mod001093 understanding innovation 010315

MOD001093 MOD001093 ENTREPRENEURSHIP ENTREPRENEURSHIP AND INNOVATION: AND INNOVATION: UNDERSTANDING UNDERSTANDING INNOVATIONINNOVATION

Prof.Stephen OngProf.Stephen OngBSc(Hons)Econs (LSE), MBA (Bradford)BSc(Hons)Econs (LSE), MBA (Bradford)

Visiting Professor, Shenzhen UniversityVisiting Professor, Shenzhen UniversityAcademic Fellow, Entrepreneurship & Innovation,Academic Fellow, Entrepreneurship & Innovation,

The Lord Ashcroft International Business School, Anglia The Lord Ashcroft International Business School, Anglia Ruskin University Cambridge UKRuskin University Cambridge UK

MBA ANGLIA RUSKIN UNIVERSITY MBA ANGLIA RUSKIN UNIVERSITY

Today’s Overview Today’s Overview

LEARNING OBJECTIVESLEARNING OBJECTIVES To identify and critically evaluate To identify and critically evaluate

different forms of innovation. different forms of innovation. To discuss the role of innovation in To discuss the role of innovation in

management and the economymanagement and the economy To understand the sources for To understand the sources for

Innovative Opportunity Innovative Opportunity To identify the drivers of innovation To identify the drivers of innovation To discuss Innovation and IPR – To discuss Innovation and IPR –

intellectual property rights. intellectual property rights.

SPOT the DIFFERENCE

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Patent LitigationPatent Litigation

Source: bbc.co.uk 30th August 2005

Creative wins MP3 player patentCreative wins MP3 player patent

One of Apple's main r ivals, Creative Technology, hasOne of Apple's main r ivals, Creative Technology, hasbeen awarded a patent in the US for the interfacebeen awarded a patent in the US for the interface

used on many digital music players.used on many digital music players.

"The f irst portable media player based upon the user interface "The f irst portable media player based upon the user interface covered in our Zen Patent was our Nomad Jukebox MP3 player," covered in our Zen Patent was our Nomad Jukebox MP3 player,"

said Creative CEO Sim Wong Hoo.said Creative CEO Sim Wong Hoo. "The Apple iPod was only announced in October 2001, 13 months "The Apple iPod was only announced in October 2001, 13 months

after we had been shipping the Nomad Jukebox based upon the user after we had been shipping the Nomad Jukebox based upon the user interface covered by our Zen Patent." interface covered by our Zen Patent."

In its press release, Creative said Apple had f i led for a patent for a In its press release, Creative said Apple had f i led for a patent for a user interface in a mult imedia player in late 2002, but its application user interface in a mult imedia player in late 2002, but its application

had been recently rejected.had been recently rejected.On 24 August 2006, Apple and Creative announced a broad On 24 August 2006, Apple and Creative announced a broad

sett lement to end their legal disputes. Apple wil l pay Creative sett lement to end their legal disputes. Apple wil l pay Creative US$100 mil l ion for a paid-up l icense, to use Creative's awarded US$100 mil l ion for a paid-up l icense, to use Creative's awarded

patent in al l Apple products. As part of the agreement, Apple wil l patent in al l Apple products. As part of the agreement, Apple wil l recoup part of i ts payment, i f Creative is successful in l icensing the recoup part of i ts payment, i f Creative is successful in l icensing the

patent. patent.

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Automatic hierarchical categorization of music by Automatic hierarchical categorization of music by metadatametadata

Patent numberPatent number : 6928433: 6928433Fil ing dateFil ing date : Jan 5, 2001: Jan 5, 2001Issue dateIssue date : Aug 9, 2005: Aug 9, 2005

Application numberApplication number : : 9/755,7239/755,723

A method, performed by software executing on the processor of a portable music A method, performed by software executing on the processor of a portable music playback device, that automatically files tracks according to hierarchical structure playback device, that automatically files tracks according to hierarchical structure

of categories to organize tracks in a logical order. A user interface is utilized to of categories to organize tracks in a logical order. A user interface is utilized to change the hierarchy, view track names, and...change the hierarchy, view track names, and...InventorsInventors : Ron Goodman, Howard N. Egan: Ron Goodman, Howard N. Egan

AssigneeAssignee : Creative Technology LTD: Creative Technology LTD

Apple pays US$100m for use of Apple pays US$100m for use of PatentPatent

Source: bbc.co.uk 30th August 2005

http://www.google.com/patents/about?id=pAGDAAAAEBAJ

SPOT the DIFFERENCESPOT the DIFFERENCE

NASDAQ AAPL

Market Cap : US$308.8 B

(2011)

PINK CREAFMarket Cap : US$0.150 B

(2011)

CREATIVECREATIVE vs vs APPLEAPPLE

INNOVATION INNOVATION IN THE IN THE

ECONOMY ANDECONOMY ANDMANAGEMENTMANAGEMENT

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1.1 What is Knowledge?1.1 What is Knowledge?

Western Philosophy : “Justified True Belief”Individual “A” to have knowledge of “P” to satisfy the following conditions : “P” is true (the truth condition);“A” must believe that “P” is true (the belief condition);“A”'s belief that “P” is true must be justified (the justification condition)

• Synthesis + Japanese Philosophy : “a dynamic human process of justifying personal belief toward the “truth” .”. I.Nonaka & H.Takeuchi (1995)

Western Philosophy : “Justified True Belief”Individual “A” to have knowledge of “P” to satisfy the following conditions : “P” is true (the truth condition);“A” must believe that “P” is true (the belief condition);“A”'s belief that “P” is true must be justified (the justification condition)

• Synthesis + Japanese Philosophy : “a dynamic human process of justifying personal belief toward the “truth” .”. I.Nonaka & H.Takeuchi (1995)

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1.2 Knowledge Definitions1.2 Knowledge Definitions

F.Hayek (1945) classified knowledge intoScientific knowledge (general rules)Knowledge of particular circumstances of time and place (implicit, context specific, tacit)

Leonard-Barton (1992) defines knowledge set as: Employee knowledge and skills;

Technical systems; Managerial systems; Values and norms.

I.Nonaka & H.Takeuchi (1995) describes knowledge as: Beliefs and commitments;Related to human action;Meaning (context-specific and relational)

F.Hayek (1945) classified knowledge intoScientific knowledge (general rules)Knowledge of particular circumstances of time and place (implicit, context specific, tacit)

Leonard-Barton (1992) defines knowledge set as: Employee knowledge and skills;

Technical systems; Managerial systems; Values and norms.

I.Nonaka & H.Takeuchi (1995) describes knowledge as: Beliefs and commitments;Related to human action;Meaning (context-specific and relational)

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1.3 Knowledge Examples1.3 Knowledge Examples

J.B.Quinn (1992) describes knowledge-based intangibles includeTechnological know-how;Product design;Marketing presentation;Understanding of the customer;Personal creativity;Innovation.

I.Nonaka & H.Takeuchi (1995) describes Japanese view of knowledge to include :

Insights, intuitions, hunches;Ideals, values, emotion;Images, symbols, schemata, mental models, beliefs, perception, metaphors.

J.B.Quinn (1992) describes knowledge-based intangibles includeTechnological know-how;Product design;Marketing presentation;Understanding of the customer;Personal creativity;Innovation.

I.Nonaka & H.Takeuchi (1995) describes Japanese view of knowledge to include :

Insights, intuitions, hunches;Ideals, values, emotion;Images, symbols, schemata, mental models, beliefs, perception, metaphors.

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Knowledge in Economic Knowledge in Economic Theories (Theories (A.Marshall A.Marshall

(1965))(1965))

Knowledge in Economic Knowledge in Economic Theories (Theories (A.Marshall A.Marshall

(1965))(1965)) ““Capital consists in a great part of Capital consists in a great part of

knowledge and organisation. knowledge and organisation. Knowledge is our most powerful Knowledge is our most powerful engine of production. engine of production. Organisation aids knowledge.”Organisation aids knowledge.”

““Capital consists in a great part of Capital consists in a great part of knowledge and organisation. knowledge and organisation. Knowledge is our most powerful Knowledge is our most powerful engine of production. engine of production. Organisation aids knowledge.”Organisation aids knowledge.”

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Knowledge in Economic Knowledge in Economic Theories (Theories (F.Hayek (1945))Knowledge in Economic Knowledge in Economic Theories (Theories (F.Hayek (1945))

““Knowledge is subjective. Knowledge is subjective. Dynamics of economic change by Dynamics of economic change by unique knowledge held by each unique knowledge held by each economic subject.”economic subject.”

