Intellectual Property, Design Innovation, and Entrepreneurship (Springer Series in Design and Innovation, 11) [1st ed. 2021] 303062787X, 9783030627874

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Springer Series in Design and Innovation 11

Matthias Hillner

Intellectual Property, Design Innovation, and Entrepreneurship

Springer Series in Design and Innovation Volume 11 Editor-in-Chief Francesca Tosi, University of Florence, Florence, Italy Series Editors Claudio Germak, Politecnico di Torino, Turin, Italy Francesco Zurlo, Politecnico di Milano, Milan, Italy Zhi Jinyi, Southwest Jiaotong University, Chengdu, China Marilaine Pozzatti Amadori, Universidade Federal de Santa Maria, Santa Maria, Rio Grande do Sul, Brazil Maurizio Caon, University of Applied Sciences and Arts, Fribourg, Switzerland

Springer Series in Design and Innovation (SSDI) publishes books on innovation and the latest developments in the fields of Product Design, Interior Design and Communication Design, with particular emphasis on technological and formal innovation, and on the application of digital technologies and new materials. The series explores all aspects of design, e.g. Human-Centered Design/User Experience, Service Design, and Design Thinking, which provide transversal and innovative approaches oriented on the involvement of people throughout the design development process. In addition, it covers emerging areas of research that may represent essential opportunities for economic and social development. In fields ranging from the humanities to engineering and architecture, design is increasingly being recognized as a key means of bringing ideas to the market by transforming them into user-friendly and appealing products or services. Moreover, it provides a variety of methodologies, tools and techniques that can be used at different stages of the innovation process to enhance the value of new products and services. The series’ scope includes monographs, professional books, advanced textbooks, selected contributions from specialized conferences and workshops, and outstanding Ph.D. theses. Keywords: Product and System Innovation; Product design; Interior design; Communication Design; Human-Centered Design/User Experience; Service Design; Design Thinking; Digital Innovation; Innovation of Materials. How to submit proposals Proposals must include: title, keywords, presentation (max 10,000 characters), table of contents, chapter abstracts, editors’/authors’ CV. In case of proceedings, chairmen/editors are requested to submit the link to conference website (incl. relevant information such as committee members, topics, key dates, keynote speakers, information about the reviewing process, etc.), and approx. number of papers. Proposals must be sent to: series editor Prof. Francesca Tosi (francesca.tosi@unifi.it) and/or publishing editor Mr. Pierpaolo Riva ([email protected]).

More information about this series at http://www.springer.com/series/16270

Matthias Hillner

Intellectual Property, Design Innovation, and Entrepreneurship

123

Matthias Hillner GSofA Singapore Singapore, Singapore

ISSN 2661-8184 ISSN 2661-8192 (electronic) Springer Series in Design and Innovation ISBN 978-3-030-62787-4 ISBN 978-3-030-62788-1 (eBook) https://doi.org/10.1007/978-3-030-62788-1 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. This Springer imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

I would like to dedicate this book to my daughter, Aiyana Sîan, who, I hope, may see this work as an inspiration for her own academic development and writing.

Foreword

This book is a tour de force and without doubt, the most comprehensive in-depth study of intellectual property in connection with design. It marks an important contribution to the field of design management, especially in an era in which design starts to occupy its rightful role in corporate culture and in corporate strategy. What was needed for many years was just such a manual outlining the process by which IP becomes an integral component of products and systems development, and of any innovation pathway. In my own consulting work in industrial design I introduced immediately after phase one and as a part of Gate 1, a line budget item called Legal Property Evaluation. The legal property evaluation was the document which I would prepare after the initial concept was arrived at. Thus, we knew what had to be designed and developed, and we could make sure that whatever we came up with could be legally protected. I just looked at one of these documents prepared in the past and it had 47 pages describing multiple granted patents that might be close to some aspects of the invention I was proposing for one of my larger clients. Large corporations at the time had no problem engaging in this process, but SMSC’s (small and medium-sized companies) did not understand the value of the legal property evaluation, knowledge which this book provides now to perfection. A series of case studies is presented in an extremely rich illustrative detail. The analysis of the cases alone is a phenomenal resource for any patent attorney. The summaries are a great feature as they focus the reader on the essential lessons to be learned, and on their own, have great value for the reader. Toronto July 2020

Alexander Manu Strategic Foresight Advisor, Keynote Speaker, and Professor at OCAD University

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Preface

Traditionally, designers work upon commission, thus relying on consultancy business models. The intellectual property (IP) that is generated in response to commissions is commonly licensed or assigned to the client and related to bespoke design solutions. The designer-entrepreneur uses a different approach. The motivation behind an entrepreneurial act is ‘the identification of an emerging need or a new way to meet an existing need’ (Abernathy and Utterback 1978, p. 4). Such innovations are often fostered and commercialized independently by small businesses instead of being commissioned. Abernathy and Utterback (1978 p. 3) argue that ‘the small entrepreneurial organization and the larger unit producing standard products in high volumes […] are at the opposite ends of a spectrum.’ This book focuses on individuals and small start-ups who seek to develop and market inventive design propositions that have a potentially disruptive market impact. It examines the significance and effectiveness of IP in conjunction with the inventors’ ambitions to establish dominant designs within existing or emerging market environments. IP is understood here as formal and informal intellectual property rights (IPRs), as well as alternative ways of safeguarding knowledge, such as secrecy and open innovation options which can be used to secure freedom to operate. This book examines IP in relation to other business development factors such as finance and fund raising, access to complementary assets (Teece 1986), as well as market access strategies. The book, which focuses first and foremost on product innovation, juxtaposes technology-driven approaches which build on the use of patents, with design-driven approaches (Verganti and Dell’Era 2014) which prioritize product languages, and sales-driven approaches that rely on speed-to-market advantages. An IP strategy can be seen as an aspect of business development involving a range of factors including formal and informal forms of IP, licensing and collaboration. These need to be managed in combination and as a process that involves the strategy’s periodic revision in light of changing circumstances. This implies that well-managed IP strategies can enhance the dynamic capabilities of businesses (Teece et al. 1997), i.e., the range and flexibility of possible responses to potentially unexpected changes in the market environment and in their financial position. The book offers a framework referred to as the business development canvas which can be used by designer-entrepreneurs to categorize and illustrate

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relevant business development factors as well as the dependencies between those. IP strategies can be developed and sketched out using this chart, and with it, they can be managed in relation to surrounding business development attributes. The contents of this book were derived from a Ph.D. thesis that has been compiled in the course of a seven-year study carried out at the Royal College of Art, London. The book is aimed not only at academics who are interested in areas of design entrepreneurship and innovation management, its contents have been thoroughly re-developed to also suit designer-entrepreneurs who seek strategic guidance and are in need of a systematic approach to their start-up business developments. In order to tailor the contents to the priorities and expectations of enterprising design practitioners and inventors, the methodology section has been removed, and the literature review was shortened focusing on key aspects only. The content structure has been amended by interspersing the case studies into the conceptual argument. The book is hoped to inspire as well as to inform. The post-doctoral re-editing process has led to a streamlined train of thought which is thoroughly illustrated through visuals and diagrams. Most of the diagrams throughout the book as well as the accompanying explanations have been revised in light of post-doctoral research insights. Those readers who seek to learn more about the Ph.D. research methodology are invited to refer my Ph.D. thesis which describes the data collection processes as well as the underlying philosophical paradigms in much greater detail. The thesis is due to be published in 2022. Singapore

Matthias Hillner

Acknowledgements

I would like to sincerely thank my main Ph.D. supervisor, Prof. Dr. Nick de Leon, for his passionate support. Having spared no effort to encourage me to commit to a second postgraduate research, he supported me both personally and academically in every step of the way. I would further like to thank Dr. Qian Sun, who joined Nick as my second supervisor in 2014, and helped to enhance the critical rigor of my research process. My thanks also go to Dr. Juliette Kristensen, who joined the supervisory team temporarily in 2018. Juliette contributed an invaluable fresh perspective during the review of my draft thesis. I remain particularly grateful to Rachel McDonagh, RCA’s research administrator, who helped me tremendously to manage my research commitments over a 6000 mile distance, after I had emigrated to Singapore in 2015. It was after my relocation that I met Prof. Alexander Manu in Brisbane, Australia, where he gave the keynote speech during an IASDR conference (The International Association of Societies of Design Research) in November 2015. I am very grateful for the exchanges which we since had and for his kind offer of writing a foreword to my book. I would like to extend my thanks to Dids Macdonald OBE, CEO of Anti Copying in Design in the UK, the meetings and exchanges with whom allowed me to stay abreast with developments in the context of design IP in the UK after I moved to Singapore. My conversations with Dids were not only an extraordinary honor; they significantly deepened my knowledge and understanding of IP infringement in the UK and enabled me to assess how legislations and legislatory changes impact industry practices at large. My express thanks go to Mandy Haberman, Sebastian Conran and Rob Law MBE. Despite their eminence and successes as enterprising designers, they have sacrificed their valuable time repeatedly to support me through continued feedback and updates. Each and every conversation was truly illuminating. I would like to further thank all the other inventors and entrepreneurs featured in this book, as well as the numerous subject experts, who met me in person, some of them on multiple occasions, to give me their first-hand feedback on specific inventions. It has been a true privilege to meet everyone. Each design and every invention featured in this book has won a range of notable awards. Although the

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text focuses on the enterprising aspects surrounding the business developments rather than the design qualities of the products per se, I am hopeful that readers feel inspired by the designs which are showcased here. Last but not least, I would like to thank Veronica Loke for having accompanied me through the best—or perhaps toughest—part of the journey in pursuit of this book, the last few years of my investigation and the development of the manuscript. This book would not have been possible without the kind support of: Denis Anscomb, KwickScreen, Index Solutions Sheraz Arif and Andy Brand, Squease Peter Brewin, Concrete Canvas Margaret Briffa, Briffa, IP and Information Technology Lawyers Richard Buchanan, Case Western Reserve University Sam Bucolo, Good Design Australia Sebastian Conran, Sebastian Conran Associates Nadia Danhash, Royal College of Art Nick de Leon, Royal College of Art Itxaso Del Palacio, University College London Carlos de Pomme, Cambiio Kristien De Wolf, Imperial College London Leontina Di Cecco, Springer Gregory Epps, Robofold Mandy Haberman, Haberman Products Bradley Hardiman, Cambridge Enterprise Limited Thomas Hoehn, Imperial College London Mathew Holloway, Artica Nejdeh Hovanessian, American University of Armenia John Hutton from Cupris Olga Kokshagina, Royal Melbourne Institute of Technology Juliette Kristensen, Goldsmith University Roland Lamb, Roli Robert Law MBE and Laura Breen, Magmatic Ltd Alexander Manu, Ontario College of Art & Design University Ash Maurya, Leanstack Dids Macdonald OBE, Anticopying in Design (ACID) Rachel McDonag, Royal College of Art Matthew Rappaport, IP Checkups Dagmar Steffen, Lucerne University of Applied Sciences and Arts Adam Sutcliffe, Orbel Health Paul Thomas, Cupris Julian Wilkins, Blue Pencil Media

Contents

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2 On Early-Stage Start-Ups . . . . . . . . . . . . . . . . . . . . . . . . . 2.1 Design London/InnovationRCA . . . . . . . . . . . . . . . . . . 2.1.1 Cupris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.2 Seaboard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.3 KwickScreen . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.4 Concrete Canvas . . . . . . . . . . . . . . . . . . . . . . . 2.1.5 RoboFold . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.6 Squease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1.7 Orbel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 Comparative Analysis . . . . . . . . . . . . . . . . . . . . . . . . . 2.3 Investors and Funding . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 Design Innovation Strategies and IP . . . . . . . . . . . . . . 2.5 The Development Attributes of an Innovation Business

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3 Innovation Management Principles . . . . . . . . . . . . . . . . . . . . . . . 3.1 Appropriablity, Complementary Assets and Their Relationship 3.2 Disruptive Innovation and the Dominant Design Paradigm . . . 3.3 Design-Driven Versus Technology-Driven Developments . . . . 3.4 Markets: Technology-Push and Demand-Pull . . . . . . . . . . . . . 3.5 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 3.6 Open Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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4 Mandy Haberman—The Journey of a Serial Inventor 4.1 Invention 1: The Haberman Feeder . . . . . . . . . . . . 4.2 Invention 2: AnywayUp Cup . . . . . . . . . . . . . . . . 4.3 Product Language Application . . . . . . . . . . . . . . . . 4.4 Genuine Competition: The Belanger Patent . . . . . .

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1 Introduction . . . . . . . . . . . . . . . . . . . . . 1.1 Design IP Stakeholders . . . . . . . . . . 1.2 Defining Design . . . . . . . . . . . . . . . 1.3 Design and Design Entrepreneurship 1.3.1 SafeView . . . . . . . . . . . . . . 1.3.2 Artica . . . . . . . . . . . . . . . . .

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4.5 IP and Litigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 4.6 Towards an Innovation Business Development Framework . . . . . . 115 . . . .

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6 Sebastian Conran Associates: Appropriability Regimes in the Context of Design Entrepreneurship . . . . . . . . . . . . . . . . . . . . 6.1 Conran Associates—Consultancy Services . . . . . . . . . . . . . 6.2 Universal Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.3 Gifu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4 Consequential Robotics . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5 Inclusiviti . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 The Triangulation of Multiple Inventive Steps . . . . . . . . . .

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7 Towards a Dynamic Business Development Framework . . . . . . . 7.1 Framing the Key Business Development Attributes . . . . . . . . 7.1.1 How the Variables Relate to Each Other . . . . . . . . . . . 7.2 On Complementary Assets and Evolutionary Strategies . . . . . . 7.2.1 IP in Relation to the Three Business Development Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 The Benefit of Pursuing Multiple Inventive Steps in Parallel . . 7.3.1 Identification of Multi-layered Variables . . . . . . . . . . . 7.4 Preliminary Conclusions—The Business Development Canvas

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5 Trunki Versus Kiddee: A Historic Verdict . . . . . . 5.1 The Case in the Eyes of the Law . . . . . . . . . . 5.2 The Impact of Litigation on the Inventing Firm 5.3 IP Strategies for Design-Driven Innovations . . .

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8 Strategic Tips for the Aspirational Designer-Entrepreneur . . . . . 8.1 Invention Alignment—Defining the Unique Selling Points . . . 8.2 Risk Mitigation Through Diversity . . . . . . . . . . . . . . . . . . . . 8.3 IP Strategies and Dynamic Capabilities . . . . . . . . . . . . . . . . . 8.4 Managing Complexity and Managing Change . . . . . . . . . . . . 8.5 The Business Development Canvas as a Change Management Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Appendices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 List of Interviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

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Introduction

Abstract

This chapter sets the scene. It explains the aims and objectives of the book, and it provides an overview over its structure. It frames the discussions through clarifying some of the most important subject-specific terms such as design-led innovation, product languages and design-entrepreneurship, appropriability and value chains. The chapter opens with a case study of a design-driven start-up that was abandoned after three years due to market-access challenges and value chain bottlenecks. It finishes with reference to a second case study that helps to introduce the challenges which early-stage start-ups are typically faced with. This book focuses on design IP (intellectual property) in the context of product innovation management. It is aimed first and foremost at designer-entrepreneurs and innovators who seek to commercialise their inventive steps. In an academic context, it also benefits business management students and lecturers, as well as those involved in academic innovation hubs. Design educators, incubator managers, business coaches, and IP consultants will find this book equally useful. The book draws insights from two series of cases studies featuring extraordinary design inventions. Towards the end, three longitudinal case studies provide strategic guidance to those involved in design and innovation management. The insights gained through the case studies culminate in a discussion of how IP strategies can be defined such that they enhance the entrepreneurs’ dynamic capabilities. To build on the distinction between technology-led and design-driven innovation, the book discusses a range of concepts related to design and makes an important distinction between product languages and technology in support. This paves the way for a discussion surrounding IP strategies which culminates in a clarification of the benefits of triangulating multiple inventive steps. The book also explains how different business development attributes develop in dependence of each other while start-ups transition into an established business or enter the phase of business growth (scaling). © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_1

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The most distinguishing quality of this book is the fact that it examines innovation-related scenarios not as momentary phenomena. Instead it explores them within their continuously changing contexts. IP, for example, is discussed in relation to the way in which its value changes over time as a venture matures. In light of dynamic capabilities the book explains how IP strategies can enhance a start-up’s survival prospects and its growth potential if they are connected systematically to other business development attributes such as the route-to-market, the finance strategy, and the access to production- and distribution-related assets. Intellectual property: Intellectual Property (IP) comprises knowledge. The degree to which knowledge can be owned, can be questioned from a philosophical perspective. From a pragmatic point of view, IP can be seen as an asset. This book distinguishes between formal IP comprising intellectual property rights (IPRs) which are secured through formal filing, and informal IP, intellectual property that is not formally secured. IP ownership is not necessarily exclusive. In fact, IP sharing can be an effective strategic measure.

Knowledge: With a view on the strategic IP management, it is important to distinguish between tacit knowledge and codifiable knowledge. The latter can be expressed visually or in writing, whereas the former constitutes knowledge which is difficult or impossible to transfer. Knowledge related to specific market environments constitutes tacit knowledge, whereas the formula for Coca Cola is an example for codifiable knowledge. Both forms of knowledge are of significance in the context of innovation management.

Intellectual property rights: Intellectual Property Rights (IPRs) are specific formal or informal rights that are articulated as part of a country’s legislation. Laws can differ significantly from country to country, and it is prudent for innovators to familiarise themselves with the rules and regulations within the territories they seek to target. To secure freedom to operate, innovators often commit to defensive filing of IP. The objective is to prevent competitors from securing exclusive access to IP.

Innovation: In the field of design, the terms innovative and creative are sometimes used interchangeably. In the context of product design and technology this can be seen as a mistake. In his review of ‘Creativity in Business’ George Cox (2005) describes innovation as ‘the successful exploitation of new ideas. It is the process that carries them through to new products, new services, new ways of running the business or even new ways of doing business.’ He describes creativity as ‘the generation of new ideas’, which lead to ‘new ways of looking at existing problems, or of seeing new opportunities, perhaps by exploiting emerging technologies or changes in markets.’ (Cox 2005, p. 3) Therefore design can be understood as the process of shaping ‘ideas to become practical and attractive propositions for users or customers.’ If we commit to this pragmatic line of thinking then we can understand design ‘as creativity deployed to a specific end.’ It follows that innovation is the outcome of the design process, if carried out successfully.

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Intangible assets: Knowledge and IP constitute intangible assets. Interestingly, Daren Tang, the former CEO of IPOS (Intellectual Property Office Singapore) and current Director General of WIPO (World Intellectual Property Organisation), predominantly referenced intangible assets rather than IP in his opening speech to Singapore’s Design Week 2019. Intangible assets are increasingly important in the context of innovation, and it can be disadvantageous to isolate IP. Intangible assets come in many forms. Trade names, customer bases and strategic partnerships constitute intangible assets, often referred to as intangibles. Mr. Chan Chun Sing, Singapore’s Minister of Trade, (2019) claimed that ‘The value of intangible assets held by enterprises accounts for more than half of the global economy.’ The rate of investment in physical properties on other hand is thought to have fallen by about 35% in the course of the last 40 years.

Dynamic capabilities: The concept of dynamic capabilities was first referred to by Teece, Pisano and Shuen in 1997. With reference to Teece’s book ‘Dynamic Capabilities’ from 2009, the Oxford Handbook of Innovation Management describes dynamic capabilities as ‘the capacity of organizations to reconstruct their resources to fit with changing and uncertain environments.’ (Dodgson et al. 2014). This ability to adapt to emerging business environmental threats and opportunities, requires an ‘understanding of organizational dynamics’ as highlighted by innovation theorists Tushman and Anderson (1986, p. 439). Dynamic capabilities include the ability to adapt and manage resources such as intangibles, which is particularly important for start-ups because entrepreneurs involved in the management thereof are faced with a greater number uncertainties than those who manage established businesses.

Traditionally entrepreneurs often build on patents to secure exclusivity to innovative design solutions. As highlighted above, IPRs are aimed at the protection of knowledge which constitutes an aspect of a company’s intangible assets. ‘One of the biggest problems confronting the management of intangibles is the difficulty of measuring them.’ (Dodgson et al. 2014, p. 17) Associating patenting with innovation is thought to be potentially misleading. Dodgson et al. (2014, p. 10) rate patenting as a proxy measure which may be relevant to some industry sectors but not to others. This book examines innovations developed by independent designer-entrepreneurs or small independent design teams in order to verify to what extent patenting constitutes a proxy measure here, what other forms of IP can support the innovation process in addition to, or instead of patents, and what other proxies there are that may help to predict the chances for start-ups to succeed. This book reveals how IP can be managed effectively over time and in relation to other business development attributes so that IP strategies can be deployed to enhance the scope of dynamic capabilities available to designer-entrepreneurs. It can be used for guidance by those who are involved in the development of IP strategies. To facilitate sound decision-making, the book assesses the immediate,

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short- and longer-term impact of design rights and patents on business development processes. To help enhance the success prospects innovations-based start-ups, it: • discusses registered design rights and patents in comparison to each other and in relation to costs and benefits • verifies and compares the robustness of design rights and patents • compares route-to-market approaches related to novel product languages to those related to novel technologies • examines the finance strategies deployed by a range of designer-entrepreneurs • helps identify business development attributes surrounding IP • establishes how different business development attributes affect the commercial success prospects of design-led start-ups • discusses ways in which IP portfolios can be strengthened through the strategic alignment of multiple inventions. The insights shared in this book should help you to take informed decisions on how to set and shift priorities over time. The content of this book sits within the context of innovation studies, design IP, and business management. The book is aimed at designer-entrepreneurs and those who support design business development processes in an advisory capacity or as investors. The book is based on a Ph.D. study which was motivated through an experience in relation to IP that was secured in pursuit of a design start-up initiative: On 11 April 2012 I filed a patent for a design concept that was aimed at enhancing the security of PIN entry devices through the integration of an optical device (Patent No. GB1203168.8). The purpose of the invention was to reduce the risk of personal identity numbers (PINs) to be obtained by fraudsters through hidden cameras or shoulder-surfing. The patent was lodged on 23 February 2012, around two and a half years after an interdisciplinary team had formed around the business start-up initiative. During this early-stage development various business plans had been written and pre-seed funding was secured. The difficulty the start-up team was faced, was to find partners for prototype development and at the same time to prevent potential collaborators from becoming competitors through adopting the relevant concepts without involving the inventors. The patent examination report was sent out 28 November 2016, over four and a half years after the patent was filed through an attorney. Some claims were rejected as ‘not new’, others as ‘obvious’ (Appendix A) which meant they had already been disclosed in other public documents. In addition, amendments were requested to the patent. However, the project had long been abandoned. Not enough security could be built around the project to warrant further investment of time and funds. This example made clear that the patent route can be very long winded and cumbersome for start-ups who rely on informed guesses in order to decide which development route to pursue. By the time a patent is granted, both a start-up business and the design proposition may have changed substantively, meaning that the patent is often of limited value. The most distinguishing quality of this book is the fact that it examines innovation-related scenarios not as momentary phenomena. Instead it explores them

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within their continuously changing contexts. IP, for example, is discussed in relation to the way in which its value changes over time as a venture matures. The book argues that IP strategies can enhance a start-up’s survival prospects and its growth potential if they are connected systematically to other business development attributes such as the route-to-market, the finance strategy, and the access to productionand distribution-related assets.

1.1

Design IP Stakeholders

Entrepreneurship is widely used term, however, what is meant by it varies at times. To succeed in commercialising an invention, designer-entrepreneurs and innovating start-up teams need to connect with third parties, who form parts of stakeholder networks. The value of IP may depend on how individual stakeholders relate to the invention, to the inventor(s) and to each other. It is important to establish to what extent and in what way the inventor’s relationship to the invention, and the relevance of IP may be different if investors are involved by comparison to a situation where the business is self-funded. In their article ‘Patterns of Industrial Innovation’ the business management scholars Abernathy and Utterback juxtapose small, entrepreneurial organisations with larger companies with high-volume productions of standard products (Abernathy and Utterback 1978, p. 3). Opposed to the latter is ‘A more fluid pattern of product change [that] is associated with the identification of an emerging need or a new way to meet an existing need’ which Abernathy and Utterback refer to as ‘an entrepreneurial act’ (Abernathy and Utterback 1978, p. 4) This book focuses on the small entrepreneurial set-ups, commonly referred to as start-ups, to examine their reliance on IPRs and other business development attributes. The book also sheds light into the role strategic partners can play in the early life of a developing design invention. In addition to these key stakeholders, the role of suppliers on the one hand, and that of buyers or licensees (as well customers in a business-to-consumer model) on the other, will be assessed. Potential competitors form also part of the stakeholder network, and it is important to note that collaborators can become competitors and vice versa. This means that stakeholder systems are not necessarily static. They may change over time, and the existence of design IP and its ownership are likely to influence the relationship between individual stakeholders. This is why dynamic capabilities management is so significant for start-ups. In 2012 the UK Intellectual Property Office (UK IPO) commissioned a study to better understand which industry sectors and stakeholders benefit from design-related IP, and in what way: The Big Innovation Centre, a London-based business-to-business service initiative for commercial enterprises, academic institutions and public agencies, whose objective is to enhance innovation practices, compiled a report that describes design as a ‘knowledge-based activity’ (The Big Innovation Centre 2012, p. 26). Knowledge and IP constitute intangible assets which are under certain circumstances protected. Formally registering IP can

6

1

Introduction

potentially help to strengthen the defensibility of IP. As intangible assets, IPRs are sometimes described as hidden value. Although their value can be notoriously difficult to quantify, ‘patents, copyright and related rights, trademarks, geographical indications and trade secrets are significant contributors to enterprise value.’ (Idris 2003, p. 7) Exploiting this value can be challenging for start-ups, because ‘It may […] be harder for smaller businesses to select the right type of intellectual property protection, given the diversity of options available. (The Big Innovation Centre 2012, p. 3) At the same time designer-entrepreneurs rely on IPR more than those companies who provide bespoke design service companies, because they are thought to be at a greater risk of being copied. The risks roots in the general belief that start-ups are stretched for budgets, and may therefore not always be able to defend themselves against IP infringement. Start-ups are also often compromised through a lack of infrastructure, whereas established firms may be able to rely on existing stakeholder networks to take products to market, and thus may be able to outrun inventing firms. Small businesses: The European Commission defines companies with less than 10 employees and a turnover of €2 m or less as a micro-company, and businesses with less than 50 employees and a turnover of €2–10 m as a small company. Medium Enterprises are companies with less than 250 employees and an annual turnover of €50 m or less. ‘Micro, small and medium-sized enterprises are often referred to by the European Commission as SMEs.’ (The Big Innovation Centre 2012, p. 33) Dids Macdonald, CEO of ACID (Anti Copying in Design) highlighted that in the UK 87% of design companies are micro-companies with 60% having less than 4 employees. She explained that ‘there is a £33.5 bn spend on design in this country’, and thus argues that small companies contribute significantly to the UK’s GDP (Macdonald 2014).

