This document discusses how leading companies are able to sustain success through successive innovation and transitioning to new platforms. It explains that while innovation is important, sustained leadership requires a model for continuous innovation to stay ahead of competitors. Intellectual property strategy can help companies cement control of current platforms while also positioning themselves for future platforms. The article analyzes how companies like Apple, Microsoft, and Amazon transitioned from success in one area to leadership in new areas. It discusses the battle for ownership of platforms and the importance of planning platform progressions from the start. Intellectual property creates a bridge between owning current and future platforms when used strategically.

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Issue 71 May/June 2015
Intellectual Asset Management Magazine
www.IAM-media.com
Time for a new conversation

2. Intellectual Asset Management May/June 2015 21www.IAM-media.com
Ahead of the game
A great innovation is only the
first step for success. The best
companies understand that the key
to sustainable advantage is to build
a model for successive innovation
so that they are continuously one
step ahead of their competitors
By Arvin Patel, Marian Underweiser,
Richard Ludwin and Marc Ehrlich
The innovation cycle:
an IP strategy for
sustained business
leadership
To a typical C-suite executive, the term
‘intellectual property’ is synonymous with
sensational headlines such as “Samsung
Pays Microsoft $1 billion in Patent Dispute”
or “Court Approves $4.5 Billion Sale of
Nortel Patent Portfolio”. However, the
phrase ‘IP department’ is likely to evoke a
very different image: perhaps a group of
executives issuing threats in a desperate
attempt to generate some licensing income
from a portfolio of slowly dwindling IP
assets or, more likely, a group of lawyers
slumped over their desks with quill
pens in hands and green visors perched
on their foreheads as they mutter an
incomprehensible stream of technical and
legal language.
This article is about neither of those.
After all, how many articles about IP
licensing have you already decided not to
read? Instead, in this article and a series of
others to follow, we will discuss something
far more valuable: the use of intellectual
property as a means to position your
company to win in today’s and – more
importantly – tomorrow’s marketplace.
Our goal is an audacious one, but we think
that we are up to the task. We will explain
why IP strategy is an essential part of your
business strategy which belongs squarely
in the boardroom – not something that is
relegated to the IP department.
Leadership that lasts
“In order to win, your company needs
to harness its innovations.”That is the
mantra of every C-level executive. But when
you compare the number of companies
competing in the market against the few that
truly succeed, it becomes plain that a great
innovation cannot be the only ingredient
required for success. If you remove from
that list the one-hit wonders – companies
that hit upon a winning product only to
be later surpassed by their competitors –
the list becomes shorter still. To become
one of those remaining companies is the
entrepreneur’s holy grail and raison d’etre.
One-hit wonders
There is good reason to focus on innovation
as the key to success. After all, it is trite
but true that we are in the midst of an
era of dynamic changes in innovation.
Technological developments such as
the creation of global communications
networks have enabled new forms of
collaboration, spawning innovation on a
scale and pace never before contemplated.
Innovation spans companies, governments
and geography. It is created and shared as
quickly as data can traverse a cable or carrier
signal. Not since the advent of the printing
press has there been such dynamism in the
area of innovation.
And yet, clearly, innovation itself is not
enough. The best companies understand not
only the need to capitalise on innovation to
win in the marketplace, but also the need to
take a longer-range view. They understand
that the key to sustainable advantage is to
build a model for successive innovation to
ensure that they are continuously a step
ahead of their competitors in new markets.

3. 22 Intellectual Asset Management May/June 2015 www.IAM-media.com
Ahead of the game
Picture: Bloomberg/Getty Images
era is the understanding that winning their
current platform is not an end in itself.
Leadership in a market must be a path to
leadership in successive markets in order to
build a company that lasts.