““Knowledge is subjective. Knowledge is subjective. Dynamics of economic change by Dynamics of economic change by unique knowledge held by each unique knowledge held by each economic subject.”economic subject.”

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Knowledge in Economic Knowledge in Economic Theories Theories ((J.A.Schumpeter J.A.Schumpeter

(1951))(1951))

Knowledge in Economic Knowledge in Economic Theories Theories ((J.A.Schumpeter J.A.Schumpeter

(1951))(1951)) ““New products, production New products, production

methods, markets, materials and methods, markets, materials and organisations resulted from new organisations resulted from new knowledge”knowledge”

““New products, production New products, production methods, markets, materials and methods, markets, materials and organisations resulted from new organisations resulted from new knowledge”knowledge”

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Knowledge in Economic Knowledge in Economic TheoriesTheories (E.Penrose (1959))Knowledge in Economic Knowledge in Economic TheoriesTheories (E.Penrose (1959))

““Services (inputs in production Services (inputs in production process) are a function of the process) are a function of the experience and knowledge experience and knowledge accumulated within the firm, and accumulated within the firm, and thus firm specific. thus firm specific. Firm is a Firm is a repository of knowledge”repository of knowledge”

““Services (inputs in production Services (inputs in production process) are a function of the process) are a function of the experience and knowledge experience and knowledge accumulated within the firm, and accumulated within the firm, and thus firm specific. thus firm specific. Firm is a Firm is a repository of knowledge”repository of knowledge”

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Knowledge in Management Theories Knowledge in Management Theories ((Peter Drucker (1960 1993))Peter Drucker (1960 1993))

Knowledge in Management Theories Knowledge in Management Theories ((Peter Drucker (1960 1993))Peter Drucker (1960 1993))

The Manufacturing-based Industrial The Manufacturing-based Industrial society evolved into a service society evolved into a service society, and into society, and into information society information society based on knowledge work. based on knowledge work. Knowledge society where the basic Knowledge society where the basic economic resource is knowledge and economic resource is knowledge and where knowledge workers play the where knowledge workers play the central role. central role.

The Manufacturing-based Industrial The Manufacturing-based Industrial society evolved into a service society evolved into a service society, and into society, and into information society information society based on knowledge work. based on knowledge work. Knowledge society where the basic Knowledge society where the basic economic resource is knowledge and economic resource is knowledge and where knowledge workers play the where knowledge workers play the central role. central role.

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Knowledge in Management Knowledge in Management Theories (Theories (Alvin Toffler Alvin Toffler

(1990))(1990))

Knowledge in Management Knowledge in Management Theories (Theories (Alvin Toffler Alvin Toffler

(1990))(1990)) ““Knowledge is the source of the Knowledge is the source of the

highest quality power ... the highest quality power ... the ultimate replacement of other ultimate replacement of other resources.”resources.”

““Knowledge is the source of the Knowledge is the source of the highest quality power ... the highest quality power ... the ultimate replacement of other ultimate replacement of other resources.”resources.”

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Endogenous Technological Endogenous Technological Change Change (Paul Romer 1990)(Paul Romer 1990)


►Human Capital = cumulative Human Capital = cumulative years of formal education + on-years of formal education + on-the-job trainingthe-job training

►Human Capital + Stock of Human Capital + Stock of Knowledge = New KnowledgeKnowledge = New Knowledge

►New knowledge translated to New knowledge translated to goods with practical value goods with practical value (technological change)(technological change)

►Human Capital = cumulative Human Capital = cumulative years of formal education + on-years of formal education + on-the-job trainingthe-job training

►Human Capital + Stock of Human Capital + Stock of Knowledge = New KnowledgeKnowledge = New Knowledge

►New knowledge translated to New knowledge translated to goods with practical value goods with practical value (technological change)(technological change)

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Profit maximizing agents invest in creation of new Profit maximizing agents invest in creation of new knowledge for return on investments at price of new good knowledge for return on investments at price of new good greater than marginal cost of production.greater than marginal cost of production.

• Economy with larger total stock of human capital will Economy with larger total stock of human capital will experience faster growth, not larger population or labour experience faster growth, not larger population or labour force.force.

• Market incentives drive technological change. Larger Market incentives drive technological change. Larger markets induce more research and faster growth. markets induce more research and faster growth.

• Free international trade and integration into world Free international trade and integration into world markets will increase economic growth.markets will increase economic growth.

• Research projects exchange current costs for future Research projects exchange current costs for future benefits – rate of technological change is sensitive to rate benefits – rate of technological change is sensitive to rate of interest. of interest.

• Policy for direct subsidy required for accumulation of total Policy for direct subsidy required for accumulation of total human capital.human capital.

Profit maximizing agents invest in creation of new Profit maximizing agents invest in creation of new knowledge for return on investments at price of new good knowledge for return on investments at price of new good greater than marginal cost of production.greater than marginal cost of production.

• Economy with larger total stock of human capital will Economy with larger total stock of human capital will experience faster growth, not larger population or labour experience faster growth, not larger population or labour force.force.

• Market incentives drive technological change. Larger Market incentives drive technological change. Larger markets induce more research and faster growth. markets induce more research and faster growth.

• Free international trade and integration into world Free international trade and integration into world markets will increase economic growth.markets will increase economic growth.

• Research projects exchange current costs for future Research projects exchange current costs for future benefits – rate of technological change is sensitive to rate benefits – rate of technological change is sensitive to rate of interest. of interest.

• Policy for direct subsidy required for accumulation of total Policy for direct subsidy required for accumulation of total human capital.human capital.

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Definition of Innovation : Definition of Innovation : Joseph SchumpeterJoseph Schumpeter

Definition of Innovation : Definition of Innovation : Joseph SchumpeterJoseph Schumpeter

1.1. The introduction of a good (product) The introduction of a good (product) which is new to consumers, or one of which is new to consumers, or one of higher quality than was available in higher quality than was available in the past;the past;

2.2. Methods of production, which are Methods of production, which are new to a particular branch of new to a particular branch of industry;industry;

3.3. The opening of new markets;The opening of new markets;4.4. The use of new sources of supply;The use of new sources of supply;5.5. New forms of competition, that leads New forms of competition, that leads

to the restructuring of an industry.to the restructuring of an industry.The Theory of Economic DevelopmentThe Theory of Economic Development (1934) (1934)

1.1. The introduction of a good (product) The introduction of a good (product) which is new to consumers, or one of which is new to consumers, or one of higher quality than was available in higher quality than was available in the past;the past;

2.2. Methods of production, which are Methods of production, which are new to a particular branch of new to a particular branch of industry;industry;

3.3. The opening of new markets;The opening of new markets;4.4. The use of new sources of supply;The use of new sources of supply;5.5. New forms of competition, that leads New forms of competition, that leads

to the restructuring of an industry.to the restructuring of an industry.The Theory of Economic DevelopmentThe Theory of Economic Development (1934) (1934)

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Definition of Innovation : Definition of Innovation : Michael PorterMichael Porter

Definition of Innovation : Definition of Innovation : Michael PorterMichael Porter

The Competitive Advantage of NationsThe Competitive Advantage of Nations (1990) (1990)

1.1. “ … “ … to include both improvements in to include both improvements in technologytechnology

2.2. and better methods or ways of doing things. and better methods or ways of doing things.

3.3. It can be manifested in product changes,It can be manifested in product changes,

4.4. process changes, process changes,

5.5. new approaches to marketing, new approaches to marketing,

6.6. new forms of distribution, and new forms of distribution, and

7.7. new concepts of scope … new concepts of scope … [innovation] results as much from [innovation] results as much from

organizational learning as from formal R&D.”organizational learning as from formal R&D.”

The Competitive Advantage of NationsThe Competitive Advantage of Nations (1990) (1990)

1.1. “ … “ … to include both improvements in to include both improvements in technologytechnology

2.2. and better methods or ways of doing things. and better methods or ways of doing things.

3.3. It can be manifested in product changes,It can be manifested in product changes,

4.4. process changes, process changes,

5.5. new approaches to marketing, new approaches to marketing,

6.6. new forms of distribution, and new forms of distribution, and

7.7. new concepts of scope … new concepts of scope … [innovation] results as much from [innovation] results as much from

organizational learning as from formal R&D.”organizational learning as from formal R&D.”

