Originally published in Inside Small Business
Intellectual capital, in the form of intellectual property – IP – rights, has helped steer the company from engineers in a garage to success on the commercial highway.
Tesla Motors is barely a decade old and enjoys a worldwide reputation and financial success. It started from scratch with a bright idea, like most start-ups and small businesses, and much can be gleaned from the way Tesla has managed its ideas.
Pre-orders for the latest Tesla Motors ‘Model 3’ have exceeded US$14 billion in future sales and are testimony to the transformational effect it is having on the automotive industry. Intellectual capital, in the form of intellectual property – IP – rights, has helped steer the company from engineers in a garage to success on the commercial highway.
Here are three examples of how Tesla Motors was able to use IP rights to fuel its growth – without ever having to enforce them!
1. Start up phase: attracting investment
To date, Tesla owns approximately 900 patents worldwide. But during early stages, Tesla focused only on protecting a few key solutions to problems faced by electric vehicles.
Owning these IP rights, however, enabled Tesla to approach the likes of angel and venture capital investors to attract the necessary funding for developing the Roadster model with British car manufacturer Lotus, and growing the business.
In exchange for providing the money to build and market your products, investors want to know that your point of difference cannot be easily replicated, and that the business has legal assets to protect it, in the hope that these will grow in value with the success of the firm.
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2. Gaining momentum: protection is leverage
The Tesla Roadster was launched in 2008 with a string of IP rights behind its proprietary technology. The battery life was extended to a range of 394 km and for the first time, electric cars became more feasible and attractive to a commercial market.
A small business with a well-protected idea or brand is in a much stronger position to negotiate with a large corporate – even more so if their idea has proven commercial market interest. Most competitors and organisations are all too eager to avoid the threat of infringement, which carries real legal, financial and reputational risks, in favour of either doing a deal with the rights owner or staying out of the market completely.
3. Reinventing the wheel: brand enhancement
When Tesla launched the Model S in 2012, with sales exceeding 50,000 vehicles on the road, it entered a more mature era of production. This level of success spurred Tesla Motors to continue using its IP rights to further growth.
Tesla’s CEO, Elon Musk, used the company’s early success from its patent rights to increase the value of its goodwill and trade mark rights – brand. In 2014, he made an unprecedented announcement that anyone could use Tesla’s portfolio of patent rights.
By supporting the development of the technology to help grow the mainstream market size for electric vehicles, Musk cemented Tesla’s reputation amongst buyers as an innovator in the field of electric vehicles.
The ultimate end-goal for many businesses is to build a powerful and valuable brand that can be used as a competitive edge to distinguish present and future products and services in the market.
By protecting your ideas – your intellectual property rights – you have powerful tools at disposal that can be utilised in different ways according to the needs of each business stage.