Battle for platforms
The battle for IT dominance today is a
battle for control of platforms. Facebook is
the 800-pound gorilla in social networking,
chased by the likes of LinkedIn, Twitter,
Google+ and others. But whether Facebook
maintains its social hegemony depends on
Pictures clockwise from top left: Getty Images, Science & Society Picture Library/Getty Images, Tim
Boyle/Getty Images, Justin Sullivan/Getty Images
Picture: John Lamb/Getty Images
Consider Apple’s ground-breaking
iPod and its concomitant leadership in
smartphones. Innovations developed for
these products turned them into widely
popular platforms (for music, application
software and new technologies), which in
turn enabled Apple’s successful entrance
into the tablet computing area (a computing
platform where numerous competitors
had previously failed to gain traction).
Apple’s success in portable music gave it
a leading position in smartphones, which
in turn helped to enable and strengthen
its subsequent success in tablets. Other
long-term successful firms have followed
a similar pattern. Microsoft’s dominant
operating system enabled it to become the
dominant application provider for office
productivity software, which in turn led
it to databases, middleware and beyond.
Amazon’s dominance as a bookseller
enabled it to become the dominant seller of,
well, everything, as well as being a tablet,
streaming media and web services leader.
Success begets success. But this does
not happen by chance among these most
elite and consistent market leaders. Before
Google leveraged its internet search engine
dominance into markets such as mobile
and video, other search engines such as
AltaVista and Excite held sway, before
eventually being displaced. What separates
the companies that dominate a market for a
short time from those that dominate for an

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Ahead of the game
cement success in their present market and
ensure their path to future success.
It is tricky to strike a balance between
competing for ownership of a current
platform and preparing for the transition to
a future platform. This is where IP strategy
comes into play. Intellectual property creates
the bridge that connects ownership of a
current platform to leadership of the next.
By choosing which intellectual property to
keep as proprietary, which to license and
which to give freely to others, a firm with
an understanding of its platform strategy
can at once establish control of its present
platform and ensure that it has a lead in
owning the next one. To do this requires an
understanding of how innovation evolves.
Visualising innovation
There are many tools offered by many
consultants which track the course of
an innovation. One of the best-known
examples is the Gartner hype cycle.
Developed by consulting firm Gartner, Inc,
the hype cycle is a graphical representation
of the maturity and adoption of a
technological innovation over time. It can
be used to assess the risk associated with
adopting an innovation based on the stage
of its evolution, as shown in Figure 1.
The stages represent the typical
evolution of a technical innovation. Starting
with a technology trigger, which occurs due
to a technical breakthrough, there follows
a period of inflated expectations, which
leads to a period where these unrealistic
expectations fail to be realised (the trough
of disillusionment). In time, a more modest
degree of success is realised by one or a few
implementers (the slope of enlightenment).
This prompts others to join the market and
heralds the arrival of second and third-
generation products. Finally, at the plateau
of productivity, mainstream adoption takes
off, more providers enter the market and the
promise of the original innovation begins to
approach realisation.
The hype cycle is a means of visualising
an innovation’s progress towards viability.
It does not, and is not intended to, directly
address innovation from the standpoint of
an innovator. Rather, it addresses it from
the vantage point of an adopter. To do
this, it charts the progress towards market
acceptance associated with making an
innovative product workable. It is possible
and useful to overlay an IP perspective on
the hype cycle. We demonstrated how this
could be done in an earlier article (“How
to value IP portfolios for acquisition”, IAM
63). We illustrated that the tool enables
executives to understand the state of their
Visionary companies plan their platform
progressions and have a strategy for what
those progressions will look like right from
the start
Peak of inflated expectations
Plateau of productivity
Slope of enlightenment
Trough of disillusionment
Technology trigger
Visibility
Time
Figure 1. Gartner hype cycle
what it can do for an encore. If Facebook
does not own the next important social
platform that evolves, it risks losing its
subscribers to the innovator which does.
That is why Facebook has worked to extend
its leadership in social media into mobile
computing through the acquisition of
Instagram, WhatsApp and others, as well
as through home-grown initiatives such as
Facebook Home.