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• Innovation = theoretical conception + Innovation = theoretical conception + technical invention + commercial technical invention + commercial exploitationexploitation

• Innovation management involves change, Innovation management involves change, particularly technological changeparticularly technological change

• Innovation management is not exclusivelyInnovation management is not exclusivelyassociated with products. New ways of associated with products. New ways of doing business in service sector. doing business in service sector. Sometimes this involves product, service Sometimes this involves product, service and process changes. and process changes. The level of change The level of change is an important dimensionis an important dimension

Key Concept : InnovationKey Concept : InnovationKey Concept : InnovationKey Concept : Innovation

SOURCES SOURCES AND AND

DRIVERS OF DRIVERS OF INNOVATIONINNOVATION

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Economic GrowthEconomic GrowthEconomic GrowthEconomic Growth

““Capitalism, Socialism, and Democracy” Joseph A. Capitalism, Socialism, and Democracy” Joseph A. Schumpeter (1950)Schumpeter (1950)

“ “The fundamental impulse that sets and keeps the The fundamental impulse that sets and keeps the capitalist engine in motion comes from the capitalist engine in motion comes from the consumer's goods, the new methods of production consumer's goods, the new methods of production or transportation, the new markets, the new forms or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise of industrial organisation that capitalist enterprise creates.”creates.”

New products, production methods, markets, materials New products, production methods, markets, materials and organisations resulting from new knowledge drive and organisations resulting from new knowledge drive economic growth.economic growth.

““Capitalism, Socialism, and Democracy” Joseph A. Capitalism, Socialism, and Democracy” Joseph A. Schumpeter (1950)Schumpeter (1950)

“ “The fundamental impulse that sets and keeps the The fundamental impulse that sets and keeps the capitalist engine in motion comes from the capitalist engine in motion comes from the consumer's goods, the new methods of production consumer's goods, the new methods of production or transportation, the new markets, the new forms or transportation, the new markets, the new forms of industrial organisation that capitalist enterprise of industrial organisation that capitalist enterprise creates.”creates.”

New products, production methods, markets, materials New products, production methods, markets, materials and organisations resulting from new knowledge drive and organisations resulting from new knowledge drive economic growth.economic growth.

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Economic GrowthEconomic GrowthEconomic GrowthEconomic Growth

““Endogenous Technological Change”, Paul Romer Endogenous Technological Change”, Paul Romer (1990)(1990)

Economy with larger total stock of human Economy with larger total stock of human capital will experience faster growth, not capital will experience faster growth, not larger population or labour force.larger population or labour force.

Market incentives drive technological change. Market incentives drive technological change. Larger markets induce more research and Larger markets induce more research and faster growth. faster growth.

Free international trade and integration into Free international trade and integration into world markets will increase economic growth.world markets will increase economic growth.

““Endogenous Technological Change”, Paul Romer Endogenous Technological Change”, Paul Romer (1990)(1990)

Economy with larger total stock of human Economy with larger total stock of human capital will experience faster growth, not capital will experience faster growth, not larger population or labour force.larger population or labour force.

Market incentives drive technological change. Market incentives drive technological change. Larger markets induce more research and Larger markets induce more research and faster growth. faster growth.

Free international trade and integration into Free international trade and integration into world markets will increase economic growth.world markets will increase economic growth.

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Economic Growth CyclesEconomic Growth Cycles

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Kondratieff WavesKondratieff Waves

K1 (UK, FR, BE);K2+K3(US, DE);K4(+JP,SE);K5(+TW,SK);K6(BRIC?)

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Macroeconomic ImpactsMacroeconomic Impacts

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Case: Case: Repsol YPF & the Repsol YPF & the Argentina's economic crisisArgentina's economic crisis• Argentina recession : peso devalues 45% in Argentina recession : peso devalues 45% in

2001; real salaries -25%;cost of living +75%; 2001; real salaries -25%;cost of living +75%; car sales -50%car sales -50%

• Distributes natural gas to over 9 million Distributes natural gas to over 9 million clients in Spain and Latin Americaclients in Spain and Latin America

• In partnership with VW, introduced the Polo In partnership with VW, introduced the Polo CNG in 2002CNG in 2002

• Now nearly 1 million gas-powered cars on Now nearly 1 million gas-powered cars on the roadsthe roads

• Over 1000 petrol stations offering gas Over 1000 petrol stations offering gas supplied by Repsol YPF in 205 towns and supplied by Repsol YPF in 205 towns and cities in Argentinacities in Argentina

• Average annual saving per year = one Average annual saving per year = one month’s average salarymonth’s average salary

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Diffusion TheoryDiffusion TheoryDiffusion TheoryDiffusion Theory

““Diffusion of Innovations” Everett M.Rogers (1995)Diffusion of Innovations” Everett M.Rogers (1995)

““The main elements in the The main elements in the diffusion of new ideas are an diffusion of new ideas are an innovationinnovation that is that is communicatedcommunicated through certain through certain channelschannels over over timetime among the among the members of a members of a social systemsocial system.”.”

““Diffusion of Innovations” Everett M.Rogers (1995)Diffusion of Innovations” Everett M.Rogers (1995)

““The main elements in the The main elements in the diffusion of new ideas are an diffusion of new ideas are an innovationinnovation that is that is communicatedcommunicated through certain through certain channelschannels over over timetime among the among the members of a members of a social systemsocial system.”.”

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Diffusion : AdoptersDiffusion : Adopters

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Diffusion : Cumulative Diffusion : Cumulative adoptersadopters

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Diffusion : Adopter Diffusion : Adopter CategoriesCategories • Innovators – Innovators –

venturesome (2.5%)venturesome (2.5%)• Early adopters – Early adopters –

Respect/Opinion leaders Respect/Opinion leaders (13.5%)(13.5%)

• Early majority – Early majority – Deliberate/Follower Deliberate/Follower (34%)(34%)

• Late majority - Skeptical Late majority - Skeptical (34%)(34%)

• Laggards – Traditional Laggards – Traditional (16%)(16%)

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Diffusion : FactorsDiffusion : Factors

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Relative advantage – Relative advantage – not twice as fastnot twice as fast

Observability – Observability – advantage not advantage not obviousobvious

Trialability – good but Trialability – good but not compatiblenot compatible

Complexity – similarComplexity – similar

Compatibility – low to Compatibility – low to modus operandimodus operandi

Risk - moderateRisk - moderate

Dvorak

QWERTY

Case : Case : Dvorak vs QWERTYDvorak vs QWERTY

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1.1. Technological advancesTechnological advances2.2. Changing customers & Changing customers &

needsneeds3.3. Intensified competitionIntensified competition4.4. Changing business Changing business

environmentenvironment

Innovation DriversInnovation DriversInnovation DriversInnovation Drivers

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1. Product technology 1. Product technology advantagesadvantages

• Pfizer’s Sildenfil – aka Pfizer’s Sildenfil – aka Viagra: the fastest Viagra: the fastest selling human drugselling human drug

• Gore Associates’ Gore-Gore Associates’ Gore-Tex: the versatile Tex: the versatile polymer polymer polytetrafluoroethylenpolytetrafluoroethylene (PTFE) e (PTFE)

• Dyson’s vacuum Dyson’s vacuum cleaner: cleaner: Revolutionised a very Revolutionised a very stable mature industrystable mature industry

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2. Process technologies2. Process technologies• Enterprise Resource Planning Enterprise Resource Planning

(ERP) business software; (ERP) business software; virtually all large firms have virtually all large firms have installed it. installed it.

• SAP, Oracle, Baan and SAP, Oracle, Baan and PeopleSoft. PeopleSoft.

• SAP has over 20,000 products SAP has over 20,000 products installed worldwide and Oracle installed worldwide and Oracle has installed databases in has installed databases in nearly every one of the world’s nearly every one of the world’s top 500 companies.top 500 companies.

• Moreover, it has changed the Moreover, it has changed the way they work (Gartner, 2002).way they work (Gartner, 2002).

