You need a business intelligence process, not a technology landscape
Patent landscaping is now all the rage when it comes to IP strategy. However, despite its popularity, it could prove worthless for many rights holders if other aspects of competitive intelligence are overlooked
A wise man once said that language gets in the way of communication. In my experience, the lexicon of the technology landscape or the patent technology landscape can get in the way of making strategic business decisions involving intellectual property and business strategy. That is why I hate the phrase ‘technology landscape’ as applied to patents. This article discusses technology landscapes from a business viewpoint before considering how to design an effective business intelligence process that utilises patent analytics, including technology landscapes.
Traditional technology landscapes
A web search for technology landscape yields a range of results, from an offshore company which will conduct a basic patent search for $1,000 to major consulting firms (eg, Boston Consulting Group or McKinsey) charging six-figure sums to generate fancy static charts of patent data among various categories, which look interesting but generally offer no useful insights.
Law firms also offer technology landscapes, but these tend either to be outsourced to an offshore company or consultancy, or to take a long time to prepare. Law firm associates or agents tend to work on an hourly billing basis to produce a long-form report, which is usually written from a legal perspective and can be difficult to update as the technology area develops.
In my experience, all of these organisations or approaches tend to:
- purchase a subscription to a software tool, often exactly the same software;
- produce a technical or management consulting view that is usually not actionable;
- deliver static reports – by the time they deliver them, the world has changed;
- fail to provide electronic access to the underlying data linked to in the analysis; and
- fail to help you integrate the new knowledge into your business processes.
I know this because in the 1990s I was part of a group doing technology commercialisation, focusing primarily on the Massachusetts Institute of Technology. We looked for solutions that helped us to make strategic business decisions and incorporated a deep understanding of the IP arenas in which we were thinking of starting companies or making investments. We looked, but we found nothing. What we needed first were analyses that were understandable and actionable. Instead, the analyses we typically received were either overly detailed technical and full of legal jargon or too high level to really understand what the issues were. Second, we needed analyses to be delivered quickly so that we could feed them into our overall assessment. Third, they needed to be cost effective. This was related to the speed of delivery. If the costs were high, we would defer the analyses until the end of our other assessment processes, thereby missing synergies in our decision process. Fourth, analyses needed to be easily updated for continual assessment.
I would thus like to explore the idea of technology landscapes from a business-decision perspective by looking at three different scenarios that led executives to ask for a technology landscape. In discussing with these executives what their business objectives were, it became clear that the phrase ‘technology landscape’ means different things to different people. What is similar in each of these cases is that to address their business goals, management did what management do best – developed repeatable processes backed by data and analytics. The problems/scenarios were:
- major operating company – patent monetisation;
- emerging growth company – IP strategy and growth; and
- corporate venture group – deal scouting.
These may be problems that you face; in which case I think that you will find my stories directly useful. If your technology landscape problem is different, I hope these stories will still offer a framework for thinking about your problem. In order to ensure that language does not get in the way of communication, I use the phrase ‘industry study’ in discussing these scenarios.
Case 1: patent monetisation at a major operating company
A multinational (BigCorp) with significant investment in patents, an in-house patent staff and patent software and patent databases needed assistance investigating a business strategy. The company’s internal technology landscape team consisted of a number of PhDs, patent search experts and lawyers. The internal technology landscape team was looking to identify patents within a specific technology area to determine whether a strategy of monetising BigCorp’s existing patent portfolio made sense (ie, it was trying to find companies that might be candidates for licensing or sale of BigCorp’s patents). The internal team had developed a technology landscape with a large number of patents, but had no way to filter out the noise. The manager in charge of this effort was frustrated and felt that he was not receiving actionable answers to his questions.
Do you know your own patent portfolio?
The first set of questions I asked related to BigCorp’s own patent portfolio. It is surprising how often I find companies that do not really understand their own patent portfolio. Why does this matter? If a company is thinking of monetising an existing portfolio then it really needs to know what in that portfolio is important to its current and planned business activities. Useful questions to ask include which patents support which products or services; which patents are strong and which are weak; and which patents are the most valuable (see “How to tell what patents are worth”).
Going through the process of understanding your own patent portfolio causes you to think about the components of value and patent strategy.
Seller – patent monetisation motivations
The next question is: why is BigCorp looking at patent monetisation strategies? Here are some of the typical reasons given from the viewpoint of the rights holder:
- competitor infringement – we think that our competitors are infringing our patents;
- non-competitor infringement – we think that non-competitors are infringing our patents;
- changed business – we are not in this business any more;
- changed strategy – we do not want to pursue this new technology opportunity; and
- adjacencies – we think that there are other application areas that are not in our current business strategy.
