How do companies protect their innovative business models from competitors? According to this Idea, intellectual property strategies are often utilized to do this, and depending on what type of company, formal or informal strategies can be the most appropriate. This research looks at four types of business model to analyze the role of IP management strategies in profitable business model innovation.
A company’s business model is the ultimate measure by which it is judged, as it expresses the underlying logic of its business. Most importantly, it explains how it creates and captures value—something The Economist describes as a company’s raison d'être. So how do you ensure something so important remains secure from competition? One way is to use intellectual property (IP) protection strategies.
In a paper accepted for presentation at the 2013 Academy of Management Conference, researchers from the University of St. Gallen examine how formal and informal IP protection mechanisms could potentially be used to protect business model innovation. They propose that different business models should be carried out with specific protections strategies; while some business models are characterized by both a high degree of formal and informal protection, others primarily apply informal protection mechanisms to profit from business model innovation.
Formal IP instruments include patents, trademarks, designs, copyrights, etc. On the other hand, informal protection instruments include keeping trade-secrets, complexity of products or manufacturing processes, a strong brand, qualified employees, loyal customers, etc.
Specifically, they looked at four types of business models:
Overall, they found that all the participating firms took advantage of various protection instruments of both types, formal as well as informal.
Methodology: The researchers interviewed senior managers and collected archival data (such as press releases) from 24 firms. Participating companies came from a variety of industries and included fast food, fashion, music, healthcare and publishing companies. They also visited the Swiss Federal Institute of Intellectual Property to gain further insight into the process of how IP titles are granted.
It is clear from these findings that a firm’s choice of IP protection is contingent on its applied business model. Depending on the current business model it operates in, it might be useful to enhance certain protection instruments in order to generate competitive advantages. As outlined above, certain business models are better suited to certain types of protection.
New entrepreneurs can take the results as guidance for deciding about the business model they want to operate; depending on the current assets they own, they might be more successful running a business model they can protect and consequently capture higher value from. On the other hand, the results can help to allocate resources to where they are needed most.
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