Innovation Risk Management: Evaluating Your Freedom To Operate

Innovation risk assessment and management is crucial when it comes to innovation management. Companies must ensure that their products, processes or services do not infringe on the patent rights of others.

Failure to do so will result in your company learning the hard way. This because litigating patents is always risky.

Some companies have infringed on other’s patents and ended up paying damage and legal costs to the patent owner typically higher than the license fee would have been.

It is therefore imperative that the importance of innovation risk management should be well understood by all firms, regardless of size.

Small or medium-sized companies who do not possess adequate patent portfolios to make cross-license agreements should carefully consider freedom to operate strategies when planning their product and marketing strategies.

Innovation risk assessment is much broader than FTO analysis. Provided by patent agents and search providers, FTO analysis helps companies determine whether it is safe to produce and market a product or technology without infringing or violating third party intellectual property rights.

Freedom to operate search is made primarily for the purpose of evaluating the risk of market entry and is common practice in pharmaceutical, electronics, engineering and other technology-based companies.

Innovation risk assessment, which is aimed at minimizing innovation risks is performed prior to product development.

This is crucial as it helps you identify patent rights that can restrict your business; gives you an overview of the technological field you are working in.

You may also get further information on your competitors, what alternative technologies might be entering the market and where your competitors are most active.

Innovation risk management may even reveal potential new opportunities for you.

During times of economic downturn and growth, companies must carefully consider where to invest. They need to know which R&D projects have a higher risk of failure hence the importance of minimizing risks.

Bear in mind that innovation risk assessment is not based on gut feeling. Decisions must be made based on facts and information.

Thus, when initiating new R&D projects, management must invest heavily in sufficient development and employee resources.

Prior to launching a new product and even prior to starting a new line of research aimed at developing new products, companies should seek to minimize the risk of infringement by securing their freedom to operate.

You don’t want to be in a situation whereby you first spend years developing a new product, start a massive marketing campaign and then successfully launch the new product only to receive a warning letter that you have infringed someone’s patent.

Should this happen to you, all the money and efforts spent on the development work could all go down the drain. It is crucial then to make sure that the evaluation of the freedom to operate is a permanent part of the development process.

The evaluation process should be a routine process, done more than once, at least during the early and late stages of the new product development process.

A good FTO analysis and innovation risk assessment gives you sufficient ground and basis for good insightful decision-making on R&D projects as well as market entry.

When carrying out an FTO analysis, you need to get hold of all the patent literature for issued patents and pending patent applications.

Thereafter, you must obtain legal opinion on whether a product, process or service may be considered an infringement of someone’s patent.

However, it is especially important to understand that a successful FTO analysis normally happens in two steps.

First, get an overall view of the patent situation in order to get a rough estimate of the patent landscape in the selected technical field.

Secondly, perform a detailed patent search and analysis in order to identify potential risks, i.e. patents that might be harmful.

Once you are satisfied with the number of patent documents available, you can then start evaluating the validity of the patents, their territorial coverage and interpretation of the claims in view of the law in each country.

Interpreting patent claims requires technical understanding as well as in-depth knowledge of national patent law and patents in general.

It is therefore highly recommended that you make use of specialized patent lawyers in Intellectual Property (IP) firms that offer FTO analyses as part of their legal services to clients.

There are instances where your FTO analysis reveals that there is a patent(s) that limits your freedom to trade. In this regards, you must decide how to neutralize these risks.

The neutralization strategy you choose to use must be in line with your business strategy.

Neutralization is a strategic business decision that requires consideration of the overall situation and not just what risks the specific patent poses.

The most common neutralization strategies used are neutralization by in-licensing or cross-licensing, neutralization by designing around the patented invention, neutralization by co-operation and neutralization by invalidation.

When patenting, ensure you are aware of the general limitations of patents, because these may offer potential opportunities to others. Patent protection is territorial, there are no world patents.

Patents have limited lifetime and also scope of protection.

Concluding Thoughts: Despite the general limitations of patents, they are still powerful business tools that can be used to improve you freedom to operate.

Patents give you competitive advantage, an exclusive right to your invention and can be used for cross-licensing. Innovation risk assessment is still important for successful new product development and launch.

It ensures that the commercial production, marketing and use of your products, processes or services does not infringe the IP rights of others.

This will in turn help you identify potential risks and avoid paying more than normal damage and legal costs in the event of litigation claims being raised against you.

Thanks for sharing:

Leave a Reply

Your email address will not be published.

Subscribe to get notified of new posts by email

Recent Posts

Categories

Leading in Uncertain Times

One of the biggest challenges facing business leaders today is making the right decisions that will ensure their organizations succeed, survive, and remain competitive in an increasingly uncertain and complex environment.

A recent post, The best way to lead in uncertain times may be to throw out the playbook, by Strategy+Business has several good points.

The article is about the COVID-19 pandemic, how global companies navigated through the crisis, and how best to prepare for future disruptions. Here are some key points and my comments.

