Monthly Archives: August 2010

Accessing IP from the big end of town

He’s an interesting thing, the most prolific inventor currently in the world (by number of US patents lodged) is actually an Australian by the name of Kia Silverbrook. Kia runs an outfit called Silverbrook Research out of Sydney.

However the most prolific companies are the usual suspects. According to CNET in 2009 the most prolific companies for the year were:

IBM with 4,914
Samsung with 3,611
Microsoft with 2,906
Canon with 2,206
Panasonic with 1,829
Toshiba with 1,696
Sony with 1,680
Intel with 1,537
Seiko Epson with 1,330
HP with 1,273

Unfortunately, the vast majority of these patents will never see the light of day as their commercialisation is not expected to meet their internal ROI requirements.

Which got me wondering “what could they do with all theses patents?” Now if you were someone like Dr Terry Cutler or Henry Chesbrough you would be arguing for open innovation, or allowing everyone to access to each others IP. However the thrust is way to “trust me you will make money in the end” for my liking and the focus is also on intermediary services such as IXC that allow behemoths to talk to each other.

It has occurred to me that maybe these patents could also be made accessible to the Australian SME’s. I would argue that the role of the startup in a market, is to validate if an idea, product or serviced is valued. If its not valued, the business will fail, but if it is valued, the startup will be snapped up by a large enterprise that’s in the market to purchase validated solutions, not take commercial risks themselves.

So here’s my idea – perhaps I should approach the guardians of this IP and make an offering along the lines of the following.

  1. I would like a non-transferable licence some of your unused IP, that looks good but is not estimated to meet your ROI requirements, for say $1,000 and potentially 10% of the equity in my business.
  2. You have the right to purchase the remaining the equity in my business for 5 x the net tangible assets for 1 year.
  3. You have the right to purchase 10 x the forecast of the next years revenue, for up to 3 years.

It seems to me that this type of purely commercial solution allows the big end of town to open up their IP portfolio’s in a win/win scenario, as well as winning kudos for not being a knowledge fortress. The other side of the coin is that small dynamic companies can do what they do best, and validate whether the IP actually has value. They will be rewarded if it does, without having to commit large to their own R&D spending.

Perhaps then those with the largest numbers of patents, can win in other ways as well?

Do you have the right background to win at small business?

A source of regular marital disharmony at my house is how issues at work should be solved. The end point of these conversations is generally one of us not speaking to the other for 10 minutes. My wife has spent almost her entire career working for large enterprises. I however have spent the majority of mine working in small businesses. So it appears to me that the skills and behaviours required for success in big v’s small environments, are completely different.

Consider this:

For big business, Strategy means “what will next years business look like?”, for small business it means “how do I survive next month?”

Market Research at the big end of town means crafting the right questions when you prepare a brief for consultants, but in small business it means having a relationship with your customers.

Sales for big business is about recruiting the right channel partners or designing your retail footprint, in small business is about closing the deal.

When it comes to accounting, for big business the issue is around selection and application of accounting policies, in small business the major focus is on getting your bookkeeping processes right.

When it come to financial reporting, the focus for big business is preparing financial reports for an external audience of analysts and shareholders , but in small business the financial reports are mostly prepared for an internal audience of management.

Good financial management at the big end of town means optimising your risk / return with your investing and financing decisions. In small business it has an almost purely operational focus, such as managing your day to day cashflow.

Valuation of assets or business units is based in comparative market data for the big end of town, but for small business its about discounted cash flows and value being in the eye of the beholder.

Supply chain management means investing in relationships for big business, but for small business it means getting the best from each transaction.

IT control means policies and methodologies such as ITIL for large enterprises. For small business it means managing your licences and anti-virus.

With HR, the situation is even different at a legislative level. For big business its about workplace rights and legislation. For small business the focus is about getting good people and keeping them.

And finally, when you talk about change, its a project for big business, where as for small business its part of the fabric of every day.

I’m starting to think that the word “business” is so generic that its meaningless. Perhaps Universities should run Commerce degrees streamed for small or large businesses, because the skills required for success are almost diametrically opposed. It seems to me is that the fundamental difference is that to be successful at the big end of town, you need to specialise, but at the small end of town you will die if you aren’t a bit of a generalist.

For me the “proofs in the pudding” evidence is that I have noticed that whose who are successful at the big end of town almost always fail when they invest their payout into a small business, and small businessmen just can’t seem to grasp the necessary behaviours to be successful when they sell their organisation into a big business.

Of course, we disagree about this as well.