1.2

Defining Design

The term design can carry many meanings and connotations. As pointed out before, George Cox uses the word in a comparatively flexible way. This may seem useful and perfectly justifiable. After all, the design industry is changing as new disciplines such as service design, systems design, and user experience design emerge. Discussions around design thinking, a term also used in the context of business management, further widens the scope of significations. This can lead to confusion at times. To allow for better clarity, and to generate an understanding for the meaning of the word design in relation to start-ups, we need to look at the degree to which design matters in relation to the business set-up. The Big Innovation Centre report mentioned earlier in this chapter acknowledges that ‘the nature of design-intensive

1.2 Defining Design

7

industries—the businesses that practise and sell design—is remarkably hard to pin down’ (The Big Innovation Centre 2012, p. 1). The report proposes to ‘think of design-intensive industries as industries that employ designers in large numbers’ (The Big Innovation Centre 2012, p. 15). With respect to designers, The Big Innovation Centre (2012, p. 20f) distinguishes between core designers and designrelated occupations. Amongst the core designers, the report lists: design and development engineers, architects, graphic designer, as well as product, clothing and related designers. Under design-related occupations, we find engineers (including mechanical, electrical and chemical engineers, production and process engineers), various kinds of technicians, and people working in the field of trades and crafts. The authors of the report justify their categorisation with the fact that core designers are people who are ‘spending at least 50% of their time working on design, while design-related occupations are the occupations that Haskel and Pesole estimated as spending 10% of their time on design […]’ (The Big Innovation Centre 2012, p. 20). This distinction between core designers and design-related practitioners can be questioned due to the fact that the notion of working on design depends on what design is considered to be. As highlighted above, the definitions of design are wide-ranging and context-dependent. Sam Bucolo from the University of Technology Sydney (UTS) builds his concept of design-led practice on the basis of business growth and design thinking (Fig. 1.1). Here ‘The “design” of propositions is based on gathering deep customer insights.’ (van der Bijl-Brouwer and Bucolo 2014, authors’ inverted commas). Whilst van der Bijl-Brouwer and Bucolo focus on the design process, Haskel and Pesole from Imperial College Business School establish their understanding based on the professional backgrounds of the team members. Existing concepts of design will be explored further down in relation to

design-led innovation deep customer insights

design thinking capability

customer engagement

Having a vision for growth in your business based around deep customer insights Expanding this vision with your customers and stakeholders Mapping these insights to all aspects of your business

business model

Applied through an abductive thinking mindset

Fig. 1.1 Design-led innovation according to Bucolo [reproduced with permission]

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Introduction

need-driven and demand-driven approaches to design, and also in relation to form-giving and technology-oriented principles. With respect to the team building, it is useful to adopt Haskel and Pesole’s distinction between core designers and design-related practitioners, because this set of definitions allows to speculatively characterise the designer-inventors’ key skills and capabilities, and to make informed guesses on their initial development priorities. The notion of design-intensive industries allows for the deduction that design-led start-ups are companies where (core) designers constitute the majority of members in the team. Professional design service activities are commonly triggered through a commissioning process, to which designers or design agencies respond. The results of these design services are tailored towards the needs and expectations of the individual customer. Such bespoke services typically generate design solutions that are not transferable from one customer to another, which is why the scalability of these businesses is limited, and usually more or less proportionate to the number of employees. Views differ, however, in line with Abernathy and Utterback’s understanding of an entrepreneurial act, we may want to restrict the use of the term entrepreneurship to set-ups that have the potential to generate disproportionately high revenues. Earlier we have defined knowledge and touched upon the differentiation between tacit and codifiable knowledge. When discussing the difference, David Teece, from the Haas Business School, University of California, explains that the latter is ‘by definition difficult to articulate’ (Teece 1996, p. 287). Tacit knowledge is difficult to transfer, to trade and to protect, although it can potentially be protected through secrecy. The success of design-entrepreneurial initiatives often depends on codifiable knowledge, because designer-entrepreneurs often take their inventions to market themselves. This means that they need to be able to communicate their knowledge, or at least part of it. With regards to the marketing of codifiable knowledge, designers are presented two options: to act as a designermaker or as a design aggregator. According to The Big Innovation Centre designer-makers convert designs into end products or product components and trade these directly, whereas design aggregators develop design solutions which they license to other firms. Design aggregators tend to be larger business rather than small start-ups. Bart Clarysse and Sabrina Kiefer from Imperial College Business School in London state: ‘While patent licensing is an available option, the majority of patents don’t earn substantial revenue through this passive method. Obtaining a patent for this reason alone, without starting a business to commercialise products yourself, may not be a worthwhile pursuit.’ (Clarysse and Kiefer 2011, p. 106) It follows that start-ups fall by and large into the designer-maker category. The Big Innovation Centre makes it clear that the business models mentioned are not mutually exclusive. However, each requires a different approach to IP management. Designer-makers have to be not only inventive, but also responsible for commercialising their inventions and of developing the surrounding business. This sets them aside from design service firms whose approach is more reactive by default. In the context of this book we neglect the fourth category in the diagram below, the global manu-services businesses. Businesses in this category tend to be larger multi-national businesses rather than small start-ups.

1.2 Defining Design

9

The diagram used by The Big Innovation Centre to categorise design-intensive companies (Fig. 1.2) suggests that the reliance on IP varies depending on the type of business. Global manu-services companies rely not on design rights but on contracts and other forms of IP, which are not specified in the report. Providers of design services sell or hand rights over to clients, and are thus not concerned with IP enforcement, unless, perhaps, their work is used without prior consent. The key concern of this book is the designer-maker category, where IP is of significance, but also problematic due to the costs in enforcing it. Please note that in this book the term designer-entrepreneur will be used instead of designer-maker to avoid confusion with concepts related to the maker-movement which promotes DIY incentives in the context of technology. The diagram in Fig. 1.2 implies that speed to market and renewed innovation is often seen as an alternative to formal

(most of) the larger design businesses

Design ‘aggregators’

Global Manu-services businesses

Current: often commissioning AND licensing design

Current: mostly not using design rights, but contracts or other forms of IP

Action: seem good targets for current EU-wide design rights info and registration encouragement

Action: unlikely to global uniform rights and enforcement

manu-services

services

Design Services Businesses

Designer-‘makers’

Current: sell intangibles or hand over rights to client in contract

Current: some use of design rights, but some see speed and innovation as more important

Action: advice / support in international contracting

Action: ensure easier (cheaper) enforcement of violations

(mostly) smaller design businesses

Fig. 1.2 Four categories of design businesses as defined by The Big Innovation Center [reproduced with permission]

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Introduction

IP. However, this may be partly due to the fact that confidence in formal IP is limited amongst designer-makers, who lack the financial resources to litigate IP enforcement. So-called designer-maker organisations and design aggregators dominate amongst the independent design-led start-ups as they promise the largest possible growth prospects, and according to Macdonald, founder CEO of ACID, they constitute the vast majority of firms in the sector. It is important to emphasise that this book examines the relevance of IP mainly from a micro-economic point of view. It is not aimed at analysing in detail the benefits, which IP deployment or changes in the IP law may have on a nation’s economy as a whole. Instead the book aims to establish what benefits and disadvantages the utilisation of IPRs has for the individual start-up.

1.3

Design and Design Entrepreneurship

The Cox Review of Creativity in Businesses mentioned in the beginning of this section defines design as that which links creativity with innovation. Cox describes creativity as ‘the generation of new ideas’, which lead to ‘new ways of looking at existing problems, or of seeing new opportunities, perhaps by exploiting emerging technologies or changes in markets.’ (Cox 2005, p. 3) Although Cox’s definition of design is rather liberal and generic—this book will touch on different concepts of design later-on (Sect. 3.3)—it is not wrong to say that design is the process of converting ideas into practical applications that address specific issues or problems. The outcomes of design processes according to Cox can range from objects such as products to processes such as services or business models. It is easy to see that this notion of design is rather open, the successful application or implementation of design solution constitutes the innovation process. It is somewhat difficult to draw a line between design and innovation with these definitions in mind. But perhaps it is more important to understand what connects design and innovation. Nejdeh Hovanessian, who graduated in design, strategy and innovation at Brunel University, suggests that innovation is the interest that is shared by both, the designer and the entrepreneur. Whilst the differentiation between a designer and the entrepreneur is sustained, this does not mean that a designer cannot become an entrepreneur through acquiring new additional skills and interests (Fig. 1.3). In other words, innovation can happen precisely at the intersection on design and entrepreneurship. Whilst Cox acknowledges the fact that ‘It is common for those in business to see creativity and the related area of design as largely concerned with aesthetic considerations such as style and appearance’, he proposes for creativity instead to be seen as a ‘path to new products and services’ and as a ‘route to greater productivity’. One could argue that this does not exclude the pursuit of products of new appearances, but it is not limited to such. Cox further emphasises that ‘“Creativity” cannot be viewed as a skill possessed by the gifted few. It needs to pervade the thinking of the whole business…’ (Cox 2005, p. 40, author’s inverted commas).

1.3 Design and Design Entrepreneurship

11

Designer seconday skills Entrepreneurial skills Designer core skills

Designer entrepreneurial core skills

Fig. 1.3 Overlap between entrepreneurial and designer skills according to Hovanessian [reproduced with permission]

Given the increased scope of activities, the designer- entrepreneur is confronted with numerous challenges over and above the design of the product or service. Who to work with? How to connect with the industry? How to brand the business? How to budget and where source funding? How to find partners and collaborators? A lot of these challenges exceed the scope of the traditional design education, i.e. the core and secondary design skills. Thus the designer-entrepreneur needs to develop new skills if taking the step into the entrepreneurial world upon exit from academia. Being creative alone is not enough. Creativity simply connects with principles of inventiveness and innovation. The terms invention and innovation are not to be confused. Innovation adds an enterprising aspect to the inventive step. In their book ‘Innovation, Intellectual Property, and Economic Growth’ Christine Greenhalgh and Mark Rogers (2010, p. 5) claim that ‘Innovation occurs at the point of bringing to the commercial market new products and processes arising from both existing and new knowledge.’ Whilst an invention constitutes a discovery which generates new knowledge, an innovation is commonly seen as the successful application, implementation and commercial exploitation of an inventive step. There may be multiple inventions related to a specific challenge or opportunity, but not all will necessarily prevail. In addition to this, it is not always the inventor who succeeds in commercialising an invention, as competitors may imitate or circumvent the inventive step. In pursuit of innovations, the designer-entrepreneur may work alone or assemble a business start-up team. Start-ups are developed from scratch, as opposed to spinouts which

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1

Introduction

are grown within larger institutions to become independent at a later stage. This book uses the term design-led start-up in reference to early-stage companies whose developments have been initiated by one or several (core) designers in pursuit of developing and marketing inventive design propositions. Designer-entrepreneurs must make sure that their innovations are of potential benefit to a sufficiently large target audience so that the business can grow. It is important to be realistic about what can be achieved. Wishful thinking often skews the designer-entrepreneur’s assessment of business prospects. It is the ambition for high growth that makes the codifiability of knowledge so important. The latter determines to what extent a business’ unique selling point (USP) can be protected and communicated. Innovation involves taking an invention to market, and this constitutes a process rather than an instance. Processes are by default time-based. Therefore relevant analyses must take the time-factor into account. However, common business strategy development tools such as the Business Model Canvas (Fig. 1.4) which was incepted by Alexander Osterwalder, a Swiss business theorist and consultant, in collaboration with Yves Pigneur, a Belgian computer scientist, do not take the time factor into account. The Business Model Canvas provides an overview over nine fundamental characteristics of a business. However, IP is not explicitly featured, and how these characteristics and their inter-dependencies change over time cannot be recorded. The fact that revenue streams constitute one of these factors indicates that this model is aimed at operating businesses rather than

problem

solution

key metrics

cost structure

value propositions

unfair advantage

customer segments

channels

revenue streams

Fig. 1.4 Structure of Ash Maurya’s Lean Canvas with four of the entry points altered [reproduced with permission]

1.3 Design and Design Entrepreneurship

13

start-ups which are often pre-trade. The Business Model Canvas is a useful tool to list resources and assets, but it is not suitable to describe the way in which the changing circumstances surrounding start-ups are managed because all characteristics are fixed. Ash Maurya, the creator of the lean canvas (Fig. 1.4) describes Osterwalder and Pigneur’s original as too simple and argues that it is based on established rather than developing businesses (Maurya 2012). To allow for strategic options to be assessed with the chart, he replaces four of the original sections: key partners gives way to problem, key activities is replaced with solution, key resources with key metrics, and customer relationships makes way for a section named unfair advantage, which he describes as the ‘competitive advantage or barriers to entry’ (Maurya 2012). Maurya argues that ‘while a Key Resource can be an Unfair Advantage, not all Unfair Advantages are Key Resources’ (Maurya 2012). Maurya’s lean canvas may lend itself better than the original to the dynamic response to one emerging challenge. However, it is limited in its capacity to articulate responses to multiple challenges. Whilst recognising the usefulness of both the business model canvas and Maurya’s derivative, at least for the purpose of a situational analysis, this book will outline an alternative, more flexible model to map and monitor business development processes. This new model can be used to manage design-led start-ups perpetually in relation to various difficulties which may arise either simultaneously or successively. Only through the recognition of temporal change, can models enhance our understanding of development strategies which are required to monitor progress, and thus increase a start-up’s dynamic capabilities.

1.3.1 SafeView This book is based on a Ph.D. study which was motivated through a personal experience with a design-entrepreneurial start-up initiative. In 2007 the Royal College of Art (RCA) in London embarked upon a four-year long collaboration with neighbouring Imperial College (IC). Using funds provided by the National Endowment for Science, Technology and the Arts (NESTA) and the Higher Education Funding Council for England (HEFCE), the two institutions committed to incubating three start-up ventures each year for a twelve-month period. Contenders had to be graduands or alumni of either of the two institutions, and as from 2009 onwards they were encouraged to apply as multi-disciplinary teams, ideally combining members from Imperial College Business School, engineers from Imperial College of Science, and artists or designers from the RCA. I pulled together a team including a student from IC’s MBA course, a research student from the college’s engineering department, and an MA student from RCA’s IDE programme (Innovation Design and Engineering). At the time I was a communication design lecturer with a body of experimental fine art works which involved transient typographic letter forms (Figs. 1.5 and 1.6). During a brainstorm session, the works inspired ideas related to situations where the obscuring of letter

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Introduction

Fig. 1.5 The TRUTH: The spherical resin cast leads to the refraction of light

Fig. 1.6 Horizons: Lenticular lenses modify the readability of the text information depending on the viewing angle

forms could serve a practical use. The idea we settled on was to develop a PIN entry device which could be used for financial transactions in conjunction with ATMs as well as chip and PIN card readers, and with security access systems. The device was to use a scrambled number display in combination with a reduced viewing angle facilitated through lenticular lenses in order to prevent so-called fraudulent shoulder surfing, a process used to obtain personal identification numbers (PIN) through spying in person or via hidden cameras (Figs. 1.7 and 1.8). We failed to enter the incubator, however, decided to continue with the project independently. This proved difficult. Without funding, the confidence in the project remained limited, and five or six months after we had turned our back on the incubator, the first team member dropped out to pursue a career in the traditional way. Several months later the second followed. In 2010 a number of small sums of smart funds was raised through grant applications and competitions. As opposed to equity investment, smart funding does not require shredding equity.

1.3 Design and Design Entrepreneurship

15

Fig. 1.7 The SafeView ATM keypad

7 11

9

8

13

Fig. 1.8 Illustration to explain the function of the SafeView keypad with reference to lenticular lenses and electronic paper displays

The difficulty we had been faced, was to find strategic partners for prototype development and prevent potential collaborators from becoming competitors through adopting the relevant concepts without involving the inventors. Having spent much time on market research and business plan writing, and long after the third collaborator had dropped out, a patent was lodged on 23 February 2012 (Patent No. GB1203168.8). The patent examination report was sent out 28 November 2016, over four and a half years after the patent had been filed through an attorney. Some claims were rejected as not new, others as obvious (Appendix A) which meant they had already been disclosed in other public documents. In addition, amendments were requested to the patent. However, the project had long been abandoned. Not enough security could be built around the project to warrant further investment of time and funds.

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Introduction

Fig. 1.9 Whilst dynamic industries such the mobile phone sector have introduced fingerprint recognition, privacy screens have prevailed in the comparatively conservative financial sectors

The key problem in this case was what entrepreneur coaches Clarysse and Kiefer referred to as bottlenecks in the value chain. Such bottlenecks lead to supply chain problems and/or distribution issues. Tightly controlled market environments such as the financial sector can be difficult to penetrate as incumbents rely on long-term contracts with existing suppliers. Clarysse and Kiefer’s explanations resonated with a comment made by a banking expert who had set in on our investment pitch in 2009. Losses through fraud are covered through insurances, and ATM manufacturers are likely to block new market entrants in order to sustain market power. A prophecy made by a future forecast strategist was proven wrongly though. Biometrics using fingerprint scans did not lead to technology substitutes, perhaps precisely because of the influence of market-controlling corporations (Fig. 1.9). This example made clear that the patent route can be very long-winded and cumbersome for start-ups who rely on informed guesses to decide which development route to pursue. By the time a patent is granted, both a start-up business and the design proposition may have changed substantively, meaning that the patent is often of limited value.

1.3 Design and Design Entrepreneurship

Some incubators insist that you spend a certain proportion of your funding on IPR. There is a culture that a patent gives you credibility. It is worth for an early stage company having one as a marketing tool, if nothing else. A patent is your only 100% way of protecting your invention if you need to disclose it in some way, as NDAs are worthless.

Mathew Holloway, Artica, 2013

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Introduction

1.3.2 Artica Artica was a venture that was amongst the second wave of incubatees at Design London. The inventors and original team members, Karina Torlei, William Penfold, Daniel BecEra and Mathew Holloway, met when studying Innovation Design Engineering at the Royal College of Art and Imperial College in 2006. During a networking event in October 2008 they joined forces with Matthew Judkins, a MBA graduate from the Imperial College Business School in London. Artica is an environment friendly cooling system that does not use any toxic gases and allows for energy savings of over 90% compared to conventional air-conditioning systems (Fig. 1.10). It can be installed in new constructions and also be retro-fitted in existing buildings. In the course of the night a thermal battery stores low temperature through freezing a phase-change material, which absorbs the warmth of the air indoors during the following day. This reduces temperatures to about 20–25 °C. Running costs are very low, as are the costs involved in product servicing and maintenance. The system was designed for use in seasonal countries with considerable temperature fluctuations during the summer period such as Northern Europe, not for tropical countries where the temperature remains high at night. Nonetheless the potential energy-savings can be considerable, and so is the potential market size. In October 2008 Artica entered the Design London Business Incubator, exiting in May 2010. Later that year it was sold to Monodraught Limited, an existing industry player, and the system was subsequently traded under the name Cool-Phase®. The start-up team filed their first patent in February 2008, and their PCT (The Patent Cooperation Treaty) twelve months later. The PCT allows inventors an extra time (usually 30 months from the first filing) to reflect on the countries within which patents are to be secured. The first patent, if successful, grants exclusive rights in the country of filing. Normally, the inventor has twelve months to decide within which other countries patents are to be filed. The PCT extends this period by eighteen months allowing the entrepreneur to explore which other countries are to be targeted. This can be a somewhat speculative endeavour, because the examination report for the first patent application may not always be

Fig. 1.10 Artica cooling system [reproduced with permission]

1.3 Design and Design Entrepreneurship

19

available when this decision is due to be made. It is also important to note that certain countries are not covered under PCT, which means that a decision needs to be made with respect to those countries within twelve months from the first filing.

Value chain: The journey of a product from manufacture to end user/consumer is often referred to as a value chain. The value chain is an diagrammatic way of showing the steps and the value-adding stakeholders involved in producing and trading a product. Typically a company will only govern part of the value chain whilst relying on suppliers of materials and components (to be found in the upstream value chain segment), and distributors (to be found downstream). The more sections of a value chain an industry stakeholder controls, the greater the market-power. Some entrepreneurs prefer to work with business ecology diagrams because the linearity of the value chain can be limiting. The latter makes it difficult to illustrate multiple distribution channels, and multiple suppliers who may be working in parallel with one another.

Appropriability regime: The term appropriability was coined by David Teece in 1986 in reference to the environmental factors that determine an innovator’s capacity to appropriate value, i.e. revenues from marketing an invention. Competitors may limit an innovator’s market share, and revenues may need sharing with collaborators. Suppliers and distributors may further reduce the returns. The stronger an innovator’s appropriability regime, the more likely the innovator will be to maximise profits. Due to the nature of market environments, profits will always be below the theoretical maximum (more to this in Chap. 3).

Artica strengthened their appropriability regime through filing three patents, which they extended through PCT applications. However, the inventors found themselves confronted with a bottleneck in their downstream value chain. In the UK, air conditioning systems are commonly fitted by so-called HVAC (heating, ventilation, and air conditioning) fitters and distributors. Long-term contracts between large firms make it difficult for new market players to enter the scene. Selling Artica directly to property developers proved difficult. So a distribution channel could not be established here. The team consequently focused on a niche market and promoted their product to the owners of listed and period properties, where the installation of conventional air conditioning systems is either legally prohibited or technically difficult (Figs. 1.11). Following some initial successful trials, which proved the viability of the product, Artica were approached by Monodraught Ltd. What Artica had attempted to do, was to focus on a more accessible niche market in the first instance, in order to later break into a mainstream market using the credentials gained. This case makes it clear that route-to-market strategies are just as important as IP protection. Nonetheless it is fair to say that without patent protection, Artica could not have succeeded.

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1 technology

product dev.

production

marketing

distribution

R&D by Artica designers and engineers

Artica’s designers work out the specifications and test prodct

Component manufacturers supply parts

Artica markets to architects, environmental consultants, HVAC distributors and fitters.

HVAC distributors sell and install product at customer sites, provide aftersales service

technology

product dev.

production

marketing

distribution

R&D by Artica designers and engineers

Artica’s designers work out the specifications and test prodct

Component manufacturers supply parts

Artica markets to niche segments of period property landlords

Artica installs product at customer sites, provide aftersales service

Phase change materials (from suppliers)

Phase change materials (from suppliers)

Artica assembes product

Artica assembes product

Introduction

end consumer Commercial landlords and property developers

end customer Niche market of commercial landlords of property properties

Fig. 1.11 Artica’s value chain before and after shifting focus on to niche markets [Source Clarysse and Kiefer 2011, reproduced with permission]

Despite their reasonably successful early exit, Mathew Holloway has remained critical of patenting regulations. He stated that, “If you are a small organisation and you try to develop something in a clever and innovative way, and you actually want to do something with it, it can be very difficult.… It is not really about how good your invention is, it is about how much money you have.” (Holloway 2013) He referred to multi-national companies who accumulate extensive patent portfolios, which they trade on without ever generating a true interest in exploiting any of their patents themselves, and explained that “A patent is… only actually valid, once it is tested in court by another company.… It works as a patent, but only to the point where someone challenges it. And then you have to spend the award money on legal fees.” (Holloway 2013) This suggests that the chances for a patent to succeed on the market depend on the financial resources available to the IPR owner, highlighting the question at what point in time a patent ought to be filed, given that start-ups are financially restricted. Despite his criticism of the patenting system, Mathew Holloway (2013) admitted that Artica’s prospects of raising seed funds would have been very limited without patents: Unfortunately it is expected by investors on the whole. Some incubators insist that you spend a certain proportion of your funding on IPR. There is a culture that a patent gives you credibility. It is worth for an early stage company having one as a marketing tool, if nothing else. A patent is your only 100% way of protecting your invention if you need to disclose it in some way, as NDAs are worthless.

Artica filed three different patents in total, which means that three different technological novelties were used in combination to allow for the product to work effectively. All members parted with the venture following its sale, except Matthew Holloway and William Penfold, who worked for the acquiring company for a period of time. For Artica IPR proved vital to be able to overcome, if not to say

1.3 Design and Design Entrepreneurship

21

bypass, bottlenecks in the value chain. Artica’s trade sale may seem premature. However, the investors seemed satisfied with the outcome. “Design London recovered its costs. The founders got a little bit of money out of it” said Hardiman, who was Design London’s incubator manager at the time. He acknowledged the fact that they “could have always held out for a better offer”, but also stated that “there have been numerous examples of companies holding out and going bust” (Hardiman 2013). Finding the right point in time for a trade sale can be difficult. Insights

The Artica case suggests that micro-businesses and SMEs can edge their way into the market, even if its appropriability regime is weak at the outset. It also highlights the benefit of IP to keep potential competitors and imitators at bay. What Artica did, was to focus on a niche market where they could secure control over a larger section of a value chain. This case suggests that IPRs ought not be seen as isolated assets. Instead they should be assessed and developed in relation to other business development attributes such as market accessibility. Although Artica did not prevail for long, it would not have been able to secure a trade sale without patent protection.

The insight gained from studying Artica encouraged the ultimate discontinuation of the SafeView project. Walking away from a venture that is likely to fail can be a wise move. Whilst a degree of courage and risk-taking is inevitably required when pursuing an entrepreneurial route, one needs to constantly balance the risks involved against the commitment of time and finances. The next chapter will explore seven other initiatives in order to establish insights about what enhances a start-up success and growth prospects.

2

On Early-Stage Start-Ups

As a start-up you have no real value. You have to convince people. In order to do that, you have to build up lots of evidence through winning competitions and generating press attention, to build up credibility through different sources. This is very difficult to do if you don’t have any protection, because once disclosed, you are unable to get a patent. Peter Brewin, Concrete Canvas, 2013 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_2

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On Early-Stage Start-Ups

Abstract

In this chapter, which comprises a series of eight product innovation case studies, compares the approaches of various designer-inventors to managing IP. The case studies range from music instruments to healthcare products. The chapter examines the inventors’ perceptions of the significance of IP in conjunction with other key business development factors. This discussion of the conditions within which design-led start-ups develop, is followed by an in-depth analysis of the key business development attributes including IP such as patents, design rights, and trade marks, as well as finance, complementary assets, and market-related factors. This generates an understanding for the development principles behind the individual start-ups, which are analysed in comparison to each other, and in consideration of the degree to which the businesses have grown in terms of value. The chapter culminates in the development of a reference framework.

Following on from Artica, this chapter examines seven other design-led start-up businesses of slightly varying nature in order to carry out a comparative analysis of what key issues design-led start-ups are faced with, and how they tackle these challenges. Although each of these ventures is closely linked to postgraduate studies conducted at the Royal College of Art (RCA), and that most of the designer-entrepreneurs involved have participated in a business incubation scheme (Fig. 2.1), either as part of the Design London incubator, or the InnovationRCA incubation scheme, the experience gained varies significantly between the designer-entrepreneurs involved. Some made full use of mentoring and funding, whilst others took advantage of office space only. Concrete Canvas, the oldest venture under examination, preceded both incubation schemes. Here the founders made use of advice and access to premises only. Other variations were due to the stages at which the incubator scheme was at different times. In the beginning, when it was named Design London, applicants could apply as individuals; however, later they needed to apply as interdisciplinary teams. The incubator management underwent staffing changes over the years. Design London was set up in 2007 and became InnovationRCA in 2011. It then moved from Imperial College to the Battersea site of the Royal College of Art. Despite the diversity of design business cases, there has been a growing suspicion that the entrepreneurs’ choices of IP may be affected by the way in which the incubator is managed, and by the guidance provided. Even sponsorship may have influenced the priorities at times. Design London was funded by the National Endowment for Science, Technologies and the Arts (NESTA) and the Higher Education Funding Council (HEFCE), and InnovationRCA receives sponsorship from Dyson. To verify the degree to which design-led businesses have been influenced through the incubation process, three case studies that did not go through an incubation scheme can be found in Chaps. 4 –6: Haberman Associates; Magmatic; and Sebastian Conran Associates. These three are mature businesses, the study of which allowed for longitudinal insights (Fig. 2.2) into the modus operandi of a design-led start-up business.

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arctica — air cooling system cupris —medical device seaboard — electronic music instrument kwickscreen — mobile room divider for medical use romulus — customer management system concrete canvas — concrete-impregnated fabric robofold — metal-folding process squease — garment for autistic children orbel — mobile hand steriliser

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Fig. 2.1 Time-line illustrating at which point in time individual ventures were incepted/entered the incubator

In conjunction with the incubator case studies, semi-structured interviews were held—mostly in person—over the period of 30–90 min. In line with Grounded Theory principles, initial questions were broad and open, and subsequently became progressively focused. Emphasis was placed on the phenomenon of design-led start-up successes and failures, with a view on how IP was managed. Notes were taken, interviews were recorded and transcribed upon completion of each interview. Where geographical distance and time pressures did not allow for physical meetings, conversations were conducted via phone or Skype. Speaking to interviewees in person was important to be able to react to their answers to open questions, and deepen the conversations. Although the initial conversations were largely led by the interviewees to allow them to ‘encourage unanticipated statements and stories’, a list of ‘open-ended non-judgemental questions’ (Charmaz 2014, p. 65) was prepared a priori, and used to verify that a consistent set of data was collected. Charmaz refers to this as an interview guide (2014, p. 62ff). Most designer-entrepreneurs affiliated with either of the two incubators were interviewed two or three times, which provided an opportunity to discuss insights and hypotheses, but also to critically verify data obtained through secondary sources such as news feeds and articles. Expert interviews were carried out with business coaches, incubator managers, lawyers, and investors (angel investors and venture capitalists) to critically review the views and assumptions shared by the designer-entrepreneurs.

