Boon Xie, Founder and CEO of WTOIP
IP-Aware Business: a Necessary and Inevitable Development in China
Innovation Driven Development
Innovation driven development is a relatively new concept, and was completely unheard of before the Eighteenth National Congress of the CPC. For the first time, businesses are encouraged to consider innovation as a competitive strength and as a means of creating value. Innovation takes its place alongside all the other familiar management measures and components of business strength.
IP is one of the key elements in innovation driven development. Previously rarely understood in China, IP is now increasingly recognised as central to business competitiveness. However, if a company’s awareness and practice of IP begins and ends with registration, it will not be using its assets to maximum effect. A vigorous IP policy will commercialise and monetise these assets, enhancing the company’s core competitiveness.
Commercialisation, Industrialisation and Financialisation of IP
Monetising IP can involve three separate practices. The starting point is commercialisation, which I define as treating IP as a tradable commodity and maximising its value in the market. This creates the flexible distribution of IP resources. The term “industrialisation” of IP refers to using IP in a company’s products, services and businesses, and assisting enterprises with upgrading and developing their infrastructure. The term “financialisation” of IP means that capital is used to encourage innovation, so that financial rewards can be given to investors as enterprises grow rapidly. If IP monetisation is a car journey, commercialisation is the vehicle, industrialisation is the route it takes, and financialisation is the engine that drives it towards popularisation, its destination and the ultimate value of IP.
We have built the car and we are mapping the route, but we have not fine-tuned the engine. Much more needs to be done to develop the financialisation of IP, which can yield significant returns over the long term, as Wall Street and Silicon Valley have shown in the past two decades. Shrewd investors show great enthusiasm for companies with core IP or innovative business models.
To reach these investors, businesses need to become IP-aware. I first suggested the concept of the IP-aware business which was originally mentioned in Chinese as “知商” in contrast to the many enterprises that paid inadequate attention to their core competitiveness, that had become addicted to discount sales online and gained market share in China solely through price wars. Gradually the emerging concept of the IP-aware business has been popularised in China in the recent one year. Any individual, enterprise or entrepreneur, scientific research institute and laboratory who creates, protects and utilises IP, is IP-aware, and the eco-system that they comprise is an “IP business circle.” In my view, only when a business has innovation at its core can it be regarded as entrepreneurial. A business without innovation will end just in failure in the age of the knowledge economy.
Undoubtedly innovation is important, but the question remains of how to weave innovation into the core fabric of an organisation’s development. Here, the model of the sharing economy provides some good examples. Essentially, the sharing economy uses information technology to create value through the redistribution, sharing and reuse of excess or idle capacity in goods and services. Participating in the sharing economy is easy and inexpensive; its benefits are available to individuals, corporations, non-profits and governments alike. This theme has been explored in articles such as Ride On! Mobility Business Models for the Sharing Economy (Cohen, Boyd; Kietzmann Organisation & Environment, January 2014); The Sharing Economy: Why People Participate in Collaborative Consumption (Hamari, Juho; Sjoklint, Mimi; Ukkonen, Antti, Journal of the Association for Information Science and Technology, 2015) and From Zipcar to the Sharing Economy (Arun Sundarajaran, Harvard Business Review, January 2013).
Finally, I have to say that with the rise of China’s middle class, the current e-commerce model based on inferior products in China will not last long. Because of the increase in consumer power, expectation of products and services quality will surely be higher. Enterprises can no longer rely on business models that involve selling fake or defective products at a low price to attract customers. I strongly believe that strengthening enterprises’ innovative abilities and helping them obtain their own IP should enable enterprises to regain their core competitiveness and embrace a brighter future.
IP-aware businesses will increasingly be a necessary and inevitable feature of China’s business landscape.