The recent emergence of on-demand
transportation provider Uber illustrates the
fact that the battle for platform ownership
starts when a company is first formed. Uber
has quickly grown to dominate the platform
for ride sharing, which it helped to create.
However, this is just the first chapter of
its business plan. Uber intends to leverage
its ownership of its taxi service platform
to develop a more extensive transit and
logistical platform and eventually to own
the platform for anything delivered. Once
Uber owns the summoning of cars, trucks
and aircraft on demand, why would it not
then own delivery as well? The fact that
Uber has a plan to evolve to successive
markets even as it competes to own its first
market is a good sign for a company that
wants to sustain its leadership.
Visionary companies plan their platform
progressions and have a strategy for what
those progressions will look like right
from the start. As Peter Thiel notes in his
ground-breaking book Zero to One: Notes
on Startups or How to Build the Future, the
founding of a company “lasts as long as a
company is creating new things and ends
when creation stops. If you get the founding
moment right you can do more than create
a valuable company, you can steer its
distant future toward the creation of new
things instead of stewardship of inherited
success. You might even extend its founding
indefinitely”. We agree, except we believe
that you must extend the founding moment
indefinitely. A company such as Apple is
creating and owning platforms today that
its founders could never have envisioned
from the confines of their garage start-up.
Companies must continuously develop
their next platform strategy because it will

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Ahead of the game
associated with the original innovation
and to extend that ownership to the next
platform. To do that, a tool must provide IP
insight.
However, the paucity of such tools
reveals a more fundamental issue.
Leaders have not yet developed a robust
understanding of how intellectual property
can be used to achieve ownership of current
platforms, let alone extend it to future
platforms. In fact, the hype cycle and other
tools like it do not actually describe a cycle
at all. They are linear models, not cyclical,
and their linear character exists because
they do not contemplate how current-
generation innovations and intellectual
property can be used to extend control to
future innovations. Because they do not
consider its IP aspects, they do not view
innovation in a cyclical manner.
Elon Musk, founder of electric car
company Tesla, recently declared that he
would make all of his company’s patents
freely available to any competitor. His
premise was to encourage other companies
to make the same kind of investment in
electric cars that he had. He responded
to those questioning the wisdom of such
an action by indicating his intention to
OLED screens for PCs
3D LCDs
Media tablet
Over-the-top set-top boxes
3D flat-panel TVs and displays
Solar power mobile devices
Head-mounted displays
Ultra-mini-PCs
Blu-ray devices for consumers
Connected video game handhelds
Connected portable media playersGames consoles as media hubs
Premium communication devices and open OS
Terrestrial digital radio
Connected portable navigation devicesE-book
readers
Connected imaging devices
Basic communication
devices and open OS
Consumer
mini-notebooks
Satellite digital radio Interactive TV
Internet radio
Voice-augmented MFPs
Mobile transphones
4k x 2k TV displays
Quantum dot displays
Photonic crystal displays
Technology trigger Peak of
inflated
expectations
Trough of disillusionment Slope of enlightenment Plateau of
productivity
Electrofluidic and electrowetting displays
Home server
Broadband connected televisions
Smart appliances
OLED TVs
Wi-Fi personal-area networks
MEMS displays
Expectations
Years to mainstream adoption:
Less than 2 years
2 to 5 years
5 to 10 years
Figure 2. Hype cycle - case study
In this case study, Rovi shows up with 12 specific technologies indicated by a red dot outlined with a blue circle.
patent portfolio mapped against a specific
technology at a given stage of the hype
cycle. This provides more insight than
simply generating a patent portfolio report
tallying patents filed or issued in a technical
area. Nonetheless, the hype cycle is limited
as an IP strategy tool, as it cannot be used to
plan a successive platform control strategy.