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RCA incubator case studies

Haberman case study Rob Law (Trunki) case study Conran case study 1990

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Fig. 2.2 Time-line illustrating at which point in time individual ventures related to the longitudinal case studies (Chaps. 4–6) were incepted by comparison to the incubator case studies

literature review period of intermission secondary research (rca incubator)

first series of interviews (rca incubator) expert interviews Haberman case study

Rob Law (Trunki) case study — primary and secondary research Design Right Infringement Survey

post-survey research and analysis

Conran case study 2013

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Conran case study resumed 2016

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Fig. 2.3 Time-line of data collection activities

As pointed out above, this series of incubator case studies is complemented by case studies with established designer-inventors (Chaps. 4–6). The approach to these case studies differed ever so slightly. This round of interviews conducted in conjunction with longitudinal case studies helped to extend the scope of the inquiry beyond the Design London/InnovationRCA incubator, so that the incubator settings can be taken into account as a possibly influencing factor in the development of start-ups. How the different stages of data collection connected in terms of time frames, can be seen in Fig. 2.3.

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Design London/InnovationRCA

The first incubator projects such as RoboFold did not need to apply as an interdisciplinary start-up team. This requirement was introduced in 2008. The SafeView project outlined in the introduction of this study was pitched in 2009. It made it into the second round of the competitive selection process, but failed to enter the boot camp, which constituted the final stage of the selection process at Design London. The case studies in this chapter were guided by the underlying question what concerns designer-entrepreneurs entertain at the outset of their start-up business development. The order in which the cases are presented in this chapter, reflects the chronology of interviews.

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The incubator case studies was interrupted by a one-year intermission due to an engagement in a design right infringement investigation which was commissioned by the UK IPO. Some of the insights gained during this project which comprised a quantitative survey are discussed in this book. However, since this investigation focused on design rights in the UK only, no chapter has been dedicated to these findings.

2.1.1 Cupris Business Proposition and History Cupris was founded in 2011. This initiative began as a multi-disciplinary collaboration between Paul Thomas, who has a degree in Engineering and Product Design, and his business partner Julian Hamann, an ENT (Ear Nose and Throat) surgeon. The initial idea came from Hamann, who detected deficiencies in the way in which ENT cases were handled in the UK. This meant that there was a perceived market need that motivated this development. The aim behind Cupris was to develop mobile diagnostic equipment (Fig. 2.4), software and services involving the patient in the diagnostic process. The ambition was to streamline the delivery of healthcare at a reduced cost in the UK. The company’s launch product was a smartphone-enabled otoscope that allowed for general practitioners to conduct the diagnosis and to consult with the ENT specialist remotely. GPs and patients were to take images on their smartphone and to upload

Fig. 2.4 Otoscope by Cupris first and latest version, TYM 2.0 [reproduced with permission]

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them to a database. They were then to be given questionnaires which help the ENT specialist to analyse the patient’s problems remotely. Transfers to hospitals and specialist doctors could thus become unnecessary. Cupris entered the InnovationRCA incubator in 2012. In the same year, an investment offer was considered, but rejected due to the fact that the investor requested a majority stake. Despite the prospective investor’s experience in medical innovations, the founders decided against the investment and support, relying instead on the funds and support obtained upon entry to the incubator. In 2014 two new members joined the team, a business development manager and a programmer. The latter two were recruited to the team to pursue the development of a platform which was to connect patients to medical advisors. This platform was intended to be an additional asset to complement the physical product. In 2014 the team had begun to run free trials in university hospitals. The purpose of this was two-fold: to obtain useful insights through customer-feedback in order to optimise the product and the system around it, and to build a customer-base for potential future sales. IP Held, Problems and Benefits The founders filed the first patent in 2011, almost a year prior to entering the incubator. At the time, little consideration was given to the brand name and the logo. The trade mark was initially unregistered. It was later changed, and the new version was registered in June 2016 as an image. The name Cupris was registered in May 2016. Filing a design patent or a registered design for the design of the product was not an option because the physical shape remained subject to development throughout the first couple of years. The form of the product was seen as secondary, since the focus was on the overall concept as well as the function and on the implementation of the technology. A competing innovation was detected in the US in 2012. Instead of filing for PCT, the founders filed their first patent only in the UK, and a second one in 2014. The competing innovation could be successfully challenged. Analysis Although the first patent was filed pre-maturely, patent searches led to insights related to overseas competition, and allowed for an informed strategic response. Paul Thomas was a serial entrepreneur. Despite his experience with earlier ventures, risks and anxieties persisted. £10 K were set aside for defending IPRs in court if needed. Having a patent application on file, helped to secure a place on the incubator scheme and it enhanced bargaining power. As the twelve-month post-filing period had not elapsed when the team entered the InnovationRCA Incubator, Cupris could make use of the incubator’s consultancy service in order to decide whether or not to take their first patent global, or to extend its scope through withdrawing and re-filing the patent. If patents are filed prematurely, inventors have 12 months to consider withdrawing and refining the patent application. This will reset the filing date potentially extending the period of exclusivity. However, it comes at the risk that a third party files a competing patent application in the meantime. The team behind Cupris chose to limit the scope of their first patent to the UK thereby saving costs, and to file a second patent two years after the first. Both

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patents were filed within the UK only. Cupris was motivated by a perceived market-need involving technology-development, platform development and concept design. Trials conducted within academia were hoped to build a potential customer-base and to further develop the product through participatory design research. This was aimed at generating demand within their future target market. Cupris combined service design aspects with the product development. The focus on patenting was comparatively strong, although the entrepreneurs’ confidence in the IP was limited. Design registrations remained ignored, partly due to the lack in suitability. Informal IP was given little significance, although secrecy was used where possible. Long-Term View Following several years of development, Paul Thomas reported in 2018 that Cupris had secured additional funding after exiting InnovationRCA. This included a grant from UK’s Technology Strategy Board (TSB, later known as Innovate UK) and a grant of nearly £1 m from the UK National Health Service (NHS). This allowed for significant team growth. A CEO (Chief Executive Officer) was recruited from Imperial College Business School, and a CTO (Chief Technology Officer) joined the team. But employing eight people proved too costly in the long run, and faced with tough competition in the healthcare service sector, the founders saw themselves forced to cut back after three years. The service design element including the platform development had to be de-emphasised, and the company shifted their focus back to the product. Only the two founders remained involved, with neither drawing a salary. Julian Hamann had continued his work as a surgeon, and Paul Thomas had started a design consultancy to make a living. The investors had retained their stakes, and a round of crowd-funding in 2017 helped to secure and additional £500 K allowing the founders to keep the business afloat. By 2018 the cumulative funding was estimated to be in the region of £2 m. The patents which Cupris had filed in the UK helped to fend off a competitor who sought to secure a competing European patent. Despite this, Paul Thomas explained that the main benefit of the patent lay in attracting investors. The product revision, which involved adding a bespoke camera and lights to the otoscope, rendered the existing patent largely obsolete. Product adjustments are needed none-the-least because the smart phone technology is constantly evolving. Sales figures had remained modest, and in 2018 Cupris was looking abroad hoping to tap into new markets. The biggest difficulty when spoken to in 2018, was to find a new CEO with business managerial experience. Despite having been involved in a start-up for well over half a decade, the managerial skillset and mindset had remained a challenge for the two founders. So did quality manufacturing. Whilst Cupris sought to expand the product portfolio by adding a thermoscope, an endoscope and a dermatoscope to their offering, producing and trading the redesign of the original product had been far from easy, and securing a profitable distribution network remained the priority. In 2018 Paul Thomas expressed a degree of regret about engaging in the serviceand platform development, a very resource-intense endeavour. Cupris engaged third

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parties for preparing and filing grant applications. This helped to sustain focus on product development and operations. Despite their troubles, the founders have managed to retain a large proportion of the shares, combined around 40%. The rest was given to investors in exchange of funding.

Review

This case points at possible benefits related to the re-filing of a patent. What can be learned from Cupris is that an early patent application can help to secure seed funding and a place on a business incubation scheme, and the second to articulate the technology in better detail. Unless withdrawn, the first patent provides the venture with a priority date. Although it can be withdrawn and re-filed, within the first twelve months, this would set the priority date back to the second filing date. Whilst this extends the patent’s maximum lifespan by up to a year and it allows for the inclusion of additional details and patent claims, there is a risk lying in the fact that a third party may file a competing patent prior to the re-filing date, thus securing priority. Knowledge of a potentially competing innovation discouraged Cupris from pursuing the process of withdrawal and re-filing. Instead a follow-up patent was filed to increase the chances to secure exclusivity within the UK. However, it is important to note that the first patent can undermine the second. There needs to be a sufficient degree of novelty involved in the second by comparison to the first patent. It is no secret that focus group feedback and early customer trials can help to align the innovation development with the expectations and preferences of the target audience, in this case future medical practitioners. But the process can be disruptive to the start-up development. The Cupris case suggests that facilitating co-creative research and developing a service element may be very resource intense. Payroll tends to be a large cost factor. Without sufficient revenues, it maybe prudent to keep the team size small, and to outsource certain developments. Although tech companies are often expected to invest revenues in growth rather than generating profits, growing sales can be more important than growing the team.

2.1.2 Seaboard Business Proposition and History Roland Lamb, a jazz musician who converted to product design upon enrolling for an MA with the RCA in 2008, invented the SEA interface (Sensory, Elastic and Adaptive). This touch sensory system that can be moulded into various shapes,

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enables the seamless transition between discrete and continuous input. It is capable of capturing three-dimensional gestures and gives the user a tactile feedback. Lamb progressed to a project-based Ph.D. and with his studies still underway, he entered the Design London Incubator in early 2011. His start-up was built around the Seaboard, a new musical instrument based on the design of a piano keyboard. The Seaboard’s patented concept enables performers, composers and producers to exert real-time control of all the major characteristics of sound. Rather than simply hitting a key with the finger, the pressure can be altered in terms of location and intensity. The pitch can thus shift seamlessly between notes. Volume and timbre can also be varied. Lamb spearheaded the product development from the start as CEO of Roli Labs. Having stated that payroll can be financially compromising, if not to say risky, Roli Labs (later to become Roli) had no less than 20 employees by January 2013. How could Roland Lamb afford this? Roli’s newsletters in 2013 and 2014 made it clear that the first product, the Seaboard GRAND Limited First Edition (Fig. 2.5), had not sold out within the first year or two of trading. It became available for pre-order in 2013, and was still offered for purchase in 2015. Considering the price of US$8888.88 and the fact that less than 88 products were sold, one can deduct that a turnover of US$1 m had not been reached by the end of 2015. A document published online on 30 August 2012 (acquired by The National Archive on 02/01/2013) revealed that Lamb sought to raise £300 K worth of equity funding whilst predicting rapid growth and promising ‘strong returns either through a major refinancing in 18–24 months or at exit through a flotation or sale to a major music industry leader in four-to-six years’ (The National Archives 2013). Although sales may have developed rather slowly in the beginning, Lamb was extremely successful in fundraising. He was thought to have raised around TSB grants (UK Technology Strategy Board) totalling around £500 K during the early stages of the business development. Like Design London incubation offers, TSB grants were handed out for developments related to patentable or patent-pending inventions. TSB also required a degree of match-funding. However, investments raised upon entry into the

Fig. 2.5 Seaboard Grand [reproduced with permission]

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incubator, as well as in-kind time-commitments could be factored in to satisfy TSB’s grant requirements. Whilst Roland Lamb carried on intensively promoting his invention through PR, his success streak did not end. In 2014 US-based online publisher TechCrunch reported that Roli had ‘acquired JUCE, a long-time C++ framework which has, over the last few years, come to be used by most of the leading audio companies’. Julian Storer, who founded the firm that developed Juce, joined Roland Lamb’s firm. The acquisition followed a $12.8 m (£8.8 million) investment, which Roli had secured earlier that year (Business Insider UK 2016), and a second series A investment round allowed Roli to raise an additional $3.7 m. It is likely that the acquisition of Juce could not have happened without the investments. However, investment rounds can be pursued with an acquisition in mind. As much as Roland Lamb could use equity investment as match-funding in pursuit of TSB grants, he may have acquired this series A investment on the condition that he would acquire Juce and thus enhance the company value. In May 2016 TechCrunch reported that Roli had raised an additional $27 m (£18.6 m) of VC (venture capital) investment in a series B funding round (TechCrunch 2016). By then the company had not only expanded to the US, the Seaboard had been introduced to 15 countries in total. In October 2017, TechCrunch reported that rap musician Pharrell Williams was amongst the Roli investors and took on a role as Chief Creative Officer (TechCrunch 2017). The cumulative funding secured, is stated by TechCrunch as $50 m in 2017, and this suggests that the non-equity and debt finance that was secured in addition to the series A and series B investments mentioned above listed by TechChrunch amounted to at least $5 m. In the process of the series B investment round, the company was estimated at a value of £60 million ($80 million) (TechCrunch 2017). It is important to point out that Roli acquired not only Juce, in 2015 the company took over Blend, an Open Collaboration Network for music creators, and the year after Roli acquired FXpansion, a developer of instruments and effects for software platforms. Both companies were small firms, the acquisition of which nonetheless tightened Roli’s appropriability regime. IP Held and Problems and Benefits Lamb confirmed that he “found it very difficult to bear the costs of early patents” (Lamb 2013). Nonetheless he managed to file his first patent within about six months of conceiving the idea. For Lamb a patent was not only a way to secure exclusive access to the technology, it was also a way to underline the fact that he is fully committed to the project and willing to sustain his commitment long-term. This is thought to have helped to attract the interest of investors and collaborators. Lamb admitted that a patent was “not always enforceable but this statement of commitment [was] relevant” (Lamb 2013). Rather than focusing on funding alone, it is worth contemplating what the funds that are sought are to be used for, and how they benefit the business. Unlike most other designer-entrepreneurs who joined Design London, Roland Lamb managed to keep all the equity during the inception period. The seed funds obtained in conjunction with the Design London incubator scheme allowed him to

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pay his start-up team, mostly freelancers, instead of shredding equity at the outset. Business partners were carefully chosen, and shares in equity have been reserved for investors. With a comparably simple first patent (European Patent, Fig. 2.6a) that was filed in 2009 (followed by a PCT filing in 2010), Roland Lamb filed a second patent, a UK patent, in 2013. The latter was significantly more sophisticated (Fig. 2.6b). Ongoing product developments appear to have led to technological insights which could be harnessed through this follow-up patent. The acquisition of other music businesses led to additional inventive steps and a further expansion of the IP portfolio. The shape of the Seaboard surface was registered as a design with the Office for Harmonization of the Internal Markets (OHIM, now known as EU IPO) in 2011. The design registration dates two years after the filing of the patent (see Appendix B). Thus Lamb made sure that the registration would be filed no more than one year after the patent was published, and also no less importantly, one year after the design was disclosed to the public during the RCA degree show. This meant that the one-year grace period for designs in the UK and in Europe was used fully. Through delaying the design registration to the maximum degree possible, Lamb maximised the possible lifespan of his registered design.

a

Fig. 2.6 Cover pages of patent applications

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Trade marks can be secured for names and shapes of names or logos. The word Seaboard has been registered as a US trade mark (see Appendix B). Securing the trade mark as a word as opposed to a shape allows flexibility in terms of the design. It has significantly greater scope. For single-product companies (as opposed to spinouts and established firms), the brand value is typically attached to the product rather than the inventor or the inventing firm. The name of Roland Lamb’s company changed numerous times during the early stages of the PR campaign. It changed from Lambde to Sea Labs to Roli Labs to We are Roli to Roli Ltd. Until the venture is known within the target market, company name changes seem less important provided that the product name differs from the company name. With start-ups the focus of attention is usually directed to the product, not to the inventing firm. The word Seaboard remained unchanged. Analysis A patent helps the designer-inventor build confidence, which is beneficial when pitching for funds, or when negotiating equity shares, even though the patent on its own is unlikely to convince an investor. For Lamb the patent was vital to secure exclusivity on the market. He rejected offers from the industry to license the invention, instead he chose to market directly to customers and distributors. The US constitutes one of the largest markets. Therefore Lamb filed a patent for the US in addition to the European patent. Not only distribution and sales, production was also integrated to secure independence and to increase the profitability. Lamb claimed that ‘The Seaboard has cost parity with other keyboard devices but can be priced above them, meaning healthy margins.’ (The National Archives 2013) To

Fig. 2.7 Seaboard product range with the Block Studio Edition at the bottom, a modular system, that allows to extend the range of keys and to attach effects modules

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test the market, a limited edition of 88 products was launched, in reference to the 88 keys of a grand piano, along with standard versions of the Seaboard which were smaller and cheaper. Several years later the Seaboard Grand made way for a collection of products (Fig. 2.7) including hard and software products, Seaboards of varying sizes, as well as accessories.

Review

In reference to the incubation period, Lamb explained that “…through the process [he] learned a lot about IP, and about product design and about the relationship between IP, product design and entrepreneurship. So those things have all come together” (Lamb 2013). Roland Lamb readily adopted the role of CEO. He appeared to have acquired the knowledge and expertise needed to fulfil this role. At the time of the interview in 2013, Roland Lamb had only two patents pending, which, like Cupris, were complementary patents. However, Lamb secured the possibility to expand his patent portfolio internationally, with the US as a key target market. Inventions incepted by designer-entrepreneurs who are not experienced engineers, are likely to be in need of much development. Therefore the initial patent may be comparatively generic with potential weaknesses. Provided that sufficient novelty can be attached to a complementary follow-up patent, a first patent can be used to attract investors and grants, and to secure the sums needed to further develop technologies. Noteworthy is the fact that Roland Lamb filed the patents as a person, not as a company. This means that the initial patents are tied to him rather than the company. Even if the company is granted an exclusive unlimited license, this can be a way for an inventor to secure one’s stakes in a company, because the latter is intrinsically dependent on the inventor. Although Roland Lamb’s second patent lists a co-inventor, this too is tied exclusively to him as a person which means that he is the sole owner. There can be responsibilities attached to patent ownership such as the responsibility to fund the litigation of infringement. However, this risk can be mitigated or fully waved as part of the license agreement. Another draw-back in conjunction with filing patents as a person is that investors and strategic partners may shy away from engaging with the company. Like most other inventors featured in this book, Roland Lamb engaged a law firm for filing his patents. This is why he may have struggled with the costs which typically amount to a four-digit sum. Although one can file directly without engaging an attorney, this is normally not recommended, because the way in which a patent is written, and the way in which patent claims are laid out is important for the scope and validity of a patent. Initially Roland Lamb’s investments in IPR were limited to the most essential, but he timed the filings to perfection. It is important to note that academic degree shows are a form of public exposure, and rights to the

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designs need to be acquired in due time to prevent their possible invalidation. Grace periods apply in some jurisdictions, but not in others. Focusing on the most essential forms of IP (technology patent, trade mark, design right), allowed Roland Lamb to integrate production without relying (too much) on external suppliers. In 2013, the Seaboard was said to be manufactured mostly in-house (Lamb 2013). The acquisition of a software firm and other start-ups significantly increased the level of independence and it tightened the appropriability regime around the firm. A few strategic steps which went hand-in-hand with successful fund-raising efforts and three acquisition of small firms. This facilitated business growth and helped to establish Roli as a very promising newcomer in the sector of musical instruments.

2.1.3 KwickScreen Business Proposition and History KwickScreen is a portable retractable room divider, originally designed to prevent germs from spreading across hospital wards (Fig. 2.8). Later the divider screen, which uses a special patented material along the top and bottom edges for stability, was marketed as a product to increase the patients’ privacy and comfort. The product was invented by Michael Korn, who graduated with MA at the RCA in 2007 and filed a patent for his invention the year after. KwickScreen launched its product in 2010 and joined the Design London incubator in January 2011. In 2007 Korn was joined by Denis Anscomb, who holds a degree in Mathematics, and had worked as a finance director prior to joining KwickScreen. KwickScreen grew without the need for equity funding. In 2012 the two founders had four people working for them. The technology development was initially part-funded by the NHS who had ‘a pot of money that was for products that were looking at infection isolation.’ (Anscomb 2013) Instead of concentrating on equity investment, KwickScreen focused on manufacturing and sales. Steady business growth indicated the gradual success of the business. Having received revenues of around £100 K in their first year of trading (2010), KwickScreen reached a turnover of just under £1 million in 2013. IP Held and Problems and Benefits Korn stated that “Having a patent has been crucial. Where we needed to engage manufacturers, and get them to invest their time and effort in making a product, they needed to know that this was not a product that somebody else could then make and copy.” (Korn 2011).

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Fig. 2.8 KwickScreen Pro, room divider, the product range further comprises KwickScreen Air, a version that is attached to the wall, and Duo, a version that contains two screens which can be unfolded into two different directions. The screen can be transparent, frosted, plain or printed with custom patterns and images. [reproduced with permission]

Anscomb expressed a slightly different position about the value of the patent than his business partner—although Korn’s public praise of the patent value may also be a defensive PR message rather than a genuine reflection of his opinion. According to Denis Anscomb, “It is not only the cost of the patent, it is the cost of defending the patent, that makes it ridiculous to think, it would ever stop anyone from copying”. (Anscomb 2013) During the first few years KwickScreen benefited from the strategic relations with a larger company, after securing the exclusive use of Rollotube, the material needed to build the product. Although KwickScreen registered a design and a trade mark in addition to their patent, Anscomb highlights the fact that “All the other intellectual property that we would put around KwickScreen is kind of insignificant compared to the fact that we have an exclusive worldwide license to use this [material] for screens…” (Anscomb 2013) Like Roli, the team behind KwickScreen secured their trade mark only for the product, not for the company. A company name does not even exist here. Analysis As in the previous cases, the confidence in the patent is low here. As no equity investment was sought, the need for a patent seemed less strong than in the cases discussed so far. Corporate relations, trade channels, access to materials and manufacturing was the focus of attention here. Anscomb admitted that “It is very difficult to know the best route at an early stage. Most investors would probably not touch something that is so early stage that it hasn’t got a patent.” (Anscomb 2013) Working without equity investment eases the pressure of pursuing a patent. Exclusive access to third party IP can be equally beneficial as a patent. The benefit here is that the IP policing and defence can be covered by a third party. The dependency on a different company’s stability can be disadvantageous. In KwickScreen’s case the licensor was

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larger, and perceived as more stable than KwickScreen (Anscomb 2013). Hence, the exclusive license constituted a strong asset at the outset. Whilst critical of patents in general, Anscomb appeared to be positive about having one. Due to the costs involved, KwickScreen did not invest in international patents. However, when interviewed in 2013, Anscomb admitted that “now, if I had the option, I would have an American patent, and I would have a European patent. But, at the time, it was just too expensive, and very few products ever become successful, and the likelihood is that you are wasting your money” (Anscomb 2013). Here the dilemma could be clearly felt. Filing for patent is costly, and possible benefits are hard to assess at the outset. Once a company starts trading, the patent maintenance costs can be offset against sales. Until then, the decision whether or not to patent appears a gamble. What the KwickScreen case highlights, is that the need for a patent partly depends on the degree to which a designer-entrepreneur needs to source equity investment. Identifying the need for investment is important for taking the right decision with regards to IPR, as is the prediction of future export interests. The optimal timing of the patenting process depends on the development pace, and the distance from market. However, these factors are even more difficult to predict than the funding needs. Most designer-entrepreneurs initially underestimate the time that is needed to render a start-up profitable. KwickScreen was very sales-oriented and used a bootstrap approach as opposed to an investment-oriented aspirational approach to develop. This means that external funding needs were reduced as much as possible in order to sustain a high level of independence. According to Anscomb the team borrowed only five thousand pounds from the incubator initially, but soon repaid the debt. To push sales in the early stages, the duo bought a van to carry out sales visits at individual hospitals. Production was done in-house rather than outsourced. Anscomb also stated that KwickScreen developed a bespoke customer management system to track progress in relation to new business. The coding of this software named Romulus was outsourced, and eventually the system was licensed out to clients. The license fees received were re-invested into further system developments. Long-Term View Following several years of development, Anscomb reports that KwickScreen has developed further, with KwickScreen established as a premium product in the healthcare screen market. A factory self-owned production in North London caters for potential growth, although the market is perceived as of limited size. Sales are strong in the UK, and also in the US where a network of distributors takes care of the sales management. Due to the comparatively low population density in the US, each distributor is allocated a specific state for trading. Sales in Europe are more modest due to a higher level of competition. In 2018, six years after the initial interview, KwickScreen employed twenty people who took care of production, sales and marketing. Whilst the Rollotube material, which stabilises the screens at the top and at the bottom, was initially supplied by a third party based on an exclusive arrangement, KwickScreen negotiated the rights to manufacture the material in-house against a royalty fee. This

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allowed to enhance the manufacturing quality, and once the patent expired, KwickScreen was perfectly equipped to produce the material independently without having to pay any royalties. Although competitors could then hypothetically have copied the product without infringing any patent rights, KwickScreen had an advanced product, production facilities, and the distribution network to sustain their market dominance. KwickScreen developed bespoke patterns, some of which were registered as designs to modify and customise the screens. By 2018 revenues have increased well beyond £1m per year. Meanwhile Romulus was redeveloped from scratch. The business proved to be difficult to scale because each CRM system had to be customised. The team set up a standalone company and called the new development Index. Anscomb successfully applied for incubation in an accelerator based in California, US. Although faced with much more competition, Index is aimed at a market much larger than KwickScreen. Index taps into corporate email systems to monitor progress with respect to evolving customer relations. Data from the web can also be harvested to identify the best possible points of contact within a specific firm. Despite modest revenues at the time the growth potential surrounding Index is thought to be considerably larger than that of KwickScreen.

Review

Focusing on sales rather than IP helped the entrepreneurs behind KwickScreen to expedite the route-to-market. KwickScreen benefited from comparatively large equity-free grants provided by the NHS. The exclusive license for a patented material from an established firm was perceived as better security than the patent that was owned for the product, because established firms are usually better equipped to litigate possible infringement. Such a strategic partnership can be very valuable. KwickScreen and Roli are similar in that both production and distribution were done in-house. This secures a degree of independence. However, it also means that a lot of effort needs to be invested into marketing, sales and distribution. Romulus/Index developed gradually with little pressure alongside KwickScreen. Pursuing complementary inventions can be beneficial provided that the second development is not too resource intensive, and supports the first. The registered designs which were secured in conjunction with KwickScreen were seen as not particularly significant to the product success. Being able to diversify and customise the room dividers was beneficial, but the risk of infringement was thought to be low. The main purpose of securing design registrations for the print patters was to satisfy the expectation of the NHS who provided development grants in the early stages. The products are marketed through the product names. The name KwickScreen was registered as a name, not a shape, to warrant for a larger scope. For a name to qualify for trade marking, it is important that the name is not a description of the product.

