How is IP relevant to SMEs?
Would you like to see your products on the shelves of major stores in the major cities of the globe?
If YES, read on….
Perhaps you are no longer content with simply remaining in your own backyard economy, selling your product to a limited group of customers. Day by day, the desire to compete in the global market grows with the increase in local market share that you have so far achieved.
As of 2012 there were over 190 million people in Southeast Asia who could be defined as middle class in that they have the financial means to make purchase decisions based on their level of disposable income. In spending terms this relates to US$16 and US$100 per day. Due mostly to the economic growth of the region.
The wealth distribution that is currently observed will continue and by 2020 the middle class population in Southeast Asia will more than double to 400 million.
The reality is that you have to learn to compete in the global market. Non-participation is no longer an option if you want not only to survive but also to grow and prosper. As the saying goes, you either “sink or swim”. You and your company must therefore learn to anticipate, respond, adapt, and emerge as a solid competitor in the world’s market.
But what does it mean to make it to that global market shelf?
What opportunities and challenges are you going to face when you strive to enter that higher sphere?
In the ASEAN region, business is booming and is forecasted to continue to grow. The market is robust. But in this market, numerous new opportunities and challenges face your business. Let’s analyze them together.
a. Increased competition
Following the ASEAN Economic Community (AEC) Blueprint 2015, the new AEC Blueprint 2025 now consists of “five interrelated and mutually reinforcing characteristics, namely: (i) A Highly Integrated and Cohesive Economy; (ii) A Competitive, Innovative, and Dynamic ASEAN; (iii) Enhanced Connectivity and Sectoral Cooperation; (iv) A Resilient, Inclusive, People-Oriented, and People-Centred ASEAN; and (v) A Global ASEAN”.
The AEC Blueprint 2025 also states that ASEAN “will also provide a new emphasis on the development and promotion of micro, small and medium enterprises (MSMEs) in its economic integration efforts”.
b. Pressure to reduce cost and increase efficiency
Your products will win against those of your competitors at home and abroad, either if they are cheaper, or if they have better technical features and higher levels of quality or, ideally, both. Reducing costs and/or increasing quality requires creativity, and research and development to identify the necessary creative solutions.
c. Shorter life cycle for products
A faster paced world and a faster paced market also means the influx of new and better products, all the time, and every time. Think of your brand new smart phone: you bought it just one year ago and now it is already obsolete and … out of fashion. Unless you are quick to introduce a new product at the right time, you risk losing your relevance and becoming outdated, faster than you anticipate. Being competitive therefore means learning to adjust to a rapidly changing market environment to respond to the demands and anticipate the needs of the market.
d. Stricter regulation in various sectors
As markets grow and as needs and wants change, government policies also change. This will have an impact on your business. For example, as the economy moves toward more green activities and cleaner production processes, new and stricter environmental regulations will have an impact on your business and on … its costs.
e. More demand for accountability
The organizations which proactively adapt and develop new business infrastructure such as transportation and supply chains will benefit from first mover advantage. Conversely, organizations which adopt a ‘wait and see’ approach will forfeit opportunities and expose themselves to risk.
f. Rising customer expectation on quality
As customers see newer products and services flooding the market, expectations on quality, cost and service also rise. Internet nowadays inform consumers of the newest and fanciest products available worldwide. To remain competitive, your business has to be able to meet or even rise above these expectations. You might have to leverage on your creativity to meet such a constant quest for quality if you want to remain competitive, and … alive.
More and more, people look for products that give them value for money. With so many products competing for customers’ preference, where do you position yourself? Can you offer your customers affordable excellence and innovative products that will stand out in the market? Can you deliver services that will be competitive in the market and yet stand out? Can you deliver the quality of products and services that customers will pick?
In short, your business can survive the competition, beat the competition, and become more profitable and successful by:
- providing innovative and better products and services, and/or
- providing the same products or services, but at competitive or lower prices.
In both cases, the only way you can achieve either of these results is by … innovating.
What is innovation?
Innovation is a process that you should apply to your entire business cycle (see later). It entails an analysis of customer needs, identification of opportunities and possibilities. It also means the development of an old idea to make it look new, feel new, or sound new. Innovation can also mean looking into more effective ways of production, better marketing and brand promotion. Innovation may mean looking into after-sales services and improving on these to better capture and re-capture your market.
The outcome of this analysis is a better product, a more effective process, or a more thought out service that has competitive advantages.
Your products and services could be improved by:
- making them more attractive,
- enhancing their quality,
- expanding their functionalities,
- improving their branding,
- reducing their price,
- offering good after-sales services
- conceiving a well thought-out marketing strategy.
All this means innovation.
Quality, sustainability and affordability are the winning combination for products to break through and win in the market. Positioning your brand within these parameters can spell success for your business. You can win over your competitors when you are able to offer products identified with a name that signifies quality, affordability, sustainability and accessibility to the consumers in the market you intend to operate.
The old way of doing business will change. Increased competition and the opening of an enhanced business and economic zone will cause major disruption. Companies may find that a supplier now has a new partner or a new competitor enters the market. Be prepared to innovate.
How can SMEs innovate?
There are essentially two ways in which an SME can innovate.
One way consists of developing an internal research and development (R&D) team and develop its own creative and innovative solutions. These should then be protected as intellectual property rights. The following step might be to start granting the use of such IP rights to third parties (through the so-called “licensing-out”). Needless to say, the costs associated with developing your own IPRs may be very significant. At times, out of the reach of small companies.
The other way to innovate entails acquiring the necessary innovative solutions (often in the form of protected IPRs) by third parties that have developed them and successfully exploited them in other markets. This phenomenon is called “licensing-in” of IPRs. This case may be more suitable for an SME that does not possess an internal R&D capacity or the financial means to carry out its own investigations. However, also in this case, the company receiving the license will have to bear the costs associated with the contractual agreement and pay for the use of third parties’ IPRs.