Fail to Leverage Innovation Created Outside the Organization (no. 20 in our list of IP mistakes)
Failure to leverage outside innovation may seem inefficient, but it may be fatal over the long term for organizations that do not prudently use this strategy.
This is why a key step to weaken and then eliminate an adversary is to first isolate that adversary…think castle siege, embargos, political labeling, or a wolf separating a deer from its herd.
Granted there can be too much interaction or too little healthy isolation, which causes other problems that we can cover in another blog post. Still, the overall trend is true. Interaction tends toward growth and isolation tends toward decline. This is a reason why open innovation has gained such widespread popularity. Managed well, it is primed to work.
Intellectual property (IP) facilitates profitable interactions and isolation because, provided we hold and maintain the strategic initiative with our IP, it allows us to selectively build interactions with entities who can facilitate our interests, and selectively isolate those entities who may not have our best interests in mind.
A common mistake that can befall an organization with an otherwise strong IP defense and defense strategy is to fail to leverage outside innovation. This, in a sense, is self-imposed isolation that works to the detriment of the organization. It frequently happens with companies perceived to have strong IP because the cultural mindset that may lead an organization to have strong IP may likewise lead it toward closing off avenues for profitable interactions with outside innovators.
There are many flavors of this mistake, and I will touch on three of them.
The first goes back centuries, and is the classic NIH or Not Invented Here syndrome. Politics and pride within any organization may lead people responsible for innovation to see any outside ideas as either suspect or inferior, perhaps even a threat to their plans. World renowned inventors can fall victim to NIH. Think about the Wright brothers who stayed with wing warp technology long after it was clear the aileron, invented by someone else, was the superior invention for the future of aviation. More recently, Apple Computer, a company with a reputation for being very innovative, stayed with the one button computer mouse far too long.
A second flavor of this mistake is to reinvent solutions. This usually happens when inventors fail to learn about the prior art. Sometimes failure to learn about prior art happens simply from not looking at the prior art. Sometimes failure to learn about prior art has institutional origins.
In order to reduce the risks of treble damages from willful infringement in the USA, many prominent R&D organizations have historically restricted their engineers from searching for and studying the claims of competitive patents. The problem with this restriction is that the aggregate cost of reinventing the prior art can exceed any damages the organization was likely to pay if the inventors infringed…which studying claims can help them to avoid. Further, the practice completely goes against the spirit of the reason governments grant patents in the first place.
Governments that wish to promote innovation grant inventors rights to exclusivity over their inventions for a period of time so that they will publicize their work and allow others to build from it. It is only a quirk or oversight that US IP laws have created (albeit somewhat alleviated by the CAFC in re Seagate) incentives that can work against the intent of the system its founders laid out. An informal survey of organizations I have worked with over the years has shown me that it has been common for organizations that do not study the prior art to spend 30% and more of their time reinventing inventions that already exist in the prior art. That represents a lot of wasted money and time. In the hypercompetitive global economy of the present, it is more expense than most organizations can afford. Their only saving grace may be if their competitors are equally inefficient.
The real company killer on this mistake, however, is flavor number three. Flavor number three is how a failure to leverage outside innovation negatively and sometimes covertly impacts all five strategic operational tenets of successful competitive organizations. These costs can exceed the cost of NIH and reinvention to the extent that they can cause an organization to collapse before managers fully understand that they have a problem. The five operational tenets, and how failure to leverage outside innovation impacts them, follow:
- Concentration of effort – When you fail to leverage outside innovation, you dilute the amount of time and money the R&D staff you employ can dedicate to the key inventions that will build the future of your company.
This happens because some of your R&D staff will likely need to reinvent enablers of those key inventions that you could have otherwise brought in from outside. For example, if you choose to invent a new communications protocol instead of using an existing protocol, then you will have to dedicate R&D to inventing that protocol that could have been employed inventing the actual communications applications where the real future of your company may lie. Such a dilution of focus would further limit the total brainpower you could devoted to and R&D effort internally that may already compete at a disadvantage with the collective brainpower of R&D staff of more collaborative competitors.
- Economy of resources – Organizations of all types seek to drive their costs down. When you use outside innovation, you should have the opportunity to use needed inventions for less cost than would be required for you to invent them yourself.
Failure to use outside innovation means that you may invest time and money to solve problems other people have already solved, which is diametrically opposed to economizing resources.
- Freedom of action – In the IP space, this is called freedom of operation (FTO), and failure to leverage outside innovation can lead to infringement and the loss of freedom of operation.
So not only do you waste money reinventing existing solutions, you may be sued for infringement if you commercially use those reinventions while you are still ignorant of the prior art. Maybe you avoid treble damages, but you now may pay for regular damages and legal costs, the cost of the reinvention, and then a solution to the FTO problem. Alternatively, you might have avoided the infringement with a license and benefited from having your researchers work on inventions that did not already exist.
- Safety – We have already covered infringement risks. Another safety risk is commercial and involves the risk of being left behind.
For example, if you fail to use an innovation from another organization that becomes an industry standard, you put your solutions at risk of irrelevancy for key markets. Even Apple saw that it made sense to seek a Mac compatible version of Office software from arch rival Microsoft … which very much benefited Microsoft as well.
- Speed – As mentioned earlier, if you leverage the innovation of others, then you do not waste time reinventing their inventions.
You instead leverage that they arrived at a solution first and avoid fighting them about it. As noted, you potentially waste time and money dealing with FTO and infringement concerns when you bump into competitive IP and do not seek to employ it in your own efforts. You also limit yourself to the brain power inherent in the organization and not the collective brain power that can be the entire world when you do not actively leverage outside innovation.
Speed is about more than getting to a solution first on the calendar. You can win such a race while burning a lot of money and energy, which may leave you with no resources to exploit your success. Speed is about leveraging every element of resource you have to capture time that moves you in a forward direction. Leveraging the outside innovation work of others means capturing their time as well as their results. This helps you achieve long term goals faster, even if you were a bit slow getting to some solutions along the way, and the terms for using the innovation of others was not as favorable as you would have liked.
On a closing note, and as proof to the statements above, look at how nature works. Nature borrows innovation all the time as species evolve from common platforms. It is also extremely unforgiving of inefficiency, killing off species that are both less capable and over capable for their environment.
(This is number 20 in our list of IP mistakes and how to fix them.)