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2.1.4 Concrete Canvas Business Proposition and History Concrete Canvas is the oldest company within this series of examples. Its inception preceded both the Design London and InnovationRCA incubators. The name relates to a material invention that can be deployed for multiple purposes. It is a flexible cement-impregnated fabric invented in 2006 by Peter Brewin and Will Crawford, who met at the Royal College of Art. In 2004 the team had patented a concrete shelter designed for disaster zones (Fig. 2.9). However, the design duo were unable to successfully market this concept to the military and to NGOs. Following an initial prototype paid for by the UK military, no orders followed. Having struggled to secure any early sales, the inventors extended the application of their material to ditch lining, slope protection, roofing. Concrete Canvas spun out of the Royal College of Art in 2004. Following their MA graduation the two founders retained access to RCA premises for a six-month period, during which they were supported by InnovationRCA, which at the time functioned as a support unit to strengthen the strive towards design innovation and entrepreneurship at the college. Following the filing of a second patent for impregnated fabric in 2006, Concrete Canvas secured around £200 K through grants, competition awards and angel investments. A large proportion of the funds had to be invested in patents. Through collaborating with third parties, including a distributor in the US, the company could test possible applications of the material and tap into a variety of market sectors and segments. Through shifting focus from the product to the material used the range of possible options could be widened. Concrete Canvas proved particularly successful in the construction industry (Figs. 2.10, 2.11 and 2.12). IP Held and Problems and Benefits Brewin (2013) described Concrete Canvas’ patents as “absolutely vital”. “If people invest in a start-up, they want to see that there is the capability to protect the technology”. By 2013 Concrete Canvas owned four different patents giving rise to a portfolio of forty patent filings in total. The word Concrete Canvas was secured as a trade mark in a wide range of countries including Europe and the US. This helped the

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Fig. 2.9 The Concrete Canvas Shelter prototype. The material is fire resistant. [reproduced with permission]

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Fig. 2.10 The Concrete Canvas material [reproduced with permission]

Fig. 2.11 Concrete Canvas used for slope protection [reproduced with permission]

Fig. 2.12 Water is applied and once dried the canvas hardens. [reproduced with permission]

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entrepreneurs to strengthen their market position which was further enhanced through the contractual arrangements which Concrete Canvas entered with third parties. Peter Brewin (2013) stated that patents are important when talking to potential customers and the press because “… there is a limit to what you can do under non-disclosure agreement … and also, it is important to generate a lot of press, and we were entering a lot of design competitions”. Concrete Canvas secured the first significant sales in 2008, and the company broke even the following year. Then the company began to established itself. When trading independently in the UK, Concrete Canvas relied on licensees in the US and Canada, where they also entertained R&D arrangements. A few years later the product could be ordered for $13– 15 per sm on Alibaba with a minimum order of 300 sm. Whilst relying on licensing alone for business growth is usually not recommendable, the Concrete Canvas case confirms that licensing can help to expand the business into territories to which the designer-entrepreneur has no direct access. Exclusive IP can be very important when entering strategic partnerships with multinational corporations, and if successful, such relationships can significantly increase the credentials of a start-up. Brewin explains that “… there is a certain amount of weight having some large multinationals standing behind you, as well, in terms of being able to protect our IP.” Brewin addressed a fundamental aspect related to the significance of IPR at the outset: As a start-up you have no real value. You have to convince people. In order to do that, you have to build up a lot of evidence through winning competitions and generating press attention, to build up credibility through different sources. This is very difficult to do if you don’t have any protection, because once disclosed, you are unable to get a patent. Brewin (2013)

Secrecy in the run-up to patents is very important. As soon as patentable knowledge is publicly shared, it can no longer be secured through patents. Even if a patent is filed in such a case, competitors can easily get the patent invalidated in court. Patents can be used to signal exclusivity and the capacity to innovate. If aligned strategically with the right route-to-market options, patents can help to increase market power. The possibility of licensing out novelties may also be attractive incentives for investing in patents. By 2013 Concrete Canvas had become an established firm. Long-Term View Knowledge and experience, and the way this is shared and exchanged with customers can be an important development aspect. The strategic sharing of knowledge is referred to as open innovation. Brewin explained that the development of new applications for Concrete Canvas were often incentivised by the firm’s distributors. The latter were approached by customers with specific challenges that could be addressed through the use of Concrete Canvas. The technical support provided by the team behind Concrete Canvas could be combined with a collaborative approach to resolving the difficulties experienced by the distributors’ clients. Following initial case analyses, entirely new applications such as roofing or sealing of tanks could be

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developed. Brewin (2013) described Concrete Canvas as “a new plan for construction rather than a product in itself.” Concrete Canvas is a typical technology-push venture, which means that the idea surrounding the technology preceded its application. According to Brewin the technology-push incentive existed from the outset, even during the phase of exploring the idea of a sheltering solution (Brewin 2013). During this early phase, the company was helped by one of their suppliers, Walkerpack, who provided Concrete Canvas with free access to a disused factory. Accessing complementary assets without incurring costs is of great benefit to a start-up that is strapped for funds.

Review

What the Concrete Canvas case highlights is that collaborative development arrangements including strategic partnerships can pave the way towards assets needed for production and distribution. Distribution-related assets are particularly beneficial in conjunction with technology-push ideas, for which the market is usually unclear at the outset. Developing innovations in exchange with the market tends to increase adoption rates, and can accelerate the route-to-market. Exclusive IP can be essential in pursuit of strategic partnerships, because it secures the inventor’s advantageous position within the stakeholder network. It is important to sustain secrecy until the patent application is filed. NDA’s are thought to be of limited benefit when trying to prevent third parties from using developed ideas and concepts. Both aspects, access to assets as well as collaborative arrangements, which in this case involves open innovation, benefit from the ownership of exclusive IPR because IPR secures the designer-entrepreneur’s position within the collaborative framework. The fact that the word Concrete Canvas could be secured as a trade mark may be surprising, because descriptive terms can usually not be registered as words, only as trade mark image. But granting exclusivity to this term does not disadvantage competitors because the material is one of a kind. Securing a trade mark as a name is generally preferred, as it allows infinite visual permutations. A trade marked image or icon (logo) can relatively easily be by-passed through altering the visual appearance of the word. If the name is secured per se, it prevents competitors from using it in any shape or form for marketing purposes.

Open innovation: This term was coined by Henry Chesbrough from the Hass School of Business, University of California, to describe the coordinated and intentional sharing of knowledge for strategic purposes. Knowledge flows can be inbound and outbound. Open innovation principles will be discussed in greater depth in Sect. 3.6.

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Complementary assets: This expression was introduced by David Teece in 1986 in reference to resources that are needed in support of either developing and producing a novelty, or in order to take the latter to market. The concept of complementary assets will be further examined in relation to appropriability regimes in Sect. 3.1.

2.1.5 RoboFold Business Proposition and History In 2007 Gregory Epps, the company founder of RoboFold, invented a sheet-metal forming process that does not require mold-tools (Fig. 2.13). Aluminium sheets are first scored using CNC cutting and this allows for them to be bent along curved lines using 6-axis industrial robots. The movements of the robotic arms are controlled through bespoke software components, which were developed in a software application called Grasshopper3D. These components can be used in combination with Rhino3D, a common computer-aided design application software. Epps patented the process in 2007. Thereafter RoboFold has built on approximately £140 K of investment obtained from the Design London incubator and family members. A combination of consultancy work, commissions and workshops enhanced the company’s economic stability. But equity returns were still due in July 2013, and in 2018 Gregory Epps confirmed having shifted emphasis away from RoboFold. Not being able to patent the software needed to coordinate the metal folding process, was a big disadvantage for the designer-entrepreneur because it made it more difficult for the inventor to secure exclusivity. Software patents are available in the US, but not in most European countries. Even in the US they are not considered to be very robust, because they can be easily circumvented or challenged. Process patents are often regarded as comparatively weak for the same reason. In a seminal study known as the Yale Survey, Levin et al. concluded that

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Fig. 2.13 Metal-folded solution developed by RoboFold on commission by Zaha Hadid Architects for the Venice Biennale 2012 [reproduced with permission]

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‘For new processes… patents were generally rated the least effective of the mechanisms of appropriation’ (Levin et al. 1987, p. 794). This disadvantage in relation to IP incentivised Epps to apply a creative approach to his business model. RoboFold offered workshops and developed software components in collaboration with customers (Fig. 2.14). Where possible, secrecy was used to sustain exclusivity. Attempts to get sponsorship from the company behind Rhino3D failed. The added value or ROI (return on investment), which the corporation would have gotten from supporting RoboFold, was presumably perceived as too low. Although, the imbalance in the market-power was of disadvantage to RoboFold, Epps promoted his invention alongside this established firm at trade fairs and conferences. Similarly to Artica, this case shows how an imbalance in market power can pose threats and limit opportunities to form strategic partnerships with existing incumbents. Concrete Canvas was in a better position by comparison to Artica and RoboFold, because it had no direct competitor. Epps promoted his RoboFold process at colleges and universities in and around London. This helped to nurture customer demand, not unlike Cupris, who engaged academic for first trials. However, like Cupris, RoboFold failed to establish a strong market position through these co-creative developments. The reasons why the co-creative approach failed, varied between the two cases. For Cupris there was too much competition to dominate the market environment, RoboFold was too niche a product, and thus did not generate enough traction.

Fig. 2.14 Robotic Lattice Smock, a steel facade which was exhibited in New York 2014; a collaboration between RoboFold and Andrew Saunders [reproduced with permission]

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IP Held and Problems and Benefits Epps filed his process patent in 2007, just prior to his graduation. The software needed for the process could not be patented within Europe because The European Patent Convention excluded computer programs. However, exclusive access to the process itself was hoped to suffice to sustain exclusivity. Epps had extended the process patent to various EU countries as well as to the US. This came at a high cost. In order to avoid shredding too much equity during the very early stages, Epps chose to pay for the patent filing and the maintenance, rather than to rely on the financial support of the RCA.

Review

Epps considered his process patent as a necessity in line with his exit strategy. He explained that “developing a technology creates potential value and that potential is protected by a patent…” (Epps 2013). However, one could argue that this potential value is as probabilistic as is the IP to which it relates, so the protective quality is of a speculative nature. Only sales provide reliable credibility, in particular where innovations are aimed at emerging markets. On the other hand, without exclusive IP, the venture’s value growth and scalability can be limited in proportion to the sales and marketing efforts. Epps registered a number of trade marks, but had to resort to figurative ones, because the word RoboFold constituted a descriptive term. Therefore it did not qualify for a trade mark. Only its specific figurative representation could be secured. However, none of the trade marks on register resembled the one used in RoboFold’s marketing materials. Changes to the visual identity seem common in the early stages of a business development, as entrepreneurs gradually build a full understanding of the business characteristics and of possible brand positioning options. There seems little benefit in focusing on branding in the very early stages of a design-led start-up business development. In principle RoboFold could have focused on the development of designs, which in turn could have been secured through registered design rights. However, identifying useful designs and sizeable markets for these, is far from easy because every product line (furniture, architectural cladding, automobile components etc.) constitutes a line of business with its own individual market environment and challenges. Instead of focusing on specific products, Epps generated income through consultancy and one-off projects. Participatory design methods were used to further develop a business-to-business service provision which helped to attract clients.

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Long-Term View Whilst understanding the value of IPR in terms of growth prospects, Epps critiqued the early-stage version of the Design London Incubator for an exaggerated focus on investors. He argued that sales should have been given greater attention and explained that “if you get sales, you get investment”. Epps (2013) further explained that he “found investors particularly unpleasant at times”. This point concurs the views of some of the other designer-entrepreneurs spoken to. The involvement of investors can be a mixed blessing. Whilst the investors’ influence on the decisions can potentially be compromising, their networks can help designer-entrepreneurs to connect with industries and to secure access to complementary assets. The reason why the role of investors is of interest, is because their potential strategic involvement and because the funds made available through investors are closely connected to the availability and value of IPR, patents in particular. Epps sought to build his business around a licensing strategy, which inevitably requires exclusive ownership of IP. But the markets surrounding RoboFold were not sufficiently clear. A wide variety of applications were under consideration, from the automobile industry and boiler covers to furniture and architecture, making the market environment seem very uncertain. Although the diversity of applications of processes and materials can be beneficial to the venture’s growth prospects, diversity can likewise impair the focus of attention, and this can significantly decelerate business developments.

2.1.6 Squease Business Proposition and History Squease was founded in 2009 by a team of four, Sheraz Arif, Andy Brand, Menno Kroezen, Katrien Ploegmakers, who invented an inflatable pressure vest that can be hidden within a trendy hooded top (Fig. 2.15). The product was aimed at people with sensory difficulties such as autistic children, who can use Squease to reduce anxiety in public environments. Following advice from patent lawyers and business mentors, the founders considered filing a patent, but encountered difficulties, one of which related to patentability. The principle of using pressure to reduce anxiety was known, which was why the inventors had to ask themselves which aspects were sufficiently novel to qualify for a patent. The main novelty was the layout of the pressure elements, the interconnecting air chambers. However, the team soon came to realise that their chances of securing a patent for the Squease application in general, i.e. for the use of an inflatable device to modify the behaviour in people with sensory processing difficulties, would be extremely limited. The patent application underwent various stages of iteration, but the costs involved in continuing their patenting strategy as well as the potential risk of failing with their patent application were judged as too high for the founders to choose the patent route. In agreement with their investors, the team behind Squease decided to discontinue their patent application. In the UK, patents can be withdrawn within twelve months from filing, i.e. before a patent application is

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Fig. 2.15 The Squease vest with and without the hooded top [reproduced with permission]

publicised. This is often done to conceal an invention from potential competitors or imitators. Instead of patenting, the team behind Squease deployed other means to secure a prominent position within the market environment. Squease initiated a rental scheme that allowed potential buyers to rent the product for a few weeks for a small fee prior to making the purchase. If the product was then bought, the rental costs were taken off the purchase price. Liaising with customers in this way not only helped to educate the market, it also kept the team behind Squease motivated —“when you hear a mum say: ‘My child can sleep now.’ Or: ‘He can now eat.’ It is really powerful feedback. That is valuable” (Arif 2013). Squease also developed a supply chain. Without that, and without a distribution network, imitators would always find it difficult to compete. The team of inventors protected their invention through filing a Registered Community Design (now: EU Registered Design) and through securing a trade mark for the word Squease. However, protective measures focused not so much on exclusive IP. Instead Squease counted on their speed to market, the complexity of their product as well as on their complementary assets, i.e. their suppliers and distributors, in order to secure their market advantage. Establishing market dominance in this way can be difficult for a design-led start-up, but niche markets and emerging markets behave differently from established markets. Established markets are often controlled by incumbents to too high a degree to allow for newcomers to edge their way in. In Squease’s case, speed to market was sustained not only through development pace, but also through the

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market uncertainty, which made it unattractive for potential competitors to imitate the invention. Squease traded their product online, and also secured distributors abroad, including in South Africa and Australia. Despite the limitations in the market size, Squease were not far from break-even in 2013. So they were significantly faster in pursuing their route to market than most of the other start-ups examined in this chapter. Their pace was somewhat comparable to KwickScreen. Avoiding the patent route and relying on a bootstrap strategy helped to reduce development costs, which in turn made it easier to reach profitability. In 2018 the business was stable with part of the team working in the Netherlands, and the others working in the UK. With modest but stable revenues, all active team members could draw a salary sufficient to make a decent living. IP Held and Problems and Benefits In 2013 Arif stated that filing a patent application had served to attract potential investors. To the question whether or not one needs a patent in order to secure investment, Arif responded that the patent provided a degree of comfort despite the fact that theirs was still in the early stages of the application stage. Most angel investors who engaged in conversations, did not ask what exactly the patent protected, within which context it was filed, and how easy it would be to enforce. Arif is not the only designer-entrepreneur to question the legal value of a patent. He argues that “if you have the money to invest in a patent as a start-up, you probably do not have enough money to enforce it later.” (Arif 2013) However, the Squease pressure vest would be very difficult to reverse-engineer, due to the complexity in its design. And yet Squease was not without competitors. At the time of the interview, the inventors were already aware of a variety of weighted vests and blankets designed for the same purpose as Squease. The product that seemed particularly similar in terms of its concept and functionality, was the T.Jacket, a garment developed and taken to market in 2011 by Dr. James Teh, an engineering graduate from the National University of Singapore. Although the T.Jacket was invented two years after Squease, the geographic distance makes it likely that this is a case of an inadvertent parallel invention, a process which Levin et al. (1987) refer to as the ‘near duplication of R&D effort by [a] rival firm’. Novelty searches are important steps in the process of innovation because more often than not similar concepts emerge independently from each other in different locations. The concept behind the T.Jacket is very similar to Squease: a hoody that conceals a technology that exerts adjustable air pressure onto the wearer’s torso, and which is aimed at an audience with psychological disorders. As the team behind Squease dropped their patent, T.Ware had freedom to operate. Squease is noticeably cheaper than the T.Jacket, about half to a third of the purchase price, however, the latter benefits from an app that allows the device to be controlled via smart phones. In 2018 Andy Brand confirmed having been aware of T.Jacket, and that Squease did not take any action, since the competitor seemed largely inactive. Despite its rapid route-to-market, the team behind Squease found it difficult to scale the business, perhaps due to the niche characteristics of the target markets involved. Niche markets are easier to dominate, but more difficult to grow than mainstream markets.

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Review

The Squease vest did not lend itself to patenting, at least not at the outset. Once on the market, the right to patent for a product ceases due to the public disclosure involved, unless the patent relates to a hidden or a newly added feature. Some countries grant a grace period, which sustains patentability for a certain period of time, usually for up to a year. A patent can be of psychological benefit, it builds confidence. As Squease was aimed at a largely underdeveloped niche market, the chances for imitators to become a threat were very limited. The market may have been too small and too uncertain to attract large firms to enter. The complexity of the design and the focus on a niche market is thought to have helped to protect the innovation to a degree. In niche markets the necessity of exclusive IPR is much reduced. Like KwickScreen, the founders shifted their focus very early on from IP to manufacturing and sales. Both products were introduced to the market comparatively fast, but scaling the businesses proved challenging. The availability of complementary assets, or the lack thereof, the nature of the novelty as well as various other business development attributes are strongly interlinked. Squease was triggered by a perceived need for a product to help children with autism. Unlike most other products discussed in this chapter, it was not a technology-push initiative at the outset. The Squease case makes it clear that there is a difference between need-pull and demand-pull, concepts which will be discussed in detail in Sect. 3.4. In this case, initial research revealed a need where there was no market demand. One should not underrate the fact that Squease had a significant impact on the quality of lives of its customers and their families. Whilst business success is largely measured in terms of revenues and market performance, admittedly also in this book, societal impact can also be seen as a measure for success. The non-economic transformative capabilities of design-inventions become particularly significant in the context of social innovation.

Market uncertainty: Clarysse and Kiefer (2011, p. 131), authors of the book ‘The smart entrepreneur’, explain that ‘the clear presence or absence or target markets and/or solidly protectable IP are indicators of environment uncertainty.’ They further refer to ‘The value chain and sales process [as] indicators of environment complexity’ (authors’ italics). What is worth taking note of is that the more novel a design concept is, the greater the chance for it to be surrounded by a high level of market uncertainty. Radical innovations can be launched within niche markets or emerging markets to establish credentials such as proof of concept before releasing them into mainstream markets.

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Speed-to-market: Clarysse and Kiefer (2011, p. 132f) differentiate between first-to-market and speed-to-market. The former means requires designer-entrepreneurs to conceal their intentions until they are ready to launch a product in order to exploit a hidden market opportunity. Speed-to-market is achieved through ‘creating an offering that is easy for customers to adopt’ (authors’ italics). The latter can be achieved through removing obstacles, e.g. through enhancing compatibility with other products or platforms, through pricing strategies, through customer support, or through enhancing user-friendliness etc. As Clarysse and Kiefer rightly point out, first-to-market does not guarantee market dominance. Nor does speed-to-market. Both concepts are often paired with continuous innovation, where-by complementary inventive steps are pursued following a successful product-launch. Omitting a patent-route may help to accelerate the route-to-market.

2.1.7 Orbel Business Proposition and History Orbel Health is a hand sanitiser aimed at use in hospitals to reduce the risk of bacterial infections such as MRSA. It dispenses a disinfectant solution from a small palm-sized container that can be clipped on to the clothing of a health care professional (Fig. 2.16). This allows for the disinfectant to be available at any given time with no time required to attend to a stationary wall-mounted dispenser. The

Fig. 2.16 The Orbel Health hand sanitiser [reproduced with permission]

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fluid dispenses through a number of balls which rotate as the healthcare practitioner’s hand slides across. It requires only one hand to get the device to release the disinfectant fluid, leaving the other hand free to perform other actions. Orbel is the second oldest RCA incubator business examined in this chapter. Having started developing his invention in 2005/2006, Adam Sutcliffe, the inventor, pitched twice for incubation at Design London. In 2007 he applied on his own and failed to get accepted. In the following year he joined forces with Damian Soong, an Imperial College MBA graduate, and succeeded. In 2010 the venture exited the Design London incubator and completed its first successful trial with the National Health Service. The following year the team of two secured angel investment from the London Business Angel Consortium (LBA). Sutcliffe advocated the registration of designs and argued that “You are less likely to get investors to invest without seeing something” (Sutcliffe 2013). IP Held and Problems and Benefits By the end of 2013 the venture had raised £675 K in total: £75 K in 2007, £250 K in 2011, £350 K in 2013. A design flaw meant that redesign became necessary to prevent the device from dispensing an excessive amount of disinfecting gel. The first design did not hold the balls in place, therefore too much fluid was dispensed. The second patent provides a supporting structure that makes sure that the balls can rotate without being pushed deeper into the container. This is why a second patent had been filed in June 2013 to complement the first (Figs. 2.17 and 2.18). The Fig. 2.17 Orbel, first patent (no. GB2439061), filing date: 19/12/2007 [reproduced with permission]

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Fig. 2.18 Orbel, second patent (no. GB2497097), filing date: 05/06/2013 [reproduced with permission]

Orbel case reveals how resource-intense a patent-focused route-to-market strategy can be: By 2013, the two patents required funds of about £120 K per year for patent maintenance alone. The costs built up due to the fact that the patents were filed internationally, covering Europe the US, Australia, Hong Kong, Japan, Argentina, Australia, South Africa and China. Long-Term View In 2013 the product was due to be manufactured in China by a group called Kyosay, who was also considered to become a potential distributor at the time. Giving away control over both upstream and downstream value chain elements (Sect. 1.3.1) can be risky, because inventors can potentially be edged out of the market. Orbel Health’s extensive IP portfolio comprising design rights in four different countries as well as in the EU, and patents in five different countries plus the EU provided the start-up with considerable security within their strategic partnership. As Orbel Health’s initial business partner, Kyosay contributed a strong set of complementary assets through sourcing the production means and material supplies from a company named Ensay. This paved the way towards Orbel’s first filling line in China. In 2013 Sutcliffe had expressed hopes that having a distributor, Pickett’s Health, invest in a minority share of the Orbel Health Limited, would mitigate the risk of strategic partners by-passing the start-up. Strategic partnerships with established firms can help mitigate the risk of IP infringement through third parties, but they can also affect the balance of power quite significantly. A robust portfolio of IP can be of great significance in such a case.

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By 2018 things had changed considerably for Orbel Health. Having partnered with Kyosay who provided engineering support and managed the manufacturers, in 2013, Kyosay went into administration in 2016 after sourcing a number of suppliers and manufacturers for Orbel. Without direct contact with their six to eight suppliers, Orbel was at risk of losing their production capabilities, but they managed to sustain communication with Ensay, a material supplier. One of the people involved in the engineering and development offered to manage the supply chain in return for a retainer contract which was the equivalent of his previous full-time salary. Due to small sales at the time, Orbel needed to raise funds to afford the retainer. Soon after, the sales manager in charge at Orbel Health, ceased his efforts due to personal problems. This led to the loss of anticipated sales opportunities. With no sales lined up, the supply chain manager needed to be paid in full despite the lack of need for production. The business declined in the course of a year. As the only remaining director, Adam Sutcliffe eventually assumed the role of the Chair of the Board. Through a chance encounter in 2018, Sutcliffe managed to secure expressions of interest from a potential distributor with a network in the US and Ghana. Prospective sales of several thousands of units helped Orbel Health to regain confidence. However, the two year-period of decline had cost the firm dearly. The storage of production tools needed to be paid for, as did the maintenance of the patent portfolio. Through taking unsecured loans from one of the investors, Orbel Health managed to prevail. Following a number of down-rounds, Sutcliffe’s shareholding had been reduced from 35% to little more than 3.5%. Despite having raised several million dollars of cumulative investment, Sutcliffe still carried the lion share of responsibilities in the business with his original business partner having moved on in pursuit of other opportunities. Support was limited to one shareholder representative and a business development consultant, who had taken on the role of the CEO. Sutcliffe cited management errors as a reason for the slow processes involving success and failure. This slow succession of ups and downs made it difficult for Sutcliffe to take an informed decision whether or not to draw a line and to consider other career options. By the end of 2019, Sutcliffe’s efforts were rewarded, at least to some extent. After his sales contact in the US had set up a distribution chain catering for all hospitals in the state of New York, and many others across the rest of the USA. Following a trial with one of the largest hospital in New York, an order of 60,000 units had been placed. A few months later, after a number of trade shows that had been managed by the US distributor, Sutcliffe reported that he had received purchase orders for 1.5 m units. This growth in demand has led to supply challenges. The Orbel management team made plans to raise investments for upscaling the production in order to increase the number of assembly lines to increase the daily production from 3500 units to 25,000. The COVID-19 epidemic in early 2020 was thought to have expedited the processing of orders on the client side. This rapid increase in orders led to challenges in the quality assurance of the product. On the one hand less time was available to gather customer feedback, investigate potential issues, and to respond to it, on the other it became significantly more difficult to mitigate the risk of production flaws and to ensure that all production lines generate products of identical quality. Despite this,

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Orbel had been able to start gathering testimonials. Sales expectations were at 500,000 units/month by the end of April, and about 1 m units/month by the end of August. When spoken to in June 2020, Sutcliffe reported that the company value was thought to grow to about £40 m by the end of 2020—even without further growth—provided that sales volumes remained steady. However, for Sutcliffe to be able to exit successfully, the company value that would still need to increase significantly, because a lot of equity share had to be sacrificed in the course of the rather challenging company history.

Review

Faced with angel investors, Sutcliffe did not have the confidence to take care of the business himself, or to appoint a CEO of his choice. Instead he relied on the investors’ preferences. Working with chairmen and CEOs who were not equipped for their roles slowed down progress and led to shortfalls in the strategy development. The latter is best developed from within. Sutcliffe compliments the US for embracing failure as a learning experience, as opposed to Europe where failure is seen as a negative. He claims that almost every successful start-up is run by people who had three or four failures. Risk adversity leads to a reluctance to put in checks and measures which would signpost failure at an early stage. Although in 2018 Sutcliffe argued that in hindsight, he should have discontinued Orbel Health after two or three years instead of pursuing it for a decade, the situation changed suddenly a year and a half later. Whilst his ownership had shrunk to a small fraction, his company was now securing growing sales, indeed to such an extent that it became challenging to scale production in line with demand. When asked about the significance of a varied IP strategy in 2020, Sutcliffe acknowledged that exclusive IP was of utmost importance for him, not only to secure equity investment, but also in order to attract distributors. He claimed that distributors would not be ready to invest in setting up a distribution chain unless they can be confident that exclusivity can be sustained. Sutcliffe did point out that stakeholders are not too worried whether the exclusivity is afforded through design patents or utility patents. The brand was initially less important for Orbel’s shareholders. The use of a consistent product name and design was sufficient to attract an audience. However, brand consistency became crucial later on. Having a trade mark on register proved to be of an advantage. Before InnovationRCA’s strong emphasis on patents was softened in 2018/2019, Sutcliffe criticised this over-reliance on patents, arguing that “Every form of IP has value in its own right” (Sutcliffe 2013). Sutcliffe expressed the view that a combination of various forms of IP should be at the focus of attention. He explained that one can file for a patent in the early stages in order to secure investment, and then to neglect the patent in favour of registered design rights (Sutcliffe 2013). However, it is important to note

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that patents and design registrations are not interchangeable (see Chap. 3). They do not constitute alternative options. Aesthetic qualities are excluded from patent protection, unless ‘the feature relates to a genuine technical effect’ (UK Government 2016, paragraph 219), and the functionality from registered design rights (UK Government, nd b). This beckons the question how shifts in emphasis between technology and product language are best strategised. It is also worth noting that Orbel Health’s position within the strategic partnership with Ensay could have been jeopardised without a solid patent portfolio. The following section offers a comparative analysis of the case studies and this will help establish a set of strategic principles.

