Masai will have new resources to defend its patents from infringement, invest in R&D and promote its brand. The loan was a result of the IP Financing Scheme administered by the Intellectual Property Office of Singapore, which allows IP-rich Singapore companies to raise money using their patents, trademarks or copyright as collateral.
A Singapore furniture manufacturer, Koda, has built IP-based growth strategies by actively franchising and licensing its subsidiary brand Commune into overseas markets like China. With the assistance of a business consultancy firm, Commune was able to identify gaps in its IP management policies and went on to protect its IP in key markets before franchising and licensing its brand.
In the meantime, Asia as a region has forged ahead with the largest number of IP filings. Asia’s trademark and patent filings accounted for 52% and 60%, respectively, of international filings in 2014. Locally, IP investments in Singapore are also reaching an all-time high, with trademark and patent filings up 5% and 9% , respectively, in 2015.
In today’s knowledge-oriented economy, Singapore’s leading companies need to recognise that innovation without protection is philanthropy. Trek 2000 is a Singapore company that serves as a cautionary tale. The company is credited as the inventor of the ThumbDrive, but that was all it got as it showcased the world’s first and smallest USB flash drive at a computer expo while its patent was still pending.
When the invention loses its “novelty” factor, it can no longer be protected. CEO Henn Tan calls that the company’s “single biggest mistake”. Trek 2000 has since gone on to build its IP portfolio and has over 600 patents in its name.
This principle applies both to companies seeking to build a sustainable competitive advantage in their core businesses and at the country level for a nation seeking to build its global competitiveness. There is no longer an effective business strategy that does not include an IP strategy.
Mark Blaxill is the executive director of XLP Capital. He can be contacted at: info@xlpcapital.com
