The High Cost of Executives’ Intellectual Property Blind Spots
Strategic business decisions often involve intellectual property, but senior managers’ understanding of salient issues is often limited.
Chris Gash / theispot.com
Do senior executives understand intellectual property issues sufficiently to make good strategic decisions? A study that invited IP experts’ opinions on the question found that 40% have encountered top managers whose grasp of IP was insufficient, leading to poor business decisions. Research data underscores the IP essentials that top executives need to understand and highlights strategic considerations they should keep in mind when setting strategy around intellectual property.
Business leaders know that the unique value propositions a business can offer its customers are the fruits of its investments in innovation. Those leaders ensure that their companies take steps to protect that intellectual property (IP) by filing patent applications, registering trademarks, and guarding the company’s rights under copyright law or keeping its know-how secret. But our research shows that in practice, leaders’ understanding of the nuances of managing IP falls far short of what their own IP experts believe is needed to support sound strategic decisions.
IP rights are tightly connected to business strategy because they don’t just protect innovating companies from copycat competitors; they also enable controlled collaboration and trade of intellectual assets and are critical components of merger-and-acquisition (M&A) discussions. Among top management’s key responsibilities is ensuring that their organization is maximizing the returns on its investments in innovation and IP — and, likewise, understanding IP rights sufficiently to guard against poor decisions.
We set out to gauge the depth of this understanding by surveying senior IP experts and received responses from 47 such individuals with long-term experience in working with and observing executives as they made strategic decisions. What we found is a substantial gap between what these experts believe executives should know and what they judge to be those senior leaders’ actual competence levels based on real-world cases.
Three problems in particular stood out. First, about 40% of the IP experts said executives tend to lack the essential IP knowledge that is relevant for some strategic decisions. More than a third said executives lack knowledge about the role of IP in relationships their company has with other organizations, including corporate transactions like M&As, R&D collaborations, licensing agreements, and contracts more broadly. And more than one-fourth of IP experts said that executives lack the capabilities needed to strategize with IP. Furthermore, our results indicate that senior leaders tend to not only lack important IP knowledge themselves but also seem to neglect seeking IP advice, occasionally even not consulting their own IP teams in a timely way. Given all of those factors, executives seem to underestimate or ignore the value of their IP, and the cost of uninformed decisions.
Below, we discuss the three IP knowledge gaps many executives face, along with critical issues they need to consider and potential ways to address them.
References
i. P. Mayring, “Qualitative Content Analysis: Theoretical Background and Procedures,” in “Approaches to Qualitative Research in Mathematics Education,” eds. A. Bikner-Ahsbahs, C. Knipping, and N. Presmeg (Dordrecht, Netherlands: Springer, 2014), https://doi.org/10.1007/978-94-017-9181-6_13; and D.A. Gioia, K.G. Corley, and A.L. Hamilton, “Seeking Qualitative Rigor in Inductive Research: Notes on the Gioia Methodology,” Organizational Research Methods 16, no. 1 (January 2013): 15-31, https://doi.org/10.1177/1094428112452151.