In this case study, Rovi shows up with
12 specific technologies indicated by a red
dot outlined with a blue circle
The hype cycle is not built with the
innovator in mind, so it is unsurprising
that it does not chart next-generation
innovations. This shortcoming is also
present in many other tools for charting
the progress of innovations. These tools
generally do not see past what is necessary
to achieve success on the first platform
and so are limited to the evolution of the
first innovation. They do not address the
innovator’s need to extend the founding
moment indefinitely. In fact, because
they do not incorporate IP considerations
into their models, they tend to offer little
more than an observer’s feedback on the
evolutionary stage of an innovation. What is
really needed is a tool that shows innovators
how to achieve ownership of the platform

6. Intellectual Asset Management May/June 2015 25www.IAM-media.com
Ahead of the game
original objective was to determine whether
patents would have any relevance in a world
where firms were regularly joining standards
bodies with royalty-free patent licensing
terms and making use of open source
software, which provided a free patent
licence. What emerged in response to that
inquiry went far beyond the initial question.
To address the question, we created
a model for tracking the progress of
an innovation from initial discovery to
development, commercialisation and,
finally, commoditisation. Although we
independently developed this model, we
subsequently learned that our stages of
innovation matched fairly closely with the
work of others in fields such as economics
(see Abernathy and Utterback http://
innovationzen.com/blog/2006/08/29/
innovation-management-theory-part-6/ ).
So we felt that we had hit on a workable set
of stages for the progress of an innovation.
However, since our work was guided by the
aforementioned initial inquiry, we spent
much of our time focusing on what happens
after an innovation becomes broadly
adopted, as is the case in both open source
and open standards. This focus yielded
insights that are unique to our model. The
critical difference with our work was that
when we tracked the course of innovation
in various fields, we discovered that when
an innovation passed into common use
(ie, when it became a broadly adopted
platform), it also became a starting point for
a successive innovation that built upon that
platform. Our model recognises that the
progression of innovation is circular, with
one widely adopted innovation serving as a
foundation, itself giving rise to a next round
of innovation. This was the origin of the
innovation cycle.
Figure 3 provides an overview of our
innovation cycle model. An innovation
progresses through the stages listed along
the blue arrow, starting at the research stage
and culminating with the infrastructure
phase. At each stage a distinct type of
innovation predominates, ranging from
radical innovation (typical of the scientific
exploration undertaken at the research stage)
to incremental innovation (common at the
commercial stage, where a focus on yield,
reliability and scalability predominates).
Accordingly, at each stage there is a
predominant IP treatment for the innovation
associated with that particular period of its
progression. For example, at the research
stage – where basic scientific research is
mostly carried out via public funding – the
licensing of resulting discoveries is typically
fairly open. By contrast, early protoypes of
innovate fast enough to ‘invalidate’ his prior
patents in terms of what really matters.
But does this strategy make sense? First,
does it not seem plausible that Tesla, while
presently very successful, recognised the
need for its larger automotive rivals to invest
in building out the global infrastructure
needed to make its electric car vision a
reality (eg, availability of charging stations or
repair facilities)? Or, to put it another way,
does it seem likely that Tesla might need the
investment of others to make the platform
viable? The company did receive a one-off
government subsidy of nearly half a billion
dollars. But as heady as that investment
was, it is not nearly enough money to build
a national, let alone global, network of
charging stations and other infrastructure
needed to realise its ultimate vision. Viewed
from that perspective, one can see why
Musk would want to assure his competitors
that their use of Tesla technology when
building out the infrastructure would not
incur his patent wrath.
In fact, he is wise to encourage his
rivals to build out charging stations that
are plug compatible with his cars. But
does that objective really require that he
open his entire portfolio of patents to
competitors to get them to act? Is Musk’s
attempt to attract competitors to his
current platform actually a detriment to
his ability to capture the next platform? To
address these types of concerns, we have
developed an innovation management tool
that specifically addresses how companies
can use their intellectual property to gain
control of a current platform and extend
that control to future platforms. We call our
tool the innovation cycle.
