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Smart businesses have a good intellectual property strategy

In the modern economy, the most important source of competitive advantage - in most cases, the only source - is something that too few business leaders understand. It is intellectual property (IP) - the indispensable but unheralded key to understanding businesses, markets and economies.

Today's corporate leaders must prioritise their efforts to understand IP and use it strategically. Businesses which have successfully harnessed their intangible assets are among the world's most profitable companies.

Take Gillette, a business often (and mistakenly) described as capturing a consumer with a cheap platform, the razor, and then making money on the repeat purchase of the blade. Gillette has many competitors all over the world, all of them willing to sell an inexpensive razor and blade combination. What makes Gillette's success remarkable is its ability to sustain its competitive performance advantage over time.

How does Gillette do this? Simply, Gillette is able to create and defend a blanket of protection surrounding its shaving innovations, thereby controlling critical technologies - such as new blade exposure angles, tighter blade spacing and better debris wash-through.

Some of Singapore's leading companies are taking heed of the importance of IP strategy and finding ways to protect and leverage their own innovations.

Swiss shoe company Masai Group International, which was acquired by a Singapore company in 2012, has developed some of the world's most innovative walking shoe technology. Its Masai Barefoot Technologies brand shoes are designed to "simulate the challenge of walking barefoot on soft earth".

In today's knowledge- oriented economy, Singapore's leading companies need to recognise that innovation without protection is philanthropy.

Masai has long struggled with the challenge of protecting its technology from copycats - CEO Andy Chaw calls defending his IP "a constant battle" - but now, thanks to a loan from DBS Bank, Masai will have new resources to defend its patents from infringement, invest in R&D and promote its brand.

The loan was a result of the IP Financing Scheme administered by the Intellectual Property Office of Singapore, which allows IP-rich Singapore companies to raise money using their patents, trademarks or copyrights as collateral.

A Singapore furniture manufacturer, Koda, has built IP-based growth strategies by franchising and licensing its subsidiary brand, Commune, into overseas markets like China. With the assistance of a business consultancy firm, Commune was able to identify gaps in its IP management policies and went on to protect its IP in key markets before franchising and licensing its brand.

In the meantime, Asia as a region has forged ahead with the largest number of IP filings. Asia's trademark and patent filings account for 52 and 60 per cent, respectively, of international filings in 2014. Locally, IP investments in Singapore are also reaching a record high, with trademark and patent filings up 5 and 9 per cent, respectively, last year.

In today's knowledge-oriented economy, Singapore's leading companies need to recognise that innovation without protection is philanthropy. Trek 2000 is a Singapore company that serves as a cautionary tale. The company is credited as the inventor of the ThumbDrive®. However, that was all it "got" as it showcased the world's first and smallest USB flash drive at a computer expo - while its patent was still pending. Soon very similar devices proliferated around the world.

When the invention loses its "novelty" factor, it can no longer be protected. CEO Henn Tan calls that the company's "single biggest mistake". Trek 2000 has since gone on to grow its IP portfolio and has over 600 patents in its name.

This principle applies both to companies seeking to build a sustainable competitive advantage in their core businesses, and at the country level for a nation seeking to build its global competitiveness. There is no longer an effective business strategy that does not include an IP strategy.

•The writer used to be with the Boston Consulting Group where he co-authored its first patent application. He is the co-author of The Invisible Edge: Taking Your Strategy To The Next Level Using Intellectual Property.

A version of this article appeared in the print edition of The Straits Times on September 06, 2016, with the headline 'Smart businesses have a good intellectual property strategy'. Print Edition | Subscribe