September 01, 2009

Intellectual Capital - By Sanjay Anandaram

I came across this interesting trivia about the late King of Pop from the “IP Marketing Advisor”: “In the 1988 video of the song Smooth Criminal, the pop star and his dancers leaned forward dramatically, seemingly defying gravity. It turns out Jackson didn’t just invent the move — he eventually patented it. To do what became a signature move in live performances without the help of harnesses and wires, Jackson created a shoe “system” called “Method and Means for Creating Anti-Gravity Illusion.” Granted in 1993 to Jackson and two partners by the U.S. Patent and Trade Office, patent No. 5,255,452 covers a “system for allowing a shoe wearer to lean forwardly beyond his center of gravity by virtue of wearing a specially designed pair of shoes.” A heel slot in the shoes gets hitched to retractable pegs in a stage floor. Wearing the shoes, Jackson (or anyone) could seem to lean past his center of gravity without toppling.

“I’ve used (Jackson’s) patent for years in classes to teach students what they can patent,” says lawyer Gene Quinn of IPWatchdog. Rather than licensing the shoes, Jackson probably sought the patent to keep the effect exclusive, Quinn says. “Just getting a patent may be enough to create marketing buzz in some cases, and he may have achieved that as well.”

There are some interesting points here. One that Michael Jackson a performer and entertainer invented a dance move and that it was patented, that the objective of the patent was to create marketing buzz by promoting exclusivity and that it is important for all to understand the value of an invention. Only then can that invention be monetized successfully.

As we rapidly move into the so-called Knowledge Economy, it is important to understand that information arbitrage can at best provide momentary gains but insights gained from knowledge of a market, process, customers, technology and so on provide long term value. Information arbitrage ceases to lose value when information becomes freely available to all as is happening in today’s world.

So what do startups and entrepreneurs need to do to develop insights?

There are no short-cuts. Insights come from deep and sustained engagement with a market and customers. It means being in conversation with customers, partners, prospects, and sometimes even competitors to understand the problems, opportunities and dynamics of the industry and the business. It means wide reading and talking to experts from industry, research labs and academia about the forces shaping the industry – regulatory, technological, economic and so on. Every entrepreneur in every industry and business needs this kind of awareness to be able to create profitable and sustainable businesses in this economy. Unfortunately, a lot of the entrepreneurs I meet are still hesitant to go out and engage with the outside world. They seem content being in their own company’s silo and view the world from that standpoint. This results in their being unable to see the lay of the land. Many a time, they aren’t even aware of their competitors and what they’re doing, what the sales challenges are, what the hiring and retention issues are, what the customer support expectations are etc. These kinds of entrepreneurs tend to reduce the issue to one of just having adequate money. Money would not solve the problem of ignorance but rather money would be available to those entrepreneurs who can demonstrate their knowledge of the business.

Intellectual capital is not just about filing patents. It is the aggregate intellectual material – knowledge, information, intellectual property, experience – that can be put to use to create wealth in a company.

Here’s an old apocryphal tale that explains the situation. A computer expert billed a company $1,000 for solving an urgent computer problem at a company. The company was livid! How could he charge so much for just 10 minutes of work and for just typing a few lines on the console screen. The computer expert replied “$100 for the 10 minutes of my time and $900 for knowing what to type on the screen to solve the problem”.

What do you think?

Sanjay Anandaram is a passionate advocate of entrepreneurship in India; He brings close to two decades of experience as an entrepreneur, corporate executive, venture investor, faculty member, advisor and mentor. He’s involved with Nasscom, TiE, IIM-Bangalore, and INSEAD business school in driving entrepreneurship. He can be reached at sanjay@jumpstartup.net. The views expressed here are his own.