ICM Advisors INTELLECTUAL CAPITAL MANAGEMENT. Monitoring patent portfolio impact on business performance - Patent Key Performance Indicators

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1 Monitoring patent portfolio impact on business - Patent Key Performance Indicators

2 How does patent portfolio affect business? Patent Portfolio KPI The escalation of global competition and the increase of competitive pressure have been driving top management attention towards the contribution to business results of each part of the organization. Hence, the use of indicators to measure, control and communicate is again a topical issue among companies. A well-known problem for innovative companies is appropriation of economic returns from technological innovation and prevention from competitors imitation. Patents in particular are one of the key mechanism for appropriating technology innovations returns in several industries. Moreover, technology innovation and collaborative R&D models require a tight control on patent generation and exploitation. Furthermore, patent related costs are increasing (people, processes, systems, legal issues). A strong patent portfolio can help companies to control the technology and commercialize products, to monitor internal technological innovation s, to open new revenues and funding sources and to gain contractual power in strategic negotiations. Patents protect know-how, products or valuable process, participate to both sustainability and value creation: so patent portfolio is becoming a strategic asset. Key management issue: How does patent portfolio affect business? IP departments face with the challenge to define relevant and reliable KPIs in order to measure how and to which extent the company s patent portfolio successfully supports the core business Since many years Key Performance Indicators (KPI) are accepted tools for management to continuously control and assess the operations within a company and patent value management is no more limited to legal department but it acquired a strong significance for the whole company involving different functions. Nowadays, the KPI methodology is even used in R&D operations in order to measure how successful and quick R&D results are transferred into profitable commercial products and services. Nevertheless most of companies do not monitor or assess patent filing activity and its impact, and this lack of information is a strong barrier to decision process. A company can not manage what is not measured. Patent portfolio is often not managed Patent portfolio must protect and exploit technology portfolio of the company in order to support the business objectives: patent portfolio must be connected and integrated with technology and overall company strategy in order to create value. Measuring patent became an urgent issue in order to maintain sustainability since patents have to support the business roadmap and furthermore, patents could create value on their own through monetization, attracting investments or as a competitive tool for strategic advantage towards competitors. In the area of intellectual property there is no generally accepted set of standard metrics: so IP departments face with the challenge to define relevant and reliable KPIs in order to measure how and to which extent the company s patent portfolio successfully supports the core business, or provides its own contributions to the overall results of the company. ICM Advisors LLC, All Rights Reserved

3 Measuring patent became an urgent issue in order to maintain sustainability since patents have to support the business roadmap Objectives and Stakeholders Main objective of a patent portfolio KPI systems is to measure the patent portfolio in order to: 1. Assess and qualify patent portfolio structure and composition 2. Understand how patent portfolio provides value to business and increase its contribution to value creation 3. Communicate patent portfolio s to relevant stakeholder through a set of customized and synthetic indicators A patent KPI system should become a useful management tool for different stakeholders inside the company: patent portfolio, in fact, is no more a legal concern but it is a cross-functional issue. For this reason the objectives, scope, indicators and level of sophistication of the patent KPI system have to be customized according to company internal and external environment and must be defined in order to answer to different stakeholder needs. For this reason the objectives, scope, indicators and level of sophistication of the patent KPI system must be defined in order to answer to different stakeholder needs. Hence, the patent portfolio KPI must support business decision process at several levels. The IP department needs to communicate about patents role in business and align patent strategy to technology and business ones; R&D department must understand how to protected research activities and inventions; the head of the business units needs to monitor patents impact on business/products and to know competitors activities; the financial direction wants to know how patents can generate revenues and sustain economic and financial results; the board needs to have a clear overview of the patenting activity in order to include patent strategy in company s strategic plans. ICM Advisors LLC, All Rights Reserved

