To run a successful business, the first requirement is to avoid any surprises. Surprising your boss, or a corporation's board, is a fast track to the unemployment line. When a business leader puts in place systems that allow the company to operate in a stable, consistent manner, the first level of business success sets in. Intellectual property contributes at this base level by helping to ensure that a company is free to offer its new and profitable products and services.
The patent case of Apple versus Samsung is a prime example of what can go wrong. It shows how devastating a surprise can be to a management team and a company's stock price. When Samsung lost the patent suit with Apple, its stock price dropped 7.5 percent and the CEO was under intense pressure by the corporation's board. Samsung further faces an injunction and exclusion against its key mobile products in the United States.1
Once a business is stable and running smoothly with no surprises, the next challenge for a CEO is to ensure that the company's IP is being used to generate sustained advantaged market positions. This means introduction of new products and services that are superior in cost, performance, or both, compared to the competition. The trick is to accomplish this feat in a manner that will allow that advantaged position to be sustained over time. Intellectual property's contribution to sustaining a market-leading position comes in the strategic acquisition and use of patents, trade secrets, copyrights and trademarks. These, each in their own way, can prohibit a competitor from offering the same product or service. To accomplish this sustained advantage a CEO must ask the right questions and generate the right competencies within the business.
The next level up the business hierarchy, once a company is competent at the first two levels, is to engage in full exploitation of its technology globally. However, there are very few companies in the world that can conduct their business in every country. The company's core competence or sweet spot usually lies in the first or second tier of the hierarchy. When a company is expanding geographically, it builds its regional business into countries in which it knows how to operate. For those countries where it's unfamiliar with doing business, licensing its technology to others who understand the country's nuances, via geographic licensing programs, builds corporate revenues faster than any other method.
Near the top of the pyramid, and only after the other three competencies are mastered, can a company look to put in place business systems that will consistently speed R&D and product development. The role of intellectual property at this level is to integrate business, regulatory, standards, marketing, R&D, and IP activities. Many companies attempt to integrate planning, creation and management strategies and tactics before they've mastered the other levels of the pyramid. But, as Maslow vividly showed us, it's hard to find shelter if you can't breathe.
Finally, at the top of the pyramid, influencing industry adoption is all about maximizing value in the various stages of the company's innovation cycle. As Marc Ehrlich, head of IBM's IP Enforcement and Commercialization business, observed: "In order to control industry adoption of new technologies a CEO must find the proper balance between proprietary protection and open licensing of a technology. To do this requires a deep understanding of the innovation lifecycle for technologies in the company's industry. For example, aggressive IP protection may make sense for early stage technologies whereas a more open licensing model, implemented after market acceptance of a technology, may facilitate industry adoption, thus setting the stage for a next wave of technological innovations for the company."