Innovating for break-out value

Give your IP the agility to put purpose before solution and open up the potential for multiplying its value, not once but several times, says Robert Klinski at Patentship

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Robert Klinski

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For now, you might still be able to afford to innovate in the classical way. Research a technology. Engineer an application. Secure the intellectual property in the solution. However, at each stage, you are going to find value leaking away.

Money is spent on exploring technologies with no certainty of making a return. It is then up to the engineers to find a purpose for it. Typically, 97 percent of the IP that you file will never show a return. The calculation is that it won’t matter: the 3 percent more than compensates.

In any case, the IP is such a comparatively minor cost compared to research, development, production and marketing that it can easily be absorbed without anyone taking too much account of it. It represents a comfortable, if wasteful, equilibrium for everyone.

As a model, it is becoming less and less sustainable. Innovation is being turned on its head. The break-out value lies in the early, disruptive stages. It depends on defining the problem first. Where is the pain being felt by the customer? What is the problem you can solve? Once you define your purpose, you can then trigger the scientists or engineers to find a solution. It’s a pattern that disruptors have followed for some time and which industrials like Siemens are starting to adopt.

You cannot expect engineers to be radical thinkers. Their role is to implement solutions, not create them. However, the resulting IP then arrives on a market that has already started to grow. Inevitably, you will find yourself competing against other solutions. Yes, you will have your share of the growth, but it will fall well short of the dominance that IP has the capability to deliver.

Over the last 20 years, valiant efforts have been made to fix these shortcomings. We innovate more openly. We collaborate more fully. However, we remain reluctant to share our best ideas when we aren’t sure how they will be owned in future, particularly as the tendency with digital is for much of the value to migrate to the top of the chain. Why innovate if the rewards end up elsewhere?

Nor does open innovation solve the problem of launching IP into a market that is already active. Your returns are inevitably going to be less than stellar.

So how you can solve this dilemma? How can you give yourself the chance of being in at the early disruptive stages of a market when the IP in your solution could sweep all before it? What would happen if you turned your innovation practices upside down and gave more weight to the most agile element in the chain of creating new value, your IP?

As a first step, why not release some of the 97 percent of what you spend on IP that never sees a return? Then give your IP team the freedom to scan the horizon. They have the knowledge to talk to engineers and see what future problems require solutions. Once you find a purpose, the IP can be framed around taking away the pain your customers are going to feel and you can start to talk to your engineers about creating a technical solution that is simple enough to become a product.

Such early-stage IP has the potential to become a disruptive technology that can dominate a market for the next few years. The IP is all within your own domain so there is no question of sharing it. It remains speculative, of course. The IP may well fail. However, you are investing far less that you would in a research programme or a collaboration. So you have more scope to move swiftly to the next potential solution.

By making your IP agile, you are giving yourself a highly efficient option on future growth, as some investors in early-start technologies are starting to recognise. Why fund the whole infrastructure of personnel, premises, exploration and testing in a start-up to test an idea when it is just as likely to fail as IP?

By contrast, IP comes at a fraction of the cost, so you can afford many more failures. If it is agile, you will have already established its purpose. If it gains any traction, you can invest in developing a solution with more certainty than giving a start-up two to three years to prove itself.

So let’s see how this logic stands up in an area of technology which has consistently seemed just out of reach: quantum computing.

Quantum value today

The closer quantum computing comes to reality, the more urgent becomes the challenge of managing one of its side effects. Because it so radically transforms processing power, none of the algorithms on which online security has depended up until now will be secure.

Most solutions rely on creating smarter chips: however, they are vulnerable because they are software to software. What if you could create the security in the hardware of a device itself, making it much harder to access?

It’s a solution that is being pursued by a team of Polish researchers. What are their options for securing their IP? Do they try to take a patent on a platform technology that may well be superseded? Or do they explore what the market is likely to demand and protect those applications instead?

In this way, they are creating a series of options on high growth. They only have to implement them as and when the market takes off. Otherwise they can drop the application and move onto the next without incurring any costs in trying to take it to market. By thinking about the purpose of their IP first, it gives them the agility to catch a market early.

Innovating with purpose

In In this scenario, IP acts as the convenor. As a purely mental discipline, it has the capacity to identify and express a problem after talking to engineers, marketing and sales. You’re not inventing out of the blue. You’re innovating for a purpose.

You are defining high-level functional solutions without necessarily having to implement them as yet. In the case of quantum computing, you might typically combine the evolution of chip design with trends in hacking to extrapolate what breaches could occur.

You’re not sitting around waiting for a genius idea. It’s more like triage: you bounce ideas back and forth, until you have something tangible that resonates with the market. Because it’s an option that doesn’t require testing and implementation as yet, it can create significant value almost immediately. In one case, we filed a patent for €5000 and sold it the next week for €3 million. Other patents may go nowhere, of course. However, it is more efficient than waiting for two years for a start-up to test out the idea.

Once you have proof of concept, you can give your IP to your engineers to invent a solution. That way you can stop yourself burning their time and money unnecessarily.

Establishing IP as an asset

When innovating with purpose, IP holds more appeal for investors: it is held in a series of blocks, each of which has the potential to be first to market and exclude others. The costs of implementation are only incurred once the IP has proved itself.

The upshot is that you can develop each application one by one. If the first one doesn’t look like working, then you can switch to the next. Alternatively, you can focus on the most promising candidate, then license or spin out the others.

Because each version of the IP stands alone, you could sell different versions of it two, three or four times, either as a licence or as a start-up. In each case, the buyer will be gaining the rights in a clearly defined asset with an established purpose for potential customers.

Where the value of your IP starts to multiply is when you establish the right to prohibit others from the market. It’s partly down to your willingness to litigate, although you could negotiate instead or sell your IP to someone who is ready to take action. What matters is your ability to exercise all those options.

Such agility makes IP a commercial product in itself. As an example in its purest form, look at Huawei, the Chinese telecoms manufacturer, whose products are now largely excluded from Western markets. However, it has remained a highly competitive performer by relying on IP as its primary asset. The same will become increasingly true for most high-growth tech ventures.

Conclusion

At full power, R&D is a magnificent battleship, but it struggles to adjust course. You may be developing groundbreaking technologies, but without a purpose, you will be burning money and time. So redeploy your forces. Make IP agile enough to scan the horizon and link up the insights of your engineers and customers. You can then create a series of options to implement not when growth is already happening, but for when it is about to take off. Even as a small player, it’s what gives you the potential to disrupt and dominate.

• 'Innovating for break-out value', an article by Robert Klinski ,first appeared in Managing Intellectual Property Today, 2025 edition, published by Novaro, ISBN: 978-1-0685644-1-3. See here for further details.