In the early 2000s, two sentences began to appear on Apple’s devices that explain better than any model what’s happening to how companies capture value: “Designed by Apple in California. Assembled in China.”
Two sentences, that point to two very different levels of profit at two very different stages of the value chain. In business school jargon this is know as the migration of value downstream and it means that the big bucks are increasingly to be made in the design and delivery of distinctive products and services rather than in the creation of the components that go into those offerings.
Many of today’s most prized assets are intellectual property or IP; that is, creative ideas and inventions. Companies and individuals are finding themselves trading on their intellectual assets rather than their physical ones - on their wits rather than than their weight – this is what’s been referred to for a long time now as the knowledge economy.
Whether you are an individual or an organisation in this type of economy, it is your intellectual capital that makes up the bulk of your offer and maintaining profitability and competitiveness is in developing and protecting that IP.
There’s a trick you can use to identify what your own IP might be.
Making money from ideas usually depends on protecting them. Just as insurance protection can sometimes be a proxy for an asset value, legal protectability can be a test of an idea’s potential value. The law protects IP in a number of ways depending on the idea: content is protected by copyright and inventions by patents. Even if you’re not looking to legally protect your intellectual capital ask the following questions
1. Are my my ideas original and tangible?
Copyright does not protect ideas themselves – it protects the expression of those ideas. To be copyrightable a thought – no matter how clever – needs to be original (meaning truly your own) and recorded in some form. So if you want to treat your ideas as assets you need to flesh them out and get them down be it on parchment or PowerPoint.
2. Does what I’m offering present something really new and useful?
Not every invention is patentable and not every product is really distinctively new and useful. Only an invention that has the following qualities can be patented: it is new, includes a non-obvious inventive step, and is applicable to industry in some form.
But there’s a catch…
Depending on the way your idea is captured you might end up giving it away for free.
Vast swathes of what used to be strictly copyrighted and protected content are now available (via channels legal or other) with no price tag. This has pushed down the price people are willing to pay for the content of your ideas alone – be it music, opinion or expertise. And it’s not just cheap imitations. Freemium was coined to describe the freely available premium content that disrupting many’s a business model.
So while as buyers we all still want news and art and education and music it is no longer entirely clear just “how” to be a newspaper, or an artist, a university or a musician (at least one that makes profits).
What’s a business to do?
In some ways its back to basics. To survive long-term in any industry or indeed role you need to be adding value. Knowing how to capture some of that value for yourself starts with truly understanding the distinctive value you are offering to the customer. Once you understand the customer’s experience you can seek to zero in on and nurture the distinctive elements that you have that go into improving that experience. If those elements aren’t physical labour or assets this means you must truly understand the value of your intellectual capital.
Start thinking about what you or your company has to offer using the two questions above and you’ll be on the first step to knowing just how far downstream you are.
Eva Maguire is Strategic Projects Manager at IMI, currently leading IMI’s research project into management practices and productivity which seeks to globally benchmark the management of indigenous and multinational organisations operating in Ireland.