Managing Intellectual Property Assets for Enhancing the Competitiveness of SMEsGuriqbal Singh JaiyaDirector, SMEs Division

From Invention to InnovationWhile invention depends upon creativity, successful technological innovation requires integrating new knowledge with multiple business functions.

Innovation What is it?The creation of new ideas/processes which will lead to change in an enterprises economic or social potential

[P. Drucker, The Discipline of Innovation, Harvard Business Review, Nov-Dec, 1998, 149]

What is Innovative Thinking?A means of generating innovation to achieve two objectives that are implicit in any good business strategy:make best use of and/or improve what we have todaydetermine what we will need tomorrow and how we can best achieve it, to avoid the "Dinasaur syndrome

Innovative thinking has, as a prime goal, the object of improving competitiveness through a perceived positive differentiation from others in:Design/PerformanceQualityPriceUniqueness/Novelty

Obstacles to Successful InnovationCompetitive positionMarket judgementTechnical performanceManufacturing expertiseFinancial resources

How to classify newness and degree of innovation and what to focus on:

New to the firm? First in the market? First in the world? Incremental or radical innovation?Innovation

There are several types of new products. Some are new to the market, some are new to the firm, and some are new to both. Some are minor modifications of existing products while some are completely innovative

Product Development StrategiesOldMarketNew MarketOld ProductNew ProductMarket PenetrationProduct DevelopmentMarket DevelopmentProduct Diversification

Marketing principles.Identify opportunities and threatsIdentify customer needsReact to a competitive environmentCareful planning to make a New or improved productUse the 4 Ps.Product servicePricePromotion Place (distribution)Retain flexibility to react to changes

The Development of Technology: From Knowledge Generation to DiffusionBasic KnowledgeInventionInnovationDiffusionIM ITATIONADOPTIONSupply sideDemand side

Innovation ProcessThe adoption of an innovation by similar firmsUsually leads to product or process standardizationProducts based on imitation often are offered at lower prices but with fewer features

The Innovation ProcessAn innovation starts as an idea/concept that is refined and developed before application.Innovations may be inspired by reality (known problem). The innovation (new product development) process, which leads to useful technology, requires: ResearchDevelopment (up-scaling, testing)Production MarketingUse Experience with a product results in feedback and leads to incrementally or radically improved innovations.

Translation of a Creative Idea into Useful ApplicationAnalytical PlanningOrganizing ResourcesImplementationCommercial ApplicationTo Identify:Product DesignMarket StrategyFinancial NeedTo Obtain:MaterialsTechnologyHuman ResourcesCapitalTo Accomplish:OrganizationProduct DesignManufacturingServicesTo Provide:Value to CustomersRewards to EmployeeRevenue to InvestorsSatisfaction of FoundersThe Innovation Process

The Profitability of Innovation Legal protection Complementary resources Ease of imitation of technology Lead time Profits from InnovationValue of an innovationInnovators ability to appropriate value from an innovation

Appropriating Value from Innovation

Product Life CycleSalesTimeIntroductionGrowthMaturityDecline

New Product DevelopmentStages in a New Product Development process: Idea Generation Idea Screening Concept Development and Testing Business Analysis Beta Testing and Market Testing Technical Implementation Commercialization

Technology Adoption Diffusion of InnovationInnovators:venturesome; greatest needEarly adopters:opinion leaders; needs drivenEarly majority:deliberateLate majority:skepticsLaggards:traditionalists; suspicious

Late Majority

Early Majority

Laggards

Innovators

Early Adopters

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New Business Models Emerge

New Regional Model Emerge

Commercialization ModelStrategic Investment is the Foundation of a Successful Commercialization Model

What Investors Look for?Novelty; world-class; evidence of commercial interest; clear path to marketUnencumbered, or encumbered by reasonable conditions (Equity, royalties)Protection (Non-disclosure agreements, Patents, Designs, Brands, Copyright)IP protected by one or more Patents is the IP required to implement the business planFreedom to Operate

Innovation, Intellectual Property and Poverty ReductionCritical Ingredients for Innovation: Intellectual Capital Human Capital Financial Capital Proximity Social Network Capital

Complementary ResourcesBargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized.ManufacturingDistributionServiceComplementarytechnologiesOtherOtherMarketingFinanceCoretechnological know-how

Risk & ReturnCompetingResourcesExamplesLicensingOutsourcing certain functionsStrategic AllianceJoint Venture Internal CommercializationSmall risk, but limited returns also (unless patent position very strongLimits investment, but dependence on suppliers & partnersBenefits of flexibility; risks of informal structureShares investment & risk. Risk of partner conflict & culture clashBiggest risks & benefits. Allows complete controlFewAllows outside resources & capabilitiesTo be accessedPermits pooling of the resources/capabilities of more than one firmSubstantial resource requirementsKonica licensing its digital camera to HPPixars movies (e.g. Toy Story) marketed & distributed by Disney.Apple and Sharp build the Newton PDA Microsoft and NBC formed MSNBCTIs development of Digital Signal Processing ChipsAlternative Strategies for Exploiting Innovation

Uncertainty & Risk Management in Tech-based IndustriesSources ofuncertaintyTechnologicaluncertaintySelection process for standards and dominant designs emerge is complex and difficult to predict, e.g. future of 3GCustomer acceptance and adoption ratesof innovations notoriously difficult to predict, e.g. PC, Xerox copier, WalkmanMarketuncertaintyStrategies formanaging riskCooperating with lead users early identification of customer requirements assistance in new product development Flexibililitykeep options openuse speed of response to adapt quickly to new informationlearn from mistakesLimiting risk exposureavoid major capital commitments (e.g. lease dont buy)outsourcealliances to access other firms resources & capabilitieskeep debt low

Innovation riskRISKSCOSTSRESEARCH DEVELOPMENT COMMERCIALISATION

Mortality of New Product Ideas

The Right Innovative Product?The right product is one that becomes available at the right time (i.e., when the market needs it), and is better and/or less expensive that its competition.To have the right product, therefore, one must:Predict a market needEnvisage a product whose performance and capability will meet that need Develop the product to the appropriate time scale and produce it.Sell the product at the right price

TimelyDifficult forcompetitors to imitateCommercially exploitablewith present capabilitiesInnovation and Competitive AdvantageCompetitiveAdvantageProvides significantvalue to customers

Strategic Entrepreneurship and InnovationEntrepreneurship is concerned with:The discovery of profitable opportunitiesThe exploitation of profitable opportunitiesFirms that encourage entrepreneurship are:Risk takersCommitted to innovationProactive in creating opportunities rather than waiting to respond to opportunities created by others

EntrepreneurshipCreativity is at the heart of entrepreneurship, enabling entirely new ways of thinking and working. Entrepreneurs identify opportunities, large or small, that no one else has noticed. Good entrepreneurs also have the ability to apply that creativitythey can effectively marshal resources to a single end. They have drivea fervent belief in their ability to change the way things are done, and the force of will and the passion to achieve success. They have a focus on creating valuethey want to do things better, faster, cheaper. And they take risksbreaking rules, cutting across accepted boundaries, and going against the status quo.

EntrepreneurshipDefining entrepreneurship is difficult because there is no universal, clear-cut definition of the term. In its most basic sense, entrepreneurship is manifest in a business venture when an individual is able to turn a novel idea into a profitable reality. In practice, however, entrepreneurship is more multifaceted, ranging from operating a small business in ones own home, to bringing a national franchise to a small town, to turning a new and unique idea into a high-growth company. Entrepreneurship can involve starting a business that brings a new store to main street, offering a product or service previously unavailable to a community, or acquiring an existing business that has had a long-standing presence in a community and helping it evolve to reflect ones own vision and personality.

EntrepreneurshipThe word entrepreneurship literally means, "to take or carry between" in the sense of an economic transaction; to be a market-maker. It does not literally convey the notion of innovation that we commonly associate with the term. Joseph Schumpeter (1883-1950), one of the more well known theorists on entrepreneurship, defined an entrepreneur as one who reorganizes economic activity in an innovative and valuable way. That is, an entrepreneur is one who engages in a new economic activity that was previously unknown. An entrepreneur is a risk taker because being innovative means there are few rules or history for guidance.