Understanding the innovation cycle
Several years ago, we developed a model for
charting the progress of innovations. Our
Private
Enterprise
Proprietary
Open/collaborative
Exploration
Discovery-based
Exploitation
Process and process-based
Public
Foundation
IPperspective
Infrastructure
Prototype Commercial
Discovery
Research
Applications
Commons
Figure 3. Innovation exhibits a natural cycle with distinct phases

7. 26 Intellectual Asset Management May/June 2015 www.IAM-media.com
Ahead of the game
they must selectively open up access to their
patents in order to shape the future platform.
Think of it this way: if your competitors
are looking to replace your Monopoly
board with another, better one, part of
the reason they are doing so is that they
believe you own too much of the first board
already. However, if you let them own some
of that first board (by sharing access to
your patents), you have diminished their
incentive to replace it. Of course, you
have also cut into your own share of the
current market. But now your competitors
are following you – as a leader, you are in
the best position to focus on what comes
next. Additionally, since your competitors
are adopting your technological platform,
you have a head start in determining what
comes next. After all, you created the
platform to begin with and likely have
some development already underway, if not
completed, on the next platform. You also
likely have patents filed and issued on this
next platform – these are not the patents
that you should be openly licensing.
Companies that want the innovation
cycle to work to their advantage must
openly license patents on their current
successful platform. Simultaneously, they
must restrict access to the next platform
by tightly controlling their patents. Only
when the next innovation becomes the
newly accepted platform should a company
consider broadly opening up those patents
for licensing. This is how successful
organisations can enable the development
of yet another platform and traverse the
innovation cycle again.
New infrastructure
We have briefly described how the
innovation cycle was developed and how it
can be harnessed to achieve long-term
success. In developing this model, we
primarily focused on technology sectors
such as communications and computers.
There is a reason for that. As Clayton
Ford Model T
Supplier:
Ford Motor Company
commercial solutions harnessing discoveries
from the research stage are usually the
province of private industry and are closely
held proprietary IP rights that are not
broadly licensed.
The set of red arrows illustrate a
feedback loop from the commons stage,
pointing back to the prototype stage. These
arrows represent our finding that
innovations, once broadly adopted (at either
the commons or the infrastructure stage),
serve as a platform upon which successive
innovations are created. In the area of
information technology, it is often the case
that this common platform is based on an
open standard or on open source code, both
involving easy or free access to patents
required to practise the technology at the
heart of the innovation. From an IP
perspective, this finding was
counterintuitive. Why would an innovator
whose innovation has just become a
successful commercial product make its
valuable patents available broadly, often for
free? Is that not like snatching defeat from
the jaws of victory?
And yet examples of this kind of
platform succession are legion. So common,
in fact, that any innovator ought to expect
that a next generation of innovations will
be built on top of its own. Thiel makes
an excellent analogy for this succession.
Arguing that the best businesses are those
that face little to no competition (ie, they
enjoy small, monopolistic markets – as was
the case initially for PayPal in the area of
electronic payments), he stresses that the
market promotes dynamism in monopolies.
Real markets are distinguished from the
market portrayed in the famous board game,
where the board is static and the winner
is the player who collects the most rent,
because “the history of progress is a history
of better monopoly businesses replacing
incumbents”. As examples, he cites Apple’s
iOS succeeding and reducing Microsoft’s
operating system dominance, which in turn
overtook IBM’s hardware dominance of the
1960s. So, in the real world, our Monopoly
board is constantly being replaced with a
newer, better board; thus, merely amassing
properties on one board does not win the
game. The way to win is to control the
succession of boards.
