Profit From Change

Change is Coming

Virtual reality (VR) format for mainstream motion pictures is on the horizon, and is certain to be a major industry disrupter. Not only will it dramatically alter the experience of movie-goers, it will require a complete change in how directors approach movie-making. Some will use VR as a cheap thrill technique. But visionary directors will develop new techniques using VR to tell their stories in new and amazingly immersive ways. They will change the industry and make piles of cash.

At a recent CES seminar, I listened to a prominent entertainment industry luminary declare that it will be at least 5 years, and more likely 10, before we have the technology to shoot movie-theater quality VR motion pictures. He further claimed that these would be shot at a cost of about $100k/second. This man appeared, to me, to have a bit of fear of this approaching change. Fear may have driven his doubt of the technology, and clouded his awareness of the rate of change.

After that session, I walked to the next hall of the Las Vegas Convention Center. And there it was! A fully functional prototype VR camera, with the capability to shoot 4k resolution video, and capture stereo sound. It even had a drone mount. Available not in 5 years, but now, and priced at $599.

See Change & Embrace It

Change is happening at a faster pace and at a larger scale than ever before. At D2 we recognize that the coming changes are not limited to technology. We are seeing massive cultural shifts and personal behavioral changes occurring across all types of markets (electronics, entertainment, industrial, medical, and education, to name a few). These rapid changes are having a global impact. Many leaders can “feel” the changes coming. This “feeling” seems to elicit one of two responses. One, driven by fear, is to hunker down, ignore the signs, and do more of the same. The other, driven by excitement, is to seek to understand the change, embrace it, and look inside it for new business opportunities.

Executives who choose the second path are leaders that are both fearless and sophisticated. They are the ones who are, at the same time, both broadly visionary and fiscally responsible executives. They understand that being frugal is vital in today’s economy but, at the same time, realize you can’t cost cut your way to growth.

Answers Are lnside

Many of these next generation leaders are turning inwards, realizing the value that is being produced by their own employees. These employees are the people living the day-to-day operations. They are experiencing the new problems and challenges that impact the business. They have ideas and solutions. Some of these ideas should be turned into patents. Some of the most valuable patents are simple solutions to emerging problems.

Typically, many of these internal ideas are incorporated into the business but then just forgotten in the daily shuffle. Other times internal ideas are “just left out in the open” and allowed to be picked up by suppliers or - even worse - competitors.

Many executives view patents as a legal defense tool best left to the corporate attorneys, but this is old school thinking. The broadly visionary and fiscally responsible leaders see intellectual property as powerful business tool.

How powerful? According to a recent Forbes article, one estimate claims that intellectual property now comprises over 35% of the total U.S. economy. It also states that IP and other intangible assets represent 80% of the market value of publicly-traded U.S. companies. Venture capitalists have told me that this number climbs to nearly 100% for many small companies and startups. This can be especially true for software companies. Everything else is vapor. Their entire value is in the IP.

Source: abfjournal (January/February 2016)

Profit from Change

Let’s look at a few specific corporate examples: In 10 years, IBM saw patent-licensing royalties rocket from $30 million to over $1 billion annually. Xerox planned royalties to go from $10 million to $200 million annually. Texas Instruments (TI) created a patent royalty effort out of desperation. They faced bankruptcy. It is now estimated that TI generates $800 million in patent royalties annually. These are only a few examples that demonstrate how patents can move from intangible and invisible assets to making a significant contribution to the bottom line.

Now let’s look at the impact of just one concept: the Amazon “1-Click” buying process. Experts have estimated the value of this intellectual property to be worth billions. Amazon both patented the business method and trademarked “1-Click.” As I said earlier, the best patents are the simplest solutions to emerging problems. What was the problem? Customers could have online buying frustration or even second thoughts. This would occur when the customers had to get out their credit card, then type in all those numbers, as well as all their required personal information. It was a stopping point in the buying process. That stopping point often led to abandoned sales. “1-Click” eliminates that stopping point.

It is a big idea. But is it worth billions? Yes indeed, worth billions every year! Amazon’s 2015 revenue was listed at $105 billion. If you only conservatively grant that the ease of “1-Click” increases conversions at checkout by 4%, that translates into $4.2 billion in added revenue for 2015 alone.

When you have a simple idea, many people will try to argue that it is not patentable. That it is too simple. But Apple thought enough of the “1-Click” patent that they licensed it from Amazon in 2000. Apple incorporated “1-Click” into iTunes and the Apple App Store. Just think about how many songs you have ordered, or apps you have downloaded impulsively, with the simple click of one button. Buy! Boom! Again, the best patents are the simplest solutions to emerging problems.

The Patent Path to Profits

Before you can realize revenue from intellectual property, you have to obtain patents. Don’t just rush out and start. You might end up with nothing but a pile of large expenses. Understanding what is patentable requires professional assistance. Understanding the rules, requirements, and overall process dictates experienced guidance. These items are nonnegotiable to the United States Patent and Trademark Office.

Recently, one of our customers told me that they thought the language and drawing requirements for patents were insane. I think they partly believed that we made them up. They wanted to rewrite their patent applications to read and look more like a marketing press release. Of course, my response was, “You are the customer. You have the right to do as you please. But my advice to you is this: don’t do it! Because, I have seen people go-it-alone this way and every time they fail.”

Even knowing how the process works, and what the rules are, is not enough. You need to determine the practical business value of a patent portfolio. To do that requires a thoughtful integration with the company’s business strategy and goals.

Finally, most organizations will need a culture change to allow the rank-and-file to see the patentable value in their day-to-day work. This is doable. And once you start a practical patent program, you will be amazed at the creativity that you unleash in your employees.

Patenting profitably is not easy. But, if you tie the effort to your corporate strategy, plan out the program, learn the rules, and do the hard work, it will be worth it. You will find piles of profit hidden right in your workplace.

Can you see the change coming? Will you be able to embrace it and profit from it? Or are you going to leave that money on the table?

Tony Olson is the founder of D2 Worldwide. D2, with its patent agents, engineers, and business-minded professionals, has helped companies - from startups to large corporations - strategize, plan, and develop impactful and profitable patent portfolios. We have even helped change company cultures to with our behavioral science approach.

To learn more about D2's IP services, click here.