Many New Zealand manufacturers are sitting on an intellectual property goldmine – but routinely give it away to their customers.
Why? Because they don’t understand its value in the first place, and because they don’t design commercial terms to their own advantage.
Putting things right involves redesigning business models to leverage intellectual property, rather than simply selling goods or services for a fee and making money from profit margin.
I am aware of several businesses whose owners belatedly realised the value of this approach. For example, a South Island contract manufacturer gave away his IP in the form of clever modifications to products being produced for customers. He received an attractive profit margin for the contracts and saw the modifications as a value added part of the service.
Nowadays he leverages his ideas’ value by ensuring contracts demand his company gets brand recognition on products, and by securing longer and more favourable financial terms from customers. The customers were surprisingly receptive to the idea because he did not seek more money; instead he made ‘soft’ demands that added more value to his business.
He told me the financial outcomes have been so impressive that, had he put these measures in place 10 years ago, he would now no longer have to work.
This is a salutary tale of how Kiwi firms need to become far more commercially-oriented and embrace new ways of doing business.
The first step is to identify a company’s intellectual assets - knowledge, experiments, drawings and documents – and intellectual property, the legally protected form of those assets.
This often requires the company to map diverse market knowledge against diverse scientific knowledge, connecting dots they hadn’t previously realised were there. Making these connections enables businesses to extract a lot more value from their intellectual assets and property than they could have by viewing them in isolation.
But a DIY mentality means New Zealand businesses tend to fall into the trap of trying to do it all themselves even if they understand their ideas’ and innovations’ value.
A more lucrative approach is to actively involve third parties in developing and marketing innovation. This can be done through strengthening distribution through partnering or via the internet, selling knowledge over the web, selling knowledge via license agreements, strengthening the innovation’s value proposition through partnering, and utilising intellectual property to strengthen the value proposition.
It’s vital, however, that businesses protect themselves by way of clever contractual terms and other measures that provide them with control over who can extract value from the intellectual assets, and by how much.
It’s time for New Zealand businesses to push back and negotiate harder.
Dean Prebble is director of commercialisation at EverEdge IP