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Patent Strategy Lesson: Engaging Senior Management in Patent Strategy Discussions - Risk and Diversification

Patent Strategy Lesson: Engaging Senior Management in Patent Strategy Discussions - Risk and Diversification

In the recently published March/April issue of Intellectual Asset Management (IAM) Magazine Peter Kim and I have written an article entitled, “Welcoming ‘the innovator’s dilemma’ to patent committees”. Readers with good memories, or folks who have looked at the home page of this website lately will remember that Peter wrote a guest post related to this topic at the end of July last year. The article for IAM expands on the ideas that Peter started, and adds a significant amount of new material on the composition and functioning of patent committees.

At its core the article is about building impactful patent portfolios, and making certain that the company involved has thought carefully about protecting a range of technologies that will provide continued leverage as the business grows, and industries changes. In particular, the focus is on making certain that the concept of disruptive technology is adequately represented in those plans, and how to ensure that this happens. The traditional stewards of patent portfolio building is the patent committee and Peter has added perspectives on how they function that will be useful for organizations that are just starting their own committees, or ones that are looking to shake things up with an existing one.

I helped with editing, and some general comments on the blog post, but when it came to the article Peter asked if I would be willing to add some additional material as a co-author. One of the things we talked about when he first wrote his post was how to determine the allocation of resources between sustaining technologies and disruptive ones. As we continued to talk through these ideas I suggested that a good analogy might be borrowed from the world of financial investments, where advisors talk about portfolios in terms of risk and diversification. As we continued talking about this idea it began to grow on me as a means of not only deciding how to think about patent strategy, and the building of meaningful portfolios, but as a means of engaging senior management, most of whom have a financial background, in the process of making technology assessment decisions. The following is an excerpt from the article, which introduces some of these ideas:

In the financial world, investors who seek steady, long-term growth use diversification strategies to buffer themselves from momentary turbulence that can take place in individual investment vehicles. They will select diversified asset classes, such as stocks vs. bonds since traditionally when one of these begins to decline it is compensated for with an increase in the other. Diversified financial portfolios also contain a mixture of investments in opposing industries, ones where there is not a correlation between the businesses associated with each. Depending on how risk averse an organization may be they will choose their financial portfolio to deliver an expected return with the least amount of risk.

Investments in technology (and their subsequent protection with patents and other forms of IP) can be managed using similar principles. In this case though, technology investments can be categorized based on their inherent risk and unfamiliarity to the organization. For example:

- Incremental improvements on existing technologies, referred to earlier as sustaining technologies – this can be thought of like a bond, low risk and familiar but not providing for large returns

- Applying sustaining technologies to new markets – similar to a stock investment in a correlated industry where market changes in traditional markets can be balanced by making investments in alternative industries that consumers may also be interested in

- Developing disruptive technologies, either in existing industries or for likely high value markets for the future – similar to a venture fund or angel investment where the earlier the investment is made the larger the opportunity for explosive growth, but with the inherent risks associated with early stage investments

Companies can meet corporate expectations for returns on IP, and determine the right mixture of technology investments, if they consider which combination of these categories they will try to achieve with their research initiatives. Once this strategy is developed it can be employed by both research managers, and participants within the organization’s patent committee to ensure that the resulting patent portfolios are maximized to achieve their stated objectives.

IAM Magazine does not sell individual articles so a subscription will be required to read the full article, but I thought I would provide a teaser of the piece in case people are on the fence about whether they want to subscribe. Feel free to contact me if you are interested in hearing more about risk and diversification as a framework for engaging senior management in patent strategy, portfolio planning, or return-on-investment discussions.

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