Old Industry New Tricks | The Intellectual Property Strategy makes the difference

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Speaking with manufacturing industry customers is more exciting than ever. The Digital Transformation and Industry 4.0 meanwhile have arrived everywhere. However, the approach and progress vary significantly - especially, when it comes to the Intellectual Property Strategy.

While some companies focus on internal digital end-to-end optimization of their product design- and production processes for shorter time to market, individualized product offerings and cost efficiency, others are taking the digital value directly to market - leveraging their enormous industry process know-how, specialized data insight and their ability to predict or optimize their customer´s value creation.

There is a chicken-egg-interdependency of business- and Intellectual Property strategy. This explains, why IP-strategy discussions without a deep understanding of business makes no sense.
Bowman Heiden – Deputy Director, Center for Intellectual Property, University of Gothenburg

Seeking the core of business transformation in digital technology adoption only is not enough. The Intellectual Property Strategy will likely decide who takes control on the whole value chain and the underlying business model - who sits in the front seat and who must find a place on the backbench.

Even though that patents represent a part of innovation only, they still indicate where the energy is in a respective geography, industry, or even company. The annual reports of patent offices provide some interesting perspectives worth exploring.

The factory of the future will have only two employees, a man, and a dog.  The man will be there to feed the dog.  The dog will be there to keep the man from touching the equipment.
Warren G. Bennis

Let´s have a short excurse into research intense industries like bio-tech or pharma. The use of new developed seeding material or next generation drug is primarily not limited by the physical reproduction but by rights the patent holders reserved to protect their IP. Even, if you don´t like gene modified crop, patenting- or trademarking nature, separating the intellectual contribution from its physical representation may imply revolutionary effects to the business establishment in your industry as well. E.g. the agricultural-technology and licensing exports from the Netherlands meanwhile surpassed their traditional food production exports in value.

Decades ago, the Software Industry emancipated form Hardware Industry by introducing the commercial concept of selling usage rights for software independently from hardware - usage gets monetized while the IP remains in hands of the software vendor. This revolutionary approach explains the disruptive potential software has to traditional, hardware centric business models. Again, it´s about who takes control in a digitized industry to come.

European Patent Office [EPO 2017] - Annual Report 2017

Infographics - International patent, trademark and design filings under the PCT, Madrid and Hague systems (2016)

With the separation of Software from Hardware arriving in automotive industry, a whole set of new proprietary software with respective End User Licensing Agreements (EULA) will be coming down the road. It seems we soon have to familiarize ourselves with  the fact that we can´t own a car entirely anymore - primarily not because we all move into the share economy model but driven by the fact that the car manufacturer will no longer own or control the required software IP. Automotive Industry for years pushed towards external innovation and external labor to reduce capital lockup - Software IP will be a game changer for car vendors who want to keep control on their core business.

This idea is intriguing us because manufacturers need to go beyond selling physical car assets and must discover us drivers as customers - welcome to next generation Customer Relationship Management and the essence of customer intimacy for an old economy!

However, transformation in software industry is going deep as well. What has worked in a traditional productized Sell-To model needs to get complemented by Sell-With and Sell-Through approaches to meet the new customer expectations. Software IP gets embedded in products, cloud-based services become essential part of other products or your current customer may want to join forces with you on innovation. Either way, it´s time to revise value propositions, to reskill the salesforce and to tune the commercial backbone towards new ways of monetization. Digital Transformation, Industry 4.0 and a solid IP Strategy belong together and form the common ground for your business in near future, so let´s prepare for it now.

Good news, the cheese may already have moved on but the opportunity maybe bigger than ever and the driver seat is not decided yet!