In this series of blog posts called “Strategy in Focus”, AWA Strategy explores the topics of IP strategy, infrastructure and management. For the premiere, we look into the purpose of implementing an IP strategy and how it ties together with infrastructure and portfolio management.
IP for Creating and Maintaining Competitive Advantages
For a firm to be successful over a long period of time, it should aim for having a sustainable competitive advantage, i.e. a long-lasting benefit (whether it is internal or external) in relation to its competitors.
For a resource or capability to lead to a sustainable competitive advantage, it must be:
- Imperfectly imitable (or costly to imitate)
- As a fourth requirement, the firm must be organised so that it can capture the value of such resource (or capability)
IP is a means to achieve and maintain this as it allows control over unique features, through patenting, trade secrets, trademarks, design rights, know-how, etc.
Without an IP strategy, however, IP is likely to be a cost that will never generate a return. Ad hoc IP activities lead to missed opportunities, high IP costs and an IP portfolio without a clear purpose.
Business context as the starting point for IP Strategy
When developing an IP strategy, the key is to not only look into what could but also what ideally should be a strong benefit within the business context so that existing and future resources supporting that benefit eventually can be secured as IP.
The IP portfolio containing these secured resources can have different functions within the firm. For a franchise, it might be the very core of the business, as the business model to a large part is centered around out-licensing IP rights. In other cases, such as when a patented invention increases product performance, it might justify a premium price. Another role of the IP portfolio is related to relationships with other actors on the market, leading to saved costs through cross-licensing patents or increased revenues through collaborations, benefiting from each other’s sustainable competitive advantages.
The IP portfolio should have a purpose that, in line with the IP strategy – and consequently the business strategy, contributes to reach the overall business goals. As the IP strategy justifies the IP portfolio (and its related costs), the IP strategy should govern the IP operations in terms of filing and maintenance of the portfolio.
Working in Accordance with Strategy
Going back to the fourth requirement for a resource to be a sustainable competitive advantage, the firm must be able to capture the value of its resources. To be efficient, this requires an internal setup where the identification of a new resource need is combined with the actual development or acquisition of that resource and lastly the value extraction of it. An IP infrastructure should enable such collaboration over different business functions, defining roles and ways of working.
Included in the IP infrastructure are also incentive structures for encouraging employees to participate in creating a commercially oriented IP portfolio in accordance with the IP strategy and IP infrastructure of the firm.