Intellectual Asset (IA) refers to identifiable and distinct knowledge, ideas, databases, instructions, and processes that contribute to economic value creation. Hence, intellectual asset management refers to their creation, possession and refinement, and deployment for extraction of economic value from them. They contribute to creating increasing economic value from tangible resources such as labor and materials. Therefore, intellectual asset management practice is vital for creating innovation success stories and advancing productivity.
If innovation is the outcome of the heroic act of a creative genius, why does intellectual asset management matter? Is not a creative spark in the mind of a genius good enough for finding Eureka of success? Ironically, irrespective of the nature of the sparks or heroic art of creative genius, every highly successful innovation emerges in a primitive form. In the beginning, none of them create a sudden flow of profitable revenue from a surge of customers. None of the innovations have the record to emerge as a flash flood, avalanche, or earthquake. Instead, they appear silently—creating little or no revenue. Invariably, people fail to detect latent potentials. If that is true, how have ideas like smartphones, mobile phones, personal computers, television, computer, microwave oven, light bulb, and many more grown into successful businesses, creating jobs, industry, and prosperity? At the root, it is intellectual asset management.
Furthermore, intellectual asset increases productivity, resulting in higher income and profitability. For example, both Samsung and TSMC are in the business of processing Silicon. But TSMC’s net profit (28%) is far higher than that of Samsung, and also many other competing companies, including Intel. The underlying reason has been that TSMC has been doing intellectual asset management jobs far better than others.
Intellectual asset management for higher productivity and earning
Productivity is a measure of producing economic value per unit of resources, like labor and materials. Hence, productivity relates to income. Therefore, we should upskill and work harder, without wasting time. To augment it, we invest in education, training, and physical assets. But advancement in those areas reaches limit very soon. Another very powerful means of increasing productivity and income is the production of reusable intellectual assets and trading them.
For example, a software firm has been in the business of securing work orders in delivering customized software applications. If that company develops each application from scratch, the cost of delivery will keep increasing with the growth of salary. But if that company adopts the management practice of performing commonality and variation analysis, and develops software assets that could be reused in multiple applications, productivity will likely grow up. Hence, intellectual asset management offers the opportunity to keep creating increasing value from the same resources, including how many hours we work. The reuse of already developed assets, at a far less marginal cost than initial R&D expenses, will lead to higher productivity and income.
The life cycle of ideas demands intellectual asset management
Irrespective of the greatness, invariably, all ideas emerge in primitive form. In the beginning, they do produce no or little revenue. Only a small number of customers show interest in the poor quality, costly products. For example, computers in the 1940s (ENIAC) were far poorer than today’s personal computers or smartphones. They were very expensive too. Even automobiles in the 1920s were poorer and also expensive (upon taking into consideration of inflation). To be more specific, in comparison to modern microwave ovens, costing only a couple of hundred dollars, the microwave oven released in 1947, costing $5000, was extremely primitive.
All those great innovative products have been growing through a flow of ideas, making them better and also cheaper. That flow of ideas is at the core of success in the competitive market. Hence, although great ideas may come out as creative outbursts of genius, their success depends on creating and managing intellectual assets.
Incremental progression for keep expanding willingness to pay
As explained, all great ideas emerge in a primitive form. They need to grow, and for that purpose, they need a well-balanced supply of ingredients. For ideas to grow, ingredients are intellectual assets—complementary ideas. Instead of a sudden creative outburst, a systematic flow of ideas, lasting over years and decades, should be ensured. Not all those ideas will be created by the initial idea generator. Instead of solo activity, such idea flow creation becomes a team endeavor. Furthermore, not all those ideas will be generated internally. Many of them will be sourced from the outside and refined internally. Moreover, as opposed to random creative outbursts, those ideas should be aligned in creating a growing willingness to pay and fending off competition. Hence, there is a need for intellectual asset management.
Sustaining innovation for dealing with competition
Once an innovation starts showing a possibility of generating growing, profitable revenue, competition starts responding. Responses start showing up as replication, imitation, innovation, and also substitution. As a result, despite the greatness, the willingness to pay for innovations starts drifting downward. Hence, innovators need to keep building knowledge, ideas, and intelligence for responding to sustaining innovation challenges. To push the willingness to pay up, innovators are compelled to keep releasing successive better versions, preferably, at less cost. But how is it possible to offer increasingly better quality at a decreasing cost? It appears to be an absurd, conflicting proposition. Yes, it does. Fortunately, the intellectual asset offers the option of improving the perceived value, while reducing the need for tangible assets.
In retrospect, such a reality is at the core of the success of most of the innovations. For example, in the beginning of life cycle in 1947, the Microwave oven used to be a 750 lb machine, consuming 3Kw energy. But the contemporary one is far lighter, consuming far less energy. But this less costly oven does the quick heating job far better than the initial one. At the core of this success is the growing intellectual asset base. Similarly, innovations like TV, computer, light bulb, and mobile handsets are diffusing deeper into society due to innovators’ success in intellectual asset management.
Intellectual Asset Management for creating scale, scope, and externality effects
The three most important key performance indicators (KPIs) for making innovations successful are economies of scale, scope, and positive externality effects. For increasing the scale, we need to succeed to reduce the cost and increase the willingness to pay among a growing number of customers. But how to make it happen? Does it happen as a social phenomenon like the way Rogers explained in his theory of Diffusion of Innovation (DOI)? Well, perhaps, not much. The underlying driving force of creating the scale effect has been due to the success of intellectual asset management. For example, a 5MB hard disk drive weighing 1 ton would have no way penetrated into the backpacks or pockets of students.
Like the scale, economies of scope are another very important attribute for reducing the cost and also increasing the quality. If innovators target to develop a family of products around a common intellectual asset base, the cost goes down due to reuse. Sometimes, quality also goes up due to commonality. For example, Apple has developed its products around the same software assets, giving similar user interfaces. As a result, the cost has come down and quality has gone up.
It appears that at the core of innovation successes and productivity growth of resources, a reusable intellectual asset base plays a vital role. To leverage it, a consistent flow of knowledge and ideas should be created. Hence, the focus should be on intellectual asset management.
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