Angel investment: Angel investments are comparatively small sums of investment which are often sought at an early stage of a development in exchange of equity, i.e. shares in the company. Sums commonly are in the five- to six-digit area. To mitigate risks, angel investors sometimes form syndicates that are led by an experienced lead-investor to be able to build on each other’s experience. Angel investment can be useful, in particular if investors have business relations within the relevant business environment. However, their influence on business decisions can also be compromising. Venture capital investments are significantly larger in size, usually seven-to-eight digits, that are managed by a venture capitalist. Whilst entrepreneurs typically pitch to angel investors during one-off investment pitch events, a venture capitalist would typically monitor the progress of a venture development over a longer period of time, usually a year or two. The venture capitalist takes a percentage of the investment in return for managing the relationship between investors and entrepreneurs.

Retainer contract: Such agreements set out a fixed regular payments, usually monthly, in exchange of services provided over a fixed period of time.

2.2

Comparative Analysis

Most of the designer-inventors interviewed perceived patents as a prerequisite to initiate a proprietary venture. All interviewees testified that there is a dependency between the acquisition of seed investment and the ownership of patents. However, some decided to abandon a patent-route early-on. There is a noticeable difference between the businesses who used few or no patents—either because their novelty did not qualify for a patent-route, or because they perceived their patent as flawed—and minimal funding: KwickScreen,

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Squease, and those who opted for patenting strategies, which significantly increased the funding needs: Concrete Canvas, Seaboard, Orbel. Those who opted out of patent protection, developed without or with limited equity investment and reduced their funding needs through a bootstrap approach. Income obtained through freelance work or teaching helped some of these designer-entrepreneurs to cover living expenses and other financial needs were limited to the best degree possible. The ventures with minimal funding, KwickScreen and Squease, secured revenues through early sales. Designer-entrepreneurs who pursued a patent-route, spent much time on developing and implementing patent strategies which appears to have limited the time available for analysing and engaging their target markets. They also focused on raising equity investment with a view on filing for patents in a variety of countries, such as Concrete Canvas and Orbel. Self-funded non-patent ventures seemed to focus on sales earlier. Designer-entrepreneurs in pursuit of a patent route needed to invest a lot of time and resources in managing the IP and forging strategic partnerships. This seems to have slowed down PR and sales efforts, none-the-least because secrecy with respect to the technical novelty is required in the run-up to a patent application (Sect. 3.5). Despite this, none of the interviewees, not even those who invested in patents, expressed much confidence in the patenting process. The latter is generally perceived as time consuming and cost-intensive. There is a shared understanding that patents cannot be defended by an early-stage start-up if infringed by a third party. This subsection examines case-study-related observations by comparison. Artica is excluded from this part of the analysis because it was sold to an incumbent during its early development. With the exception of Concrete Canvas, all ventures benefited from a degree of seed funding which was capped at £75 K during the Design London Incubator phase. However, KwickScreen (and Romulus), and Squease—soon converted to a bootstrap approach which meant that they limited their costs to the best degree possible in order to avoid the need for equity investment or debt. Roli, Concrete Canvas and Orbel used an equity-intensive strategy. RoboFold and Cupris sit between both categories with some investment used, but not to the level at which Roli and Concrete Canvas have. The ventures’ funding approaches were first assessed in 2013–2015 with a view on the development stage of each respective venture. The ventures were re-assessed in 2016–2018 through primary and secondary research, and some were re-examined in 2020. The observations point towards a dichotomy between funding-intensive start-ups and those who sought to limit their funding needs as much as possible. Although this relatively small number of inquiries is by no means representative of the design-entrepreneurial scene at large, this dichotomy is a known in the context of creative entrepreneurship. Aspirational businesses tend to use equity funding to grow more aggressively in order to be able to acquire and defend a larger market share than those who build on a bootstrap strategy. The invention itself, the market access prospects may play a significant role in the decision-making.

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IPR focus

funding needs

Seaboard

high

high

Concrete Canvas

high

high

Orbel

high

high

Cupris

medium

medium

KwickScreen

low

medium

RoboFold

medium

low

Squease

low

low

Fig. 2.19 Funding strategy versus IP strategy

In Fig. 2.19 the reliance on IPR is assessed in relation to the range of formal IP obtained by individual start-ups. Concrete Canvas, Roli (Seaboard) and Orbel own multiple patents in a variety of territories, multiple registered design rights, and registered trade marks. This shows a high reliance on IP. RoboFold and Squease de-emphasised their formal IP, whereas Cupris and KwickScreen make use of formal IP to some extent. The table above (Fig. 2.19) shows a relationship between IP reliance and funding needs. The assessment of the former is based on the IP portfolio (mainly patents and design rights), as well as on verbal comments. The coherence between the need for equity investment and the reliance on formal IP points towards a conundrum surrounding IP dependency and finance needs. Designer-entrepreneurs need patents to raise angel investments, and investment is needed to secure patents. Insights

Designer-entrepreneurs are typically confronted with the choice between a bootstrap approach in pursuit of early sales on the one hand, and with a patent-intensive strategy in pursuit of angel investment. Investment needs grow in proportion to the number of countries under consideration for trade. Designer-entrepreneurs can file an early patent in order to abandon or to de-emphasise it following early-stage investment. In most cases follow-up patents are required to strengthen the protection of developing technology concepts.

2.3 Investors and Funding

2.3

59

Investors and Funding

The designer-entrepreneurs shared the perception that a patent enhances the chances of securing angel investment, even if a patent remains to be verified. A range of angel investors were spoken to during an investment pitch event at the Dyson Centre in London Battersea on 10 December 2013. The event was organised by the London Business Angel Association (LBA) in collaboration with the RCA. Three out of four angel investors spoken to stated outright that patents mattered. Two of those three labelled them as pretty important. One of these two further explained that a patent helps making sure that the innovation does not infringe the rights of third parties. This is not perfectly correct, because pending and even and approved patents can be challenged in court, for example on grounds of prior art or lack of novelty. Other criteria came to mention, such as the proximity to market. The latter is of importance, not only because of the investors’ interest in early returns, but also to limit the need for additional investment rounds. With early stage investments, angel investors can expect a greater stake in the business in return for their funds, but additional investment rounds may dilute the shareholding, as was the case with Orbel Health. If a venture is close to market, the need for additional funding rounds is likely to be limited. The fourth angel spoken to, stated that the relevance of patents depended on the sphere, which means that the entire situation needs taking into account. The sphere can be related to Teece’s appropriability regime, an important indicator of a start-up’s success prospects which will be discussed in greater detail in Sect. 3.1. The angel investors’ responses suggest that patents provide an effective indicator that enhances the designer-entrepreneur’s prospect of securing equity investment. Market proximity, which can be measured based on sales, orders, or expressions of interest, increases a venture’s credibility. In line with earlier insights, John Hutton, who joined Cupris as Business Development Manager in 2013 argued that early patenting may delay market entry (Hutton 2013). Whilst market proximity and patent ownership both matter, the two attributes may stand in conflict with each other during the early stages of a design-led start-up. As highlighted in the preceding section, angel investment differs from venture capital in that the latter is usually a higher budget covered by a range of investors who are represented by a venture capitalist. One such venture capitalist, Carlos de Pommes (2014), confirmed that “Angel investors do want to see patents, and they get very nervous when they do not see patents. And that is much due to the lack in sophistication of investors, and especially of those angel investors.” He further explained that “… when you hear investors or incubators say: Patents are the most important thing, it is because it is the only tangible thing that they can actually articulate.” (de Pommes 2014) De Pommes highlights the value of secrecy, while Itxaso Del Palacio, another venture capitalist, pointed out in 2013: “I have fourteen start-ups in my portfolio. None of them have filed any patent. None of them!” By the way, the designer-entrepreneurs’ wide-spread fear of having ideas and concepts adopted by third parties when conveying details to investors is not justified. De Pommes explained that “Companies need to have the strategic intent to

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want to do something in this area …” (de Pommes 2014). Angel investors and venture capitalists do not develop ventures themselves, which is why they are not in the position to adopt and exploit the IP of others. “The goal [of investors] is to invest, it is not to start their own companies, and they are not going to take your idea” (Del Palacio 2011). The threat of imitation rests with strategic partners who may turn their back on the inventor. Investibility Itxaso Del Palacio highlights three key criteria for judging the investibility of a venture: • Team (Backgrounds, experience, interpersonal relations) • Target market (Scalability of business) • Technology These three areas in combination with finance and IP provide key development aspects, which this book refers to as business development attributes. Some of the ventures examined in the preceding section sought equity investment, others chose to limit costs to avoid shredding equity. Del Palacio (2013) confirms that “Not everybody needs capital… many ideas are not capital consuming, so you don’t need them… there are other sources of capital.” Del Palacio refers to smart money as alternative, and potentially more valuable funding sources than venture capital (Del Palacio 2013) Focusing on bootstrapping and on deploying a sales-oriented approach can be advisable. In relation to sales, Del Palacio explains: “You are not an entrepreneur because you raise money, but because you make money.” She remains unphased if entrepreneurs claim to have raised high sums, unless there is a track-record of successful sales. Direct sales are crucial because venture capitalists track entrepreneurs and companies over a period of time. The costs and time required to pursue a patent route can only be justified if the long-term business development trajectory is significantly greater than that which a venture would be experiencing without patent protection. The relationship between business success, i.e. business growth, and patenting, or IPR in general, will be further examined in Chaps. 4 and 5. Judging by the responses of the interviewees, there is little middle ground, which would allow designer-entrepreneurs to mitigate the funding requirements and the associated risks without outright abandoning patent protection. De Pommes explains: “Patents are there to defend your business. But there are other ways to defend your business.” (De Pommes 2014) So what are the alternative routes to defend your business? The above analysis suggests that the designer-entrepreneur has the choice whether to opt for a sales-oriented business development strategy combined with a bootstrap approach, or for a patent-based business development strategy, and pursue an equity-investment route. Whilst sales-driven strategies appear to speed up the route-to-market, it is not yet clear whether or not this limits the potential business growth.

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Insights

Angel investors take a keen interest in the possibility of patent protection. Some even expect patents to be in place by default. However, other aspects such as the relationship between the invention and the target market environment matter, too. For raising venture capital, start-ups need to be further developed, and, ideally, show proof of market, i.e. have a record of sales. Venture capitalists rate proximity to market and market prospects as more significant than patents. Besides financial resources and knowledge/IP, the team itself, the business scalability (market), and the technology/design per se, form the key business development attributes.

2.4

Design Innovation Strategies and IP

With a view on the dichotomy between sales-oriented strategies on the one hand, and IP-centric strategies on the other, we can examine the likely implications for the route-to-market. Whilst juxtaposing IP and sales orientation, we can differentiate between formal registered IP, i.e. patents and design rights/design patents, and secrecy, a different way of protecting knowledge and IP. Based on the deployment of these different mechanisms, development steps can be mapped out on a time-line in accordance of priorities (Figs. 2.20, 2.21 and 2.22). Separating formal IPR into those which protect technological qualities, namely patents, and those related to the visual qualities (product language), namely registered design right or design patents, produces four development aspects in total: product language, secrecy, technology IP, and sales. The aspect of branding is not considered at this stage, because it typically takes a business considerable amounts of time to develop brand recognition amongst target audiences. The three schematic simplifications above (Figs. 2.20, 2.21 and 2.22) illustrate ways in which the early-stage development phase may roughly pan out for a start-up. The sales-focused approach (Fig. 2.21) is the most straightforward. The technology-focused approach (Fig. 2.20) may lead to a small patent portfolio, whereas a focus on product-language may lead to a coherently designed product range. The diagrams mark out IPR-related aspects and introduction of sales in yellow. Securing patents is perceived as time-consuming and costly. If time and seed funds need to be set aside for patenting (usually around US$5–6 K for national patents, and roughly the same amount for PCT applications as well as for

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product language

secrecy

no emphasis on secrecy

technology

patent filing

sales

On Early-Stage Start-Ups

product language development

product language promotion

possible product language revision

float technology

continued technology development

additional patents

market research

introduce trade

expand trade

product language development

product language promotion

possible product language revision

Fig. 2.20 Technology-driven development

product language

secrecy

no emphasis on secrecy

technology

technology development

possible patent filing

float technology / promote technology

continued technology development

sales

market research

introduce trade

expand trade

continue trade

product language promotion

possible expansion of product range

Fig. 2.21 Sales-driven development strategy

product language

registration of design right / patent

secrecy

secrecy around technology

lifting of secrecy around technology

open innovation options

technology

technology development

patent filing / float technology

additional patents

sales

market research

introduce trade

expand trade

PR surrounding product language

Fig. 2.22 Design-driven development strategy

registration in any European country), then less time and finances can be committed to other business development needs such as prototyping, production development, and market research. Registered designs can be obtained significantly cheaper and faster than patents, suggesting that those designer-entrepreneurs who opt for an early patent enter markets later than those who neglect the patenting option in the beginning in favour of a design-driven or sales-driven strategy. However, the

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effectiveness of registered design rights requires verification, as there are limited precedences which would reveal how easy or difficult it is to build businesses through design-driven approaches. It is clear that designer-entrepreneurs need to decide very early, to what extent design developments are worth decelerating to allow for the pursuit of patents. The next section examines the key business development attributes to develop a framework that allows to systematically evaluate the potential benefits of investing time and resources in the development of exclusive product languages in conjunction with innovative start-ups.

2.5

The Development Attributes of an Innovation Business

The strong inter-dependency between IPR investments and funding needs is evident in the responses of the interviewees. However, whilst the designer-entrepreneurs’ presumption that patents are a prerequisite to secure investment is shared by angel investors, it is not shared by venture capitalists. Designer-entrepreneurs who de-emphasise or abandon patents tend to reach markets earlier, which implies that tech-driven strategies harnessed through patents are likely to require more development time by comparison. Complementary assets such as exclusive access to materials (e.g. KwickScreen) and facilities (e.g. Concrete Canvas), and access to distribution networks (e.g. Squease, Orbel) can be equally, if not more significant than IPR. This relates back to the sphere mentioned by one of the angel investors mentioned in Sect. 2.3. At the same time it has to be acknowledged that patents can facilitate the access to complementary assets. At least they may enhance the designer-entrepreneur’s bargaining position, be it just due to the confidence which they help generate amongst the patent owners. The investors’ expectations towards IP as articulated above have an influence on the perceptions of the designer-entrepreneurs and their mentors, and the director of InnovationRCA, Nadia Danhash, confirmed that the initial focus on patents within the incubator was originally incentivised by NESTA, one of the incubator’s main funding bodies. However, this does not prove that patents are actually beneficial to the venture’s success prospects. A striking proportion of the designer-entrepreneurs interviewed above expressed doubts about the real benefit of patents. All interviewees concurred in claiming that patents were expensive and time consuming to obtain. Furthermore, patent infringement is generally perceived as difficult for micro-scale start-ups to litigate due to the lack of capital. In light of the points made by the venture capitalists, we may argue that avoiding the sacrifice of equity when sourcing seed-funding through bootstrapping or smart funding strategies, does not rule out the possibility of securing venture capital funding at a later stage, in particular since venture capitalists do not rate IP quite as high as angel investors do. This means that bypassing IP at an early stage does not automatically limit the potential business growth trajectory.

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Patenting can slow down the development of start-ups. Those inventors who de-emphasise the patent route, tend to be more sales-oriented and they generate revenue at an earlier point in time. Patenting is only needed for exclusivity, and only once the public disclosure of technical concepts is immanent. The issue with the start-ups examined in this part of the book, is that they all evolved from academic studies. Therefore the technologies were all exhibited in public during degree shows. Such public exposure can be compromising. Venture capitalist Itxaso Del Palacio had named three key investibility criteria: team, target market, and technology. To allow for product language-related issues to be captured, we may want to replace the term technology with design proposition or proposition. The interview transcripts used for the case studies were analysed to verify the designer-entrepreneurs’ most prominent concerns. Concepts were highlighted and marked out in order to verify the number of references. Many of the references fell neatly into these three categories: References to issues like knowledge, expertise, competencies as well as commitment, credentials etc. could be linked to the team development. Development pace, development incentive, product development, as well as ideas, concept, novelty can be allocated to proposition. The concept technology was replaced with the term proposition, so that its coverage could be extended to include design. The reason for including design (in the sense of product language) was to not limit the inventive aspect to technology alone. Public relations, target audience, competitors etc. were concepts that could be associated with target market. At this point we may prefer to drop the prefix target because designer entrepreneurs are not always clear about where and how their design proposition is best applied (Figs. 2.23 and 2.24). Although most of the key concerns unveiled during the interviews with the seven designer-entrepreneurs can be mapped against the three criteria mentioned by Del Palacio: team, proposition and market, some rather prominent issues cannot be allocated to any of the three areas. The majority of the latter relate to IP on the one hand and finances on the other. Del Palacio’s articulated the three criteria in response to what investors are looking for, i.e. she discussed them in relation to finances. After adding finances as a fourth business development attribute, the vast majority of summative key terms gathered can be accommodated. One area that was less frequently discussed during the interviews was that of assets. Although some

TEAM

PROPOSITION

MARKET

Fig. 2.23 The identification of variables within this Venn diagram was based on the most simple premise: a design team (or lone inventor) incepts a design proposition, which they (or he or she) take(s) to market

2.5 The Development Attributes of an Innovation Business

IP IP

TEAM

65

BRANDING

PROPOSITION

FINANCE

MARKET

COMPLEMENTARY ASSETS

Fig. 2.24 Here three variables were added: IP, finance and complementary assets, the variables in relation to which Del Palacio had discussed the significance of team, proposition and market. The variable branding is added with a view on the mid-to long-term development needs related to the competitive brand positioning

designer-entrepreneurs, such as the team behind Concrete Canvas, entered strategic partnerships in order to access complementary assets—Concrete Canvas found use in a disused factory—this area did not come to mention as often as any of the others. However, complementary assets are important aspects in relation to appropriability regimes and dominant designs, and were added as a sixth business development attribute in consideration of the possibility that they were overlooked by the designer-entrepreneurs interviewed in Sect. 2.1. If the five business development attributes team, proposition, market, finance and assets are seen as areas that need constant development and that they are permanently interdependent, a circular diagram as shown on the right-hand side of Fig. 2.25 could be more appropriate than the elongated version shown in Fig. 2.24. However, the interviews conducted in Sect. 2.1 revealed that during the early business development period designer-entrepreneurs had little knowledge and understanding of market characteristics and penetrability, and limited access to assets. In most cases discussed in 2.1, the proposition and the invention-specific knowledge constituted the only selling point at the outset. Therefore the team and the IP constitute determining independent variables, which Creswell refers to as ‘predictors’ (Creswell 2014, p. 52). The situation related spin-outs grown within medium or large corporations, may be very different and much more in line with the diagram on the right-hand side of Fig. 2.25 because these ventures have access to the corporation’s assets, and teams can be configured more freely in relation to the development needs surrounding a proposition, because candidates can be selected from a comparatively large pool of employees. The elongated model will be given preference here, because this book focuses on small independent start-ups that tend to have very limited team building capabilities and limited flexibility in changing team constellations other than recruiting additional team members. At the same time, it must be acknowledged that businesses will function in much less linear

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PROPOSITION

IP

TEAM

BRANDING

PROPOSITION

FINANCE

TEAM

MARKET

BRANDING

IP

COMPLEMENT RY ASSETS TA FINANCE

MARKET

ASSETS

Fig. 2.25 Here three variables were added: IP, finance and assets, the variables in relation to which Del Palacio had discussed the significance of team, proposition and market

fashion once established. The circular interlinking of business development attributes becomes gradually more appropriate, as a business begins to establish itself as a profit-generating entity with tried and tested operations in place. To further clarify the nature and interdependencies between business development attributes, it is important to bring the time factor into equation. Business development attributes constitute variables the nature of which changes over time. Creswell (2014, p. 52) specifies the temporal order of variables as one of the two distinguishing characteristics. The other characteristic is the measurement or observation that relates to an individual variable. The significance of individual variables is highly likely to change over time, meaning that the dependencies also change as the venture develops. The value of a patent can depreciate as a patent matures, and the technological context also changes which can lead to technology obsolescence and technology substitutes. This in combination with the fact that more than one independent variable determine individual dependent variables, means that the framework to describe the design business start-up development needs to be multi-linear. The seven business development aspects shown in Fig. 2.24 can be subdivided into primary and secondary aspects. The team, the knowledge held in relation to the proposition, and the proposition itself can be regarded as primary aspects which are strongly interdependent. Finance needs, the market and complementary assets, as well as IP constitute secondary aspects, which may be largely unknown to the team in the beginning, in particular if the start-up is incepted in an academic context. A potentially significant aspect which has thus far been de-emphasised is that of brand values. Branding does not play a major role in the early stages of a business development, because brand recognition can only be developed over time and through the continued exchange with other industry stakeholders. As highlighted in Sect. 2.1, the name of Roland Lamb’s company changed several times, and so did the shape of Gregory Epps visual trade mark. Until a company is established, there is a degree of flexibility attached to the brand articulation. The latter may prove to be more significant in conjunction with business-to-consumer products, as opposed to business-to-business products. With single-product companies such as the ones

2.5 The Development Attributes of an Innovation Business

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knowledge

team

proposition

finance

market

IP strategy

complementary assets

brand assets

smart funds & investments

market strategy

IP strategy development

comp. asset access

brand design

investments & revenues

market position

IP strat. implementation

comp. asset deployment

brand activation

revenue growth

market power

IP portfolio management

comp. asset integration

brand policing

business growth

Fig. 2.26 Three primary variables at the top and five secondary variables including IP and knowledge assets in the centre. Business growth constitutes the development objective

discussed in Sect. 2.1, the product brand is typically more significant than the company brand. The ultimate goal behind managing the key business development attributes is business growth. The secondary aspects are characterised through a range of iterations depending on the maturity of the business priorities change, e.g. from strategy development to implementation to strategy management (Fig. 2.26). It is important to emphasise that this book focuses on the business development attributes of start-ups with a focus on design. It discusses how the required capabilities are developed and acquired over time, and how these affect a start-up’s success-prospects. This means that the variables need to be mapped out on a time-line (Fig. 2.27). Business development attributes develop over time and in dependence of one another. At the outset, independent small start-ups have little to rely on other than the team, as well as the design proposition that is nourished through the team’s existing knowledge. Team roles and responsibilities depend on the requirements of the proposition and on the knowledge held by individual team members. The selection of team members may depend on their knowledge and expertise. The triangular interrelationship between team, knowledge and proposition is the driving factor at the outset of an independent design-led start-up. An understanding of suitable markets and market niches often evolves gradually over time, and assets are often

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market

market analysis and strategy development

market positioning

market power

brand assets

brand design

brand activation

brand policing

knowledge and IP Strategy

IP strategy development

IP strategy implementation

IP portfolio management

finance

smart funds and angel investments

investments and revenues

revenue growth

complementary assets

complementary asset access

complementary asset deployment

complementary asset control / integration

business development attributes

meta variables

business growth

anticipated outcome

Fig. 2.27 Time-line version of Fig. 2.26. As a business matures business development aspects change, so do priorities. Meta variables are defined through sub variables which are business-specific and therefore not shown here. Brand design may comprise names, trade marks, urls, brand colours, etc.

far from reach in the beginning. Finances are needed to secure asset accessibility, and the design proposition determines which markets or market niches are of interest. The interviews carried out within InnovationRCA suggest that the interdependencies between finance and IP dominate the list of concerns amongst designer-entrepreneurs. The comparative analysis of interview transcripts point towards a strong interrelationship between those two factors. The designerentrepreneurs perceive patents as a prerequisite for securing angel investment, and conversely angel investment is required to fund this comparatively expensive form of IP. On the other hand, venture capitalists seem more focused on market access and available assets by comparison. This suggests a misalignment of perceptions with respect to what shapes the credentials of a design-led start-up. The financial needs depend on the IP strategy as well as on product itself, because the latter requires complementary assets (non-financial assets) to become market-ready (materials, production etc.) Conversely one can argue that the more access to complementary assets already exists, the less financial resources are required. This means that finances and access to complementary asset are interdependent variables. The IP strategy and financial needs can also be considered as interdependent, as the availability of financial assets determines what formal IP can be afforded, and in which territories it can be secured. These interdependencies lead to a conundrum which can make decision making difficult. In the course of the remainder of this book, we will discuss scenarios which facilitate the identification of independent and dependent variables, and the clarification of dependencies is critical for strategy developments.

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The market environment influences both the sales strategy and possible market positioning. In the long run, the sum of these business development factors determines the market power, which also derives from the control over complementary assets. The latter may be increasingly integrated, as shown in the example of the Seaboard, who acquired Juce, a software platform, in 2014. Business growth depends on the sales strategy, the control over assets, and it results from the level of market power. The purpose of this book is to determine the way in which IP interacts with the other factors mentioned above. What is worth noting is that the relevance of IP exists from the outset in the form of proposition-related knowledge held within the team. IP strategies are developed and IPR acquired in response to this knowledge. IP is a development aspect that is closely linked to most other business development attributes. The question that arises is how existing and emerging knowledge is best managed in support of the development of the other variables within the business development framework. Insights

All of the inventions discussed in Sect. 2.1 were aimed at more or less radical innovations which means that they were hoped to have a disruptive impact on the respective business environment. The information gathered in conjunction with the case studies in this section suggests that: • Most designer-entrepreneurs perceive patents as a prerequisite to initiate a proprietary growth business. • Angel investors share this point of view, whereas venture capitalists highlighted other criteria such as market size, market proximity and market accessibility as more important. • Patents are expensive and time consuming to obtain. • Patent infringement was thought to be difficult to litigate for micro-scale start-ups due to the lack of available capital. • The patenting process is believed to slow down the development of start-ups. • Inventors who de-emphasised the patent route, tend to be more sales-oriented and are likely to generate revenue at an earlier point in time. • Some of the case studies revealed that equity investment could be by-passed through boot-strapping. Focusing on first-mover advantages and/or secrecy provided alternative means of building defences against competitors. Registered design rights and also design patents are easier and faster to obtain than (utility) patents. The question is whether they are robust enough to provide alternative avenue to designer-entrepreneurs. If they are, they could speed up the route-to-market and to reduce initial funding needs. Registered design rights and design patents protect different characteristics of a design proposition, namely the visual rather than the functional. However, if they are

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sufficiently robust, they could help to delay the need for patent filing, until a working prototype is developed. They could prevent premature patent filing, and thus mitigate the risk of having to file follow-up patents, as required for Orbel and the Seaboard for example.

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In open innovation settings, complementary assets are particularly important because their ownership mitigates concerns about loss of intellectual property. Oliver Alexy and Linus Dahlander, 2014 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_3

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Abstract

This chapter summarises and critically reviews the most significant principles in the area of innovation management. The chapter starts with a discussion of factors surrounding value appropriation as introduced by David Teece in 1986. This is followed by explanations related to the concept of dominant designs and product life cycles as introduced by Abernathy and Utterback in 1978. Other sections discuss in detail the value of product languages in relation to technology innovation, market-related drivers such as technology-push and market-pull, and last but not least intellectual property rights (IPR) Different forms of IPR are explained and compared in relation to robustness and effectiveness, and how they may pave the way towards open innovation initiatives. The insights drawn help generate an understanding of product and start-up business developments, and also of market dominance.

This chapter discusses a range of key concepts that are well-established in innovation management and innovation systems theory. The chapter starts with a discussion of principles surrounding value appropriation as introduced by David Teece in 1986. This is followed by explanations related to the concept of dominant designs and product life cycles as proposed by Abernathy and Utterback in 1978. In combination, the insights help generate an understanding for product and business developments as well as market capture. A dialectical discourse juxtaposing technology aspects and product languages, i.e. the visual qualities of design propositions, is followed by a critical review of the dichotomy between technology-push and market-pull incentives. The question to be resolved here is not only what motivates designer-inventors to follow an enterprising route, and how do they respond to these incentives, but also what implications their strategic responses may have? How does a business development strategy unfold if a designer-inventor focuses on technology innovation as opposed to product languages, and vice versa? A section on open innovation follows a comprehensive analysis of intellectual property rights (IPR) which are discussed in relation to numerous criteria such as applicability, costs, life-span, robustness and usage. The purpose of this chapter is to deepen the understanding of the value of IP for design-led start-ups, and to clarify how IP connects with other means of value appropriation. Its contents pave the way towards three longitudinal case studies which are discussed in Chaps. 4–6.

3.1

Appropriablity, Complementary Assets and Their Relationship

In 1986 Teece introduced the term appropriability to sum up ‘the environmental factors… that govern an innovator’s ability to capture the profits generated by an innovation.’ (Teece 1986, p. 287). Due to competition and the possible need for

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collaborative arrangements such as outsourcing manufacturing or distribution, the profits captured will always be below the theoretical optimum. The appropriability regime determines to what extent profits can be optimised and how close towards the theoretical optimum the profit generation can be pushed. Teece lists as the most important factors ‘the nature of the technology, and the efficacy of legal mechanisms of protection.’ (Teece 1986, p. 287). He admits that patents can be of limited benefit in a lot of cases because ‘Many patents can be “invented around” at modest cost.’ The nature of the technology is of significance, because it is believed that the more complex the technology, the more difficult it will be to circumvent the patents involved. Complexity also increases the potential for sequential innovation, ‘where one innovation builds on previous innovations’ (Greenhalgh 2010, p. 300). In conjunction with appropriability, Teece also discusses the relevance of other business activities, such as ‘marketing, competitive manufacturing, and after-sales support’ (Teece 1988, p. 288) to succeed in business. This makes it clear that appropriability is determined by numerous factors, IPR included. Teece distinguishes between tight and weak appropriability regimes, where-by ‘Tight appropriability is the exception rather than the rule’. He relates tight appropriability regimes to technologies that are easy to protect, and weak appropriability regimes to technologies that are ‘almost impossible to protect’ (Teece 1988, p. 287). The term technology is used in a loose sense. Teece lists the formula of Coca Cola as an example for a tight appropriability regime. To prevent confusion, this book refers to an invention or an imitation as a design proposition instead of a technology. The latter term is used only for aspects of the proposition that serve a practical function. The question that arises is how different aspects of a design proposition can be protected. In addition to the dialectical juxtaposition of tight and weak appropriability regimes, Teece distinguishes between fully integrated businesses such as companies that do not rely on third parties to produce and commercialise their products or services, and those who rely on contracts in order to access complementary assets. Complementary assets, another term coined by Teece and briefly mentioned in Chaps. 1–2, can be defined as the sum of ‘additional resources and capabilities needed to bring a technology product to market’ (Clarysse and Kiefer 2011, p. 80). These may comprise access to materials, production facilities, customer relations, service expertise etc. The lack of control over or access to required complementary assets, can lead to bottlenecks in the value chain, both upstream, i.e. towards the supply of materials and components, as well as downstream, towards the end customer. Artica lacked complementary assets downstream, namely mainstream market access (Sect. 1.3.2). SafeView was an example of a venture that lacked access to complementary assets both upstream and downstream (Sect. 1.3.1), because the financial markets are very lightly controlled by a very small number of large incumbents. Teece explains that complementary assets can be accessed either through integration or through contractual arrangements. He further relates complementary assets to market power. Both aspects suggest that complementary assets are to be closely linked to the complexity of business environments and to value chain

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control. The value chain aligns value-adding stakeholders who contribute to the product’s journey to the market. Market players can sit upstream or downstream in relation to the position of the innovator. If a technology is licensed, they may also be positioned next to the innovator. The greater the area, that falls under the innovator’s control, the greater the returns that can be captured by the innovator. The difficulty for the aspiring designer-entrepreneur is the lack of access to materials and manufacturing facilities (upstream value chain), and to trade channels (downstream value chain). If the market power over complementary assets is tightly controlled through independent asset owners so that the prospect of asset integration is low, Teece’s model (Fig. 3.1) suggests that the entrepreneur relies inevitably on the collaboration with those who control the complementary assets. In this case strong appropriability is essential for the designer-entrepreneur in order to be able to pursue commercial success. Weak appropriability in combination with a tightly controlled market is likely to lead to the failure of the inventor to appropriate commercial value from the invention, because competitors can easily imitate or circumvent the invention.

strength of appropriability regime

weak legal / technical appropriability (e.g. weak IP protection)

strong legal / technical appropriability (e.g. robust IP protection)

Market power of innovators / imitators

position with respect to the option of commissioning complimentary assets

innovators and imitators advantageously positioned vis a vis independent owners of complementary assets.

innovators and imitators disadvantageously positioned vis a vis independent owners of complementary assets.

innovator at advantage

imitator at advantage

strategy: contract

strategy: contract

strategy: contract

outcome: innovator will win

outcome: innovator should win

outcome: innovator or imitator will win; asset owners will not

strategy: contract if can do so on competitive terms; integrate otherwise

strategy: integrate

strategy: contract (to limit exposure)

outcome: innovator should win; may have to share profits with asset holders

outcome: innovator should win

outcome: innovator will probably lose to imitator and / or asset holders

Fig. 3.1 Contract and integration strategies in relation to appropriability and access to complementary assets according to Teece—The original version of this diagram was published in Research Policy, Vol. 15(6), Teece, David J., Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy, pp. 285–305, Copyright Elsevier (1986) (reproduced with permission)

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In a seminal study which known as the Yale Survey, Levin et al. (1987, p. 797) state that ‘For small, start-up ventures, patents may be a relatively effective means of appropriating research and development (R&D) returns, in part because some other means, such as investment in complementary sales and service efforts, may not be feasible’. This statement suggests that there is a reciprocal relationship between a company’s need for patenting and its access to complementary assets: The less control the designer-entrepreneur has over the complementary assets needed, the higher the need for a patent. Integration of production is usually unaffordable at the outset of a small-scale start-up, in particular if designerentrepreneurs exits academia, because they tend to have no, or little connection with the targeted industry sector. Here IPR, such as exclusive access to a patent, may help to access complementary assets because it prevents manufacturers from entering competition with the designer-entrepreneur. It may also induce larger companies to consider strategic partnerships with the start-up. Therefore both IPR and complementary assets contribute to the strength of a business’ appropriability regime. In addition, as much as IPR can make it easier to access complementary assets via strategic partners, it can also compensate for the lack thereof. Appropriability Teece introduces us to the concept of an appropriability regime to highlight the significance of the environmental factors that surround a business. A detailed examination of these factors will be required to resolve the question of how value can be appropriated from an inventive step. Teece makes it clear that the strength of an appropriability regime depends on complementary assets which can be acquired through either contracting or integration. Which option to choose with respect to IP depends on how tight or weak the business’ appropriability regime is, as well as on the degree of competition and the competitors’ market power (Fig. 3.1). Poor access to complementary assets suggests that IP is very important and vice versa. Roli accessed Juce first through contracting, and later through integration. The prospective value gain for integration was used to attract investors. The integration of Juce as a key asset significantly increased Roli’s market power and the company value. The team doubled in size. This example shows how various business development factors can go hand-in-hand if managed well. The appropriability regime surrounding most start-ups tend to be exceptionally weak in the beginning. This reveals one of the reasons why the designer entrepreneurs interviewed in the previous chapter expressed such as keen interest in exclusive IPR. The objective behind strengthening the appropriability regime is to increase market control (or market power) and to capture larger sections of the value chain. Both market power and value chain control are closely linked and both depend on access to complementary assets. The latter may enhance a business’ dynamic capabilities meaning that the appropriability regime, no matter how strong or weak to begin with, is never static or stable. As with IP, the value of which depends on the legal system within which a start-up operates and also on the business’ ability to implement and defend its IP, the appropriability regime is subject

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to positive or negative changes during the venture’s life cycle. The value of IP also depends on the level of risk of being imitated, and the latter may depend on the business’ development stage. Knowing how likely it is for an invention to be imitated prior to market entry, is important for answering the question how prospective developments surrounding IP in conjunction with complementary assets can be framed in relation to time. Which is preferential: To secure complementary assets first through contracting in order to integrate them once sales provide cash flow? Or is it preferential to invest in the integration of complementary assets early in order to enhance the bargaining power? Business development models such as the framework shown at the end of Chap. 2 may help to answer these questions. Models such as this can also help to assesses the dynamic interrelations between complementary assets, IP, complexity of invention, market complexity, market power of competitors, etc. Through further discussing the framework mentioned (Fig. 2.27), this book will identify possibilities of systematically mapping time-based IP strategies in relation to the other business development aspects involved. Summary

An appropriability regime describes the sum of circumstances that affect a company’s current or prospective market power. Teece refers to complementary assets as the key factors that determine the strength of a venture’s appropriability regime. Complementary assets are built or acquired through either licensing or integration. The key factor of a design-led start-up is knowledge. Where this can translate into formal and informal IP, it can be deployed to compensate for the lack of access to complementary assets.

3.2

Disruptive Innovation and the Dominant Design Paradigm

In their article ‘Patterns of industrial innovation’ from 1978, Abernathy and Utterback (1978, p. 5) state that ‘innovation within an established industry is often limited to incremental improvements’ and that ‘Major product change is often introduced from outside an established industry and is viewed as disruptive’. The two authors attribute the potential to initiate major change to small start-ups. They further explain that the ‘stimulus for innovation changes’ as a business establishes itself, respectively its innovative proposition in the market. This is important because these changes may affect the value and significance of IPR as well as that of other business development attributes.

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Tushman and Anderson, who came to mention in Chap. 2, confirm that ‘periods of incremental change [are] punctuated by technological breakthroughs’ which may lead to ‘competence-destroying discontinuities’ (Tushman and Anderson 1986, p. 439). These discontinuities render existing knowledge obsolete and force established firms to adapt their skillsets. Through disrupting the existing order, they trigger ‘major changes in the distribution of power and control within firms and industries’ (Tushman and Anderson 1986, p. 442). In line with Abernathy and Utterback, Teece defines the dominant design paradigm as the phase that follows the establishment of new industry standards, which Tushman and Anderson refer to as new product classes. The dominant design paradigm manifests itself when ‘one design or a narrow class of designs begins to emerge as the more promising’ (Teece 1986, p. 288). Teece further explains that ‘Once a dominant design emerges, competition shifts to price and away from design.’ As a design is being adopted within the business environment, a new mainstream standard is established. One problem with this argument is that design-led start-ups are by default far from becoming market leaders, and their appropriability regime is usually weak at the outset. Although it can be difficult for start-ups with no trading history to clearly identify their target markets, in particular when it comes to radical disruptive inventions, Abernathy and Utterback (1978, p. 4) speculate that the ‘diversity and uncertainty of performance requirements for new products’ might put the small, adaptable start-up at an advantage over large competitors, because economies of scale, i.e. volume production, is not a significant advantage the context of radical innovation. Similar to Tushman and Anderson (1986, p. 443), who claim that ‘technological discontinuities and dominant designs are only known in retrospect’, management researchers Salter and Alexy (2014, p. 32) argue that ‘the sources and the timing of a radical innovation are unpredictable and even unknowable’. The fact that Salter and Alexy distinguish between product, process and service innovation only, seems questionable, because the design sector is more multifaceted than this. To shed light into this matter, design will be examined in greater detail in Sect. 3.4. In his discussion of the dominant design paradigm, Teece refers to the Abernathy-Utterback product life cycle (PLC). This concept suggests shifts between product innovation and process innovation, claiming that: In the initial “fluid” stage, firms propose an array of different products and designs incorporating the new technology. In the “transitional” stage, a dominant design emerges, and while not necessarily the highest performing product configuration, the design becomes a commonly accepted standard by producers and consumers. (Salter and Alexy 2014, p. 38, authors’ inverted commas)

Tushman and Anderson (1986, p. 439) argue that ‘Those firms that initiate major technological changes grow more rapidly than other firms. Once established as a commodity, the product then enters a phase, at which the focus of the competitive environment shifts from design to price. Price reduction can often be achieved through process innovation, e.g. through the adjustment in production processes. Teece calls this the shift towards the specific stage. Although Teece builds his

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concept of a dominant design paradigm on Abernathy and Utterback’s PLC concept, he perceives the Abernathy-Utterback framework as unsuitable ‘for small niche markets where the absence of scale and learning economies attaches much less of a penalty to multiple designs’ (Teece 1986, p. 288). In other words, in niche market environments multiple designs can prevail in parallel, because cost efficiency in production is not as significant as when in mainstream markets where products are manufactured en mass. However, what Teece does not recognise, is that there is a ‘shift from radical to evolutionary [incremental] innovation’ (Abernathy-Utterback 1978, p. 6), meaning that dominant designs develop gradually through a process of paradigmatic transition. A dominant design paradigm never applies to a radical innovation at the outset, because radical innovations are juxtaposed with established markets because of their disruptive effect. Once the design has been widely adopted, it ceases to be radical, becoming mainstream. Although securing a dominant design paradigm is desirable in the long term to allow for a high growth trajectory, the dominant design paradigm is of no immediate relevance to the designer-inventor who seeks to take a disruptive innovation to market. Therefore exclusive IPRs have different short-term and long-term implications, an important distinction because the significance of these implications may vary depending on development and funding strategies. For an early exit, the long-term implications may be less relevant. However, if the strategy relies on iterative innovation, the opposite will be the case, and securing a dominant design paradigm will be beneficial. Strategies to get a radical innovation adopted, and to capture a sizeable share of existing markets, are of more immediate significance, because this constitutes the first step towards a profitable business. Summary

Teece uses the term dominant design for product solutions that disrupt the market in such a way that production methods are being adapted in alignment with the new product solution. The ecosystem surrounding this new product is reorganised in line with what the new product solution requires for ease of production and distribution. Teece specifies three distinct stages: the fluid stage, the transitional stage, and the specific stage. During the specific stage a product (or design proposition) will have established as a dominant design, which means that a start-up will have become an established business and obtained a leadership position within a market or a market sector. Abernathy and Utterback claim that ‘The stimulus for innovation changes as a unit [i.e. a business] matures’, whilst ‘uncertainty about markets and appropriate targets is reduced’ (Abernathy-Utterback 1978, p. 7).

The Product Life Cycle The concept of the dominant design paradigm supports the pursuit of a time-based business model. Here a product goes through three stages, a fluid stage, a

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transitional stage and a specific stage. Developments of design-led start-ups are often closely intertwined with that of a product or a particular design solution, because inventive start-ups are often single-product companies. Due to the dependency of the start-up on the product life-cycle, it will be important to map the development cycles of the business against the three stages which Teece has outlined in his concept of a dominant design paradigm. During the early start-up period, i.e. before a design solution is established in the market, it is by default not dominant. However, without exclusive IP it may be difficult for a business to establish a dominant design paradigm around a product, because barriers are needed to prevent imitators from competing with the innovating start-up if the latter seeks to establish a dominant design in the long run. In pursuit of a time-based IP strategy framework, the long-term trajectory must be taken into consideration in relation to a business development model. Once a dominant design paradigm has been established, a variety of options present themselves to the designer-entrepreneur: an initial public offering (IPO), a trade sale, company mergers, business scaling (scale-up), perhaps in combination with an IPO or a merger. This often goes in line with continued incremental innovation of the existing product, the expansion of the product portfolio and/or the expansion of the trade territory. It may be difficult to decide such long-term goals at the outset. But understanding the options which may present themselves is nonetheless important. After all they may affect the IP strategy.

3.3

Design-Driven Versus Technology-Driven Developments

In Chap. 2 the term design-led has been defined in relation to start-up teams, whereby at least half of the members are core designers. This understanding of the term design-led is derived from the characteristics of design-intensive industries. The concept of design itself requires further clarification. Design and innovation can be found in a variety of context. Roberto Verganti and Claudio Dell’Era from the School of Management, Politecnico di Milano, list ‘product design, engineering design, software design, organization design, business model design, market design’ as examples (Verganti and Dell’Era 2014, p. 141). In their chapter contribution to the ‘The Oxford Handbook of Innovation Management’, the two authors argue that design as a possible aspect of innovation has been traditionally neglected in favour of technology and markets. This leaves us with the question is if the visual design of products may also be a driving force for innovation. Defining design is far from easy. For better orientation, Verganti and Dell’Era (2014, p. 140) offer three possible definitions: design that is ‘associated with the form of products, often in juxtaposition to the product function’; ‘design as a creative approach to problem solving’; ‘design as the “making sense of things”’.

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Verganti and Dell’Era’s first definition is limiting. It reduces design to the definition formal-aesthetic qualities, thus leading to a simplistic dichotomy between design and engineering. The notion of separating technology aspects from design might suggest that this first definition suffices the purpose of identifying design aspects in an innovation that are not technically relevant. However, with reference to radical novelties that often do not conform with existing (aesthetic) standards, Verganti and Dell’Era (2014, p. 140) reject this concept of design. The juxtaposition of form and function can be contested due to diverse potential qualities that are inherent in the visual, which transcends the common notion of aesthetics. In her thesis ‘Design Semantics of Innovation’, Dagmar Steffen, a design historian from University of Wuppertal in Germany, builds on the ‘Offenbach Theory of Product Language’ which was originally developed by Jochen Gros, Professor of Design Theory and Product Language (1974–2003), and Richard Fischer, Professor of Product Design and Sign Functions (1975–99), at the Academy of Art and Design Offenbach, Germany, in the 1970s and 80s. This theory defines the product function as the link between the product and the user. It differentiates between practical functions and product languages/sensual functions (Fig. 3.2). The product language comprises formal aesthetic and semantic functions, the latter of which can be either indicative in that they ‘visualise and explain the various practical functions of a product and how it should be used’ (Steffen 2010) facilitating the intuitive use of products; or they can be symbolic, building on the imaginative capacity of the user. Where semantic functions are symbolic they generate associations through the

User

Function

Practical functions

Product

Product language / sensual functions

Semantic functions

formal aesthetic functions

Indicating functions

Symbol functions

Fig. 3.2 This conceptual model illustrating the ‘Offenbach Theory of Product Language’ first appeared in a two-part-article authored by Jochen Gros for the magazine ‘Form, Zeitschrift für Gestaltung’ (No. 74 + No. 75) in 1976. The diagram later re-appeared in a publication series entitled as ‘Grundlagen einer Theorie der Produktsprache’ (Basics of a Theory of Product Languages) written by Jochen Gros, published 1983 by the Offenbach Academy. Dagmar Steffen further discussed the model in her article ‘Design Semantics of Innovation’ which was published as part of the book ‘Design semiotics in use’ by Susann Vihma (ed.) in 2010. (reproduced with permission)

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processes of denotation and connotation. Where symbol functions are attached to a product, the visual impact of the latter transcends that which is necessary for its appropriate use. Verganti and Dell’Era’s second definition of design, which sums design up as ‘all major creative activities and professions that produce a modification in the environment’ (Verganti and Dell’Era 2014, p. 141), builds on a liberal understanding of design thinking that falls in line with Cox’ understanding of creativity as a ‘path to new products and services’ and as a ‘route to greater productivity’ (Cox 2005, p. 40). Pursuing design-problem solutions through the use of design thinking methods tallies with Sam Bucolo’s concept of design-led innovation mentioned in Chap. 2. Of course, from a business perspective, the designer-entrepreneur must apply creative thinking not only to the development of the product, but also to the way in which necessary assets are sourced, and developmental challenges solved, and, although design thinking is beneficial to designer-entrepreneurs, and despite the fact that most will make use of relevant skills, be it intuitively or intentionally, this second definition of design is far too lateral for assessing the relevance of IP in conjunction with early-stage innovation initiatives. In order to analyse the relevance of IP, it is useful to restrict the notion of design to the development of the commodity, and to separate this design activity from surrounding creative efforts. As it lacks in analytical detail, this second definition of design does not lend itself to the identification and analysis of suitable forms of IPR to protect the form and function of an invention. Verganti and Dell’Era’s preferred definition is the third, which proposes design as an activity ‘concerned with making things more meaningful’ (Verganti and Dell’Era 2014, p. 142). This concept introduces meaning as a new aspect. The legitimacy of this perspective is to some extent supported by Steffen’s thesis mentioned above. The only difference is that the Offenbach theory refers to indicating functions instead of signalling functions, the term used by Verganti and Dell’Era. Attributing a functional value to the visual qualities of a product can be useful to assess appropriability options because such qualities can impact a product’s commercial prospects. Philippe Starck’s Juicy Salif lemon squeezer designed for Alessi was very impractical, but none-the-less it became a historic design icon. Starck claimed, perhaps sarcastically, that it was not meant to squeeze lemons but to start conversations. Verganti and Dell’Era’s model suggests that product meanings can be promoted by the designer and, if done successfully so, will be adopted by the audience through cultural discourse. The scholars argue that ‘…rather than resulting from a process of problem solving, meaning change derives from a process of “interpretation” (or better re-interpretation) of the reason why people buy and use the product.’ (Verganti and Dell’Era 2014, p. 151, authors’ inverted commas). This makes it clear that Verganti and Dell’Era’s notion of meaning is not necessarily bound to the intentions of the designer, it may equally derive from the signification as it is perceived by the user(s) or customer(s). Verganti and Dell’Era’s admit that ‘… meanings cannot be imposed (they depend on the interaction between a customer and the product).’ (Verganti and Dell’Era 2014, p. 143). This implies that value is dependent not only on the degree to which the innovation is of value to

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users from an objective point of view, it is the degree to which audience members attribute value to novelties in exchange with one another. Value related to meaning can be connected to the look and feel as much as to the usability. As it is re-motivated through social discourse, Verganti and Dell’Era’s concept of signification is inter-subjective. Radical innovation has been much discussed in the literature, but mainly in relation to technology developments, not so much in terms of meaning change, although one may be reminded of Barthes’ discussion of mythologies using the example of Citroen DS (Barthes 2000, p. 88ff). Verganti and Dell’Era argue that ‘the subject of design as innovation of product meanings has largely been neglected in management studies’ (Verganti and Dell’Era 2014, p. 156). Once the technological aspect of an innovation has been resolved, ‘the main challenge for innovation managers […] is shifting from technology development to technology interpretation’ (Verganti and Dell’Era 2014, p. 156). Verganti and Dell’Era claim that ‘radical innovations of meaning ask for profound changes in the socio-cultural regimes.’ The products involved ‘may contribute to the definition of new aesthetic standards’ (Verganti and Dell’Era 2014, p. 146). This reference to aesthetics is useful, because it connects the third definition of design with the first. Aesthetics, semantics and pragmatics (technology function) are re-connected here, not by default, but only if the visual expression carries or triggers semantic connotations. This supports the idea that aesthetic and functional aspects of a novelty may be: (A) mutually complementary, and (B) equally worth protecting. It is useful to connect product semantics and product languages with design in terms of form-giving, because product languages can be potentially value-creating, and such value can be commercially appropriated. This is why, in the context of the remainder of this book, design is understood in line with Verganti and Dell’Era’s third definition as a process of defining the product language, i.e. shape, look and feel of a product in recognition of potential signalling and symbol functions. Where novel product languages lead to changes in meaning within the socio-cultural regime surrounding the product, Verganti and Dell’Erra speak of design-driven innovation. The authors argue that design-driven innovation is capable of creating demand through establishing a design as the dominant product language, which re-enforces demand following the launch of the invention/innovation (Verganti and Dell’Era 2014, p. 142f). ‘Design-driven innovation is therefore pushed by a firm’s vision about possible breakthrough meanings that people could love.’ (Verganti and Dell’Era 2014, p.145f, author’s italics). The fact that Verganti and Dell’Era’s use the concept of design-driven innovation exclusively in conjunction with radical innovation, can be questioned because the impact on the audience cannot be predicted with certainty, and what impacts one audience positively may affect another differently. As it depends on the social discourse, the impact inevitably escapes the designer’s control, at least to some degree. On the other hand, one could argue that the impact/adoption rate of technology-led (or technology-driven) innovation, can be equally difficult to predict. Innovators rely on informed guesses when establishing their focus of attention

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in relation to their development ambitions, and it is this ambition at the outset, the innovators’ focus of attention and the development strategy, which are of primary interest in conjunction with this thesis. In line with Verganti and Dell’Era, the term design-driven innovation is understood throughout the remainder of the book as a development process that focuses on the visual definition of a design proposition in terms of both aesthetics and semantics. As such, it is a process, which, if extra-ordinarily successful, may lead to a change in meanings and to dominant product languages. This book uses the term design-led exclusively in relation to the start-up team as explained in Sect. 1.2. This book further discusses design-driven innovation, a process that involves the definition of novel product languages, in relation to technology-driven innovation, which is a process of defining the functionality of an design proposition, be it of a mechanical, electric, or electronic nature. These two processes constitute two different development aspects, which can be mutually complementary, and the designer-inventor needs to assess the relevance of both in order to set priorities with respect to development-strategic decisions and funding. Like Teece (1986), Verganti and Dell’Era refer to William Abernathy and James Utterback’s (1978) definition of a dominant design, which derives from ‘the successful synthesis of individual technological innovations introduced independently in prior products’, and ‘wins the allegiance of the market place’ (Verganti and Dell’Era 2014, p. 148). Verganti and Dell’Era introduce the concept of a dominant product language to allow for a discussion of the market impact which novel product languages may have. They acknowledge that ‘unlike dominant designs emerging in technological fields (Abernathy and Utterback 1978; Utterback 1994), several dominant languages [may] coexist in the same industry’ (Verganti and Dell’Era 2014, p. 149). However, the same can be said with respect to dominant (technological) designs that are introduced to niche markets, where multiple radical innovations can co-exist, as pointed out with reference to Teece in Sect. 3.2. The use of the term design in relation to technology innovation can be confusing, as one cannot be certain what is meant, the visual or the technical design. To avoid confusion this book uses the term product language used in relation to the visual form (the definition of semantic qualities included). The distinction between the visual and the technical is necessary to allow for the comparative analysis of IPRs connected to (visual) design aspects on the one hand, and IPRs connected to technology aspects on the other. Consequently this book distinguishes between a dominant design paradigm, as the market dominance of a technology innovation, and a dominant product language which may re-enforce a dominant design paradigm. The designer-entrepreneur needs to decide which of the two aspects, i.e. the visual and the technical, ought to be protected through IPRs, how much investment is needed to effectively secure such protection, and at what time within the development process the relevant protection is best taken out to minimise investment and to optimise the scope of exploitation. The decisive response to these questions forms the basis for a sound IP strategy.

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Summary

This section distinguishes between design-led start-up teams and designdriven initiatives, whereby the latter stand in juxtaposition to technology-driven initiatives. In this section, the focus is shifted towards the invented commodity, the design proposition. In light of design-driven initiatives, product semantics and product languages can produce valuable selling points that can be protected through IP. This gives way to a second IP route which can be integrated into an IP strategy. The above text introduces the notion of a dominant product language to complement the concept of a dominant design which was discussed in Sect. 3.2. A design-led start-up team can pursue either of the two, or both. In the latter case, it may require shifting priorities from time to time, which again suggests that an IP strategy needs to be mapped not only against surrounding present appropriability factors, but also across a timeline which comprises potentially emerging appropriability factors.