4 A patent portfolio KPI system is a valuable tool to direct IP protection and exploitation along the value chain of the business processes. Implementing a Patent Portfolio KPI System A patent portfolio KPI system is a valuable tool for management to direct IP protection and exploitation along the value chain of the business processes. Setting the right set of metrics and indicators is a customized process and it is based on stakeholders requirements and objectives. The KPI model should consider the contribution of patent portfolio to achieve company s strategic goals, its impact on economic and financial results and its role for IP operations workflow efficiency and efficacy. KPI system can be implemented on different level of sophistication Once indicators have been created, the critical process is to use and spread them through the organization KPI system can be implemented on different level of sophistication according to Company purposes and nature of decision process: short term/tactical (to control/monitoring) or long term/strategic (to measure value creation and business impact) IP Management best practices adoption Role of patent portfolio in the business strategy/industry Management priorities and commitment Data availability Once indicators have been created, the critical process is to use and spread them through the organization. First step in the implementation process is to set-up objectives of patent KPI systems and specific requirements for each stakeholder needs. Second step is to build up the model and to define right set of indicators to summarize patent portfolio activity and impact. Indicators must be synthetic, easy to make and to understand, time related and actionable. Third step is to implement the model in a supporting systems configured according to the operational and management reporting requirements. Finally dissemination plan to KPI users must be defined with delivery rules and update activities. Even if sophistication and dissemination of IP management practices are increasing among industrial companies, monitoring patent impact on business value drivers is a complex process that faces structural barriers such as: lack of systems to capture data, lack of available resources and, often, lack of management support. However, given the strategic role of patent portfolio, measuring its impact and evaluating its contribution to company is a critical step in order to deeply exploit its potential value. ICM Advisors LLC, All Rights Reserved

5 and ICM Advisors Profile is a leading European professional network specialized in: Valuation of IP and Intangible assets, IP Strategy & Finance, Global Competitive Market & Technology Intelligence, Systematic Innovation & Technology Transfer. The network is organized in three business units: Valuation & Strategic Services ICM Advisors Competitive Intelligence Services ICM Research Innovation & Technology Transfer Services ICM Industrial ICM is a founding member of IPT Alliance, with Avenium Consulting SA (France - Subsidiary of CEA Commissariat à l'energie Atomique et aux énergies alternatives) and Patev Associates GmbH (Germany). IPT Alliance is the European leader in Intellectual Property Management and in Technology Transfer with a track record of references in many industrial sectors The network operates with a staff of about 150 professionals. The headquarter is based in Geneva. European Locations: Düsseldorf Geneva Grenoble Hamburg - Karlsruhe Milan Munich Paris Turin Vicenza Via Monte di Pietà, Milano - Italy Phone: Fax , Avenue Louis Casaï 1209 Geneva Switzerland Phone: Fax: ICM Advisors is the business unit of valuation and strategic services of. The company has a strong specialization in industrial and financial management of intangible assets supported by valuation methodologies recognized by financial community and combined with proprietary methodologies at the state-of- the art of the best international practices. ICM Advisors is the first European company that provides integrated professional services with industrial and financial solutions that use intangible assets as collateral. In Italy ICM Advisors is a leader in the valuation of intangible assets and intellectual property (brand, know-how, patents...) with more than 700 valuations. The high seniority of its advisors with international experience in many industries and with multidisciplinary skills such as marketing, technology, business strategy, economic-financial valuation, corporate finance and development of international markets enables comprehensive valuation of the company the potential of the intangible heritage. The company has a database of financial, industry, marketing and technology managed and organized by ICM Research business unit of equity research and competitive intelligence. ICM Advisors counts among its customers major businesses, SMEs, financial institutions and associations / industrial sectors, in both B2B and B2C sectors, which have chosen for its expertise, its innovative services, its advanced research units and the high quality of service. International offices: Geneva Grenoble Paris Karlsruhe Düsseldorf Munich Turin Milan Vicenza icmadvisors@icmadvisors.com Web Site: ICM Advisors LLC, All Rights Reserved