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Business-Finance

Published on December 8, 2008

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The Importance of Intellectual Property for Business Development and Growth : The Importance of Intellectual Property for Business Development and Growth Dr. Guriqbal Singh Jaiya Director Small and Medium-Sized Enterprises Division World Intellectual Property Organization www.wipo.int/sme SMEs Website : SMEs Website IP for Business Series : IP for Business Series Making a Mark (Trademarks) Looking Good (Designs) Inventing the Future (Patents) Creative Expression (Copyright and Related Rights) Spotlight is on knowledge in today’s economy : 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 : 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 : The challenge of adding value in today’s economy Raw materials/Inputs: Processing (Value addition) = Value added output/component; product; sale; Profit Value addition: 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 Levels of Product : Levels of Product Brand Name Quality Level Packaging Design Features Delivery & Credit Installation Warranty After- Sale Service Core Benefit or Service Actual Product Core Product Augmented Product THE PRODUCT LIFE CYCLE : THE PRODUCT LIFE CYCLE A reminder that most products do not live for ever A conceptual framework only Difficult to measure where a product is in its life cycle Tangibility Spectrum : Tangibility Spectrum Tangible Dominant Intangible Dominant Salt Soft Drinks Detergents Automobiles Cosmetics Advertising Agencies Airlines Investment Management Consulting Teaching Fast-food Outlets Fast-food Outlets             What is innovation? : What is innovation? Innovation is the process and outcome of creating something new, which is also of value. Innovation involves the whole process from opportunity identification, ideation or invention to development, prototyping, production marketing and sales, while entrepreneurship only needs to involve commercialization (Schumpeter). What is innovation? : What is innovation? Today it is said to involve the capacity to quickly adapt by adopting new innovations (products, processes, strategies, organization, etc) Also, traditionally the focus has been on new products or processes, but recently new business models have come into focus, i.e. the way a firm delivers value and secures profits. What is innovation? : What is innovation? Schumpeter argued that innovation comes about through new combinations made by an entrepreneur, resulting in a new product, a new process, opening of new market, new way of organizing the business new sources of supply Dimensions of innovation : Dimensions of innovation There are several types of innovation Process, product/service, strategy, which can vary in degree of newness: Incremental to radical, and impact: continuous to discontinuous Drivers for innovation : Drivers for innovation Financial pressures to reduce costs, increase efficiency, do more with less, etc Increased competition Shorter product life cycles Value migration Stricter regulation Industry and community needs for sustainable development Increased demend for accountability Demographic, social and maket changes Rising customer expectations regarding service and quality Changing economy Greater availability of potentially useful technologies coupled with a need to exceed the competition in these technologies What is innovation? : What is innovation? Gary Hamel argued that today’s market place is hostile to incumbents, who now needs to conduct radical business innovation: Radically reconceiving products and services, not just developing new products and services Redefining market space Redrawing industry boundaries New conditions for innovation : New conditions for innovation Small start-up entrepreneurs increasingly depend on large firms: as suppliers or customers for venture finance, for exit opportunites, for knowledge (production, markets and R&D) and for opening new markets. New conditions for innovation : New conditions for innovation Large firms increasingly depend on small start-ups for NPD, as suppliers of new knowledge (which they cannot develop themselves), or organizational renewal, for experimentation with busienss models, for opening new markets, etc New developments in innovation raises new issues and problems : New developments in innovation raises 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. Complementary Resources : Complementary Resources Bargaining power of owners of complementary resources depends upon whether complementary resources are generic or specialized. Manufacturing Distribution Service Complementary technologies Other Other Marketing Finance Core technological know-how The eleven modes of cooperation agreements: illustration of their anchor points : Source: S. Urban, S. Vendemini, CESAG, Strasbourg The eleven modes of cooperation agreements: illustration of their anchor points Slide 22: Source: S. Urban, S. Vendemini, CESAG, Strasbourg Cooperations modes and value chain THE CHAIN MODEL : THE CHAIN MODEL DESIGN INDUSTRY RETAIL VALUE CROSSES ONE SINGLE CHAIN : TECHNOLOGY INNOVATION QUALITY/PRICE HOW TO TURN TECHNOLOGY INTO ART IN ORDER TO TRANSMIT TO CONSUMERS A UNIQUE IMAGE New Business Models Emerge : New Business Models Emerge New Regional Model Emerge : New Regional Model Emerge Commercialization Model : Commercialization Model Strategic Investment is the Foundation of a Successful Commercialization Model Strategic Entrepreneurship and Innovation : Strategic Entrepreneurship and Innovation Entrepreneurship is concerned with: The discovery of profitable opportunities The exploitation of profitable opportunities Firms that encourage entrepreneurship are: Risk takers Committed to innovation Proactive in creating opportunities rather than waiting to respond to opportunities created by others Understanding the Process of Innovation : Pre-IPO Expansion Start-Up Seed Idea / Concept 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 Slide 29: Expansion Start-Up Seed Idea / Concept 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 The firm with a product meeting a market demand : The firm with a product meeting a market demand product the firm = demand the market The firm with uncertain future market demand : The firm with uncertain future market demand the firm = the market ? time drivers of change: population tastes and fashions economic conditions technology politics and regulations The firm adapted to changes in market demand : The firm adapted to changes in market demand the firm = the market the firm = the market time The firm facing competitive activity : The firm facing competitive activity the firm = the market competitors the firm = the market time MARKET ORIENTATION : MARKET ORIENTATION a corporate philosophy the implementation