By Christopher M. Kalanje, Consultant, SMEs Division, WIPO. Reused with permission from WIPO. See original article for all references.
Generally put, an ‘innovation’ is developing a new idea and putting it into practice. As this article is focused on the competitive strategy of a private enterprise in a market-driven business environment, the term ‘innovation’ is used here to refer to the process of bringing valuable new products (goods and services) to market i.e., from the idea/concept formulation stage to the successful launching of a new or improved product in the marketplace, or the result of that process, so as to meet the explicit or implied needs of current or potential customers. In other words, through innovation an enterprise seeks to deliver unique new value to its customers. In this context, ‘marketing’ is the understanding of that unique new value and communicating it to the current and potential customers of a business so that the product sells itself.
Technological innovation may be classified in several ways: product vs. process, radical (basic or fundamental) vs. incremental (improvement), and disruptive vs. sustaining (sequential and/or complementary). Other important types of (non-technological) innovations that do not result from scientific and/or technological R&D, but are often crucial for profitably marketing the products and services resulting from the investment made in R&D are: marketing innovation, institutional innovation, and complementary innovation.
In this article, however, the focus is on technological innovations. Nowadays, it is generally accepted that in a knowledge-driven, competitive business environment, technological innovation (hereafter, for the sake of simplicity, simply called ‘innovation’) is a principal determinant of successful firm performance. But differences of opinion persist amongst economists and policymakers about the exact role of intellectual property (IP) in relation to innovation. On the one hand, in theory, the IP system is considered to be absolutely necessary “to encourage creative intellectual endeavor in the public interest,” and on the other, some observers believe that, in practice, the IP system hinders competition to the extent that it is often seen to be playing a negative role in innovation. Hence the need for a systematic and periodic study and review of the actual use by businesses of the tools of the IP system so that economists are able to provide empirical, evidence-based guidance to policymakers to adapt the IP system so that it continues to serve the conflicting private and public interest in spurring further innovation and its wide diffusion in the shortest possible time. This article, however, does not deal with these otherwise important aspects.
Managing innovation better than its competitors is one of the main objectives of a business that wishes to survive and thrive in today’s economy. By relying on practical examples, this article highlights the important contributions made by the effective use of the different tools in the IP system to the process of taking innovative technologies to market, through launching of superior products and/or services. For explaining the role of the tools of the IP system, it goes beyond merely looking at technological innovation as either radical or incremental technological breakthroughs. Instead, it looks upon technological innovation as an interactive process made up of a number of distinct stages. It begins with the formulation of a novel idea/concept and, through a series of stages, ends in the successful launching and marketing of a new or improved product in the marketplace. In other words, it looks at practical IP issues of relevance to different stages in the whole new product development process in which technological innovations may be introduced at different stages of the value chain from the producer to the end user. For the sake of simplicity, it focuses on the idea stage and the research and development stage.
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