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Case :Case : Metro AG’s ‘Future Metro AG’s ‘Future Store’, GermanyStore’, Germany• World’s fifth largest retailer World’s fifth largest retailer

joined forces with Intel and joined forces with Intel and SAP to build a fully working SAP to build a fully working ‘prototype’ supermarket‘prototype’ supermarket

• RFID ‘smart-tag technology’ RFID ‘smart-tag technology’ used on all productsused on all products

• Shopping trolleys have touch Shopping trolleys have touch screen computers and screen computers and scannersscanners

• Smart tags cost 0.5 Euros each Smart tags cost 0.5 Euros each and are currently too and are currently too expensive for every item in expensive for every item in every supermarketevery supermarket

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Type of innovationType of innovation ExampleExampleProduct innovationProduct innovation The development of a new or improved The development of a new or improved

productproductProcess innovationProcess innovation The development of a new manufacturing The development of a new manufacturing

process such as Pilkington’s float process such as Pilkington’s float glass glass processprocessOrganisational innovationOrganisational innovation A new venture division, a new internal A new venture division, a new internal

communication system; communication system; Management innovationManagement innovation TQM (total quality management) systems, TQM (total quality management) systems,

BPR (business process re-BPR (business process re-engineering); engineering); introduction of SAPR3introduction of SAPR3Production innovationsProduction innovations Quality circles, JIT manufacturing system, Quality circles, JIT manufacturing system,

new production planning software, new production planning software, e.g. MRP e.g. MRP II, new inspection systemII, new inspection systemCommercial/marketing innovationsCommercial/marketing innovationsNew financing arrangements, new sales New financing arrangements, new sales

approach, e.g. direct marketingapproach, e.g. direct marketingService innovationsService innovations eBay; Internet banking, etc.eBay; Internet banking, etc.

Typology of innovationsTypology of innovations

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Three key schools of Three key schools of thoughtthought

1.1. Market-based view of innovationMarket-based view of innovation : :market conditions provide the context which market conditions provide the context which facilitate or constrain the extent of firm innovation facilitate or constrain the extent of firm innovation activity (Slater & Narver, 1994; Porter, 1980, 1985).activity (Slater & Narver, 1994; Porter, 1980, 1985).

2.2. Resource-based view of the firmResource-based view of the firm : : a firm’s own resources provide a much more a firm’s own resources provide a much more stable context in which to develop its innovation stable context in which to develop its innovation activity, and to shape its markets in accordance to activity, and to shape its markets in accordance to its own view (its own view (Tidd et al., 2001; Shavinina, L.V. (ed.) Tidd et al., 2001; Shavinina, L.V. (ed.) (2003); Patel, P. and Pavitt, K. 2000)(2003); Patel, P. and Pavitt, K. 2000)..

3.3. SerendipitySerendipityInnovation is all due to luck and good fortuneInnovation is all due to luck and good fortune

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Models of innovationModels of innovation

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Research anddevelopment

Manufacturing Marketing User

Technology push

Research anddevelopment

ManufacturingMarketing User

Market pull

Linear models of Linear models of innovation managementinnovation management

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Manufacturing

MarketingResearch and development

Coupling model of Coupling model of innovation managementinnovation management

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Science andScience and

technology basetechnology base

Needs ofNeeds of

the marketthe marketdevelopmentsdevelopments

TechnologicalTechnological

Creation of new knowledgeCreation of new knowledge

dominated by universities and dominated by universities and

large science-based organisationslarge science-based organisations

Technology development-Technology development-

dominated by organisationsdominated by organisationsthe consumption of productsthe consumption of products

Consumers express theirConsumers express their

needs and wants throughneeds and wants through

Conceptual frameworkConceptual framework

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EXTERNAL INPUTS:EXTERNAL INPUTS:societal needs;societal needs;competitors;competitors;supplier partnerships;supplier partnerships;distributors;distributors;customers;customers;strategic alliances.strategic alliances.

EXTERNAL INPUTS:EXTERNAL INPUTS:scientific and technological scientific and technological development;development;competitors;competitors;suppliers;suppliers;customers;customers;university departments.university departments.

Organisation and Organisation and business strategy business strategy

Mar

ketin

g

Mar

ketin

g

EXTERNAL INPUTS:EXTERNAL INPUTS:macro factorsmacro factorsROIROIcosts;costs;competition.competition.

Organisation’s Organisation’s knowledge base knowledge base

accumulates accumulates knowledgeknowledge

overover timetime

Research and technology

Research and technology

Innovation management Innovation management frameworkframework

New productsNew productsSource: Trott, 2005

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Innovative firmInnovative firm Explanation for innovative capabilityExplanation for innovative capability

Apple Apple Innovative chief executiveInnovative chief executive

GoogleGoogle Scientific freedom for employeesScientific freedom for employees

SamsungSamsung Speed of product developmentSpeed of product development

Procter & GambleProcter & Gamble Utilisation of external sources of technologyUtilisation of external sources of technology

IBMIBM Share patents with collaboratorsShare patents with collaborators

BMWBMW DesignDesign

StarbucksStarbucks In-depth understanding of customers and their culturesIn-depth understanding of customers and their cultures

ToyotaToyota Close co-operation with suppliersClose co-operation with suppliers

Innovative capabilityInnovative capability

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Case : Case : GilletteGillette• Gillette ‘Mach 3’ razor is a first-to market productGillette ‘Mach 3’ razor is a first-to market product• Developed at a very high costDeveloped at a very high cost• A UK supermarket chain was quickly able to A UK supermarket chain was quickly able to

produce a good copy at a fraction of the original produce a good copy at a fraction of the original costcost

• Gillette have been more dependent therefore on Gillette have been more dependent therefore on expensive television advertising to protect sales of expensive television advertising to protect sales of their producttheir product

• When products are easy to copy, competitors can When products are easy to copy, competitors can ‘leapfrog’ original features and Wilkinson Sword ‘leapfrog’ original features and Wilkinson Sword Company have now introduced a 4 blade razorCompany have now introduced a 4 blade razor

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• Tetley is a market leader and the originator of the Tetley is a market leader and the originator of the round teabaground teabag

• Advertising was based around a better cup of tea Advertising was based around a better cup of tea that would result from bags where the tea could that would result from bags where the tea could circulate bettercirculate better

• Knew that competitors would try and copyKnew that competitors would try and copy• Hired consultants to develop a new Hired consultants to develop a new

manufacturing line for round teabagsmanufacturing line for round teabags• When new product was introduced competitors When new product was introduced competitors

were unable to obtain similar manufacturing were unable to obtain similar manufacturing equipment and Tetley maintained its leadequipment and Tetley maintained its lead

Case : Case : Tetley’s TeabagsTetley’s Teabags

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Case :Case : Singapore Airlines Singapore Airlines• Voted world’s best airline in Voted world’s best airline in

surveys by travel magazinessurveys by travel magazines• First-to-market strategy for many First-to-market strategy for many

yearsyears• More modern aircraft offering:More modern aircraft offering:– larger than average seatinglarger than average seating– first in-flight phones and faxesfirst in-flight phones and faxes– Led in the introduction of Led in the introduction of

electronic ticketselectronic tickets– Flexible for flight confirmations Flexible for flight confirmations

by phone, fax or emailby phone, fax or email• Staff receive longer and more Staff receive longer and more

detailed training detailed training – Visit senior citizens’ homesVisit senior citizens’ homes

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• How can partnerships and alliances help a How can partnerships and alliances help a company in the service sector achieve its company in the service sector achieve its innovation strategy?innovation strategy?

• How can service and product strategies of How can service and product strategies of different companies be aligned to target different companies be aligned to target specific customers segments?specific customers segments?

• How can a service provider make it harder for How can a service provider make it harder for competitors to copy innovations?competitors to copy innovations?

Case Study: NTT Case Study: NTT DoCoMoDoCoMo

54

PlatformPlatformVendorsVendors

ContentContentProvidersProviders

HandsetHandsetVendorsVendors

NTTNTTDoCoMoDoCoMo

Inter-OperabilityInter-Operability Inter-OperabilityInter-Operability

Co-marketingCo-marketing Co-marketingCo-marketing

Business Business OpportunityOpportunity

Portal Portal FunctionalityFunctionality

ContentContentHandsetsHandsets

Volume Volume OpportunityOpportunity

Revenue Revenue CollectionCollection

Content / Handset IntegrationContent / Handset Integration

i-modeCollaborationConceptv2.ppt

DoCoMo i-Mode DoCoMo i-Mode CollaborationCollaboration

55

Organisational Knowledge Organisational Knowledge CreationCreation

Organisational Knowledge Organisational Knowledge CreationCreation

““The Knowledge-Creating Company” The Knowledge-Creating Company” Nonaka,I. & Takeuchi, H. (1995)Nonaka,I. & Takeuchi, H. (1995)

““Organizational knowledge creation is Organizational knowledge creation is the key to the distinctive ways that the key to the distinctive ways that Japanese companies innovate.”Japanese companies innovate.”Organizational knowledge creation: Organizational knowledge creation: “The capability to create new “The capability to create new knowledge, disseminate it throughout knowledge, disseminate it throughout the organization, and embody it in the organization, and embody it in products, services, and systems.”products, services, and systems.”

