The Accelerating Pace of Innovation

The Accelerating Pace of Innovation

The world of intellectual property is advancing at an exponential rate. Unlike the early industrial era, where a span of years or even decades occurred between major technological breakthroughs, we are now in an atmosphere of constantly evolving innovation. What this means for businesses is that in-house research capabilities will not be enough to be competitive anymore. Effective R&D now occurs on an open, global scale—gone are the days of isolated laboratories, garage workspaces and independent contributions. In its place is the rise of the university research lab, built on a world of academic expertise, with complex ties to enterprises that can harness their developments for mutual commercial benefit.

Just this month, Tesla overtook Ford (est. 1903) in market capitalization. This means a 14-year old company is teaching an industrial icon the necessity of staying astride of the reshaping innovation landscape. The new valuation is not on the basis of profitability or balance sheets, where Ford is clearly in a better position. Instead, it prices in a hypothetical future that Tesla is helping pave, over a legacy automaker whose entrenched and depreciating market share is becoming increasingly vulnerable. Tesla is more valuable than Ford not because of their profits or market penetration, but for the power of their ideas, and the ability to execute their innovations quickly. While the comparatively nimble Tesla is essentially innovation incarnate, the old, sluggish auto giants are struggling to reconcile the out-of-date aspects of their business with the new worlds of shared, autonomous and electric transport. This is how Tesla, hinged entirely on emerging technologies, can compete with an experienced, major manufacturer. Investors are realizing the weight of intellectual property. It is the paramount asset class in today’s market, more valuable than material resources and revenues, because of its potential to revolutionize industries overnight. So while Ford struggles to maintain market share, Tesla is framing a new future from scratch.

Although now most innovation is open innovation, the companies that were the first to recognize the strength of bringing in external discoveries have become more successful than their intrinsically-oriented counterparts. When a company begins to adapt to open innovation, it is suddenly conducting research on a global scale, leveraging discoveries from all over the world to enhance its products and/or services. A key example of success from adoption of open innovation practices is one of the world’s greatest consumer good companies, P&G (est. 1837). Around the turn of the last century, even though P&G had the vast majority of its products developed in-house, former CEO A.G. Lafley recognized that it was no longer enough. He created the Connect+Develop division to capture groundbreaking IP from external sources. This gave the company the edge it needed to maintain ubiquity in the 21st century, and gave rise to several their most popular products today. Perhaps one of the best features of the program is that both innovator and licensee come out as victors—P&G gets new, competitive products from their research network, and the external innovators get more revenue from licensing agreements, royalties and the value of the P&G brands. Open innovation agreements from P&G alone have generated over $3B in revenue for their research affiliates. This demonstrates the necessity of open innovation in maintaining a competitive edge.

Professor Henry Chesbrough, the coiner of the term “Open Innovation,” makes several solid arguments for outwardly-focused IP development strategies. One point he argues is that companies can help maintain positive revenues by not only in-sourcing external technologies, but by also by redistributing their own IP that is not in use. This is a much a more fluid, parsimonious system than the old brick-over-brick methods of strenuously developing IP internally. He envisions a perfect company as being able to capture and market IP from any source. This entails not only finding external IP relevant to a product line, but also being able to seamlessly integrate innovations from varied provenance. A company that can do both of those things is poised to be a game-changer in any field.

Online giant Amazon (est. 1994) is another example of a company using a more open model of development. Everything Amazon does internally, they replicate for their users for a price (such as their web services and self-publishing platforms). And since anyone can sell almost anything on Amazon, it effectively captures new markets as a sales channel in an unparalleled fashion. Amazon’s business is scalable on a new level, as it literally captures and redistributes everything worthwhile it encounters or creates. Consider the way Amazon tracks down and sells new products as an analogue to the way P&G acquires new innovations—both are forms of open exchange, and both are powerful conduits of business development. This shows that the open innovation model works on several levels, and that a company in a closed ecosystem can no longer be competitive.

Research institutions aren’t immune to the increasing speed of innovation either. Neil Veloso, the executive director of technology transfer at Johns Hopkins Technology Ventures (JHTV), came up with “2-2-2” program. The program’s intent is quite simple—inventors who submit disclosures can expect initial contact from JHTV within two days, a scheduled meeting with JHTV personnel to discuss the innovation within two weeks, and a decision on whether or not JHTV will patent the discovery within two months. This commitment to resolve invention disclosures within two months demonstrates awareness of the rapidly changing IP landscape, where the value of innovations is extremely time-sensitive. This is especially notable since an office like JHTV processes almost 500 disclosures a year.

Ray Kurzweil, inventor and futurist said it well: “We won’t experience 100 years of progress in the 21st century—it will be more like 20,000 years of progress (at today’s rate).”

Tekcapital can help you keep up with the rapid pace of innovation. Use our Invention Evaluator and Discovery reports to find powerful, curated university IP to stay at the forefront of your market.