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IP Blog / Intellectual Property and business value: making IP a C-suite priority

Intellectual Property and business value: making IP a C-suite priority

Intellectual Property (IP) is one of the greatest sources of value creation in the corporate world, but it is also one of the most underutilized. While research shows that up to 90% of company value is linked to intellectual capital, most businesses still treat their IP function as an administrative cost center.

At best, it is seen as a resource for supporting research and development (R&D), but more often, it is simply treated as a necessary expense rather than a strategic enabler for growth. This often comes down to the fact that IP is an intangible asset whose value can be hard to assess in concrete terms.

Take your IP management to the next level

As such, in order to take full advantage of their assets, companies must find a way to make the impact of their IPs visible, quantifying the risks of ineffective management of intangible assets and the value potential that effective IP strategy and management could have for their customer intimacy and market success. By placing IP strategy and management at the top of the C-suite agenda and raising company-wide awareness of their strategic implications, companies can rethink and redesign company-wide processes to better deliver on their potential. To accomplish this, companies must establish three pillars of IP innovation: a strategic mindset for IP assets, a market-driven business / product development approach and an effective deployment and steering approach.

1. Strategic mindset for IP assets

The most important thing to recognize is that if you want to drive value from your IP, you need to utilize the rights that come with it. Patents and trademarks are not worth much to a company if they end up as a pile of paper in the repository. For some businesses, their patents just serve as vague proof that they are innovating and coming up with new ideas without actually taking the next step to bring those ideas to fruition.

There are multiple ways to handle this: Companies can get additional value by granting licenses and collecting licensing fees for their IP rights. Alternatively, they can take steps to prevent competitors from using their inventions, monitoring the market to identify potential infringers. This also requires not to shy away from enforcing these rights through litigation. Many large and small companies are doing this, though not systematically. To be effective in this approach, you need awareness across all departments about the purpose of these assets and how the company uses them.

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Raising the level and quality of IP understanding across all departments that interact with it is a strong first step toward a swifter asset management policy. When team members are informed of the value-driving capacity of IP, more can be done to realize that potential.

Yet, for a company to strategically utilize its IP assets, it needs to have them in the first place. This leads to the second pillar: how to steer and drive inventions and product development.

2. Market-driven business and product development approach

One of the biggest reasons companies struggle to develop valuable IPs is that they approach innovation from the inside out rather than from the outside in. This means that they are very excited about their engineering capabilities and creativity, so they just keep on developing and patenting in the name of showing off how inventive they are or what new technological innovations they can come up with. While an approach can be successful, it can also lead to a lot of wasted potential.

Every company should remember that no matter how "innovative" something is, it likely will not be profitable if it does not address real customer needs. When developing new inventions, inspiration must come from the market and the customers, with new products being designed to meet their specific demands. This can be difficult sometimes, as it might require an organization not to follow through on a great idea that the R&D function has developed that lacks a clear market need.

In cases like this, a company's IP function can provide valuable insights for R&D to complement their development processes and steer them in a direction that is most beneficial to the company. This leads to the third and final pillar.

3. Effective deployment and steering approach

Something vital to understand when aiming to create valuable IPs is that by its very nature, IP development is a cross-functional process. Though a company will naturally have an internal IP function, many of the best ideas and insights can only be generated if multiple functions in a company work together. Functions such as business, legal, marketing, sales, product development, R&D and customer relationship management (CRM) contribute to IP development's collective success.

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The IP-creation cycle is larger and more complex than any single business department. For instance, the legal team may work with the engineers to identify whether a new company product is patent-eligible and the marketing department to protect the associated branding.

However, this can lead to problems as not all of these functions are managed by the same people. Companies should develop IP committees and establish solid governance processes to compensate for this, ensuring that all key stakeholders have a voice and can coordinate their efforts.

Once everyone is on the same page regarding IP development, it is equally important to ensure that the organization is transparent about defining and communicating relevant KPIs. After all, only what gets measured gets managed, so internal leadership needs to be clued in on the company's larger IP goals. For instance, if there is a business area that the company wants to grow into, members of the IP committee should have easy access to information such as the number of relevant disclosures, filings and / or grants in the area, along with the R&D spend per granted patent as measures for success. The selection and granularity of the KPIs and information should also be adequate for the organization's respective stakeholder groups and hierarchy levels.

Unlocking the business value of IP

Given the proper support, IP can be a core enabler for the future economy's innovative power and financial success. To get there, company leaders, particularly Heads of IP, must develop the right communication strategy and training practices to instill a strategic mindset for thinking about IP. Additionally, they must push to engrain IP processes into a market-driven product development approach to lead innovations in the most meaningful and profitable direction. Lastly, they must establish effective governance and reporting systems to coordinate a company's various functions and stakeholder groups, placing IP at the top of the management agenda. When these factors come together, companies position themselves for tremendous future success.

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