““The Knowledge-Creating Company” The Knowledge-Creating Company” Nonaka,I. & Takeuchi, H. (1995)Nonaka,I. & Takeuchi, H. (1995)

““Organizational knowledge creation is Organizational knowledge creation is the key to the distinctive ways that the key to the distinctive ways that Japanese companies innovate.”Japanese companies innovate.”Organizational knowledge creation: Organizational knowledge creation: “The capability to create new “The capability to create new knowledge, disseminate it throughout knowledge, disseminate it throughout the organization, and embody it in the organization, and embody it in products, services, and systems.”products, services, and systems.”

Nonaka & Takeuchi Nonaka & Takeuchi Model for Model for Knowledge CreationKnowledge Creation

Case : NECCase : NEC

Case : KaoCase : Kao

MANAGING MANAGING INNOVATION INNOVATION

AND AND INTELLECTUAL INTELLECTUAL PROPERTYPROPERTY

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Profiting from innovationProfiting from innovation

• For an innovation to be profitable:For an innovation to be profitable:– The technology underlying the product The technology underlying the product

must workmust work– The product must create value for the The product must create value for the

customer/consumercustomer/consumer– The innovator must be able to The innovator must be able to

appropriate (capture) enough of the value appropriate (capture) enough of the value to make a profitto make a profit• Value can be lost to competitors, Value can be lost to competitors,

buyers, suppliers, etc.buyers, suppliers, etc. (Winter, 2000)(Winter, 2000)

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Mechanisms of Mechanisms of appropriabilityappropriability• SecrecySecrecy– Trade secretsTrade secrets

• Legally protected intellectual assets are Legally protected intellectual assets are termed intellectual property (IP)termed intellectual property (IP)

• Control of complementary assetsControl of complementary assets– Other assets such as distribution, service Other assets such as distribution, service

capability, customer/supplier relationships, capability, customer/supplier relationships, complementary productscomplementary products

• Lead timeLead time– First-mover advantageFirst-mover advantage

(Winter, 2000)

The Importance of The Importance of Intellectual PropertyIntellectual Property

Intellectual PropertyIntellectual Property Is any product of human intellect that is intangible Is any product of human intellect that is intangible

but has value in the marketplace.but has value in the marketplace. It is called “intellectual” property because it is the It is called “intellectual” property because it is the

product of human imagination, creativity, and product of human imagination, creativity, and inventiveness.inventiveness.

ImportanceImportance Traditionally, businesses have thought of their Traditionally, businesses have thought of their

physical assets, such as land, buildings, and physical assets, such as land, buildings, and equipment as the most important.equipment as the most important.

Increasingly, however, a company’s intellectual Increasingly, however, a company’s intellectual assets are the most important.assets are the most important.

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Determining What Intellectual Determining What Intellectual Property to ProtectProperty to Protect

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Criteria 1Criteria 1 Criteria 2Criteria 2Determine whether Determine whether

the intellectual the intellectual property in property in

question is directly question is directly related to the related to the

firm’s competitive firm’s competitive advantageadvantage.

Decide whether Decide whether the intellectual the intellectual

property in property in question has question has value in the value in the

marketplace. marketplace.

Common Mistakes Firms Make in Common Mistakes Firms Make in Regard to Protecting Their Intellectual Regard to Protecting Their Intellectual PropertyProperty

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Not properly identifyingNot properly identifyingall of theirall of their

intellectual property.intellectual property.

Not legally protecting theNot legally protecting theintellectual propertyintellectual property

that needs that needs protectingprotecting..

Not fully recognizing Not fully recognizing the value of theirthe value of their

intellectual property.intellectual property.

Not using theirNot using theirintellectual property asintellectual property as

part of their overallpart of their overallplan for success.plan for success.

The Four Key Forms of The Four Key Forms of Intellectual PropertyIntellectual Property

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PatentsPatents

CopyrightsCopyrights

TrademarksTrademarks

Trade SecretsTrade Secrets

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Types of intellectual Types of intellectual propertyproperty

Intellectual propertyIntellectual property Key featuresKey features

PatentPatent

Offers a 20-year monopoly; for new products or Offers a 20-year monopoly; for new products or manufacturing processes, or improvements to an manufacturing processes, or improvements to an existing product or process, which was not existing product or process, which was not previously knownpreviously known

CopyrightCopyrightProvides exclusive rights to creative individuals forProvides exclusive rights to creative individuals forthe protection of their literary or artistic productionsthe protection of their literary or artistic productions

Registered designRegistered designRegistration of the outward appearance of an Registration of the outward appearance of an article; provides exclusive rights for up to 25 yearsarticle; provides exclusive rights for up to 25 years

Registered trademarkRegistered trademarkA distinctive name, mark or symbol identified A distinctive name, mark or symbol identified with a company’s productswith a company’s products

FIGURE 2.4 Patent Applications and Patents Issued

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FIGURE 2.6 Trademark Applications and Trademarks and Renewals Issued

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1.Trade secrets1.Trade secrets• Often applied to ways of working, price costings Often applied to ways of working, price costings

or business strategiesor business strategies• Also applied to products (e.g. Coca Cola)Also applied to products (e.g. Coca Cola)• Legal definition unclearLegal definition unclear• Maintain secrecy during product developmentMaintain secrecy during product development

– Risk of information leakage?Risk of information leakage?– Inhibits internal knowledge transfer?Inhibits internal knowledge transfer?– Limits inter-company collaboration?Limits inter-company collaboration?

• Difficult to maintain once marketedDifficult to maintain once marketed– Reverse-engineering by competitors?Reverse-engineering by competitors?

• No protection against independent invention by No protection against independent invention by othersothers

Trade SecretsTrade Secrets Trade SecretsTrade Secrets

A trade secret is any formula, pattern, physical A trade secret is any formula, pattern, physical device, idea, process, or other information that device, idea, process, or other information that provides the owner of the information with a provides the owner of the information with a competitive advantage in the marketplace.competitive advantage in the marketplace.

Trade secrets include marketing plans, product Trade secrets include marketing plans, product formulas, financial forecasts, employee rosters, formulas, financial forecasts, employee rosters, logs of sales calls, and similar types of logs of sales calls, and similar types of proprietary information.proprietary information.

The Federal Economic Espionage Act, passed in The Federal Economic Espionage Act, passed in 1996, criminalizes the theft of trade secrets.1996, criminalizes the theft of trade secrets.

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What Qualifies for Trade Secret What Qualifies for Trade Secret Protection?Protection?1 of 21 of 2

Trade Secret ProtectionTrade Secret Protection Not all information qualifies for trade Not all information qualifies for trade

secret protection.secret protection. In general, information that is know to In general, information that is know to

the public or that competitors can the public or that competitors can discover through legal means doesn’t discover through legal means doesn’t qualify for trade secret protection.qualify for trade secret protection.

Companies protect trade secrets Companies protect trade secrets through physical measures and written through physical measures and written documents.documents.

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What Qualifies for Trade Secret What Qualifies for Trade Secret Protection?Protection?2 of 22 of 2

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The strongest case for trade secret protection is The strongest case for trade secret protection is information that is characterized by the following. information that is characterized by the following.

• Is not known outside the company.Is not known outside the company.• Is known only inside the company on a “need-to-know” Is known only inside the company on a “need-to-know” basis.basis.• Is safeguarded by stringent efforts to keep the information Is safeguarded by stringent efforts to keep the information confidential.confidential.• Is valuable and provides the company a competitive Is valuable and provides the company a competitive advantageadvantage• Was developed at great cost, time, and effort.Was developed at great cost, time, and effort.• Cannot be easily duplicated, reverse engineered, or Cannot be easily duplicated, reverse engineered, or discovered.discovered.

