Treat IP as a Cost Center (no. 24 in our list of IP mistakes)

I suspect that most IP Strategists have, at one time or another, used or referenced the Intellectual Capital Pyramid from Edison in the Boardroom (Davis & Harrison, 2001) to try to expand the C-Suite understanding of the value of IP/IC beyond the Legal function. You’ll recall the five levels from the base “Defensive” to “Cost Control”, “Profit Center”, “Integrated”, and finally to the apex level “Visionary”. 

Clearly, it’s important in most organizations to try to move beyond use of IP for purely defensive purposes, and by add some rigor in the management of IP portfolios to control costs and continually align with business plans and goals, the IP group is naturally brought into contact with, and over time can be integrated with, other departments. Here, as in Edison in the Boardroom, I use “integration” in the sense of integrating company practices: defense; cost control; revenue (profit) generation, leading to an organization where IP is no longer a purely legal asset. 

So controlling costs is not the issue; it’s a very necessary element in developing an “Integrated” and perhaps ultimately a “Visionary” use of IP (and more broadly Intellectual Capital) to influence and shape markets. The mistake of “treating IP as a Cost Center” refers to something quite different. This is a potentially very destructive mindset, whereby a senior influential individual or an organization considers IP purely in terms of the cost to the company to obtain and maintain IP.

Although individuals and organizations may espouse the value of IP, and may even introduce good practices and incentives to generate new IP, the fog of reining in increasing IP costs can very quickly move across an organization, blinding it to the value that maintaining and adding IP can bring and pushing it back down the IC pyramid to a Defensive position. The consequences may be devastating, including many described in other Mistakes in our List, from losing market opportunities to exclusion from a market or market segment and others.

Demonstrating IP value to the C-Suite, ideally through examples of successes and financial returns, is a continual challenge faced by IP Strategists and Heads of IP in most organizations. Even with a very enlightened and supportive CEO, others in senior positions can chip away at the IP strategy bedrock in the name of cost-efficiencies, especially if the IP budget is formally within their domain. Effective communication and natural or learned skills of persuasion are critical assets of the IP Strategist/Head of IP in today’s IP-centric world. Without them, the fog may never clear.

(This is number 24 in our list of IP mistakes and how to avoid them.)

(Image credit: Images of Money)

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