Patents: The future of competitive success through innovation

Today, in the age of decreasing attention spans, fickle consumers are constantly looking for and even expecting the next big thing. Innovating isn’t as easy as waving a magic wand, and regardless of the merit to the technological advancement or the time and money it takes to innovate, companies are increasingly subject to the expectations game. Now more than ever succeeding is all about making better products and offering new and improved services quicker and more reliably than your competitors. Succeeding through innovation is also about meeting expectations.

You may recall that there was great disappointment in 2012 when Apple released the iPhone 5 even though the iPhone 5 was superior in nearly every way to the iPhone 4. Still further disappointment came a year later when in 2013 Apple didn’t make enough changes to even justify calling it an iPhone 6, but instead released the iPhone 5s and 5C. There is already at least some disappointment swirling about the expected iPhone 6s. Over the next 5 months you can expect many additional articles professing disappointment about an anticipated next iPhone release. Analysts, investors and consumers want, and expect, more than ever.

Of course, Apple is hardly the only technology company to disappoint analysts, investors and/or consumers, although the cult-like following of those (including myself) who use Apple products is easy to see given the sea of tech websites devoted to all things Apple. Social media as a sector continues to disappoint consumers even though users can’t seem to resist. PC World labeled Windows Vista the biggest tech disappointment of 2007 and the Zune was a complete failure. Google Glass seems to be going nowhere.

Indeed, there are no shortage of tech gadgets and services that disappoint. But failure is not in and of itself synonymous with defeat. Of course, according to Albert Einstein, the definition of insanity is “doing the same thing over and over again and expecting different results.” But Henry Ford also explained, “the only real mistake is the one from which we learn nothing.” Unfortunately, in the tech world we frequently see history repeat itself, yet so many tech giants always seem to convince themselves that their success will last forever. The next time a technology company says dominant forever will be the first such time it has ever happened.

Just as everyone needed a web strategy 15 years ago, in this new, fast-paced environment every company needs a streamlined innovation strategy.

To innovate at the pace required in order to meet expectations, and to also stay ahead of the competition, companies simply must innovate faster. They also need to find a less costly way to engage in research and development, as well as cheaper solutions to ultimately take R&D to the marketplace.

[Patent-Business]

While pumping money into internal research and development is nothing new, even high-flying innovative companies do not have a never-ending horizon, or a bottomless pit of money to invest in innovating. At some point innovations need to fly or companies need to move on. This economic reality is even true for giant companies that dominate their marketplace, such as Google. Just recently the Wall Street Journal published a story about how Google is now placing a two-year time limit on new R&D projects. Either the project will die, be moved into Google from the Google Lab, spun off or licensed out, according to the Wall Street Journal.

Michael S. Malone, a prominent technology writer who has covered Silicon Valley and high-tech for more than 25 years, has also recently pointed out that large tech companies rely on purchasing the innovations of others because they themselves are simply not capable of innovating anymore. Malone goes on to cite Entrepreneur and author Salim Ismail who believes that established companies are simply not structured for speed, which is why they must acquire younger, still entrepreneurial companies.

The fact that large, established companies are unable to innovate is not at all shocking. Innovation overwhelmingly happens in small companies and entrepreneurial start-ups, in research labs and universities. When any company gets too large it loses the ability to innovate. As a company grows decision-making becomes remote and removed by layers of bureaucracy. Large, established companies in the technology tend to be publicly traded companies that have divergent interests and issues that require attention, but which also take management’s eye off the ball so to speak. No longer nimble and responsive, the corporate structure the isolated innovator from executives simply does not support a vibrant innovation ecosystem. Too many layers between a potentially promising innovation and the visionary who can champion the project is precisely why large tech companies buy smaller, nimble, exciting, innovative companies. Apple, Google, Facebook, Oracle, Cisco and virtually every large pharmaceutical company and biotechnology company has fallen prey to their own size and lethargy.

Surprisingly, at a time when many major technology corporations are struggling to innovate, we see utter disdain for patent owners. In at least some corners the term “patent troll” has become synonymous with innovator, or patent owner. So successful has the PR campaign against patent owners been that it seems to have become self evident to journalists and many members of the public that patents are bad and inventors who own them are practically evil. Void from the discussion is any perspective on the real problems facing American companies – namely innovating to obtain a competitive advantage and set themselves apart from the competitors they have today and the competitors they will surely have tomorrow.

The creative power of patents and how patent licensing contributes to innovation is a topic that is simply not discussed today despite the obvious benefits of patents and the synergies that can be created by licensing in technologies. This is unfortunate given that noted economists Robert Litan (Brookings) and Hal Singer (Progressive Policy Institute) have concluded “modestly increasing the number of patents under license, using conservative assumptions of the impact on the economy of increased innovation, could generate social benefits ranging between $100 and $200 billion per year.” Indeed, increased patent licensing, or outright acquisition of patents, will not only help, but will likely become essential for those companies who understand the importance of continually squeezing out innovation as fast and efficiently as possible.