Physical Measures for Protecting Physical Measures for Protecting Trade SecretsTrade Secrets

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Restricting access Labeling documents

Password protecting confidential computer

files

Maintaining logbooksfor visitors

Maintaining logbooks foraccess to sensitive

material

Maintaining adequate overall security

measures

74

““The secret to one of the world's most famous brands lies deep The secret to one of the world's most famous brands lies deep in a bank vault somewhere in Georgia, US. Its exact location is in a bank vault somewhere in Georgia, US. Its exact location is reportedly known only to between two and four Coca-Cola reportedly known only to between two and four Coca-Cola executives. executives. It is rumoured that measures are employed to protect the chosenIt is rumoured that measures are employed to protect the chosenfew – the executives never travel together, and must approve afew – the executives never travel together, and must approve asuccessor should one of them die. successor should one of them die. Outlets which make the drink are simply supplied with syrupsOutlets which make the drink are simply supplied with syrupsand other ingredients from Coca-Cola – but not the original and other ingredients from Coca-Cola – but not the original recipe. recipe. People have revealed what they claim to be the official recipePeople have revealed what they claim to be the official recipeafter analysing the drink, but Coca-Cola remains tight-lipped.”after analysing the drink, but Coca-Cola remains tight-lipped.”

No sign of the recipe on the can!

Source: Tom Geoghegan, ‘What we still don’t know’, bbc.co.uk/1/hi/business 2nd June 2005

Trade secretsTrade secrets

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2.Copyright 2.Copyright ©©• Applies to:Applies to:– Original literary, dramatic, musical and artistic Original literary, dramatic, musical and artistic

works (70 years after author’s death)works (70 years after author’s death)– Sound recordings, films, broadcasts and cable Sound recordings, films, broadcasts and cable

programmes (50 years post publication)programmes (50 years post publication)– Typographical arrangements or layout of a Typographical arrangements or layout of a

published edition (50 years post publication)published edition (50 years post publication)• Automatic protectionAutomatic protection• Cannot copyright ideasCannot copyright ideas– Must be in tangible form (e.g. written)Must be in tangible form (e.g. written)– Copyright applies to the presentation of the Copyright applies to the presentation of the

idea.idea.

Protecting Your IdeasProtecting Your Ideas

CopyrightCopyright – an exclusive right that – an exclusive right that protects the creators of original protects the creators of original works of authorship such as literary, works of authorship such as literary, dramatic, musical, and artistic dramatic, musical, and artistic works. works.

Copyrighted material is denoted by Copyrighted material is denoted by the symbol the symbol ©. ©.

2 - 76

CopyrightsCopyrights

CopyrightsCopyrights A copyright is a form of intellectual property A copyright is a form of intellectual property

protection that grants to the owner of a work protection that grants to the owner of a work of authorship the legal right to determine of authorship the legal right to determine how the work is used and to obtain the how the work is used and to obtain the economic benefits from the work.economic benefits from the work.

A work does not have to have artistic merit A work does not have to have artistic merit to be eligible for copyright protection.to be eligible for copyright protection. As a result, things such as operating manuals and As a result, things such as operating manuals and

sales brochures are eligible for copyright sales brochures are eligible for copyright protection.protection.

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What is Protected By a What is Protected By a Copyright?Copyright?

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Literary works Musical compositions

Computer software Dramatic works

Pantomimes andchoreographic works

Pictorial, graphic, andsculptural works

Exclusions From Copyright Exclusions From Copyright ProtectionProtection The Idea-Expression DichotomyThe Idea-Expression Dichotomy

The main exclusion is that copyright laws cannot The main exclusion is that copyright laws cannot protect ideas.protect ideas. For example, an entrepreneur may have the idea to For example, an entrepreneur may have the idea to

open a soccer-themed restaurant. The idea itself is not open a soccer-themed restaurant. The idea itself is not eligible for copyright protection. However, if the eligible for copyright protection. However, if the entrepreneur writes down specifically what his or her entrepreneur writes down specifically what his or her soccer-themed restaurant will look like and how it will soccer-themed restaurant will look like and how it will operate, that description is copyrightable.operate, that description is copyrightable.

The legal principle describing this concept is called the The legal principle describing this concept is called the idea-expression dichotomy. idea-expression dichotomy.

An idea is not copyrightable, but the specific An idea is not copyrightable, but the specific expression of an idea is.expression of an idea is.

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Obtaining a CopyrightObtaining a Copyright

How to Obtain a CopyrightHow to Obtain a Copyright Copyright law protects any work of authorship Copyright law protects any work of authorship

the moment it assumes a tangible form. the moment it assumes a tangible form. Technically, it is not necessary to provide a Technically, it is not necessary to provide a

copyright notice or register work with the U.S. copyright notice or register work with the U.S. Copyright Office.Copyright Office.

The following steps can be taken, however, to The following steps can be taken, however, to enhance copyright protection.enhance copyright protection. Copyright protection can be enhanced by attaching the Copyright protection can be enhanced by attaching the

copyright notice, or “copyright bug” to something.copyright notice, or “copyright bug” to something. Further protection can be obtained by registering the Further protection can be obtained by registering the

work with the U.S. Copyright Office.work with the U.S. Copyright Office.12-80

Copyright InfringementCopyright Infringement1 of 21 of 2 Copyright InfringementCopyright Infringement

Copyright infringement occurs when one Copyright infringement occurs when one work derives from another or is an exact work derives from another or is an exact copy or shows substantial similarity to copy or shows substantial similarity to the original work.the original work.

To prove infringement, a copyright To prove infringement, a copyright owner is required to show that the alleged owner is required to show that the alleged infringer had prior access to the infringer had prior access to the copyrighted work and that the work is copyrighted work and that the work is substantially similar to the owner’s.substantially similar to the owner’s.

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Copyright InfringementCopyright Infringement2 of 22 of 2

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• The illegal downloading The illegal downloading of music is an example of music is an example of copyright of copyright infringement.infringement.• Copyright infringement Copyright infringement costs the owners of costs the owners of copyrighted material an copyrighted material an estimated $20billion per estimated $20billion per year in the U.S. alone. year in the U.S. alone.

83

Case : CopyrightCase : Copyright"Dan Brown copied from The Holy Blood and the Holy "Dan Brown copied from The Holy Blood and the Holy Grail and therefore the publication of the result by the Grail and therefore the publication of the result by the defendant is in infringement of the copyright of my client defendant is in infringement of the copyright of my client in the United Kingdom." in the United Kingdom." "The authors' historical conjecture has spawned many "The authors' historical conjecture has spawned many other books that developed aspects of this conjecture in other books that developed aspects of this conjecture in a variety of directions. But none has lifted the central a variety of directions. But none has lifted the central theme of the book." theme of the book."

Source: Lawyers for Baigent & Leigh, February 2006

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3. Registered design• Intended for designs with aesthetic appeal– Toys, electrical appliances, packaging, etc.

• New designs:– Not published in the UK– Materially different appeal to the eye.

• Outward appearance of an article– Actual shape, configuration, pattern, etc.

• Maximum of 25 years– Exclusive rights for initial five years, renewable for

up to five five-year periods• Similar in operation to the patent system

85

Example : Registered Example : Registered designdesign

86

4. Registered trademark 4. Registered trademark ®®• Distinctive names, marks and symbols Distinctive names, marks and symbols

identifyingidentifyinga company’s productsa company’s products

• Must be:Must be:– Distinctive in itselfDistinctive in itself– Non-deceptiveNon-deceptive– Not confusing.Not confusing.

• International registrationInternational registration• Many brands are registered trademarksMany brands are registered trademarks• LicensingLicensing

Protecting Your IdeasProtecting Your Ideas TrademarkTrademark – any distinctive word, – any distinctive word,

symbol, design, name, logo, slogan, symbol, design, name, logo, slogan, or trade dress a company uses to or trade dress a company uses to identify the origin of a product or to identify the origin of a product or to distinguish it from other goods on the distinguish it from other goods on the market. market.

ServicemarkServicemark – the same as a – the same as a trademark except that it identifies the trademark except that it identifies the source of a service rather than a source of a service rather than a product. product. 2 - 87

TrademarksTrademarks TrademarkTrademark

A trademark is any word, name, symbol, A trademark is any word, name, symbol, or device used to identify the source or or device used to identify the source or origin of products or services and to origin of products or services and to distinguish those product or services from distinguish those product or services from others.others.

Trademarks also provide consumers with Trademarks also provide consumers with useful information.useful information. For example, consumers know what to expect For example, consumers know what to expect

when they see a Macy’s store.when they see a Macy’s store. Think how confusing it would be if any retail Think how confusing it would be if any retail

store could use the name Macy’s.store could use the name Macy’s.

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Types of TrademarksTypes of Trademarks1 of 21 of 2

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TypeType Types of Marks CoveredTypes of Marks Covered

TrademarkTrademark

DurationDuration

Renewable every Renewable every 10 years, as long 10 years, as long

as the mark as the mark remains in use.remains in use.