Many people presume that an industry study is not needed to deal with competitor infringement, and that patent monetisation here is a matter for the lawyers. Most companies will not sell patents to a third party to go after a competitor; they want more direct control in such cases. Yet there is a reason why an industry study can be extremely helpful in such situations, and that is the importance of understanding what the competitor has or can acquire. You do not want to go after a competitor with a rifle only to be met with a countersuit cannon fired from its existing patent portfolio. You should also be careful to tie up key patents that can harm you to make sure there are no loose cannons on the deck. An industry study can help you to identify which patents to acquire.
Most companies think twice about suing non-competitors for infringement – it is a potential distraction and can boomerang in adverse publicity
Competitor infringement goes to the core of a company’s business. Infringement by non-competitors is another matter. Most companies think twice about suing non-competitors for infringement – it is a potential distraction and can boomerang in adverse publicity. If the patents at issue are not the crown jewels of the portfolio, the company may be willing to sell them to a third party and retain a licence. In this case an industry study can frame the opportunity for both the company and any potential buyer by providing information about who is in the technology space and who should be investigated for possible infringement.
Changed business, changed strategy, adjacencies
These three patent monetisation motivations can be roughly called technology transfer cases. The thought here is that there is non-litigation value in BigCorp’s portfolio which is not currently being realised and is unlikely to be pursued by the company. An industry study in a technology transfer situation is designed to identify potential purchasers or licensees of BigCorp’s off-strategy applications. In most cases there will also be some form of non-patent technology know-how transfer.
For cases of non-competitor infringement technology transfer, we need to think about value.
Building the case for value
There is an old saying in financial circles – “stocks are sold, not bought”, meaning that you must build a case for value before someone will buy. Stocks and patents are alike in that it can be extremely difficult to figure out what their values are without analysing them in detail. In the financial industry, a common set of metrics and measurements has evolved over the years and is starting to become more widely recognised.
In patent monetisation, a key determinant of value is the use to which the patent will be put by the buyer.
Acquirer – patent acquisition motivations
Other than to settle or avoid a direct infringement claim, why do people buy or license patents? Some reasons include:
- monetisation intermediaries – buying patents to assert them;
- open innovation – acquiring new products/services;
- litigation ammunition – amassing defensive ammunition in my technology/product area or in other areas where my competitors operate; and
- litigation immunisation – to keep patents away from others
In each of these cases an industry study provides a starting point for crafting a valuation story and strategy. An industry study will identify the players, as well as their historic and current activities. It will also help to identify new entrants and provide a basis for predicting trends. However, these are just the basics.
A good deal of business intelligence is embedded in patents. Patent activity is a useful indicator of the applicant’s technology investment activity. One key benefit of an industry study can be realised by holding interactive sessions with key management stakeholders from the appropriate functional groups (eg, technical, legal, marketing, strategy and finance) to derive a shared understanding of the business significance of the results and to develop strategies and ongoing processes to make use of the knowledge obtained. These sessions can allow management to develop new ways of thinking about intellectual property from a business perspective, which lasts well beyond the immediate task at hand.
Take, for example, the patent monetisation scenario of litigation immunisation. BigCorp used patent analytics to determine the strengths and weaknesses of its offered patents. Then it investigated the direct and indirect citation landscape to identify potential purchasers. Patent analytics were run on the most closely relevant patents of each of the potential purchasers. Using this data BigCorp stakeholders held working sessions to discuss various ‘what if’ scenarios (eg, what would Company A’s portfolio look like relative to that of Company B if Company A acquired the BigCorp patents?). These data points and this process helped BigCorp to craft a valuation case for why Company A or Company B should purchase the BigCorp patents.
Case 2: IP strategy and growth at an emerging growth company
After several years of product development, a well-funded emerging technology company (EmergingCorp) introduced its first major product line six months ago. The product has been well received in the market and management is preparing to raise capital for growth. The company is early on in its IP development and wants to be more strategic in this area. Its patent lawyers are from a major law firm and have several pending patent applications, none of which has been granted. Management thinks that the patent work to date is good, but it wants an independent view. In addition, it feels that the law firm is unable to provide the company with input into IP strategy from a business perspective. Management wants to be able to answer IP strategy questions from potential new investors and believes that a technology landscape would help it to identify competitors and to see what the company is up against.
Business dynamics and IP strategy for an emerging company
Before discussing what a technology landscape means to an emerging company it is important to understand the business dynamics at play. Many entrepreneurs I have met question the feasibility of developing an IP strategy in an emerging company on the basis that patents are expensive and that they cannot afford to litigate or enforce their patents. While this is true, it misses the point.