3.4

Markets: Technology-Push and Demand-Pull

Before designer-entrepreneurs can hope for market dominance, markets need to be accessed. Market adoption depends on a number of factors, including the level of demand or potential need. Verganti and Dell’Era do not only contrast technology-push with design-driven innovation, they triangulate both aspects with market-pull which they equate to user-driven innovation. They suggest that radical technology improvements and radical meaning change triggered through design-driven innovation can potentially coincide (see top-right quarter in Fig. 3.3), which supports the argument that design-driven and technology-driven innovations are not mutually exclusive. Rather they can be complementary. Verganti and Dell’Era’s claim that market-pull (user-driven) developments (see bottom-left quarter in Fig. 3.3) cannot be radically innovative because the ‘user-centred approach […] operates within existing socio-cultural regimes’ (Verganti and Dell’Era 2014, p. 146). In line with Donald Norman and Roberto Verganti one could indeed argue that radical innovation requires several steps of ‘small changes in a product that helps improve its performance, lower its costs, and enhance its desirability’ (Norman and Verganti 2012, p. 6) in order to increase a product’s adoption rate in the market. This suggests that incremental innovation follows radical innovation whilst a design proposition is being established in the market, which tallies with Teece’s point that competition shifts from design to price as articulated in Sect. 3.2. As explained, this can only happen after radical innovation ceases to be radical. To claim that user-driven developments cannot lead to radical

3.4 Markets: Technology-Push and Demand-Pull

85 technology enhancement radical

technology-push innovation pushed through radically new technology solutions

radically new product languages applied to radically new technologies

meaning change

incremental

market pull (user driven innovation)

radical

design-driven radically new product languages lead to meaning change

incremental

Fig. 3.3 Verganti and Dell’Era (2014, p. 147) suggest that breakthrough technological changes are often associated with radical changes in product meanings, that is to say, shifts in technological paradigms are often coupled with shifts in socio-cultural regimes

paradigm changes seems far-fetched. It would imply that users engage in innovation processes blindly without any possible learning involved. It would further mean that any social innovation that involves co-creative user engagement would be incremental by default, and the shift from innovation that is managed by trained designers, to innovation where everybody designs, as proclaimed by Liedtka et al. (2017, p. 7) would progressively limit radical innovation in the future. On the contrary one can argue that, although market-demand may predominantly revolve around existing offerings based on which the audience judge their needs, engaging users in design research and prototype testing, can lead to unexpected insights which in turn may pave the way to radically new ideas and user behaviours. Future forecast strategist Alexander Manu explains that people’s ‘desires, goals and motivations change, and this is where we can now find what generates a business. Synchronicity is launching the iPhone at the precise moment when every Apple user was ready to engage in the behaviour of using it.’ (Manu 2010, p. 9). Clarysse and Kiefer (2011, p. 11) juxtapose technology-push and demand-pull as two polar opposites, but admit that ‘entrepreneurial opportunities don’t always fit neatly into one category’. Verganti and Dell’Era’s model does not contradict that

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Clarysse and Kiefer’s. They simply add a new dimension suggesting that technology-push combined with design-driven innovation can create demand over time by setting new standards through novel product languages. This shift in the paradigmatic regime ties in with Teece’s concept of the dominant design paradigm although it extends the argument from a pragmatic manufacturing-based context into a socio-cultural one. Verganti and Dell’Era (2014, p. 154) refer to breakthrough product meanings, whereby ‘designers act as brokers of design language’. One could argue that the demand that emerges from design-driven innovation is not first and foremost the ‘Economic and market demand’ (Godin and Lane 2013, p. 31), but rather demand in the loose sense. Godin and Lane (2013, p. 31), the authors of a paper on the ‘The Hi(story) of the Demand Pull Model of Innovation’, describe this meaning as ‘demand [that is] part of a semantic or then-emerging discourse’. This is when a product becomes a must-have item, which is hardly ever due to people’s true needs. People’s want plays a far greater role. The Squease case (Sect. 2.1.6) made it quite clear that there is a difference between need and demand: although research had revealed a need for the Squease vest, where there was little initial market demand. The latter needed to be motivated. As neither of the two models recognise that an entrepreneur’s emphasis on demand-orientated problem solving, technology development and visual design may shift over time, it is worth examining the forces involved in greater detail. Managing the shifts in developmental priorities is key to the development of a time-based innovation management model. Demand-Pull and Knowledge Push Along a Time Axis Verganti and Dell’Era’s use the term market-pull, whereas Clarysse and Kiefer use the word demand-pull. Godin and Lane’s paper mentioned above, explores the development history of market-related push and pull concepts, and in addition it introduces the concept of need-pull. What exactly is the difference? Inventors may respond to a perceived need, although the market does not demand it. Godin and Lane describe need as potential demand. So how do demand-pull, market-pull, or need-pull connect with technology push? According to the linear technology-push model, basic scientific research triggers ideas which, through applied research lead to technology developments. These turn into products, which are eventually marketed. The market-pull model starts with the identification of market needs which leads to ideas development, and subsequently product development and marketing. Godin and Lane critique the linear models of technology-push and market-pull. They favour multidimensional models such as the Myers and Marquis Model arguing that market adoption typically evolves from a complex interplay between technical feasibility and potential demand. The successful negotiation of both factors leads to a design solution that is ultimately introduced to the market. The reason why linear models do not always lend themselves to guiding the process of design-inventive activities is because the latter are not always linear in nature. In his paper on ‘Wicked Problems in Design Thinking’ Richard Buchanan (1992, p. 15)

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claims that ‘the problems addressed by designers do not, in actual practice, yield to any linear analysis and synthesis yet proposed.’ The Myers and Marquis model from 1969 does not prioritise either technology-push or demand-pull principles. It allows for both aspects to be addressed. Summary

Technology concepts as well as product languages can both be pushed in pursuit of new market opportunities. Market-need and market-demand are defined in this book as two different concepts, though market-need can be articulated—through public relations, advertising or educational activities—to trigger market-demand. Pushes and pulls surrounding both product languages and technology concepts may occur in alternating fashion. This may have an impact on how an IP strategy ought to be constructed and rolled out.

The linearity of the multidimensional model can be made apparent through sketching a plausible case scenario against the Myers and Marquis Model (Fig. 3.4). A designer-inventor may start with a design idea or a basic design concept following some more or less sudden insight, be it due to a personal experience, or following some basic research into a given problem. Following the ideas development, a designer-inventor needs to verify technical feasibility as well as the potential market demand or societal benefit. Instead of working in a linear

Current state of technical knowledge

Search

Use

Search, research and development activity

Technical feasibility recognition

Fusion into design concept

Potential demand recognition

Solution (invention)

Adoption

Implementation and use Diffusion

Information readily available

Time Current economic and social utilisation

Recognition

Idea formulation

Problem solving

Solution

Utilization and diffusion

Fig. 3.4 The Myers and Marquis Model from 1969 as discussed by Godin and Lane (2013) (reproduced with permission)

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fashion, designer-inventors may need to work backwards through part of the model, or even pursue developments in a cyclical fashion. Development loops may occur during the early development process. For example, a perceived demand may give an inventor an incentive to come up with a technology solution, but then the target market turns out to be impenetrable. The designer-inventor then searches for a different market. This was the case with Artica, who failed to enter the mainstream market of heating, ventilation and air-conditioning (see Sect. 1.3.2), or Concrete Canvas who failed to secure sales for their concrete shelter, and then decided to focus on further developing the material instead. Here need-pull (shelters) turned into technology-push (concrete impregnated canvas). Multidimensional models can be useful, because demand-pull and technology-push may drive innovation more or less simultaneously, although one may be more prominent than the other at times. This means that the designer-entrepreneur’s focus of attention may oscillate between the two parameters, the technical knowledge development and ideas for the utilisation, throughout the development process. The problem with multidimensional models is that they do not allow for repeat patterns—cyclical movements or development loops— which may be needed to resolve complex problems. Forms of Demand and Meanings To connect the notion of demand with Verganti and Dell’Era’s concept of radically new product semantics, it is useful to examine how demand can manifest itself over time where it is not given from the outset. Godin and Lane list three different forms of demand: economic or market demand; social meaning; and loose meaning. Godin and Lane define the ‘loose meaning’ as demand that is ‘part of a semantic or then-emerging discourse that placed the emphasis on the contribution to innovation of factors external to or other than scientists’ pure motivations (i.e.: economic, social, cultural and historical factors).’ (Godin and Lane 2013, p. 31) This definition closely resembles the kind of demand which Verganti and Dell’Era claim evolves from design-driven innovation in that the demand is created and not existent a priori. Godin and Lane (2013, p. 27) state that demand can be ‘pushed by the supply of scientific discoveries (inventions) or technological opportunities’. Although they do not acknowledge the idea of a design-push here, their notion of demand-push and that of Verganti and Dell’Era are mutually supportive. Demand-push can be reinforced through cultural discourse, if designs are paraded as award-winning achievements for example. A design becomes a historic factor if it produces a dominant design paradigm or a dominant product language. Therefore radical change can motivate demand, which in turn may trigger a market-pull. This confirms that ‘demand is not an independent variable, but the dependent one’ (Godin and Lane 2013, p. 27). Instead of referring to market pull, this book recognises market demand as a phenomenon that can be triggered and/or strengthened by design- and technology-push as well as need-pull factors. Once market demand comes into existence, it turns into a pull incentive for the entrepreneur. It follows that technology-push, radical meaning change, and market-pull

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are not mutually exclusive. Not only may they happen in succession, or even simultaneously, these phenomena can also be closely interlinked. Once market-pull manifests itself as a result of design-driven innovation, renewed technology-pushes may be incentivised, and the new product semantics can be transferred onto other products. In in 2003 Apple introduced a white iMac to the markets which carried visual features similar to the iBook—white colour rounded corners. The product language was later applied to the iPod Photo in 2004, and to the iPod Mini in 2005. Product languages were cross-pollinated. In light of the above, it is important to distinguish between demand-pull and need-pull, whereby ‘The concept of needs refers to specific social issues’ (Godin and Lane 2013, p. 27), and also between technology-push and design-driven innovation. Summary

Technology-push derives from a technology-driven strategy to innovation, and design-push from a design-driven approach. Shifts between the two are possible and may be advantageous. To assess strategic requirements, it is necessary to examine which forms of IPR lend themselves best to harnessing design-driven initiatives as opposed to technology-driven endeavours. Knowing where and when shifts between design-driven and technology-driven phases happen can be important for devising effective IP strategies.

Given that a dominant design paradigm does not present itself during very early stages of a business development, the models above may seem of limited interest to the designer-entrepreneur at the outset. However, the impact of imitation through competitors increases significantly as demand pull manifests. To articulate the risk of imitation, Teece strengthens the fact that ‘When (…) a dominant design emerges, the innovator may well end up positioned disadvantageously relative to a follower’ (Teece 1986, p. 288). Here a strong appropriability regime is of critical importance to fend off competitors. The point to be made here is that the appropriability regime should cover not only the technology, it should also safeguard the product language, because the latter can strengthen both a business’ competitiveness and its growth potential. Brand assets such as trade marks also enter the equation as a design-led start-up begins to establish itself in the market, but it may require some time until trade marks obtain market recognition. To understand how to best deploy and time IP protection, one must understand the dynamic interplay between technology-push, radical meaning change, which derives from design-push, and market-demand, which results from the interplay between need-pull and demand-pull. One must almost predict how these forces will interact following the floating of a design proposition in order to optimise the way in which IP strategies can be developed and applied over time. Both technology developments and

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product languages provide possible push incentives. There is a difference between societal need and market demand. Whereas the former is a pull incentive from the outset, market demand can be pushed or be an already existent pulling force.

3.5

Intellectual Property Rights

The sections above leave little doubt that the aspiring designer-entrepreneur must not neglect the potential benefits of formal and informal Intellectual property rights (IPRs). It may seem a little surprising to situate IP this far into a book about innovation. The reason for this is that the exclusivity that is often associated with IP ought not to be taken for granted. The value of IP and the efficacy of IPR, to use Teece’s terminology, can be questioned. To judge how a designer-entrepreneur can make best use of IPR, requires a contextual understanding for the conditions within which IPRs are being deployed, and the case studies in the previous chapter are hoped to pave the way towards this understanding. IPRs are understood as specific rights that are articulated within a legal framework. The most significant forms of IPR are patents, trade marks, designs (which depending on the jurisdiction are referred to as design rights or design patents). IPRs such as patents, trade marks and design rights differ significantly in what they can and cannot protect, and also in terms of the conditions that apply. Similar to the design patent in the US and in China, the so-called registered design right in the UK/EU protects the shape and configuration of objects. The novelty aspect is as important in relation to designs as it is in relation to patents: ‘a design shall be protected to the extent that it is new and has individual character [7]….’ (The Supreme Court of the United Kingdom 2016). Since 1 October 2006, designs are no longer examined for novelty upon application in the UK (UK Government 2007b), whereas they are in the USA (United States Trademark and Patents Office (2) nd, p. 10). This means that referring to existence of prior art is a common approach for competitors to invalidate registered design rights in the UK, the application process in the US is considerably longer (around 1.5 years as opposed to a few weeks in the UK and the EU). Patents only protect the technical aspects of the design, not visual-aesthetic qualities. Therefore a design, the novelty of which is purely aesthetic, does not qualify for a utility patent. Conversely a technology that functions irrespective of the form does not qualify for a design patent/registered design right. Whilst in design, form and function may be closely linked, in the eyes of the law they are clearly distinct. Since visual elements of a design that relate to a product function are excluded from design right protection in the UK and the EU, a registered design right can be invalidated upon application through a competitor if the design is needed for the way in which a design operates. The previous section discussed market demand, and various case studies in Chap. 2 revealed how lengthy the route to market can be. In their book, ‘The Smart Entrepreneur’, Clarysse and Kiefer (2011, p. 127) claim that ‘Patents are

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particularly important when your business is not close to market, because the exclusivity afforded by a solid patent can buy you some time by preventing competitors from encroaching on your idea while you develop applications.’ On the other hand a patent application sets the clock ticking. Within 18 months the invention is publicised and the business intentions made clear to potential competitors. Even though competitors are not allowed to exploit the invention without the patent holder’s consent, they may be able to circumvent it through alternative technology solutions. Premature filing also bears the risk of omitting useful details due to a shortfall in the technology development. This could be seen in the case of the Seaboard, for which a second patent had to be filed. Delayed filing bears the risk of losing the priority date (a striking example of this scenario can be found in Sect. 4.4). Patenting also reveals the innovator’s intent. Circumventing or infringing the IP involved can lead to competition. From a financial point of view, a patent application entails a whole string of events, which cannot be delayed, and which can be costly. Patent protection policies may be needed to cater for the event of infringement through third parties. Within twelve months from filing a national application, a decision must be made whether or not to take the patent global, either through filing a PCT (Patent Cooperation Treaty) application, or through applying in foreign countries directly. Then costs may begin to spiral, and development budgets need to grow accordingly. ‘Over the 20-year lifespan of the patent you can expect to pay in excess of £100,000 per invention for reasonable geographic coverage.’ (Clarysse and Kiefer 2011, p. 105) But it is not only costs that constitute a problem. Some patent attorneys advise to delay patent applications as much as possible, because the validity of a patent is limited to five years. Although renewals allow for the lifespan to be extended by up to 15 additional years, premature filing cuts the patent’s lifespan short. Every year counts in terms of commercial exploitation, and the period of possible exploitation is reduced if a patent is filed too early. That aside, an aspiring design-entrepreneur may also wonder to what extent his or her patent can be enforced if challenged. Patent infringement litigation can cost several millions. At the same time Clarysse and Kiefer (2011, p. 90) admit that ‘IP is still central to many business strategies … if you do possess a solid piece of intellectual property, such as a patent, you’re more likely to attract investors for your venture’. The situation surrounding design rights is not too dissimilar at first sight. The life span of a registered design right is limited to a maximum of 25 years in the UK and in the EU, and the registration needs renewing every five years. One key difference between patents and designs is the time factor. Whilst it can take years to get a patent application approved, a design registration is processed within weeks in the UK and in the EU. The life span of the US design patent is limited to 14 years. It does not require any renewal processes, but it takes about 15 months to get a US design patent granted. Patenting can increase the sustainability of a micro-scale start-up’s value proposition, which is important for the company’s growth potential and fund-raising prospects. If patenting is not an option, such as in the case of a service design or process innovation, secrecy, possibly combined with copyright, may be

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an alternative. In the longer term market adoption and brand recognition can serve as a means of fending off competitors. This aside, there appears to be a more prominent reason for the designer-entrepreneur to file for patent: IP is often regarded as a possible means to extend the time needed for accessing complementary assets (e.g. Concrete Canvas in Sect. 2.1.4). Entrepreneurs with a design background usually need to also enhance their business skills, and they must try to mitigate the risks which may derive from collaborative arrangements and marketing efforts. The question is whether or not there is an alternative to costly patents, in particular if a business is design-driven rather than technology-driven. Knowing that design registrations protect the shape and form of an object, regardless to what extent this carries semantic or aesthetic value, and patents protect the function of an object, we will compare the two means of protection in the following. Copyright will be ignored in this instance, because it constitutes an unregistered IPR (at least in most countries) the infringement of which can be very challenging to litigate. Trade marks will be examined in more depth later in conjunction with brand values. Registered and Unregistered IPRs Commonly drawn distinctions within the IPR system are between formal and informal IPR on the one hand, and between registered and unregistered IP. This book treats formal IP as a form of intellectual property that is explicitly recognised in the legislation of a country, whereas informal IP is seen as other forms of protection such as defence publications. NDA’s as shown in Fig. 3.5 under the rubric IP in the loose sense are typically formalised through written agreements. However, it can be debatable what exactly they cover and for how long. Hence their value typically resembles more that of other loose forms of IP protection. It is worth noting that brand recognition as marked out in Fig. 3.5 can potentially help to strengthen other forms of IP protection. Registered IP comprises any IPRs that is

IP in the loose sense

IPR in the strict sense

informal IP protection

unregistered IPR

registered IPR

lead time / speed to market secrecy / NDAs complexity of proposition defence publications

copyright unregistered design rights

patents registered designs / design patents

unregistered trade mark

registered trade mark

brand recognition

branding

Fig. 3.5 Knowledge can be harnessed through a variety of ways, formal and informal IP included. Entrepreneurs are best advised to look at all available options and develop defence strategies that build on a variety of protection mechanisms

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registered with the relevant authorities such as patents, registered designs, design patents (which exist in some countries such as the USA and China in place of registered designs), registered trade marks. In the UK some private initiatives such as ACID allow for the independent recording of unregistered IP, such as copyrighted concepts, patterns, and unregistered design rights and unregistered trade marks. Trade mark protection constitutes a form of IP that connects with brand values and does not directly protect the specialist knowledge a company generates and seeks to exploit. This is why it is advisable to treat trade marks as brand assets rather than an IP asset when utilising the framework shown in Fig. 2.27 (see Chap. 2). Formal Versus Informal IP Informal IP is not necessarily IP in the strict sense. It also comprises similarly useful informal appropriation mechanisms such as secrecy, speed-to-market (lead time), and design complexity. The line between formal and informal IP is somewhat difficult to draw. IPR in terms of copyright, patents and design registration constitute key factors that can strengthen a start-ups appropriability regime, because they seek to protect a company’s specialist knowledge. However, this can also be protected through secrecy or through defensive publications. The latter require a sufficient level of exposure, which means that they are difficult to rely on for a start-up business, whose exposure of knowledge is typically limited due to their lack of prominence in the public domain unless design awards, exhibitions and press publications facilitate exposure. Whilst defensive publications can be used to secure a company’s freedom to operate, they do not secure exclusivity because competitors share the right to use the knowledge conveyed, except of that which is already secured through IPR in the strict sense such as copyright or registered or unregistered design rights. This indicates that defensive publications can be of limited benefit and potentially restrictive to the growth potential of start-up businesses. Secrecy, on the other hand, is a means available to start-ups and needs considering as a potential alternative protection method to patents and other means of formal IPR. The ambition behind the previous discussion surrounding appropriability regimes is to establish the circumstances under which formal IPRs are viable, under what circumstances secrecy is preferable, and under what circumstances both means of IP protection may best be neglected on the whole. With reference to a study conducted by Landes and Posner in 2003, Hall et al. argue that ‘around 80 per cent of copyright had little economic value’ (Hall et al. 2012, p. 33). As copyright is not registered in most countries, it can be difficult for start-ups to sue potential infringers of copyrights. In the case of a dispute, a designer-inventor needs to prove when the IP was produced which can be difficult without documentary evidence. Secrecy Versus Registered IPRs Although ‘commonly secrecy, confidentiality agreements, lead-time, and complexity (of design) are subsumed under the informal IP heading’ (Hall et al. 2012, p. 6), this book treats secrecy and confidentiality not as IP in the strict sense, but as

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IP in the loose sense (see Fig. 3.5). The reason for this is that unregistered IPR can be considered as less formal than registered IPR (see comment in copyright at the end of the preceding paragraph). This is why this book refers to registered IP as formal, and unregistered IP as informal. IP in the loose sense extends the spectrum towards the informal end of the scale. Even though trade secrets can be secured in writing and potentially enforced, separating secrecy from formal IP allows for the comparative analysis of the benefits and disadvantages of both. It is thought that the ‘Enforcement of secrecy [can] be costly and may be difficult to achieve in court’ (Hall et al. 2012, p. 10). The costs necessary and risks attached can be particularly difficult for start-ups to bare. Hall et al. point out that there is ‘a wide range of factors that could be important in the decision to use patents or secrecy’ (Hall et al. 2012, p. 34). The authors claim that ‘firms systematically regard lead-time and secrecy as more important ways to protect their IP than patents’ (Hall et al. 2012, p. 23). However, they discuss firms in general and not start-ups, let alone disruptive start-ups. As registered IPR such as patents and registered designs are made public, they provide competitors with insight into developing innovations. Although they are not allowed to copy those for a certain period of time, there remains a high risk for competitors to circumvent the inventive steps involved, and thus to come up with alternative design solutions. In contrast to established businesses, pre-trade start-ups have no additional income-stream. Therefore they rely on their innovation in a different way and to a greater degree than established companies generating spin-outs. The lack in differentiation between start-ups and established businesses marks a knowledge gap in the field of innovation management which this book seeks to address. In regards to secrecy there is one significant potential draw-back: It does not secure freedom to operate by default. ‘If a firm opts for secrecy there is a risk that its competitor will be awarded the patent instead.’ (Hall et al. 2012, p. 15). To reduce the complexity involved, lead time and learning curve advantages can be considered as possible benefits that may derive from secrecy rather than as independent appropriation mechanisms. Without secrecy, be it just temporary, lead time can be difficult to establish. The biggest problem with secrecy is that lone inventors and SMEs often need to convey their concepts, or a significant part thereof, in order to attract business partners, investors and potential strategic partners (see Peter Brewin’s comment in Sect. 2.1.4). Registered IP and secrecy can be combined through keeping some elements of the innovation confidential, whilst securing registered IP protection for others. Patents require secrecy up until the filing date. This in combination with the need to verify potential strategic partners, may explain why some start-up businesses file patents prematurely: They need to obtain a status which allows them to share technical knowledge without losing exclusivity. Some economic theories suggest that firms which produce large innovations, i.e. innovations that lead to large profitability, should rely more on secrecy than on patents to protect their IP (Anton and Yao 2004). While it seems counter-intuitive, this result is based on the idea that the disclosure requirement of the patent law may allow competitors to appropriate some of the returns of the innovation while at the

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same time patent-holders may not necessarily have their rights successfully enforced in court. Until they are confirmed in court during an infringement lawsuit, patents are probabilistic and not definitive in nature. This in combination with the fact that the commercial prospects of a fledgling innovation can be unclear to the designer-inventor at the early stages whilst possible market applications and audiences are still under examination, can make it rather difficult to determine the best possible IP strategy at the outset. Hall et al. (2012, p. 8) highlight that ‘the choice between patents and secrecy involves an explicit and fairly stark trade-off between disclosure and non-disclosure of an inventive idea’. In other words, the designer-entrepreneur needs to decide between the two options, and this decision needs to be made at a very early stage, despite the fact that once a decision has been taken to patent, it becomes irreversible once twelve months have elapsed after filing. But, is this trade-off really so stark? The key to optimising IP strategies is to compartmentalise. There are different aspects to an innovative concept, which can be protected in a variety of ways. Rather than to think of secrecy versus patents, it is a matter of getting the combination right. A few facts need bearing in mind: Although patenting strategies can be adapted, secrecy can be sustained long-term only with respect to aspects of the invention not included to the patent. At the same time, freedom to operate remains crucial to all relevant aspects of novelty. The trade-off involved in registering IPR is less of a sacrifice with respect to designs than it is with patents. Whilst technical novelties can potentially be concealed within a product, the registered design right protects only that which is visually disclosed to the by-stander. Here secrecy ceases to be an option, as soon as a product enters the market. A Comparison Between Patents and Registered Design Rights The existing literature makes little if any distinction between designs and patents, and one may be inclined to think that the former are generally neglected in the context of innovation management. Rebecca Thushnet, a law scholar, argues that ‘The law’s traditional bias against, even fear of, the visual may help explain why design patents have been of less interest to many intellectual property scholars than other bodies of IP law.’ (Tushnet 2012, p. 409) The following paragraphs will shed some light into the particulars surrounding registered design rights, design patents, and utility patents. Costs and Duration Design patents and the registered design rights can be obtained comparatively inexpensively. Even the EU-wide registration of a design costs no more than a few hundred Euros. Online filing and bulk registration may lead to further cost savings. The processing is fast compared to patents, with applications being processed within matter of weeks. Within Europe, designers benefit from a grace period of up to 12 months, meaning that the designs can be made public up to a year prior to filing. Through renewals, design registrations can be extended to up to 25 years in Europe. The benefit of a design registration over a copyright is that copyright infringement usually occurs only where a design is intentionally copied, whereas the registered

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design excludes designs of close similarity regardless of whether or not it is a result of copying. To succeed with a design registration, there needs to be an element of novelty involved. Some countries such as the UK have discontinued novelty searches upon filing. This speeds up the registration process, however, it means that IP owners have no real indication if their IP will be upheld if challenged in court. If prior art existed at the point of filing, then the design right is likely to be invalidated. The costs involved in the US design patent are higher, around US$1500 but here a novelty search is carried out, which is why it takes around 12–18 months until the design patent is granted. In relation to the US design patent, there is no renewal fee due and its life span is 14 years according to the US Patent and Trademark Office (please do note that regulations can be subject to change). A utility patent can take up to five years until it is processed, and with the involvement of a patent attorney, it may cost to US$5–10 K. Whilst design patents and the registered design rights are significantly cheaper than utility patents, and require in terms of processing time, their value for start-up businesses can be questioned. Robustness If we understand the term robustness in relation to IP along the lines of strength, i.e. the likelihood for it to be successfully defended against an imitator, then it follows that the easier it is to contest a form of IP due to the way IP has been defined or commonly interpreted in court, the less robust it is. IP scholar Rebecca Tushnet states that ‘Design patents are an area of intellectual property law focused entirely on the visual’ (2012, p. 409). The same applies to registered and unregistered design rights in Europe. The fact that neither the design patent, nor registered design right requires any verbal description or claims makes it easy to file either directly without involving lawyers. However, with the appearance being the key in determining potential infringement, the judgment lies in the eyes of the observer, and perception is known to be subjective. Tushnet (2012, p. 417) argues that ‘the ordinary observer test makes design patent infringement findings harder to review and analyse; as gestalts, they are difficult to dissect’ (Tushnet 2012, p. 417). The UK/EU-equivalent to the ordinary observer test is the informed user test. Who is to be considered as a user—a buyer, an operator, a consumer etc.—and to what degree that user is to be informed, can be questioned. David Musker, a UK-based IP Attorney, addressed this problem in a presentation given to the European Communities Trade Mark Association (ECTA) in Alicante in 2014. The term informed user remains highly ambiguous. Musker et al. concluded: ‘… are we talking about a real(istic) consumer or a purely artificial construct? We still don’t know.’ The Value of IPR This section discusses the reasons why designer inventors may want to register IPR. Greenhalgh and Rogers differentiate between three fundamental benefits, stating that ‘Market power, licensing and signalling are the basic ways in which firms can benefit from IPRs’ (Greenhalgh and Rogers 2010, p. 151).

