In licensing, it’s not where the market is today but where it’s going. Licensing is about spotting where an industry and companies are going, and capitalizing on it with your IP. That’s why licensing is such an ideal strategy. It lets you strike while the iron is hot, and take advantage of market demand for new products or technologies by bigger companies.
Globally large corporations are increasingly licensing-in new technology. But one of their biggest challenges if finding the right type of innovative IP for their markets. One way global companies are addressing this is by forming an innovation cluster.
One example is a German innovative cluster that’s a collaboration between engineering and electrical companies. It’s focused on developing technologies on renewable energy. The cluster pools the resources of larger companies. The idea is to speed up the innovation process by enabling startups and small businesses to focus on their strengths and link them to the cluster of larger corporations, giving them access to their production, R&D and other development resources. These clusters also link with other clusters in different industries, which grows the network of resources available to startups. In return, startups and new technologies get established faster, and larger companies get access to these new technologies through licensing and joint innovation development.
This is an example of the type of opportunities that a small company or startup can take advantage of through licensing. As large companies move into new marketplaces, they don’t have the R&D resources to quickly develop the technologies they need to aggressively build their markets. They look for a startup that’s done all the hard and expensive work of developing the IP and, sometimes, successfully launched it into the market. Licensing the IP gives them instant access to a customer or market. It’s better to license in and use the technology then to allow a new competitor to enter and compete against them.
Another trend to capitalize on is bigger companies looking to fill a gap in their product line to meet existing customer needs. GE announced a licensing agreement to acquire rights to a stem cell technology. This technology is part of an initiative by GE health care to expand its presence in the cell therapy area. GE’s strategy to carry out this goal is to use both direct acquisitions as well as licensing in technologies.
As the innovation cycle shortens, more and more large companies are using licensing and other collaborative relationships to capitalize on new market opportunities. Rather than waiting to build your own market presence, which could take years, licensing gets you into this market faster by partnering with these large companies. They in turn have the money, staff and resources to successfully launch your technology into the market, and turn it into a hundred million dollar business.
IP is an important part of every business today, especially startups. In impacts every part of your business, from sales, to strategic planning, marketing and branding. And in a fast-moving (and competitive) market, such as health care or consumer electronics, where technologies have shorter commercial lifespans, licensing gets your IP into the market in less time, with less risk while generating royalty revenues which are immediate profit.
That’s the power of letting others use your IP through licensing. And that’s one of the biggest reasons why licensing is an important strategy for every startup and operating business in today’s fast-moving marketplace.