The entrepreneur’s primary job is to create value and to capture enough of the value created to be sustainable.
Consider the grid below.
Most financially successful technology entrepreneurial ventures are acquired by larger companies which need to innovate. The reason for this is that over the past 20-plus years business leaders have come to realise that the large relatively fixed R&D infrastructures in large corporations were not turning out innovations fast enough. One solution was to acquire R&D by acquiring venture capital-backed companies which had innovated more quickly and de-risked the investment. From this perspective, the venture capital industry is about outsourced R&D.
Also at play has been the open innovation movement, which is breaking down the ‘not invented here’ attitude. Open innovation includes efforts to engage with external actors to bring ideas into the corporation or to commercialise ideas developed inside the corporation (eg, Procter & Gamble’s connect and develop model).
What does this have to do with technology landscapes?
A major goal of an industry study/technology landscape project for an emerging company is to help it to arrive at a business strategy that is enabled by an IP strategy which develops intellectual property to support innovation goals and increase the likelihood and value of an acquisition.
EmergingCorp conducted an industry study in the initial market where it had introduced its first product line. This identified the large companies, research universities and other smaller players which were patenting in this initial market. The management team used the industry study to integrate its existing market intelligence with the additional business intelligence that emerged from analysing the patent landscape. This integrated view enabled management to grasp patent issues from a business perspective and improved communications with the outside patent prosecution law firm. Given the limits of its patenting budget, the company considered strategic public disclosures of features to prevent others from creating picket fences around its core patents. EmergingCorp also set up a periodic monitoring process to keep itself informed of changes to the landscape that might require adjustments to its strategies.
EmergingCorp is thinking through alternative business/patent strategies, including focusing product development efforts on next-generation features that likely acquirers will find valuable. This is being made possible because of the ability to integrate market intelligence with patent landscape insights enabled by patent analytics.
It is also rethinking its industry value chain in light of knowledge that it is gaining from the patent landscape process. This is revealing some applications of its technology that could create disruptive business models, which would further enhance its value to an acquirer.
The bottom line is that patents are now no longer an afterthought left to EmergingCorp’s lawyers. Instead, its management has the means to create a more robust business strategy because it can translate dense individual patents into a more comprehensive and strategic view through a focused patent landscape process.
Case 3: deal scouting by a corporate venture group
The US-based corporate venture group of a multinational corporation (MegaFirm) had made an acquisition and belatedly wanted to understand its competitors’ patent positions within the area (minimal due diligence on patents is more common than you would think). Going forward, it wanted to identify potential acquisition targets and to understand the extent of the white space within certain areas. A year ago, it contracted with a major strategy consulting firm to produce a technology landscape at a cost of over $200,000. However, the landscape failed to provide answers to the questions that management was concerned about.
Problems with previously tried approaches
The corporate venture group faced the fundamental price versus quality problem which confronts buyers of any product or service. Do you buy the more expensive or the cheaper product? Do you get a better product or service if you pay more? You know the price, but how do you assess the quality? The $200,000-plus which the corporate venture group paid the major consulting firm resulted in that firm’s logo on the report, but what else did the group receive? On the other hand, do you want to take the risk of a low-cost offshore solution? The price dilemma is only the tip of the iceberg. What is really needed is a process supported by data and analytics – the way that most other parts of a corporation’s business are managed.
Technology is facilitating the democratisation of invention, enabling entrepreneurs and researchers to develop new things in a global/distributed ecosystem. This puts great pressure on corporations to identify, evaluate and act on new things all the time
What does corporate venture capital do?
Let us take a step back and think about the business issues faced by the corporate venture group. The structure and operation of corporate venture capital groups vary depending on factors such as industry environment, corporate culture and the point of time in the financial cycle. These are all important, but they are secondary to the main mission of most corporate venture capital groups: to bridge the innovation gap increasingly faced by large organisations as innovation cycles accelerate and innovation increasingly takes place at the intersection of traditional technology areas (eg, lab on a chip, which is at the intersections of genomics/proteomics, microfludics and microprocessors).
The mission of corporate venture capital to bridge the innovation gap is due not only to the accelerating pace of innovation and the technology intersections that are driving complexity, but also – and probably more importantly – to the conscious decision of large companies to outsource the early stages of the innovation pipeline. Thus, they have cut spending on internal research and are depending on the outside world, research universities and start-ups to incubate emerging technologies. At the same time, technology is facilitating the democratisation of invention, enabling entrepreneurs and researchers to develop new things in a global/distributed ecosystem. This puts great pressure on corporations to identify, evaluate and act on new things all the time. In the old world, those new things were residing in their own labs.
