Thursday 13 March 2014

The importance of Intellectual Property in any business

  • Intellectual Property is vital in any business - underpins value propositions, provides the sustainable and non-replicate basis of competitive differentiation (the "unfair advantage" every company needs)
  • It is the unique way that particular company goes about satisfying its customers needs in ways that others cannot - often known as the crown jewels
  • I have always seen it this way - I have always been involved in knowledge-based businesses and the way you develop and package expertise is the only way you compete and survive: if you don't know something that someone doesn't then why are you in that business?
  • Companies that lose focus on IP development, and hence lose focus on innovation, become commoditised and easily drift out of experience: like road-runner they can hold their position for so long and then collapse to the ground after a dramatic and unnatural pause.  No difference here between the cotton mills of the 19th century and predictive analytics businesses of the 21st century
  • Protecting IP is also crucial but in knowledge-based businesses is not about patents - it is about trade marks (crucial), copyright (crucial), culture and process, ensuring IP is productised in ways that ensure it does not walk out of the door in peoples' heads but the company retains it, creating customer-based methods that mean individuals cannot replicate the IP and process around it in other companies that do not have the same approach and mentality of the company where it was created
  • Staff retention, incentives, motivation and knowledge-management systems are then very important to ensure the company and brand benefit from the IP created by its staff
  • How do you know you have IP in a knowledge-based business - it can be an idea/method/approach/product that you sell multiple times that you can say you invented and multiple clients knock your door down to access the IP and gain value from it for their businesses
  • IP is in the intelligence but also the way it is applied and that is where uniqueness is built
  • As a CEO who has bought and sold consulting and publishing businesses - IP is what I look out for most.  Having lots of IP doesn't necessarily mean that you get astonishing value but it does mean you are saleable
    • By being able to show we had a process that could reliably generate 3 to 5 "£1m" products every year over a number of years to underpin revenue forecasts was a big factor in how we sold our consulting company
  • It is also the way you attract the best people to your business - appearing vanilla does not attract the mavericks, the thought leaders, the inventors and innovators
  • As a more recent technology investor then I have been surprised about how little importance is paid to patents - the nervousness over revealing your invention to the outside world and the difficulty in enforcing patent rights reduces their impact on investment attractiveness
  • However, the fact that you have invented something that you cannot see anyone else has invented is of immense value - at least lets investors know that there might be something unique in there and it is all about speed of execution - protection through action not through the courts
  • Many investors do like to see patents as a way of giving them insolvency protection - at least there might be assets to sell if everything goes wrong and they then have a chance of rescuing some value out of the deal
  • In the software world, trademarking and copyrighting is far more important than patents 
    • I have used trademarks to force companies to either change their brands, company name and also avoid competing with us in some geographic markets
    • These threats are credible as you can easily prove that there is client confusion and that the "copycat" company was imitating you as they started afterwards - difficult to prove they were not copying you
      • This has worked for me in the US, Europe and China
    • Copyrighting is similar protection and all credible and meaningful evidence with which to support your differentiation claims with clients - not necessarily to sue imitators: no-one in the SME space really has the inclination or resources to fight such things in court

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