Armed with the knowledge that
hegemony is fleeting and that their
innovation will be replaced by a next
generation of innovations, what can
innovators do to own and control that next
platform? Our answer, which solved our
puzzle regarding the use of patents in a world
of open source and open standards, is that
Companies that want the innovation
cycle to work to their advantage must
openly license patents on their current
successful platform. Simultaneously, they
must restrict access to the next platform
by tightly controlling their patents
Picture: Barry Winiker/Getty Images

8. Intellectual Asset Management May/June 2015 27www.IAM-media.com
Ahead of the game
design and logistics support for the finished
product. The intricate choreography
required to process the order, build the
laptop and deliver it within two weeks is
repeated thousands of times every day for
each of Dell’s products.
The choreography of the‘flat world’
relies on companies working together across
a global network. In order to achieve this
separation of labour, standards are required.
For example, Dell needs to know how the
components it gets from multiple sources
will work together, how the delivery systems
for multiple suppliers will ensure that the
right parts in sufficient numbers will arrive
for assembly in time to process orders, how
payments will be processed by the time
orders ship and how various fulfilment
operations will coordinate the shipment
of the finished goods. These intercompany
operations require common standardised
protocols to ensure the seamless operations
that Dell depends on to run its business. This
is the norm for running business operations
in the modern economy, but it is light years
from how companies used to operate.
The Ford Motor Company of 1913 is an
iconic example of how companies operated
in the heyday of the industrial era. Ford
produced every component in the Model T.
It designed and built the engine, chassis and
suspension. Ford even owned rubber tree
plantations, which it used to harvest rubber
for tyres. Fast forward to 2014 and Ford is as
globally integrated as every other successful
company. Its supplier network provides
most of the components for its modern cars
(see boxes).
Thus, the infrastructure used by
companies to create their products has
Christensen noted in his book The
Innovators Dilemma: “Those who study
genetics avoid studying humans…because
new generations come along only every
thirty years or so. Instead they study fruit
flies, because they are conceived, born,
mature, and die all within a single day.” That
is why Christensen studied the market for
disk drives and that is why we focused on
network intensive industries. In technology
sectors where devices must communicate,
connect and interoperate, the
interdependence of products makes
traversal of the innovation cycle faster and
more visible.
Metcalfe’s Law holds that the utility
of a network is proportional to the square
of the number of connected users. For
technology companies, this means that
there is a strong incentive to build products
that work together, which in turn is why
standard interfaces and communication
protocols pervade the business. Technology
is a business of standards.
In The World is Flat, Thomas
Friedman describes the emergence of a
global communication network that has
transformed the way in which businesses
operate. This network also fundamentally
changed the way that companies use (or
ought to use) their intellectual property.
The global communications network
that Friedman describes enables labour
specialisation by permitting companies
to interact with one another. Friedman
illustrates this transformation by tracking a
customer’s order of a Dell laptop computer
from website to doorstep. The process
involves hundreds of companies in dozens
of geographies providing parts, labour,
Ford Fusion
Suppliers:
Air intake manifold – Montaplast
Washer hose assembly – Bowles Fluidics
Side-view mirrors actuator – MCI Mirror
Controls
Front windshield direct glazing – Sika
Glove box latch – Southco
HVAC duct- ABC Group
Piston pins – Burgess-Norton
Turbo control valve – KSPG Automotive
Propeller shaft – IFA Rotorion
Wiring clip – TRW Fasteners
Overflow bottle – MPC
Cooling fan module – Johnson Electric
Charge air cooler – Behr
Front bumper mounting components – EFC
International
Battery cover assembly – Midway Products
Cockpit and console – IAC
4WD coupling – JTEKT
Clutch hydraulic actuation system – FTE
Torque sensor – Borums
Transmission end covers – Metadyne
Drivetrain components – Automatic Spring
Products
Seat adjusters – Brose
Mirror button – 3M
Passive outside door handles – ADAC
Steering wheel – Takata-Petri
Heated seat switch – Omron
2-way lumbar system – Leggett & Platt
Muffler coatings – Magni
Side door locking system – Kiekert
Fuel system – CWC
Cargo floor mat – AGM Automotive
Strut bearings – FAG
Fuel charging assembly – Cooper-Standard
Fuel lines – Fraenkische
Picture: Bloomberg/Getty Images

9. 28 Intellectual Asset Management May/June 2015 www.IAM-media.com
Ahead of the game
intellectual property.