  • Rather than follow a rigid blueprint, executives must help organizations focus on sensing and responding to unpredictable market conditions.
    • Comment: Senior leaders play a vital role in providing clarity about the organization’s strategic direction, creating alignment on key priorities to ensure the achievement of enterprise objectives, and ensuring the business model is continuously evolving to create and capture value in the face of uncertainty. They must not rest on their laurels and stick to the beliefs and paradigms that got them to where they are today and hope they will carry them through tomorrow. Regulatory changes, new products, competition, markets, technologies, and shifts in customer behavior are upending many outdated assumptions about business success. Thus, the businesses you have today are different from the ones you will need in the future hence the importance of continuously sensing changes in the global economy. Employees and teams often feed off the energy of their leaders and tend to focus their attention where the leader focuses attention. If the leader is comfortable with current business practices and rarely embraces the future or challenges the status quo, then the team is highly likely to follow suit.
  • When it became clear that supply chains and other operations would fracture, organizations began scenario planning to shift production sources, relocate employees, and secure key supplies.
    • Comment: Instead of using scenario planning to anticipate the future and prepare for different outcomes, it seems most of the surveyed organizations used scenario planning as a reactionary tool. Don’t wait for a crisis or a shift in the market to start thinking about the future. The world is always changing. As I wrote in The Resilient Organization, acknowledge that the future is a range of possible outcomes, learn and develop capabilities to map out multiple future scenarios, develop an optimal strategy for each of those scenarios, then continually test the effectiveness of these strategies. This does not necessarily mean that every change in the market will impact your business. Identify early warnings of what might be important and pay closer attention to those signals. In other words, learn to separate the signals from the noise.
  • The pandemic forced the organization’s senior management team to re-examine how all decisions were made.
    • Comment: Bureaucracy has for a very long time stood in the way of innovation and agility. To remain innovative and adapt quickly in a fast-changing world, the organization must have nimble leadership and an empowered workforce where employees at all levels can dream up new ideas and bring them to life. Identifying and acting on emerging threats and potential opportunities is not the job of the leader alone but every team member. To quote Rita McGrath, in her book Seeing Around Corners, she writes, “Being able to detect weak signals that things are changing requires more eyes and ears throughout the organization. The critical information that informs decision-making is often locked in individual brains.” In addition to the internal environment, the leader must also connect with the external environment (customers, competitors, regulators, and other stakeholders), looking for what is changing and how.
  • It’s worthwhile for leaders of any team to absorb the lessons of sense-respond-adapt, even if there is no emergency at hand.
  • Sensing: Treat the far-flung parts of your enterprise as listening stations. The question leaders must ask is, “What are we learning from our interactions beyond the usual information about costs and sales?” Train your people to listen for potentially significant anomalies and ensure that important information is not trapped in organizational silos.
    • Comment: Cost and sales data are lagging indicators that reveal the consequences or outcomes of past activities and decisions. Although this information can help leaders spot trends by looking at patterns over time, it doesn’t help understand the future and inform what needs to be done for the numbers to tell a different story. In addition to lagging indicators, pay attention to current and leading indicators and understand the relationship between these indicators and outcomes.
  • Responding: Improve communication across intra- and inter-organizational boundaries. Leaders should view business continuity as an essential function that acts as connective tissue for the enterprise.
    • Comment: In addition to creating mechanisms that allow the free flow of information both inside and outside the organization, decision-makers should also be comfortable receiving information that challenges their personal view of the world, even if it’s not what they want to hear. Create a culture of psychological safety where people are not afraid to share bad news for fear of getting punished, but rather are acknowledged and rewarded for speaking up. Leveraging the diversity of thought enables leaders to anticipate the future as an organization, decide what to do about it collectively, and then mobilize the organization to do what’s necessary.
  • Adapting: Challenge assumptions, and question orthodoxies. There’s always the temptation to mitigate threats simply by applying existing practices harder and faster. One way to get at those deeper issues and encourage double-loop learning is to ask, “What needs to be true for this to be the right approach?”
    • Comment: In an increasingly uncertain environment, it’s difficult to survive and thrive with an old business model or outdated technologies. Many businesses fail because they continue doing the same thing for too long, and they don’t respond quickly enough and effectively when conditions change. As a leader, stay curious and connected to the external environment, look for market shifts, understand what needs to be regularly refreshed and reimagined, adopt new technologies and capabilities, and adapt in ordinary times but also during times of transition. Unfortunately for many leaders, it’s just more convenient for them to continually downplay the fact that conditions are changing than take the appropriate course of action that drives business success.

How are you preparing your organization for potential future disruptions?

Thanks for sharing:

The Collaborative Organization

These days the term collaboration has become synonymous with organizational culture, creativity, innovation, increased productivity, and success.

Let’s look at the COVID-19 pandemic as an example. At the peak of the crisis, several companies instructed their workers to adopt remote working as a health and safety precautionary measure.

Two years into the pandemic, they are now asking their employees back to the office full time or are planning to adopt a hybrid model.

The need to preserve our collaborative culture and accelerate innovation are two of the top benefits being cited by organizational and team leaders for bringing workers back.