of the marketing concept an ideal a policy statement a corporate state of mind MARKET ORIENTATION : MARKET ORIENTATION a faith an organizational culture a concept of stages of development and degree of maturity that parallels the economic development of the national market MARKET ORIENTATION : MARKET ORIENTATION places the highest priority on the profitable creation and maintenance of superior customer value while considering the interests of other key stakeholders provides norms for behaviour regarding the organizational development of and responsiveness to market information A form of organizational culture that:- Different orientations of business: : Different orientations of business: Product orientation Cost orientation Capacity orientation No-commitment orientation Competitor orientation Market orientation Entrepreneurship 1 : Entrepreneurship 1 Entrepreneurship 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 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 : 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 : 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 : Entrepreneurial Success 1. People (Entrepreneur /Entrepreneurial Team) 2. Opportunity (Marriage of Market and Product/Service) 3. Access to Resources (Land. Labor, Capital, Knowledge And the fit amongst these three elements (Business Model) Slide 43: “Frantrepreneur” (fran*tre*pre*neur) n.  One possessing the desire to be a business owner -- without the desire to recreate the wheel -- by following a proven system for the benefit of personal and professional goals. What is a Franchisee? Slide 44: The Frantrepreneur Mentality “I’m in business for myself, but not by myself”. “I have the opportunity to learn from the success and failure of others.” “I want a ‘bottled’ process for success that I can use in developing my own successful business.” "Why would I spend years and the investment required to establish a successful brand when I could buy a franchise which provides immediate access to a successful business system and a brand name which others already have made successful?" “Why would I work for someone else when I can work for myself and reap the rewards of my efforts?" Entry Strategies : Entry Strategies New Business Develop a new product or service Develop a similar product or service Competitive approaches Existing Business Buying a business Franchise Joint venture – customer or supplier “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.” : “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 Definition : Definition Competitive Advantage An advantage over competitors gained by offering consumers greater value than competitors offer. Competitive Strategies : 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 Competitive Strategies : 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 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 : CORE COMPETENCES Definition Hammel and Prahalad defined core competence as a central value - creating capability of an organization/enterprise. CORE COMPETENCES : 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 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 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 : The Five Generic Competitive Strategies Relative costs and differentiation : Relative costs and differentiation Relative costs Differentiation High High Low Low Niche Outstanding success Disaster Lowest cost PRICING OBJECTIVES : PRICING OBJECTIVES PRICING OBJECTIVES ENVIRONMENTAL ANALYSIS CORPORATE OBJECTIVES PROFIT ORIENTATED VOLUME ORIENTATED COST ORIENTATED COMPETITION ORIENTATED PRICING STRATEGIES : PRICING STRATEGIES Segmented/Differential: random/periodic/second market discounting Exploiting Competitive Position: price signalling/penetration/experience curve/geographic pricing PRICING STRATEGIES : PRICING STRATEGIES Product Line Pricing: image pricing/price bundling/premium pricing/complementary pricing Dynamic Pricing Strategies: multi-tiered price or channel pricing Low-Cost Provider 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 Success Low-cost leadership means low overall costs, not just low manufacturing or production costs! Differentiation Strategies : 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 Objective Keys to Success Differentiation Strategies Where to Find DifferentiationOpportunities in the Value Chain : 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 activities How to Achieve aDifferentiation-Based Advantage : 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 capabilities Approach 4 Incorporate product features/attributes thatlower buyer’s overall costs of using product Types of Differentiation Themes : 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 : 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 : 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 : 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 : 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 : 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 An Aspect of Good Management : An Aspect of Good Management People Management – because IP is generated by people and used by people Knowledge Management – because a lot of knowledge is informal and may or may not crystallise as recognisable category of IP IT Strategic Planning – because a lot of IP is IT-related; some of the more complex IP issues arise in IT context Contract Management – because IP is often created (or improved) in context of a contract (eg, supply contract or joint venture relationship) Asset Management – because IP is an asset, albeit intangible; it has a value Risk Management – because there are risks to an organisation flowing from its actions, or failure to act, in relation to IP (including risk of lost opportunity) with permission of P Crisp, AGS, 2003 Introduction to IP Management 1 : Introduction to IP Management 1 Legal Technical Business Export Financial Relationships Accounting Tax Insurance Security Automation Personnel Introduction to IP Management 2 : Introduction to IP Management 2 Trademarks (Brands) Geographical Indications Industrial Designs Patents and Utility Models Copyright and Related Rights Trade Secrets New Varieties of Plants Unfair Competition Basic Message 1 : 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 : Basic Message 2 IP Strategy should be an integral part of the overall business strategy of an Enterprise The IP strategy of an Enterprise is influenced by its creative/innovative capacity, financial resources, field of technology, competitive environment, etc. BUT: Ignoring the IP system altogether is in itself an IP strategy, which may eventually prove very costly or even fatal Basic Message 3 (More for Less) : Basic Message 3 (More for Less) Own Use Licensing Franchising Merchandising (Mickey Mouse, Hello Kitty)

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