A company that holds pertinent
intellectual property can often dictate the
direction for standards development. That
company’s willingness to allow others to
access the intellectual property has a lot
to do with the way that the standard will
develop. Those that control the development
of the standard will have a significant first
mover advantage to develop on top of the
standard, versus their competitors.
Sound familiar? It should, because it is
precisely the mechanism that we have been
advocating for using the innovation cycle.
The pervasiveness of standards in building
critical business infrastructure creates a real
opportunity for savvy companies to use their
intellectual property to gain market advantage.
But wait, there’s more…
We began this article with a bold objective:
to convince executives that IP strategy is
essential to their company’s success and
accordingly that it must be developed at the Picture: Lionel LOURDEL/Getty Images
Plan Create Leverage
Evaluate Enable Invent Manage Defend Influence Capitalise
Direct
IP assessment
Culture of
innovation
IP pipeline
IP policies
Enforcement
guidelines Influence
innovation and IP
network
Leverage
innovation and IP
networkIP strategy
IP tools Risk management
Sales/licensing
guidelines
IP landscape
Communications IP portfolio
Reputation
building
IP budget
Negotiation
leverage
Collaboration
guidelines
Partner landscape
Control
IP/business
strategy align
Organisational
change
management
Deploy IP
organisation
enablement
Allocations Manage
infringement
assertions
Legal/regulatory IP asset valuation
IP needs list
IP organisaton
infrastructure
Deploy inventor
enablement
IP portfolio
management
Industry standards IP asset marketing
Performance
measurement
Performance
measurement
Performance
measurement
Quality
management Performance
measurement
Performance
measurement
Performance
measurementPerformance
measurement
Execute
IP strategy
implementation IP organisation
enablement
Inventor training
Invention
evaluation
Invention
identification
Asset donation
IP engagement
enablement
Regulatory & legal
monitoring
Invention
harvesting
Invention review
process
IP leaks Open innovation
Product sales
enablement
Landscape
monitoring
Inventor
enablement
Strategic invention
development
Publications
Defensive leverage
creation
Standards
participation
Asset negotiation
Licensing
Legal/regulatory
intervention
Figure 4. IP component business model
evolved from being completely in-house
during the industrial era to largely outsourced
in our globally interconnected economy.
These changes call for CEOs to make a shift
in how they use their intellectual property.
In the industrial era, intellectual property
could properly be viewed as serving the same
function as a moat around a castle. Since a
competitor would need to replicate the entire
infrastructure to create a competing product,
the prohibitively expensive costs were a huge
barrier to entry – rubber plantations are not
cheap. In this environment, patents were an
additional barrier to entry to be used against
the few competitors which had the financial
means to compete.
In the modern, globally interconnected
economy, the infrastructure for building
products no longer exists within a
single firm; rather, it exists in the form
of a network of connections between
cooperating firms. That network is held
together by standards and standards are
shaped by those that hold important

10. Intellectual Asset Management May/June 2015 29www.IAM-media.com
Ahead of the game
The CBM represents the architecture
of a business. As seen above, the columns
divide the business by capability (they
answer the question: “What do we need
to be good at?”) and the rows divide the
business by operational level (Direct =
strategic level; Control = management level;
Execute = processing level).
At the intersection of the columns and
rows are the components – the building
blocks of innovation and IP enterprise.
Each component represents a set of best
practices and activities which deliver a
service within the overall business. Within
each component, critical information about
operationalising that business competency
are captured, including the following:
• business purpose;
• activities;
• resources;
• key performance indicators; and
• performance metrics.