Collaboration is indeed essential for the achievement of team goals, functional objectives, and the overall success of the organization.

Today’s breakthrough innovations are emerging from many interacting teams and collaborative relationships.

When teams, functions, and organizations collaborate, the whole is greater than the sum of its parts; group genius emerges, and creativity unfolds.

But, what makes a successful collaboration? What are the key enabling conditions?

  • It extends beyond the boundaries of the organization. Business success is a function of internal and external relationships. Instead of viewing your business in vacuo, understand that you are part of an ecosystem. External to your organization, who do you need to partner with to enhance your value creation processes, achieve/exceed your objectives, or successfully execute your strategy?
  • Ensure the objectives are clear and there is shared understanding by everyone. Unclear objectives are one of the topmost barriers to team and organizational performance.
  • Foster a culture that encourages opinions and ideas that challenge the consensus. People should feel free to share their ideas and not hold back for fear of others penalizing them or thinking less of them. Collaboration is hindered when one or two people dominate the discussion, are arrogant, or don’t think they can learn anything from others.
  • Groups perform more effective under certain circumstances, and less effective under others. There is a tendency to fixate on certain topics of discussion amongst groups which often leaves members distracted from their ideas. To reduce the negative effects of topic fixation, members of the group should be given periods to work alone and switch constantly between individual activity and group interaction.
  • Effective collaboration can happen if the people involved come from diverse backgrounds and possess complementary skills to prevent conformity. The best collective decisions or creative ideas are often a product of different bodies of knowledge, multiple opinions, disagreement, and divergent thought processes, not consensus or compromise.
  • New technologies are making collaboration easier than ever, enabling us to increase our reach and broaden our network. Although new technology helps, it will not make your organization collaborative without the right culture and values in place. First, define what you want to achieve through collaboration then use these tools to promote creative collaboration.

How else are you championing collaboration within your organization to create value and succeed?

Thanks for sharing:

Preparing for Geopolitical Shocks

Geopolitical instability has steadily increased over the past years, and uncertainty in the global economy is at an all-time high. Thanks to globalization and advances in technologies, we now live and work in a tightly interconnected world, one in which the boundaries that previously separated domestic from global issues have disappeared.

Threats are no longer confined to traditional political borders, social structures, and geographic boundaries. Geopolitical shifts have dramatically altered the global economic landscape and brought politics and business together.

The rise of China as an economic and politically influential power has threatened the dominance of the United States as the world’s largest economy. Although the opening of China and a market of 1.4 billion people have benefited both countries, it has also intensified competition and sparked U.S. economic and technological espionage accusations against China, leading to strained relations between the two giants.

U.S. companies operating from China have felt the impact of this tense relationship. The opposite is true for Chinese companies in the U.S.

Across Europe, national populism is on the rise and now a serious force. In 2016, the United Kingdom shocked the world when it voted to leave the European Union, generating reverberating effects across markets.

Banks and financial services companies that once benefited from the EU passporting system have had their cross-border banking and investment services to customers and counterparties in the many EU Member States impacted, causing them to reimagine their value proposition models.

The recent invasion of Ukraine by Russia is another example of a geopolitical event that has had devastating effects on human livelihood and businesses. Although the conflict between the two countries has risen over the years, I think it’s fair to say that few political analysts, governments, and businesses predicted a war to happen.

The war has created a humanitarian crisis, rattled global commodity and energy markets, caused prices to soar, and forced many international companies to temporarily suspend their Russian activities or completely cut ties with the country.

Global supply chains which are already fragile and sensitive due to the COVID-19 pandemic are now facing new challenges in the aftermath of the Russia-Ukraine crisis. Multilateral economic sanctions have been imposed on Russia. A state of affairs that was unthinkable months ago and is now threatening to derail the nascent global economic recovery from the COVID-19 pandemic.

Given the global domino effect of geopolitical events and the shrinking of the distance between markets and politics, the need to better understand and more effectively mitigate geopolitical risk has become more urgent. The business impacts, whether direct or indirect, vary by company type and industry sector.

Your company may not be able to prevent wars between nations, but you can anticipate and better prepare for geopolitical shocks:

  • Integrate strategy, risk, and performance decision-making. Consideration of risks to business success is an important part of the strategy selection and execution process, not an afterthought.
  • Develop a better understanding of geopolitical trends and how they are changing. For example, what are the megatrends in business, politics, and technology that are making geopolitical risks more diverse, prevalent, and consequential?
  • Assess the links between these geopolitical events and business performance. What are the events that matter most to your business? For example, how might current global political trends pose physical, business, and reputational risks to your parent organization?
  • Anticipate how these trends are likely to play out in the short, medium, and long terms, and develop mitigation strategies for each geopolitical scenario. Proactively anticipate and plan for radically different worlds, instead of reacting to problems as they arise
  • Review your mitigation strategies as the world changes. Are they effective enough in case of a major shock?
  • Develop capabilities for continuous learning to anticipate, address, and recover from geopolitical crises.

What do you think?

Thanks for sharing: