Authors: Matthew Wahlrab and Craig Rochester
Expanding what IP is in business in 2022
Intellectual Property (IP) often brings to mind images of high-tech enterprise laboratories, heavyweight legal teams, and significant capital investment.
But any company that’s up and running has some form of IP that can be valuable to its bottom line. Your company is already generating an absurd amount of IP every day, but your business may not have the capacity to document your strategies, track intellectual property market changes, or create a plan for developing new intellectual property in parallel with your business growth.
The very act of thinking up your business idea produced IP; so did getting the business off the ground. And every day since then, your IP portfolio has grown, generating things like know-how, goodwill, customer lists, sales content, and other IP that may be protectable by one or more IP rights such as patents, trade secrets, trademarks, or copyrights.
The challenge is that not all ideas are worth the cost of formal IP documentation. However, clearly documenting the ideas that are worthy is vital to setting your business up for success. This is the only way you’ll be able to take your sparks of genius, prevent others from using them, and effectively communicate them to investors, collaborators, business partners, and your market.
Safe to say no business is going places without getting those key groups on board. Your big ideas, the nuances of the product you’ve developed, and — above all — the benefits your product brings to the world are what persuade customers and investors. But all that ingenuity, nuance, and user benefit is invisible and meaningless if you keep it locked up in your founder’s brain. No investor or user in their right mind will be convinced — and as for the others, you might want to steer clear in case you suddenly find a well-funded competitor who just happened to have had access to some of your best ideas.
So, it’s key to outline your A+ ideas in a way that non-expert audiences can appreciate them. Then, you’ll be in a position to build out a strong IP portfolio for your company, with solid tools for pursuing a sustained competitive advantage.
But more on that later. First, let’s take a closer look at how the market defines IP. Then, we’ll dive into how IP assets can add value to your business and how you can leverage IP in your everyday work.
What the heck is intellectual property anyways?
In the infinite wisdom of the internet,
intellectual property is defined as: “Any of various products of the intellect that have
commercial value, including copyrighted property such as literary or artistic
works, and ideational property, such as patents, business methods, and
industrial processes.”
Now allow us to dissect this
definition, Rapid Alpha style. “Products of the intellect that have commercial
value” are those A+ ideas you generate in the founding and daily operation of
your business. And ascertaining how much commercial value they have — and when
— is crucial. In IP, value is temporal. In general, we find that the commercial
value of IP increases dramatically at first, mirroring your product’s market
traction. Then, eventually, all the competitive advantage that’s been built on
your technology will become obsolete, as product lifecycles mature and new
successor products are developed. Ultimately, the value of IP is only ever
going to be temporary — though in some cases it can last decades.
On this note, it’s key to realize that
ideas you have today might have very low commercial value. But if you weed out
your A+ ideas from the rest, you can invest strategically in nurturing them,
and in wrapping the right assets around them to build yourself a sustained
competitive advantage (more on this below).
As soon as we get to the “including
copyrighted property” stage of the definition, we’ve already gone way too
narrow for Rapid Alpha’s tastes. This takes us straight into IP rights; the
realm of law firms and IP attorneys. Oftentimes, attorneys will match your
pieces of intellectual creativity with a by-the-book IP right. But there’s a
key step missing here: understanding the commercial value of the
intellectual creation. In other words, whether
the monetary or time cost of IP protection for this particular idea or
copyright registration is even necessary, or the best way to protect that idea.
Focus
“Every company has some form of IP
that can be valuable to its bottom line.”
At Rapid Alpha, we prefer to support founders and companies in honing their ideas while creating a comprehensive inventory of their intellectual property assets. We trace each idea’s potential commercial value — and not just in the revenue-generating or cost-cutting sense. There are many elements we consider in order to help your business thrive, such as strategic IP licensing, presenting a dynamic innovation narrative to investors and customers, and leveraging IP assets to reward employee innovation and foster a positive and creative company culture.
This circles us neatly back to our final IP definition dissection: IP as “business methods, and industrial processes.” IP isn’t just in your macro strategy; IP is right down in the minutiae of your standard operating procedures (SOPs). From the process you use to eliminate non-starter R&D ideas to how you receive and handle invoices, all of these are IP assets. If you treat them as such and leverage them to identify ways of being more attractive to work with as a company, they can be used alongside the traditional forms of IP protection to build a sustained competitive advantage.
We know IP is everywhere. But how do we use it to create business value?