This model delivers the modularity and
flexibility required to meet the changing
needs of a business. It enables a flexible,
real-time and realistic way of implementing
business policies, as opposed to merely
attempting to adopt wholesale a completely
predefined structured IP model.
Flexibility is important because optimal
IP strategy depends on the industry,
market and innovation itself, as well as the
company and its culture. If you review the
CBM chart in light of the innovation cycle,
you may see many components relevant to
your business. Others may see a different
set of relevant components, and that makes
sense. CBM provides a framework to help
deconstruct and reconstruct business
processes, enabling incorporation of the
insights achieved by the innovation cycle
and other IP tools and principles.
The innovation cycle and IP tools
discussed earlier are only a sub-set of
tools contained in the components above.
Thoughtful leading organisations must
develop their own CBM not only to track
their operational effectiveness, but also to
win in the future.
Great innovation is not the only ingredient
required for success. The best companies
understand that the key to sustainable
advantage is building a model for
successive innovation that ensures they
are continuously one step ahead of
their competitors. Here is how the best
companies successfully navigate the
innovation cycle:
• They understand that winning in one
market must be a path to winning in
successive markets.
• Visionary companies plan their market
progressions and have a strategy for
what those progressions will look like
from the start.
• Savvy companies use intellectual
property to gain control of a current
market and extend that control to
future markets.
• Companies must openly license
patents in their current successful
market, while simultaneously restricting
access to the next market by tightly
controlling those patents.
• Only when its next innovation becomes
the newly accepted platform should a
company consider opening access to
those patents.
• A company that holds pertinent
intellectual property can often
dictate the direction for standards
development.
• The component business model
enables companies to integrate many
IP best practices in a manner that is
specifically relevant to them and can
lead to breakthrough results.
Action plan
top of the company. If you agree with this
premise now and you did not before you
read this article, then we have achieved our
goal. However, what we have described here
is by no means a complete IP strategy in and
of itself.
In order to use the innovation cycle
effectively, a firm needs to have a precise
picture of its intellectual property,
including the characteristics of its global
patent portfolio. For example, it would
be impossible to gain control of a current
platform, let alone use that control to
lead the market to a successive platform,
without patents covering essential aspects
of each platform. Obtaining these patents
and understanding how and when to use
them requires a deep understanding of your
business, your innovation culture and the
IP environment in which your business
competes, to name a few of the relevant
considerations. The innovation cycle is not
a tool for beginners. To use it, a firm must
be well versed in many more fundamental
aspects of a complete IP strategy.
While the benefit of harnessing the
power of the innovation cycle is a worthy
reason to develop a comprehensive IP
strategy, the innovation cycle model is just
one of many arrows in the quiver of a firm
with a fully integrated IP strategy.
While the development of such a
strategy is beyond the scope of this or any
single article, we intend to publish further
articles which will focus on other tools,
as well as some of the more fundamental
aspects for developing a fully integrated IP
strategy. However, for now, it is sufficient
to note that developing a comprehensive
IP strategy is not an easy task. Companies
need a road map to follow in charting their
course. Our preferred approach is through
the use of a component business model
(CBM) methodology.
Component business model
The CBM is a methodology originally
developed by IBM that has proven to
be effective in designing/re-designing
organisations, making important
management decisions and guiding
re-engineering processes. It has been
successfully deployed within IBM and
in Fortune 100 companies worldwide.
The CBM methodology enables firms to
integrate many IP best practices in a manner
that is specifically relevant to each firm.
Properly implemented, the methodology
can lead to breakthrough results which
follow when technology, legal and business
processes are seamlessly integrated into the
fabric of the business.
Arvin Patel is senior vice president of
intellectual property and licensing at Rovi,
Santa Clara, California.
Marian Underweiser is head counsel for IP
policy at IBM, New York, United States.
Richard Ludwin is associate general
counsel for intellectual property and patent
strategy at IBM, New York.
Marc Ehrlich is associate general counsel
for intellectual property at IBM, New York