Higher growth rates are achieved when you have stronger competitive advantages in a substantial niche market where your product or service meets a compelling need.
Solving a compelling need and targetting an easily reachable market in itself won't drive substantial growth if there are many competitors able to absorb the available demand. Even a strong competitive advantage will not be sufficient if it cannot be protected or sustained over time.
What you need for long-term growth is either legal protection of your advantage, which is available through patents, trademarks, licensed rights or copyright, or deep expertise which is difficult to copy.
The monopolistic protection offered by intellectual property (IP) registration is somewhat difficult to reconcile with our free market ideology. Why should we allow a business to exclude competitors and give it the right to charge higher prices than what a competitive market would impose?
The answer lies in the desire of governments to encourage risk taking in product development. Why would any company spend huge amounts of money to develop a new product if it could quickly be copied by their competitors? How would you achieve a return on your R&D spend if your competitors could sit back and wait for you to do all the hard work, only to see them copy your invention before you could recover your expenses? Thus, the state legitimises monopolistic outcomes in order to encourage innovation. That being the case, you need to take advantage of that concession to develop IP which can build and sustain your competitive advantage.
A well-developed and protected competitive advantage provides a business with room to experiment with market approaches, allowing it to make mistakes and provide a time buffer for it to bring new products to market to sustain its advantage.
But first you need to discover what you can do to create an IP-based advantage. This is the intersection between customer problems and innovative solutions. You should be on the search for ways in which you can develop new products, which can incorporate novel approaches which can be registered as IP. Even small improvements can open up opportunities for registered IP, which in turn can lead to a perception in the marketplace of leading edge developments. Sometimes perception is as good as reality.
While the main advantage of IP is the competitive advantage, it provides to near-term marketing efforts, don't forget that registered rights can last many years, thus the benefits can be exploited for a long period. Also don't forget that IP which provides a competitive advantage can dramatically improve the value of the business on sale or on a public listing. It also significantly improves the ability of a business to raise angel or venture capital finance.
Not all registered IP is good IP. Simply developing something to clock up a registration is going to do little for your business. It must lead to an increase in competitive advantage to make a difference. If in doubt, try asking your customers if your planned innovation excites them - that is your ultimate test.
Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.
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