EntrepreneurshipEntrepreneurship is the process of creating or seizing an opportunity, and pursuing it regardless of the resources currently controlled. The Websters Third New International Dictionary defines an entrepreneur to be one who organizes, owns, manages, and assumes the risks of a business

EntrepreneurshipThe entrepreneur shifts resources out of an area of lower and into an area of higher productivity and greater yield.[J. B. Say, French economist, circa 1800] Entrepreneurship is creative destruction. Dynamic disequilibrium brought on by the innovating entrepreneur, rather than equilibrium and optimization, is the norm of a healthy economy and the central reality of economic theory and practice. [Joseph Schumpeter, Austrian economist, 1911] The entrepreneur searches for change, responds to it, and exploits it as an opportunity. Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service[Peter Drucker, 1985]

EntrepreneurshipEntrepreneurship 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.

EntrepreneurshipEntrepreneurship, 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.

EntrepreneurshipEntrepreneurs have:A passion for what they doThe creativity and ability to innovateA sense of independence and self- reliance(Usually) a high level of self confidenceA willingness and capability (though not necessarily capacity or preference) for taking risks

EntrepreneurshipEntrepreneurs do not (usually) have:A tolerance for organizational bureaucraciesA penchant for following rulesA structured approach to developing and implementing ideasThe foresight to plan a course of action once the idea is implemented and established

Entrepreneurial Success1. 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

Major factors determining success of a new product in the marketThe product provides functional advantagesLower price for comparable productMore attractive design (look)Reputation of brandEasy access: Available in the main retail shopsConsistent product qualityExcellent after-sales services

Competitive AdvantageCriteria

New ProductDevelopmentBreakthroughInnovation?Need two processes: NPD and NB(usiness)D?Innovative New ProductsNewBusinessesNew Business DevelopmentAn opportunity driven path to market- a different business design

Protection of IPUtility models, PatentsCollaborative ResearchAgreementConfidentiality or Nondisclosure Agreements (Trade Secrets)Technology LicensingAgreement, BrandingValue adding

Intellectual Property QuestionsIntellectual Property (IP) Issues/questions during New Product Development (NPD): Can the innovation be legally protected? For how long? How does one protect an innovation from imitators? How much will it cost? When to protect? Do you need to rely on an IP expert? The answers are complicated by the fact that one or more types of legal frameworks may be used to protect a particular innovation, product, process, or creative work. These include trade secrets, trademarks, designs, patents, and copyright. It is necessary to know which are applicable and when each is appropriate. This varies somewhat from jurisdiction to jurisdiction. The advice of a lawyer that specializes in these matters is essential

Intellectual Property QuestionsIt is necessary to know which types of intellectual property rights (IPRs) are applicable and when is each type of IPR appropriate. This varies somewhat from one country to another. The advice of an IP lawyer is desirable if not essential.

BackgroundIn September 2000, the WIPO Assemblies approved the creation of a substantial new program of activities, focusing on the IP-related needs of SMEs worldwideSMEs Division established in October 2000Nine professionals and three administrative staff in the SMEs Division of WIPO

Strategy1.Demystification2.New audience3.New Areas4.Proactive5.E-Services6.Partnership

(1) DemystificationStudiesGuidesEvents and expert missionsWebsite and newsletterCD-ROMMagazine articles

(1) Demystification (Studies)National Studies (on IP and SMEs) completed or under way in Argentina, Bhutan, Mongolia, Nepal, Philippines, Sri Lanka, Tanzania, Sierra Leone, Romania, Chile, Colombia, Costa Rica, El Salvador, Honduras and Paraguay, Egypt, Morocco, LebanonWIPO Survey of IP Services to Tenants of European Technology IncubatorsNorwegian SMEs and the IPR system

(1) Demystification (Guides)WIPO/ITC Guide on Marketing of Crafts and Visual Arts; Role of Intellectual Property; A practical guideWIPO/ITC Guide on Secrets of Intellectual Property: Guide for Small and Medium Sized ExportersWIPO/ITC Guide on Exchanging Value: Negotiating Technology Licensing Agreements - A Training ManualITC Guide on Exporting Automotive ComponentsITC Guide on Pharmaceutical SMEs (Forthcoming)

(1) Demystification (Guides) PublishedMaking a Mark (Trademarks)Looking Good (Designs)Inventing the Future (Patents)

(1) Demystification (Guides)Translation and/or customization: Under way, with funding from several sources, in the following countries: Algeria, Argentina, Australia, Canada, Czech Republic, Egypt, Estonia, Hungary, Italy, India, Israel, Kenya, Lebanon, Malaysia, Malta, Mongolia, Morocco, New Zealand, Philippines, Poland, Slovakia, Spain, Tanzania, Tunisia, Vietnam16 Countries members of the OAPI

(1) Demystification (Events)Special programs, seminar and workshops organized by the SMEs Division in Geneva in partnership with selected associations and organizations (IASP, INSME, IPI, MOST, WASME)Annual WIPO Forum on IP and SMEs for IP Offices of OECD Countries

(1) Demystification (Events)WIPO-Italy Forum on Textile and Clothing Industries of the Mediterranean Basin Countries (Prato, Italy - December 2003)Participants from Algeria, Cyprus, Egypt, Jordan, Israel, Lebanon, Malta, Morocco, Palestine, Syria, Tunisia, Turkey

(1) Demystification (Website)The Website of the SMEs Division is in six UN languages (English, French, Spanish, Arabic, Russian and Chinese)More than 60,000 pages viewed every month in 2004Contents include sections such as IP for Business, IP and E-Commerce, Activities, Best Practices, Case Studies and Documents

(1) Demystification (Website)

(1) Demystification (Newsletter)Monthly e-newsletter in the 6 UN languages (Free)Content includes articles, updates with information, links and documents Launched in August 2001Total number of subscribers: >19,000

(1) Demystification (CD-ROM)50,000 copies of the SMEs Division CD-ROM distributed to SME support institutions, IP Offices and others worldwideMarketing and customizationE-learning CD ROM (in partnership with KIPO: IP Panorama)SAARC CD-ROM (in preparation)

(1) Demystification (Articles)Some articles recently published:What to do if you are accused of copyright infringementTapping into Patent Information: a buried treasureInternational trade in technology licensing of know-how and trade secretsIntellectual Property and E-commerce: how to take care of your business websiteOffshore outsourcing and IPSavvy marketing: merchandising of IP rights

(2) New AudienceBringing IP issues to SME eventsBringing new business perspective to IP eventsNew partnership: Open door policyIGOs, government focal points, SME support, training and financial institutions, chambers of commerce and industry, SME associations, SME research institutions, private sector institutions, universities, etc...

(3) New AreasCreative IndustriesIP for financing (venture capital, securitization)Accounting and valuation of IP assetsIP Asset Management, IP Due Diligence and IP AuditFiscal policies and IP (tax incentives for R&D activities, patenting, licensing etc.)IP services to SMEs by incubators, technology parks, chambers of commerce and SME associationsIP needs of SMEs in agriculture, biotechnology, handicrafts, software, textiles, etc

(4) Being ProactiveOriginal ContentLinksBest PracticesCase Studies

(5) E-ServicesWeb site contentSME mailE-mail newsletterDistance learning (proposed)Discussion forum (proposed)

(6) PartnershipNational and Regional IP OfficesNational SME focal points in government, private sectorChambers of Commerce and IndustrySME Associations; CooperativesIncubators, Science Parks, Technology ParksUniversities; R & D InstitutesPrivate Sector ConsultantsSME Finance Institutions (including venture capitalists)Other UN Agencies (ITC, ILO, UNIDO, AfDB)

Thank YouGuriqbal Singh Jaiyaguriqbal.jaiya@wipo.intwww.wipo.int/sme/en/index.htmlwww.wipo.org

203727It is a value-based competitiveness proposition.The U.S. can no longer successfully compete on cost (primarily), As an advanced industrial, if not post-industrial economy, it must compete on valueunique qualities of performancerather than cost.

Innovation and entrepreneurship generate value that contributes to increases in productivity, which, in turn 1412