IP in all its nuances can drive market value and make or break a company’s competitive advantage. At Rapid Alpha, we see that companies which thrive in new or existing markets tend to focus on recognizing, documenting, and protecting their IP across 3 key areas:
- Technical differentiation
- Competitive advantages achieved through company culture
- Creative business models to grow market share
If a company is focused on at least 1 of these 3 strategies, we believe they have a shot at being able to win market share. Achieving all 3, however, involves a concentrated focus on IP — so let’s take a closer look at how each of them can add business value.
1. IP in technical differentiation
With technical differentiation, we’re talking about improvements in your base technology that enhance performance. In the most literal sense, these will be improving operational efficiency and reducing costs. Utility patents and trade secrets are standard useful IP protection strategies here
Focus
“At Rapid Alpha, we support founders and companies in honing their ideas while creating a comprehensive inventory of their intellectual property assets.”
Your R&D process is constantly churning out IP: the ideas you do go with, the ideas you don’t go with, how you sign off internally between R&D and Product Development, your beta partner list, and so on. Documenting this process and related information will create IP assets with some often-overlooked benefits, like making training more efficient, creating institutional knowledge in the event of employee turnover, and providing tangible evidence of your company’s intangible assets when raising capital.
Let’s say you’re a SaaS founder: to win over your tech-savvy market, you might need whitepapers that go into bits, bytes, integration points, and so on. Your marketing department is pushing to create persuasive outputs, but they need product descriptions to start from. Everything designed for those marketing outputs (from tweaking bits and bytes to adding your company logo to the eventual .pdf) is IP that, as the output changes hands from department to department in your company, evolves into additional IP. The overall result? Sales, brand development, and, often, the documentation you need to secure IP rights that can be used to further your competitive advantage.
2. IP in company culture
Think mission statements, value statements, branding, SOPs, conflict management procedures, financials, compensation packages, key performance indicators (KPIs), and so on. These are all forms of protectable IP.
To contextualize this, let’s say you’re at the point where your company has the opportunity to scale. However, the original founding team has no idea how to effectively delegate. Instead, they find themselves wearing uncomfortable hats, in roles they never signed up for, sitting amongst a jumble of jottings, calculations, and files they’re somehow supposed to communicate to new hires so that they can execute and contribute.
As there’s been no idea mapping (in other words, IP mapping) in place until now, there’s no foundation of accessible, interpretable materials your team can use for effective onboarding. There’s no structure: no client list, no product description, no “here’s how we do things around here.”
For new hires, a lack of SOPs introduces them into an inefficient and frequently awkward environment. In the worst-case scenario, they might inadvertently let key IP slip outside your company walls, as they simply don’t know what they need to guard and what’s shareable. An unintended leak of important information is a great way to inadvertently squash out the autonomy and creativity your company needs, so avoidance is key.
3. IP in business models
When the incumbent market is dominated by mature technologies, creative business models are often needed to compete with generations-old technologies that have had years to develop an entrenched customer base and improve their cost profiles. In these instances, business models that recognize where value is being created may open a door to markets for disruptive new technologies.
Focus
“IP in all its nuances can drive market value and make or break a company’s competitive advantage.”
Take Apple, for example. The brand derives money as a percentage of app store revenue; likewise, partnerships with cell phone providers allow Apple to sell iPhones on payment plans, reaching a far wider customer base. Looking to add value for the consumer that goes beyond a basic transaction like selling a phone is a creative, business-boosting asset that brings in revenue, locks in customers, and diversifies a broader customer base.
Similarly, IP may provide ways to reduce or even eliminate switching costs for new software providers. That’s an idea (again, IP) that removes a major adoption hurdle for big businesses in a long-term relationship with an aging provider; an idea that would likely increase market share.
Key takeaways for managing IP in a growing or aspiring business
We’ve defined IP from our broad Rapid Alpha view, and we’ve looked at how IP can serve your company across those 3 key difference-makers: technical differentiation, company culture, and business models.
Here are our key takeaways:
✓ Understanding where your company’s IP lives is critical to long-term growth
✓ Focus on documenting and presenting your IP in a way that allows key non-expert audiences (investors, partners, adopters) to easily understand and derive value from your innovation
✓ Differentiate between IP that’s nice to have vs what’s essential for growth, as this focuses scarce resources: think technical differentiation, company culture, and business models
✓ Map and inventory your IP to efficiently scale your business: the right documentation will allow you to onboard and delegate safely and effectively
✓ Keep your view of IP flexible and broad — to create a sustained competitive advantage, nuances are key. Take advantage of IP assets that are overlooked by many companies.
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