The IP advantage

To compete in the downturn, you have to own your strategy or risk losing it

Competitive strategy used to work in two ways. Outside-in and inside-out. Either position yourself competitively in your market. Or work out what makes you great.

Neither approach really works any more for a strategist like Allison McSparron-Edwards (MD of Consultrix Ltd) who specialises in helping enterprises to survive and grow, particularly marketing and communications agencies. In the downturn, she is finding that those who have built IP into their business model are flying. Those who rely on softer forms of knowledge and expertise are struggling.

The trouble is that, on the web, any points of difference between businesses are quickly replicated and lost. You have to tie down securely what makes you special. It can be an uncomfortable lesson for the four-fifths of British enterprises who compete not on what they make, but on what they know.

First, their main asset, brainpower, is in the heads of people who can easily leave. Second, many enterprises tend to confuse financial plans with strategy. "Senior managers do not give enough thought to what makes them different or special," says McSparron, who is both an accountant and a psychologist. "They often set themselves a financial goal of becoming bigger, instead of spending time identifying how they could use IP to make themselves unique."

"In a service company, you are unlikely to capture the core of an idea. But you can break it down. How do you process it? How do you analyse it? How do you bottle it? How do you give it back to the client? Once you tie up the IP rights, you will be in a much better position to offer something unique that customers are prepared to pay for."

McSparron points towards market research companies. Instead of just selling advice by the hour, they offer software applications that can track, for example, the behaviour of consumers. Retailers will pay a premium, for instance, for techniques that can monitor consumers’ eye movements showing how often and for how long they look at different products on supermarket shelves.

To get into this position of strength, first map out all your processes, says McSparron, then see what rights you can secure, as well as making sure you protect associated software. "It won’t create a permanent advantage, but will give you two to four years of protection before everyone else starts to catch up."

McSparron points to how software developers are creating tools over which they have IP control (such as techniques for setting up 'shop windows' online). Once the original cost of programming for your first customer is met, margins on subsequent sales will be much higher.

For advertising agencies, where returns on activities are harder to measure, the challenge is how to develop the kind of applications and tools which can be protected using IP. One route is to buy a digital outfit that already has a competitive advantage based on IP.

Expect to find plenty of other bidders, says McSparron. "They are starting to realise that the rules of strategy are being re-written. In the struggle to differentiate yourself, IP can give you an edge."

Visit the Consultrix website .