Intellectual Property Management for Enhancing the Competitiveness of SMEs and Other Creative Communities G S Jaiya, Director, SMEs Division World Intellectual.

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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Intellectual Property Tuned To A Company’s Business

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Intellectual Property Tuned To A Company’s Business Software Companies

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•Most value is in Human Creativity, Patents, and Trademarks•Some value in Know-How, and Sales

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)