Service Service markmark

Renewable every Renewable every 10 years, as long 10 years, as long

as the mark as the mark remains in use.remains in use.

Any word, name, symbol, or device Any word, name, symbol, or device used to identify and distinguish one used to identify and distinguish one company’s goods from another. company’s goods from another.

Examples: Examples: Apple, d.light, Dry Soda, Apple, d.light, Dry Soda, ModCloth, and Zeo.ModCloth, and Zeo.

Similar to trademarks; are used to Similar to trademarks; are used to identify the services or intangible identify the services or intangible activities of a business, rather than a activities of a business, rather than a business’s physical products.business’s physical products.

Examples: Examples: 1-800-FLOWERS, 1-800-FLOWERS, Amazon.com, Mint.com, and Zipcar.Amazon.com, Mint.com, and Zipcar.

Types of TrademarksTypes of Trademarks2 of 22 of 2

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Type Types of Marks Covered

Collective mark

Duration

Renewable every 10 years, as long

as the mark remains in use.

Certification mark

Renewable every 10 years, as long

as the mark remains in use.

Trademarks or service marks used by the members of a cooperative, association, or other collective group.

Examples: Rotary International and International Franchise Association

Marks, words, names, symbols, or devices used by a person other than the owner to certify a particular quality about a good or service.

Examples: 100% Napa Valley and Underwriters Laboratories

What is Protected Under Trademark What is Protected Under Trademark LawLaw1 of 21 of 2

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ItemItem Example(s)Example(s)Words

Numbers and letters

Designs and logos

Sounds

YouTern, PledgeMusic, GiftZip

3M, MSNBA, 1-800-FLOWERS

Nike swoosh logo

MGM’s lion’s roar

What is Protected Under Trademark What is Protected Under Trademark LawLaw2 of 22 of 2

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ItemItem ExampleExampleFragrances

Shapes

Colours

Trade dress

Stationery treated with a special fragrance

Unique shape of the Apple iPhone

Nexium—the “purple pill”

The layout and décor of a restaurant

Exclusions From Trademark Exclusions From Trademark ProtectionProtection

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ItemItem ExampleExampleImmoral or

scandalous matter

Deceptive matter

Descriptive marks

Surnames

Profane words

Labeling oranges “Fresh Florida Oranges” that aren’t grown in Florida

Phrases like “golf ball” and “fried chicken” are descriptive and can’t be trademarked

Common surnames like “Anderson” or “Smith” can’t be trademarked

The Process of Obtaining a The Process of Obtaining a TrademarkTrademark

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95

Case : TrademarksCase : Trademarks

Orange colour clash set for courtOrange colour clash set for court

A row over the colour orange could hit the courts after mobile phone A row over the colour orange could hit the courts after mobile phone giant Orange launched action against a new mobile venture from giant Orange launched action against a new mobile venture from Easyjet's founder. Easyjet's founder. Orange said it was starting proceedings against the Easymobile service Orange said it was starting proceedings against the Easymobile service for trademark infringement. for trademark infringement. Easymobile uses Easygroup's orange branding. Founder Stelios Haji-Easymobile uses Easygroup's orange branding. Founder Stelios Haji-Ioannou has pledged to contest the action. Ioannou has pledged to contest the action. The move comes after the two sides failed to come to an agreement after The move comes after the two sides failed to come to an agreement after six months of talks. six months of talks. Orange claims the new low-cost mobile service has infringed its rights Orange claims the new low-cost mobile service has infringed its rights regarding the use of the colour orange and could confuseregarding the use of the colour orange and could confusecustomers – known as "passing off".customers – known as "passing off".

Source: bbc.co.uk 20th February 2005

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5. Patents5. Patents• 20-year monopoly to make, use or sell20-year monopoly to make, use or sell• Legal right to prevent others using the Legal right to prevent others using the

inventioninvention• Public disclosure of details of the inventionPublic disclosure of details of the invention• NoveltyNovelty

– Must not be part of ‘state of the art’Must not be part of ‘state of the art’– Words, publications, anticipationWords, publications, anticipation

• Inventive stepInventive step– Not obvious to a person skilled in the artNot obvious to a person skilled in the art

• Industrial applicationIndustrial application– Machine, product, processMachine, product, process

97

Limitations of patentsLimitations of patents• Annual fees requiredAnnual fees required• National patent protectionNational patent protection• Patent harmonisationPatent harmonisation

– European Patent Convention (EPC)European Patent Convention (EPC)– Paris Convention Treaty (PCT) – 114 countriesParis Convention Treaty (PCT) – 114 countries– First-to-file (EU) vs first-to-invent (US)First-to-file (EU) vs first-to-invent (US)

• Legal costs of defenceLegal costs of defence• Limited effectiveness in some industriesLimited effectiveness in some industries

– Patent life vs ‘imitation lag’Patent life vs ‘imitation lag’• Inventing around patentsInventing around patents

Protecting Your IdeasProtecting Your Ideas

PatentPatent – a grant from the Patent – a grant from the Patent and Trademark Office to the and Trademark Office to the inventor of product, giving the inventor of product, giving the exclusive right to make, use, or sell exclusive right to make, use, or sell the invention for 20 years from the the invention for 20 years from the date of filing the patent application. date of filing the patent application.

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PatentsPatents

PatentsPatents A patent is a grant from the federal government A patent is a grant from the federal government

conferring the rights to exclude others from conferring the rights to exclude others from making, selling, or using an invention for the term making, selling, or using an invention for the term of the patent. (See the next slide for a full of the patent. (See the next slide for a full explanation.)explanation.)

Increasing Interest in PatentsIncreasing Interest in Patents There is increasing interest in patents.There is increasing interest in patents.

Since Patent #1 was granted in 1790, the U.S. Patent & Since Patent #1 was granted in 1790, the U.S. Patent & Trademark Office has granted over six million patents.Trademark Office has granted over six million patents.

The patent office is strained. It now takes an average of The patent office is strained. It now takes an average of 35.3 months from the date of first filing to receive a U.S. 35.3 months from the date of first filing to receive a U.S. patent.patent. 12-99

Proper Understanding for Proper Understanding for What a Patent MeansWhat a Patent Means

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A patent does not give its owner the right to make, use, or sell an invention; A patent does not give its owner the right to make, use, or sell an invention; rather, the right granted is only to exclude others from doing so.rather, the right granted is only to exclude others from doing so.

As a result, if an inventor obtains a patent for a new kind of computer chip, As a result, if an inventor obtains a patent for a new kind of computer chip, and the chip would infringe on a prior patent owned by Intel, the inventor and the chip would infringe on a prior patent owned by Intel, the inventor has no right to make, use, or sell the chip.has no right to make, use, or sell the chip.

To do so, the inventor would need to obtain permission from Intel. Intel may To do so, the inventor would need to obtain permission from Intel. Intel may refuse permission, or ask that a licensing fee be paid for the rights to infringe refuse permission, or ask that a licensing fee be paid for the rights to infringe on its patent.on its patent.

While this system may seem odd, it is really the only way the system could While this system may seem odd, it is really the only way the system could work. Many inventions are improvements on existing inventions, and the work. Many inventions are improvements on existing inventions, and the system allows the improvements to be (patented) and sold, but only with the system allows the improvements to be (patented) and sold, but only with the permission of the original inventors, who usually benefit by obtaining permission of the original inventors, who usually benefit by obtaining licensing income in exchange for their consent.licensing income in exchange for their consent.

Growth in Patent Applications in Growth in Patent Applications in the United Statesthe United States

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Three Basic Requirements for Three Basic Requirements for Obtaining a PatentObtaining a Patent

12-102

Types of PatentsTypes of Patents

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TypeType Type of Invention CoveredType of Invention Covered DurationDuration

UtilityUtility

DesignDesign

PlantPlant

20 years from 20 years from the date of the the date of the

original original application.application.





New or useful process, machine, New or useful process, machine, manufacturer, or composition of material manufacturer, or composition of material

or any new and useful improvement or any new and useful improvement thereof.thereof.

Invention of new, original, Invention of new, original, and ornamental design for and ornamental design for manufactured products.manufactured products.

Any new varieties of plants that Any new varieties of plants that can be reproduced asexually.can be reproduced asexually.

