The following is an extract from my upcoming book, in which I explore the role that IP and intangible assets play in the new economy we’re entering.
I also want to show start-ups how to launch “IP-centric” ventures in which their IP feeds back into the company at all levels.
The global economic meltdown of the early 21st century has left us all poorer. We are left with two options: business as usual, or we reinvent the economy to stop this from happening again.
The good news is, our economy is already being reinvented, whether we’re aware of it or not. We’ve slipped quietly from the Information Age into an economy increasingly dominated by a whole new class of assets: intangible assets and the accompanying intellectual property rights that are used to protect these assets.
Intangible assets arise from human creative endeavor. They typically manifest as business ideas, new techniques, business methods, customer lists, company data, and the like – everything that gives the company the edge it needs to stay competitive and profitable. Some accounting standards have reduced the concept to “everything in an enterprise that isn’t a tangible asset”, but I hope to show that there is more to it than this.
Intellectual Property, commonly referred to as IP, similarly is a term increasingly being bandied about in corporate corridors today. IP can be protected by way of legal rights to intangible assets. These can been formalized as patents, trademarks, trade secrets, design rights, and copyright. Very few start-ups and entrepreneurs understand exactly what this assets class can mean for their businesses and what the enormous impact is that IP has not only on a global and local economic scale, but also on protecting ideas and multiplying profits in their enterprises, which is one of the reasons for writing this book.
To many, it remains a nebulous, obscure legal concept that has little, if any, relevance to everyday life, yet it holds the key to starting up rapidly, keeping competitors at bay, and ensuring sustainable profits, as I hope to show in this book.
A groundbreaking report recently released by the Ocean Tomo group has quantified the effects of intangible assets on our current markets. It showed that more than 80% of the market capitalization of S&P® 500 companies simply cannot be accounted for by tangible, bricks and mortar-type assets. Until the late 1970s, comfortably more than 80% of publicly listed companies’ market capitalization (i.e. the total value of their issued shares) was accounted for by things you could see, feel, and touch – physical, tangible assets.
But this has changed dramatically in less than a generation: intangible assets are changing the face of businesses all over the globe and need to be managed as vigorously, if not more so, than other company assets. When combined with traditional business practices this provides explosive results, and this book aims to translate the secrets of global best practice into a step-by-step guide for start-ups and entrepreneurs.
My aim is to show a new generation of entrepreneurs how to pull the 80% value lever as opposed to the 20% lever that contemporary management theorems have focused on. I’ve included benchmarks and best practices from some of the most strident global IP players and translated these into easy steps that entrepreneurs and CEOs of start-ups can easily and quickly apply to their own ideas and enterprises.
When you consider that IBM is speculated to earn nearly $2 billion per year purely by licensing some of its unused intellectual property to other companies, including competitors, then it becomes clear that these concepts may have considerable value that should be transcribed into the vocabulary of start-ups everywhere.
The converse also holds true – mismanagement of IP can be disastrous. Research in Motion, the makers of Blackberry handsets, were nearly brought to their knees by an unknown company wielding nothing more than a handful of patents. Their mystery competitor didn’t produce handsets, software, communications hardware or any other product that competed with RIM’s technologies. In fact, they produced nothing except a few patent documents, yet it dealt a blow to RIM from which they are still reeling.
More recently, the mobile phone patent war between Apple and Samsung (and just about everyone else in the telephony market) has propelled IP and the value associated with these legal rights to the front pages of newspapers around the world.
The list goes on.
In this new age, companies can only distinguish themselves, truly distinguish themselves, by their creative output. And where companies produce intangible assets at levels never before seen, entrepreneurs can and should make money not only by following traditional commercializing activities, but also by exploiting the rights underpinning the true value of their enterprises – their proprietary intellectual property rights which protect these intangibles. IP truly is a strategic power-tool for wealth creation, business development, and profit multiplication, but it’s being used sub-optimally by the vast majority of companies and start-ups, if not mismanaged or neglected completely.
For this reason, I want to use this book to introduce the concept of the ‘IP-centric’ start-up – an enterprise in which IP is used for ideation, protection, collaboration, morale, and culture. If you are aware of the enormous benefits that can be unlocked by actively identifying, protecting, and exploiting your IP then, all things being equal, there is little doubt that you will be able to obtain and sustain greater profits and market domination than your competitors.
This century will be the century in which IP makes a business case for itself and becomes a central tenet of how business is done around the globe. This is exemplified best by the fact that China has come from nowhere (relatively speaking), to becoming the biggest filer of patent rights in the world, in one fell swoop deposing the residents of the US, Japan, and Europe as the former mainstays of patent filings. Japan has taken things further, pronouncing itself to be an IP economy. They’ve realized that they simply can’t manufacture cheaply enough, so they have changed their economy to be one in which they are the ‘head’ thinking out the ideas and protecting them, and then having them manufactured by the ‘hand’ economies who pay the Japanese royalties for using their IP.
Creativity, when harnessed in the form of IP, is thus a force that can be used to enrich the lives of individuals and the future of nations. My task with this sit and my upcoming book is to demystify IP and provide you with practical insider’s tips to ensure that your dreams, vision, and aspirations are protected and lead to long-term, sustainable wealth and profits. I hope you find it engaging and that it helps you realize the incredible value that IP, if leveraged correctly, can add to your life, your business, and your wealth.