An IP savvy business doesn’t look at its intellectual property as a sunk cost. They don’t ignore it and leave it on the shelf. They look at it as an income producing asset, that’s core to their business and leverage it many ways.
The IP savvy business understands that in an intangible economy, competition is about rights to new ideas and innovations, and managing its IP is a core part of its short and long-term strategy.
Many of the most successful companies, including Microsoft, Lucent, IBM, Dell, Dow Chemical, and Gillette and others, are all IP savvy. They recognize that IP and not physical assets are the drivers of shareholder wealth and their competitive advantage.
An IP savvy business makes licensing a core part of its business strategy. Apple’s IPod is a good example. Accessory products are not core to Apple’s business. They license to meet the demand for these accessory products, and benefit from the royalty revenue. Licensing the iPod brand provides great opportunities for IP savvy companies to generate millions in sales revenues, producing all kinds of terrific products to make the iPod more user-friendly and enhance the listening experience.
An IP savvy business doesn’t use licensing as a last-ditch effort when it’s in financial trouble or under intense competitive pressure. When the market for RIM’s Blackberry technology collapsed they turned to licensing to try to salvage it. But by then it was too late as competition from Android and I-Phone dominated the market. One of the most innovative companies in the camera business, Polaroid, went bankrupt twice before they turned to licensing. They managed to salvage the company by licensing out their brand to companies in the digital photography market.
An IP savvy business takes advantage of underused IP to build its own value. In one case, a semiconductor company saw a big opportunity in the patents of a chip manufacturer. They bought the patents for $70 million and generated more than $450 million in licensing revenues.
Many IP savvy businesses grow up using licensing. They understand the incredible potential of licensing and use it to find new IP, acquire the rights for little or no money, then wait to see what develops. In some cases, it transforms their businesses overnight. During my studio days, I saw this first hand licensing two of the most successful kids entertainment franchises in the world. Some of the companies that were early licensees on these properties literally exploded into overnight successes when these properties became big hits at retail.
While an IP that goes from zero to hero is the exception and not the norm, in this fast-moving and rapidly changing marketplace, new opportunities are popping up every day. Trying to build a hundred or two hundred million dollar company is very challenging, and it takes decades to get there. But licensing lets you tap into an existing hundred or two hundred million dollar market, where royalty revenues can amount to a very significant sum.
If you’re not an IP savvy business, you can become one. It starts with an IP Audit to organize your IP assets, confirm their protection, figure out what you’re using, and finding new ways to make money with them. Next is creating a plan to manage and leverage them. Licensing in and out, joint development and cross-licensing are some of the different strategies to consider. If you’re commercializing your IP directly, get an IP valuation. It’s your biggest business asset and, as its value increases, so does your business and shareholder value. If you don’t have someone inside, then invest in retaining an IP expert to help you.
An IP savvy business knows how to link their IP to every aspect of their business strategy – from product development to product design, from raising capital to expanding its business internationally. IP is a sustainable and highly renewable resource that is your greatest competitive advantage – if you know how to manage and use it to get the biggest return at every stage of your business growth.