Business Method Business Method Patents Patents (Special Utility Patent)(Special Utility Patent)

Business Method PatentBusiness Method Patent A business method patent is a patent that A business method patent is a patent that

protects an invention that is or facilitates a protects an invention that is or facilitates a method of doing business.method of doing business.

The most notable business method patents The most notable business method patents that have been awarded:that have been awarded: Amazon.com’s one-click ordering system.Amazon.com’s one-click ordering system. Priceline.com’s “name-your-price” business Priceline.com’s “name-your-price” business

model.model. Netflix’s method for allowing customers to set up Netflix’s method for allowing customers to set up

a rental list of movies to be mailed to them.a rental list of movies to be mailed to them.

The Six Steps to a PatentThe Six Steps to a Patent

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1. Establish the invention’s novelty

2. Document the device

3. Search existing patents

5. Complete the patent application

6. File the patent application

4. Study search results

The Process of Obtaining a The Process of Obtaining a PatentPatent

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Patent InfringementPatent Infringement

Patent InfringementPatent Infringement Takes place when one party engages in Takes place when one party engages in

the unauthorized use of another the unauthorized use of another party’s patent.party’s patent.

The tough part (particularly from a The tough part (particularly from a small entrepreneurial firm’s point of small entrepreneurial firm’s point of view) is that patent infringement cases view) is that patent infringement cases are costly to litigate.are costly to litigate. A typical patent infringement case costs A typical patent infringement case costs

each side at least $500,000 to litigate.each side at least $500,000 to litigate.

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108

Case :Case : Micro Scooters Micro Scooters

• The urban scooter was smash hit and continues to be popular today. The urban scooter was smash hit and continues to be popular today. • Wim Obouter recognized that when he wanted to go out for a drink or Wim Obouter recognized that when he wanted to go out for a drink or

a meal in the evening, it was often too far to walk but not far enough a meal in the evening, it was often too far to walk but not far enough to warrant getting his bicycle out of the cellar, or to drive. to warrant getting his bicycle out of the cellar, or to drive.

• He found a partner company to fund the tooling and a Japanese retail He found a partner company to fund the tooling and a Japanese retail partner —with an opening order of 20,000 scooters. These sold partner —with an opening order of 20,000 scooters. These sold immediately and the market grew quickly to sales of 75,000 units per immediately and the market grew quickly to sales of 75,000 units per week—almost an instant success.week—almost an instant success.

• ‘‘the product was great but it… [needed] a strong brand to maintain a the product was great but it… [needed] a strong brand to maintain a market leadership position’.market leadership position’.

• With hindsight, Wim sees two With hindsight, Wim sees two issues with patentsissues with patents: the time required : the time required before cover is achieved and the investment needed to enforce them.before cover is achieved and the investment needed to enforce them.

http://www.micro-scooters.co.uk/index.asp

Conducting an Intellectual Property Conducting an Intellectual Property AuditAudit1 of 21 of 2

Intellectual Property AuditIntellectual Property Audit The first step a firm should take to protect its The first step a firm should take to protect its

intellectual property is to complete an intellectual intellectual property is to complete an intellectual property audit.property audit.

An intellectual property audit is conducted to An intellectual property audit is conducted to determine the intellectual property a firm owns.determine the intellectual property a firm owns.

There are two reasons for conducting an intellectual There are two reasons for conducting an intellectual property audit:property audit: First, it is prudent for a company to periodically determine First, it is prudent for a company to periodically determine

whether its intellectual property is being properly protected.whether its intellectual property is being properly protected. Second, it is important for a firm to remain prepared to Second, it is important for a firm to remain prepared to

justify its valuation in the event of a merger or acquisition. justify its valuation in the event of a merger or acquisition. 12-109

Conducting an Intellectual Conducting an Intellectual Property AuditProperty Audit2 of 22 of 2

The Process of Conducting an The Process of Conducting an Intellectual Property AuditIntellectual Property Audit The first step is to develop an inventory of a The first step is to develop an inventory of a

firm’s existing intellectual property. The firm’s existing intellectual property. The inventory should include the firm’s present inventory should include the firm’s present registrations of patents, trademarks, and registrations of patents, trademarks, and copyrights.copyrights.

The second step is to identify works in The second step is to identify works in progress to ensure that they are being progress to ensure that they are being documented and protected in a systematic, documented and protected in a systematic, orderly manner.orderly manner.

12-110

Protecting Your IdeasProtecting Your IdeasType of Type of

ProtectionProtectionWhat It What It Covers Covers

Time Time RequiredRequired

CostCost

CopyrightCopyright Works of Works of original original authorshipauthorship

About 2 weeksAbout 2 weeks About $35About $35

TrademarkTrademark Logos, names, Logos, names, phrasesphrases

6 – 12 months6 – 12 months $900 - $1,500$900 - $1,500

Design patentDesign patent Look of an Look of an original productoriginal product

Up to 2 yearsUp to 2 years $5,000 - $20,000$5,000 - $20,000

Utility patentUtility patent How an original How an original product worksproduct works

2 – 5 years2 – 5 years $5,000 - $20,000$5,000 - $20,000

Business Business method patentmethod patent

A business A business processprocess

2 – 5 years2 – 5 years $5,000 - $20,000$5,000 - $20,000

2 - 111

Source: Anne Field, Source: Anne Field, ““How to Knock Out Knock Offs,How to Knock Out Knock Offs,”” Business WeekBusiness Week, March 14, 2005., March 14, 2005.

SummarySummary The creative process is a tenant of the The creative process is a tenant of the

entrepreneurial experience. entrepreneurial experience. Success, and even survival itself, requires Success, and even survival itself, requires

entrepreneurs to tap their creativity. entrepreneurs to tap their creativity. The seven steps of the creative process The seven steps of the creative process

transform an idea into a business reality. transform an idea into a business reality. Creativity results in value, and value Creativity results in value, and value

provides a competitive advantage. provides a competitive advantage. Entrepreneurs protect their creative ideas Entrepreneurs protect their creative ideas

with patents, trademarks, service marks, with patents, trademarks, service marks, and copyrights to sustain a competitive and copyrights to sustain a competitive edge. edge.

113

ConclusionConclusion

““Innovation : the successful Innovation : the successful implementation of novel and implementation of novel and appropriate ideas within an appropriate ideas within an

organisation.” 3Morganisation.” 3M

Further ReadingFurther Reading Drucker, P (1994) “Innovation and Entrepreneurship”, Elsevier Drucker, P (1994) “Innovation and Entrepreneurship”, Elsevier Drucker, P (2002) “The Discipline of Innovation”, Harvard Business Review, Drucker, P (2002) “The Discipline of Innovation”, Harvard Business Review,

Aug 2002, Vol 80, p95 Aug 2002, Vol 80, p95 Wickham, P (2001) “Strategic Entrepreneurship”, FT Prentice Hall, 2nd Wickham, P (2001) “Strategic Entrepreneurship”, FT Prentice Hall, 2nd

edition. Ch14 “Entrepreneurial Innovation” edition. Ch14 “Entrepreneurial Innovation” Tidd, Bessant & Pavitt (2009) Tidd, Bessant & Pavitt (2009) “Managing Innovation – integrating “Managing Innovation – integrating

technological, market and organizational change”, Wiley, Chichester, 4th technological, market and organizational change”, Wiley, Chichester, 4th edition edition

Barringer, Bruce R. & Ireland, R. Duane (2011) Barringer, Bruce R. & Ireland, R. Duane (2011) Entrepreneurship-Entrepreneurship-Successfully launching new ventures Successfully launching new ventures 44thth edition, Pearson. edition, Pearson.

Trott,P. (2008). Trott,P. (2008). Innovation management and new product development, (Innovation management and new product development, (44thth edition). FT Prentice Hall.edition). FT Prentice Hall.

Goffin,K. & Mitchell, R. (2005) Goffin,K. & Mitchell, R. (2005) Innovation Management – Strategy and Innovation Management – Strategy and implementation using the pentathlon frameworkimplementation using the pentathlon framework. Palgrave Macmillan. Palgrave Macmillan

Nonaka,I. & Takeuchi, H. (1995). Nonaka,I. & Takeuchi, H. (1995). The Knowledge-Creating CompanyThe Knowledge-Creating Company. Oxford . Oxford University Press.University Press.

Chesbrough, H. (2006). Chesbrough, H. (2006). Open Innovation – The new imperative for creating and Open Innovation – The new imperative for creating and profiting from technology. profiting from technology. Harvard Business School PressHarvard Business School Press

QUESTIONS?