How do the traditional technology landscape products and services help corporate venture groups to bridge the innovation gap? They do not provide much help or value because they do not enable the continual discovery and monitoring that are essential to identify innovation and transfer the innovation benefits to the corporation’s business units. They do not do this for the reasons described above: they are slow, costly and static. These are the frustrations that the corporate venture group sought to address.
Improved process leads to improved outcomes
The corporate venture group decided to design a data and metric-driven process for initially identifying relevant innovations of interest to MegaFirm. In contrast to the static charts showing patent filing dates and company patent counts that it previously received, it used patent analytics and visualisations to facilitate cooperative discussions between the corporate venture group and the management of MegaFirm’s business units. The goal was to achieve a shared understanding of the innovation trends in the area of interest by investigating the patent and research relationships among companies, inventors and universities. This high-level framework was supported by more detailed information and details, which facilitated important continuing communication and collaboration between technical, legal and business representatives.
The collaboration did not stop once the initial technology landscape was completed and delivered, a process that took approximately one month. A key result of the initial phase was that it promoted alignment of understanding among the groups from a business perspective. This alignment helped to shape the ongoing tracking of developments and innovation information transfer to the business units. Data and metric-driven algorithms enabled rapid and cost-effective updating of the technology landscape information – every three months in the rapidly developing initial area of interest.
Business intelligence process
What these three cases illustrate is that business decision makers dealing with intellectual property do not just need a technology landscape; they need to design and implement a business intelligence process to achieve specific business goals. At best, a technology landscape is only the beginning – a portion of the data which informs business questions and decision making. Traditional one-shot, static technology landscapes have limited usefulness. Where else in business are strategies developed and decisions made without ongoing analysis and measurement?
Fortunately, the field of patent analytics is rapidly developing and a variety of tools are now available. Now it is management’s turn to develop the business intelligence processes that use these new resources to create and implement business and IP strategies. This is what management is trained to do and what it does in virtually every other important aspect of the company’s business.
Make or buy?
Developing a business intelligence process around intellectual property involves many of the issues that companies face in ‘make or buy’ decisions. In general, you should make if the task reinforces or is within the sphere of the company’s core competencies; otherwise you should buy.
Start by clearly stating the goals – in the case studies discussed above, the goals were all quite different – and be sure to think about how you will make the process actionable.
Assess your core competencies as they relate to achieving the goals. Consider both current core competencies and related competencies that you may want to develop as part of the process.
Then research available solutions for your non-core competency needs.
Next, set clear criteria for making as opposed to buying. Reasons for making include the following:
- cost considerations (it may be less expensive to do internally);
- the need to integrate various internal functions;
- the need to exert direct control over analysis;
- better quality control;
- secrecy being required to protect proprietary analysis algorithms;
- unreliable suppliers;
- a lack of competent suppliers;
- control of turnaround times;
- provision of a second source (eg, build redundancy in key areas); and
- emotion (eg, pride).
Reasons for buying include the following:
- lack of internal expertise;
- research and specialised know-how exceeding that of the company;
- cost considerations (it is less expensive to outsource than to build and support internal staff);
- small volume requirements;
- insufficient internal capacity;
- quicker turnaround – the supplier is better placed to generate the analysis;
- the supplier’s broader visibility on developments that may affect the company; and
- a desire to maintain a multiple-source policy
Now, design an initial draft process that takes into account the goals you have articulated and that utilises, where appropriate, your core competencies and reasons for making and any outside resources and reasons for buying. Apply time, turnaround and cost metrics to your draft process. As a test, design a second draft process which takes advantage of unique outside resources in place of internal resources in certain portions of the process. Apply time, turnaround and cost metrics. Iterate again if necessary, but in my experience one of the two draft processes will be an improvement on what you have now and is usually good enough to implement on some basis – avoid analysis paralysis.
I have seen this work. Let me know if it works for you.
To develop a business intelligence process which includes patent analytics, start by looking at your own patent portfolio. Do you really understand what you have from a business perspective?
- Clearly state goals – what are you trying to learn from an IP/technology landscape?
- Assess your core competencies.
- Research available solutions for non-core competency needs.
- Set clear make as opposed to buy criteria.
- Identify key internal constituencies which should be involved.
- Design an initial draft process and ensure that it is actionable.
- Apply time, turnaround and cost metrics to the draft process.
- Revise the process as appropriate.
- Execute, monitor and adjust over time.