Blaxill and Eckardt identify three ways to secure the benefits of IP: control, collaborate, and simplify. Control is the most obvious and easily understood. The success of the Gillette Company (a subsidiary of Procter & Gamble) is often ascribed to its business model: Give away the razors and make money on the blades. This strategy sounds clever, until we realize that it affords little protection from rivals and can hardly explain Gillette’s high performance over so many years. Yes, Gillette has been a relentless innovator, but more importantly, it has protected its innovations with a blizzard of patents. The Fusion and Fusion Power razors, to mention the most current examples, are protected by no fewer than 30 U.S. patents that cover the blade geometry, blade coating, blade guard, pivot mechanism, trimming blade, blade retaining clips, handle design, grip design, system design, cartridge design, cartridge connection, cartridge dispenser, and more. Several of these elements have multiple patents.
Beyond control, companies can capture the benefits of IP through collaboration with others. The Toyota Motor Corporation’s network of suppliers is a widely acknowledged source of competitive edge; less well known is its extensive array of complementary patents and cross-licensing deals that make the idea of imitation daunting to rivals. By dispersing IP among a network of firms with which it collaborates closely, Toyota gains a competitive superiority that is even more difficult for others to overcome. Far from yielding its IP advantage by working with other firms, Toyota cements its IP advantage through its network.
Finally, since complexity adds to unwieldy coordination tasks, the third approach, simplify, emphasizes the benefits of setting industry standards. Here the authors explore the trade-offs between open and closed architectures, showing how open architectures can bestow benefits on companies that set the rules for the interfaces and interdependencies among components in a product design. As a prime example, Blaxill and Eckardt describe IBM’s success with the System/360, which set a standard that other players in the industry were forced to follow. The paradox: Simplicity, far from leading to imitation and irrelevance, can lead to a profitable position of network centrality.
The Invisible Edge is not without shortcomings. The concept of IP can be made so broad as to explain anything that confers advantage, and any success can somehow be attributed to IP. Furthermore, too much space is devoted to Facebook, perhaps an appealing example given its recent success, but surely an atypical example given that it has yet to establish a clear business model able to produce a stream of profits. Yet on balance, Blaxill and Eckardt have produced a fine book that is both insightful and timely. It sets forth a strong intellectual premise but is aimed at a practitioner audience. If anything, the authors’ subtitle sells their book a bit short. The Invisible Edge isn’t merely about taking strategy to the next level. Intellectual property is central to the formulation and execution of a successful strategy at any level. And by the end of the book, it is hard to imagine a successful strategy that isn’t solidly backed up by the protection of intellectual property.
The Importance of What You Do
What enables companies to develop the innovations that are essential to protect? For that, we turn to a second book, Dynamic Capabilities and Strategic Management: Organizing for Innovation and Growth, by David J. Teece, longtime professor at the University of California at Berkeley. The book is not based on original research or empirical findings, and indeed has relatively few examples of specific companies. It is more a collection of articles, written over many years, capturing an evolution in thinking by one of the most accomplished academics in the field of strategic management.