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The signalling effect: Greenhalgh and Rogers (2010, p. 151) argue that patents ‘undergo an external quality check [during the mandatory patent search], hence they act as good signals’, and that this can benefit team building and fund raising efforts. Nonetheless patents can be challenged in court, not only whilst a patent application is pending, also after it has been granted. So a degree of uncertainty is sustained, at least until a successful defence has been confirmed in court. Whilst filing a patent can be expensive, investing in a patent allocation may signal investors and competitors the entrepreneur’s commitment to and confidence in the business. This can be useful when negotiating favourable terms during fundraising, team building and in pursuit of strategic partnerships. IP that is not examined for novelty, such as the registered design right in the UK or Europe, does not carry the same level of signalling effect. The signalling effect in conjunction with registered designs is also limited due to the low costs involved. The patent reflects a more serious financial commitment on behalf of the designer-inventor. Market power: This term can be understood as the degree to which a company governs the value chain within which its innovation is situated. IPR can enhance the market power of enterprising businesses because for a certain period of time it may warrant for a degree of exclusivity. Whilst this may facilitate a dominant position within a market, it may not prevent competitors from circumventing an innovative step, or even from infringing the IP involved. Most designer-entrepreneurs are concerned about the latter. However, it is very rare that IP is intentionally infringed until proof of market has been established. Once a product secures market adoption, the threat of imitation becomes real. Licensing: As pointed out earlier, the chances for an early-stage start-up to generate substantive revenues through licensing are limited. However, licensing can be a way to expand sales into territories to which the designer-entrepreneur has no direct access. As such expansions through licensing can be built into the long-term business development strategy, exclusive IP can help to attract investors. As licensing depends on IPR, the licensing potential relates directly to a venture’s growth prospects. Formal IPR are granted for a limited period of time, e.g. depending on the jurisdiction around 20 years for patents, and 14–25 years for registered designs and design patents. However, the lifespan of a product in the market may be much shorter than the possible maximum of protection. Whilst electronic devices and fashion design products are often substituted comparatively fast, furniture designs may have a comparatively long lifespan. Summary

The purpose behind IP protection methods is to secure freedom to operate, and, where possible, exclusive access to knowledge that can be commercially appropriated. The time factor is of great significance in relation to a start-up’s IP strategy: grace periods and filing dates determine eligibility, whilst renewal deadlines and maximum life spans affect the commercial value of registered

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IPRs. Secrecy, lead time, and open innovation principles constitute informal IP appropriation mechanisms, that can be deployed in place of and—sometimes—in combination with registered forms of IPR. However, such informal protection methods bear risks because they can be difficult to sustain for start-ups who may lack access to markets and strategic partnerships. To strategically align and combine formal and informal forms of IPR, as well as IPR in the strict sense and IP in the loose sense, the efficacy of various forms of IPR needs to be taken into account. Whereas patents have been thoroughly discussed in existing literature, there are very few studies on design rights. Greenhalgh et al. identify the signalling effect, market power and licensing as the most prominent reasons for securing IPR. However, only the first is of immediate benefit to the early stage start-up. The remaining two aspects gain in importance as the start-up begins to transition into an established business.

3.6

Open Innovation

The term open innovation was coined by Henry Chesbrough from the Hass School of Business, University of California, as the ‘purposive outbound flows of knowledge and technology […] to absorb external knowledge […] for the purpose of internal development, manufacture and sales’ (Chesbrough 2005, p. 10). In line with this notion, management scholars Alexy and Dahlander (2014, p. 442), explain open innovation as ‘all flows of knowledge across the boundary of the firm, independent of the form or direction’, whilst distinguishing between inbound and outbound knowledge flows. In terms of inbound knowledge flows, Alexy and Dahlander differentiate between acquired and sourced inputs, noting that acquiring ‘relates to buying inputs’ whereas sourcing involves scanning the environment for input through working with users and suppliers (Alexy and Dahlander 2014, p. 445f). When it comes to outbound IP, Alexy and Dahlander (2014, Table 22.1, p. 445) distinguish between selling and revealing. Revealing proprietary knowledge may not be advisable unless part of the knowledge can be retained for commercial purposes, or if the innovator can rely on other factors that allow the firm to appropriate value from the innovation. Two questions one could raise here, are: When is it advisable to reveal proprietary knowledge? And in what way do the benefits which micro-scale start-up derive from knowledge-sharing, differ from those of a medium or large enterprise? Dodgson (2014, p. 465) points towards the possibility of small firms to collaborate with large firms in pursuit of combining the flexibility of the small firm with the resource-richness of the latter. However, small firms can be at risk of being edged out of the value chain, unless they have some IP secured exclusively in addition to that which is to be shared.

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Mark Dodgson (2014, p. 462) defines collaboration as ‘the shared commitment of resources to the mutually agreed aims of a number of partners’. According to him, the purposes behind collaboration include ‘develop new markets, gain access to production and distribution networks’. Expanding a market can be difficult for an early stage start-up that is yet to identify suitable market access points, whilst in the process of defining and codifying a design proposition. But securing exclusive access to resources can lead to significant competitive advantages. KwickScreen’s exclusive right to use Rollotube material was key to their success, and the fact that their supplier was a larger established firm benefited the start-up. However, open innovation exceeds the notion of collaborative arrangements, as it comprises various forms of knowledge exchange including engaging customers in research and product testing. The growth of the internet communication and of globalisation are contributing to the ‘ever-increasing interconnectedness between and among […] different actors’ (Alexy and Dahlander 2014, p. 457) and thus facilitate open innovation. Although it has been suggested that engagement in open innovation ‘positively affects [a firm’s] financial performance and market value’ (Alexy and Dahlander 2014, p. 443), questions emerge, in relation to start-ups. Alexy and Dahlander state that ‘In open innovation settings, complementary assets are particularly important because their ownership mitigates concerns about loss of intellectual property’ (Alexy and Dahlander 2014, p. 451). But start-ups may find it difficult to access complementary assets without IP that secures their unique selling point (USP). Due to their lack of control over complementary assets, start-ups may see themselves ‘forced to enter relationships with partners enjoying stronger positions’ (Alexy and Dahlander 2014, p. 451), and Artica which was discussed in Sect. 1.3.2 constitutes such an example. IPR can be very significant in relation to open innovation arrangements. Alexy and Dahlander (2014, p. 451) explain that, ‘The more strongly enforced the legal mechanisms that define ownership over intellectual property along clearly demarcated boundaries, the easier it will be for two parties to contract over the exchange of innovation’. This means that IPRs function as a facilitator for collaboration as much as it can help to secure exclusivity. Concrete Canvas (Sect. 2.1.4) set clear boundaries between internal and external knowledge through patenting the material, after their Concrete Canvas Shelter failed to secure market adoption. This allowed the entrepreneurs to exchange freely on possible application of the material. Generally, IPRs can make it easier to set boundaries around knowledge areas, and these boundaries help the parties involved to revert to internal knowledge if the collaboration does not proceed. This means that start-ups who hold registered IPR, are attractive to potential collaborators, not only due to their exclusive value proposition, but also due to the fact that the other party can clearly distinguish between internal and external knowledge. Alexy and Dahlander (2014, p. 452) further argue that ‘The earlier in its life-cycle a technology is, the more likely that rallying a crowd behind one technology can give one company a lead in establishing a dominant design’. As a dominant design relies on the adoption of other market players, sharing knowledge

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can be essential to attract interest. The difficulty is to find suitable partners with compatible knowledge. According to Alexy and Dahlander there is no definitive clarity about how open innovation is best timed, and to what extent knowledge should be shared to enhance a company’s development prospects. Increasing the number of stakeholders through open innovation initiatives can complicate decision-making processes. Effective open innovation provides the potential to accelerate innovation, but it requires ‘the appropriate degree of openness’ (Alexy and Dahlander 2014, p. 446). The key question here is how and in what way open innovation lends itself to the use by start-ups. The fact that these have limited access to complementary assets, puts them in a weak position. In principle, businesses have three options: To safeguard their knowledge through secrecy, to secure exclusivity through formal IPR and to trade it, or to share knowledge freely. It is likely that start-ups need to make use of a combination of all three options, use what Alexy and Dahlander (2014, p. 457) refer to as coupled models. The question is how to place and shift emphasis over time. What we can conclude from Alexy and Dahlander’s paper is that open innovation is best suited for established businesses who can secure their market position through controlling complementary assets. User tests aside, start-ups may be best advised to limit outbound open innovation activities to selling and to use revealing only in pursuit of incremental innovation once the novelty is established in the main target market. With respect to the longer-term future, the need for open innovation may grow even for start-ups due to the ‘ever-increasing connectedness between and among these different actors’ (Alexy and Dahlander 2014, p. 457). If indeed the need for start-ups to commit open innovation increases, the urgency to secure exclusive IPR will grow as well. Summary

Open innovation comes in forms of inbound and outbound knowledge flows. Both can involve financial transactions or be free. IP can be very important in both situations. Sharing some knowledge for free can be combined with securing exclusivity over other knowledge aspects, or protecting some knowledge through secrecy. Such coupled options are common. Yet again, the question that arises is how to combine the range of available options and how to play them out over time. Open innovation aspects are significant in relation to a time-based IP management model, since collaboration can help obtain access to complementary assets, e.g. through working with a larger established organisation (senior partner) in a strategic partnership. Open innovation can also help to establish a customer base through user testing or focus group inquiries, for example. Last but not least, collaborative arrangements can also help to expand into new markets or to adapt an innovation for new applications. Open innovation pursued by small start-ups

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in collaboration with a senior partner can pave the way towards a trade-sale. The relationship between IP and forms of open innovation needs not only exploring in relation to time. The likelihood for partnerships to involve entities of different sizes is also important, since the need for exclusive IP may be greater for the smaller firm involved.

4

Mandy Haberman—The Journey of a Serial Inventor

The value of registered designs and their robustness really depends on the prior art. So, if it is a very novel product, it has broader protection. If it is very similar to things that had been put on the market before, it has much narrower protection. Margaret Briffa, IP Lawyer, 2014 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_4

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Abstract

This chapter features the first of three longitudinal case studies. It examines the journey of a serial-entrepreneur, Mandy Haberman, the inventor of the AnywayUp baby cup, who went through a number of development stages and encountered a range of challenges in pursuit of her high-growth business. This journey involved a range of legal battles surrounding IPRs which were secured in conjunction with a variety of inventions. As the development cycles behind Haberman’s inventions are much greater than those of the inventions discussed in Chap. 2, this part of the book reveals how early-stage decisions can impact the longer-term prospects of design innovations.

The case studies examined in Chap. 2 point towards patterns, such as the refiling (Cupris, Seaboard, Concrete Canvas, Orbel) or the withdrawal of patents (Squease), the long-term impact of which could not be fully established because all of the businesses were still fledging when examined. To validate the insights obtained in Chap. 2, this chapter examines the journey of a serial-entrepreneur, Mandy Haberman, who went through a number of steps until establishing a business. This journey involved a range of legal battles surrounding IPRs which were secured in conjunction with various inventions. As the development cycles behind Haberman’s inventions are much greater than those of the inventions previously discussed, this part of the book reveals how early-stage decisions impact the longer-term prospects of design innovations.

4.1

Invention 1: The Haberman Feeder

Mandy Haberman graduated in graphic design, but became a product inventor following the birth of her third child, who was diagnosed with Stickler Syndrome. The illness prevented Haberman’s daughter from feeding. Her daughter’s need triggered Haberman’s innovative thinking. In 1984, after four years of development, she patented the so-called Haberman Feeder, a baby bottle for children with feeding difficulties. The bottle, which to this date remains in use in hospitals worldwide, comprises a long teat and a valve system (Fig. 4.1) that enables babies to suckle by stripping milk along its length. In the beginning Haberman approached many organisations for support, and managed to raise £20 K for prototyping her invention. After trying in vain to commercialise her invention on a larger scale through business-to-business marketing, she set up her ‘business on a shoestring from the kitchen table’ (Pitts 2012) and sold her first product directly to parents and to hospitals at a unit price of £12.50 via mail order. Although Haberman could not sell her invention in large volumes and had to take distribution into her own hands, her product had a lot of impact in the medical field. In an interview she pointed out that limiting the patent to the UK compromised the commercial success of the

4.1 Invention 1: The Haberman Feeder

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Fig. 4.1 The Haberman Feeder [reproduced with permission]

product. Although Haberman had secured a patent only for the UK and a European trade mark, she also registered a trade mark in the US. “With very limited investment, that was good use of the IP.” (Haberman 2014) On her website, she stated that ‘The companies that [she] approached to commercialise [her] invention weren’t interested.’ (Haberman n.d.) According to the inventor this was due to the fact that the product was limited to a niche market. The benefit of targeting niche markets is that there is limited competition, if indeed any at all. However, a dominant design can be of limited commercial value in a niche market, unless the market can be grown through pushing demand, or through establishing the product in other territories, or in mainstream markets. Unable to secure investment, Haberman applied a bootstrap approach whilst marketing her first product. Although there was a market need, the market was very small. Market demand was pushed through communications with key industry stakeholders such as hospitals and the National Health Service (NHS) in the UK. The lack of market demand at the outset combined with the small market size, made it difficult for Haberman to commercialise her first invention. Although viable, the business could grow only within limits. No imitator entered the scene. This example suggests that the risk of being imitated is proportionate to the scalability of the business and the market value. Despite the limited commercial success with her first invention, Haberman managed to establish credentials with respect to her inventive and entrepreneurial capabilities, which benefited her second endeavour.

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4.2

4 Mandy Haberman—The Journey of a Serial Inventor

Invention 2: AnywayUp Cup

In 1990, Haberman developed a concept for a non-spill baby cup. The AnywayUp cup (note that the word ANYWAYUP is a registered trade mark) uses a slit valve to prevent liquid from escaping. In 1992 the first of numerous patents was filed successfully to secure exclusive use of the IP. The year after, eighteen companies were presented with prototypes using non-disclosure agreements (NDAs) as a protective measure. In an interview Haberman explained that she could not secure a license contract, because ‘Everyone thought it was great but it was a new, unproven product and they were all risk-adverse.’ (Pitts 2012) Unproven here means lack of proof of market, not lack of proof of concept. A Strategic Partnership and Clever Marketing In 1995 Haberman entered a partnership with V&A Marketing Ltd., a small Cardiff-based innovations marketing firm. The product was launched at two trade fairs, securing advance orders worth £10,000. These orders helped to obtain the bank loan needed to put the AnywayUp cup into production. The year after, sales reach 60,000 per week, and the product was stocked by Tesco and Safeway, two major UK supermarket chains. This was the result of an unusual marketing campaign: V&A Marketing Ltd had sent AnywayUp cups filled with concentrated Ribena and packaged loosely in a white cardboard box to distributors with a note asking the recipient to call if it had not spilt. By 1997, the company facilitating the AnywayUp cup production had grown to 70 employees, and Sebastian Conran Associates, a reputable UK design consultancy, was commissioned to redesign the product. Conran’s redesigns (Fig. 4.3) made a significant difference. The rapid increase in sales—4000% according to Conran Associates (nd)—may be partially due to the fact that the business was still young and thriving, but there can be little doubt that the product language impacted sales significantly. Traditionally cups were fully transparent and designed along straight lines, as was Haberman’s first product (Fig. 4.2). The products designed by Conran were of a more organic shape using semi translucent or opaque plastics which came in multiple colours (Fig. 4.3). Fig. 4.2 Haberman’s original AnywayUp cup [reproduced with permission]

4.2 Invention 2: AnywayUp Cup

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Fig. 4.3 Beaker (at the back) and AnywayUp Classic Cups (in the front) as designed by Sebastian Conran Associates [reproduced with permission]

The fact that this approach was emulated by the majority of existing incumbent is testimony that Haberman and Conran had introduced a dominant design which disrupted the mainstream markets in line with Verganti and Dell’Era (see Sect. 3.3). 1997 was not only a breakthrough in terms of sales growth, it was also the year when a series of IP infringements began. Infringement 1: In 1997 Jackel International Limited, one of the 18 companies, to whom the AnywayUp cup prototypes had been shown five years earlier, introduced a product branded as ‘Tommee tippee’ non-drip cup, which resembled Haberman’s original prototype. The inventor issued legal proceedings against Jackel International Limited, after her sales had dropped by about two thirds. Years later the British newspaper The Guardian reported: Jackel argued that the design of the valve was “obvious”, that nothing in the technology involved in Haberman’s valve was outside normal workshop modifications, and that its operating principles had been known of for a long time. But its claim was rejected by the judge, who ruled that although Haberman had only taken a small and simple step, it had been a very effective one and had been sufficiently inventive to deserve the grant of a patent monopoly. Jackel was forced to withdraw its patent-infringing product. (Insley 2012)

An injunction prevented further infringement of Haberman’s patent through Jackel International Limited, who first appealed against the verdict, but abandoned their appeal in 2000 when an out-of-court settlement was reached. Haberman and V&A Marketing Ltd were compensated for their costs and awarded damages. The fact that three years had passed from infringement until the case was resolved,

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shows how long difficulties can prevail in relation to the legal enforcement of patents. Infringement 2: In 1999 Haberman issued proceedings against Icoma Babyworld, a Dutch distribution firm, who had traded a product similar to Haberman’s AnywayUp cup. Following a court hearing in January 2000, the judge ruled that the Icoma’s product infringes Haberman’s European patent. The parties reached an outer court settlement, following which Icoma ceased infringement across Europe and paid a contribution towards Haberman’s legal costs. Infringement 3: During a trade fair in Holland in May 2000, yet another infringement was spotted. This led to action brought successfully against Difrax and Kruidvat, two Dutch companies who had traded products supplied by Royal King Infant Products Ltd, a company in Thailand. 18,000 Royal King products were seized and given to Haberman who donated them to charities. Infringement 4: Haberman’s legal pursuit in the USA proved even more challenging than the case against Jackel International. Having tolerated infringement in the US for several years whilst hoping that her US licensee would take action on her behalf, Haberman issued proceedings against three companies in the US in 2005: Playtex Products, Gerber Products, and Walmart, who was distributing Playtex and Gerber products. Walmart was only included to the case in order to prevent the other two production firms from ‘legislation hopping’ (Haberman 2008), i.e. to prevent the case from being taken to a state in which the legislation would favour the defendant. Playtex settled out of court. However, the case against Gerber went to court. The final outcome of this ‘roller coaster ride of stress and excitement’ (Haberman 2008) confirmed the validity of Haberman’s patent, but it also stated that the patent was not infringed. Gerber requested Haberman to pay several million dollars towards their legal costs. Following negotiations, Haberman ‘paid a small amount towards their costs (made sweeter by a favourable exchange rate) and gave them the right to manufacture [that specific product, however, without modifications (Haberman 2020)] in China but only for sales in the US’ (Haberman 2008). Haberman reported ‘a great sense of achievement from having stood up for [her] rights, particularly against such powerful opponents. As a result of [her] US patents being declared valid in court, other companies have since requested licenses. So financially, overall, enforcing [her] rights has turned out to be well worthwhile.’ (Haberman 2014) Haberman had negotiated a contingency agreement which meant that her legal costs would be capped if the case spiralled out of control. Having a contingency agreement in place had strengthened Haberman’s confidence so she decided to pursue the litigation route.

4.3 Product Language Application

4.3

109

Product Language Application

The Classic Cup and the Beaker marked a turning point for the Haberman brand. The success led to a range of design variations, which ultimately culminated in a portfolio of products all of which used the patented slit-valve. For the Bird cup (Fig. 4.4 left) a design patent was filed in the US in 2012 (Fig. 4.6). The design patent itself is devoid of any surface patterns and focuses on the physical shape of the artefact. It uses outline drawings to protect the overall product shape, whilst Haberman’s AnywayUp cup (utility) patents protect the functionality, i.e. the way in which the product performance is enhanced through the slit valve mentioned in the previous section. The Cow cup (Fig. 4.4 right) has had enduring market popularity for over 20 years, again an indication that product semantics as discussed in Sect. 3.3 matter. Section 3.5 discussed the robustness of IP, and it became clear that design patents and registered design rights are not sufficiently tested in court to judge their reliability. With respect to this, it is interesting that Haberman chose not to protect the product language of her Smiley Cup, another product that uses the patented slit valve through a registered design right in Europe. She opted for a 3D trademark instead (Fig. 4.5). When comparing the registered design right to the patent, Haberman stated: “The thing about design registration, it is much, much narrower […] they [the competitors] only need to change a number of very tiny details to not be infringing the design registration. It does protect against copying and counterfeiting if it is an absolute copy.” (Haberman 2014) Haberman (2014) claimed to have filed her US Design Patent as a strategic measure “to obtain a granted right faster than could be achieved by our patent application”. The intention was to secure some formal registered IP prior to the product launch, and considering that “The US patenting process [related to utility patents] can take many years.” The Bird cup uses the slit valve at an angle. This allows for the valve to open more easily as a baby drinks. Haberman’s products underwent continuous enhancements, both in terms of design and technology (Fig. 4.6).

Fig. 4.4 Bird cup on the left and the extra-ordinarily successful Cow cup on the right [reproduced with permission]

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Fig. 4.5 Graphic representation of the Smiley Cup, 3D community (i.e. EU) trade mark by Haberman Filing date 19/06/2001 [reproduced with permission]

With respect to registered design rights Haberman’s legal consultant, Margaret Briffa, explained: The value of registered designs and their robustness really depends on the prior art. So, if it is a very novel product, it has broader protection. If it is very similar to things that had been put on the market before, it has much narrower protection. (Briffa 2014)

Briffa’s point implies that registered design rights are more effective for protecting radically new product languages than those which trigger incremental change. The fact that radically new product languages are fundamentally different from existing designs, broadens the scope of protection. However, Haberman’s concerns related to competing re-designs that use slight alterations to secure freedom to operate, could suggest that the registered design right’s robustness remains within limits. This juxtaposition of views raises the question whether or not 3D trade marks constitute an alternative to registered design rights in the UK and Europe. Briffa explained that “3D trade marks are very difficult to get. […] They are incredibly difficult to secure. […] You need a lot of evidence of the recognition of the shape, exclusively to you on the market. Certainly for the community one you need surveys and witness evidence.” (Briffa 2014)

4.3 Product Language Application

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Fig. 4.6 Representations of the Bird cup in the US patent (US D684,426) Filed: Feb. 28, 2012; Date of Patent: Jun. 18, 2013 [reproduced with permission]

As early stage, i.e. fledgling start-ups are pre-trade or trade only at a very small scale, the market recognition necessary for securing a 3D trade mark is far from reach. The community trade mark that protects the visual shape of the Smiley Cup took almost 18 months until approval—19/06/2001 to 13/01/2003. Trade marking the names Haberman (18 months: 03/06/2004–05/12/2005) and Mandy Haberman (14 months: 03/06/2004–31/10/2005) took similarly long. The name ANYWAYUP took a much longer time to protect, almost 2.5 years: 24/07/1996–01/02/1999. But this may have been at least in part due to how the filing process had been managed.

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The latter was the first trade mark to be filed in the course of Haberman’s journey, and when it comes to branding, the first step tends to be the most difficult. An oppositions verification period is always part of the process. The fact that trade marks take a long time to secure by comparison to registered design rights alongside the fact that they are effective only if supported through market recognition, confirms that brand values are not effective means for design-led start-ups to by-pass the lengthy and costly patenting route. When interviewed Haberman pointed out that during a trade show she had seen a competing product that was visually almost identical to the Smiley Cup: … across the room […] I saw another cup and I thought: That is my cup. And all from what I could see, it looked exactly like it. But when you got rid of things, the colour was different and this angle was different, and that detail was different, and it was not protected then. There was not enough there for us to go about doing something that would stop them from infringing our design. (Haberman 2014)

Haberman took no action to contest the competing design. In addition to the time required to secure 3D trade marks, her concerns related to its robustness, make it clear that this form of IP is not a suitable alternative to registered design rights for fledgling start-up businesses.

4.4

Genuine Competition: The Belanger Patent

As explained in Sect. 2.1.6, the term duplication of research and development (R&D) relates to scenarios where two or more inventors or inventing firms develop simultaneously the same or similar concepts. Haberman’s concept of the AnywayUp Cup coincided with another innovation that originated in the USA: The Dripless liquid feeding/training container invented by Richard Belanger (Patent reference: US005079013A) that was used by Playtex (see infringement 4). With respect to the AnywayUp Cup, Haberman explained: I took out my first patent application in 1991, and I got to the end of that period of time where you had to spend money on a law firm, PCTs or overseas, and I needed £4000, and […] I talked to my patent agent and said: What do I do? He said: Either you borrow the money and go and do it, or we can stop it and start again. And that is what I did. […] But by doing that I lost a year’s priority. (Haberman 2014)

The possibility of withdrawing and refiling a patent including the risks involved in this process, has been highlighted in Chap. 2 with reference to Cupris (Sect. 2.1.1). The implications can be considerable. Haberman stated: I cannot believe how much I lost as a result of it. […] If I had not pulled the first one that I started again, my priority would have been a year earlier, so therefore it would not have needed to be amended in order to cover a little bit of prior art that came out in that year. So I could have had a patent on a cup with any type of valve, rather than a slit-valve or a double slit valve. (Haberman 2014)

4.4 Genuine Competition: The Belanger Patent

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The Belanger patent was filed 7 January 1992, and produced prior art, which reduced the scope of Haberman’s AnywayUp Cup patent. With respect to the potential duplication of R&D, Haberman stated: If it is not completely obscure, if it is a device for the general market, that the general market is going to want, you can bet on the fact that someone else is going to have the same idea at the same time. So you have got to get the priority. I would go insane if I thought about what I had actually lost. I did extraordinarily well from the cup, well better than I ever thought I would. But you could have added several millions on the end of the order. (Haberman 2014)

The fact that the risk of infringement grows in line with market demand, does not surprise. The concern that another competing invention may enter on the market, perhaps one that is protected through a patent that affects one’s freedom to operate, was common amongst the RCA inventors interviewed (Sect. 2.1). Whilst secrecy can be an effective mechanism to protect against copying, it perpetuates the risk of another inventor filing for a patent for a similar design concept, unless the product is already on the market (trading phase) or through a defence publication that articulates the technical particulars of the invention in the public domain. Due to the risk of competing inventions, Margaret Briffa recommended using the help of patent attorneys when filing for patents: … patents […] are very technical beasts. There is nothing to prevent an inventor from applying for something for themselves. But the prospect of them ending with anything that is worth anything and can be enforced is very slim. It really needs an expert draughtsman to look at the invention, look at what is out there already, decide what elements of that invention are worth capturing, and to draft it broadly enough that slight changes by someone else do not defeat it, but not so broad that it is not patentable because it is not inventive. (Briffa 2014)

Cases like Haberman and Cupris are not unusual. Briffa pointed out several “clients who put their filing in, haven’t achieved their investment, and then pull the patent and re-file it. The only problem is, then you will have lost your priority date.” (Briffa 2014) This again underlines the interdependence between patenting and finance needs highlighted in Chap. 2.

4.5

IP and Litigation Costs

Haberman’s product portfolio exemplifies how design-driven and technology-driven innovation can be effectively combined to accelerate business growth of as discussed by Verganti and Dell’Era. However, if there is a prioritisation of technical aspects in design-led innovation (i.e. innovation fostered by design-led teams) then this will inevitably affect the entrepreneurs’ attitudes towards design IP and their IP strategies. In a conversation, Haberman rated the registered design right as “not very strong” (Haberman 2014). If Haberman was mistaken here, and registered design rights prove to be robust means of protection through court action, then the designer-entrepreneurs’ confidence in design IP and

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in the value of product languages may increase. What is of low value, is not worth protecting. Conversely, what cannot be effectively protected, may be perceived as of low value. Value here can be seen as a soft asset (ideological, e.g. societal or environmental impact, design quality, accreditation, reputation, prestige etc.) or as a material asset (monetary value, design-business development potential). This indicates that not only the business development potential and the market-potential of the product influence the innovators decision whether or not to formally register IP, the perceived value of the product languages also does. Although Haberman (2008) described US litigation as ‘fearfully expensive, around 4 the UK litigation costs’, she perceives the US patent litigation system as effective and efficient. Haberman entered legal proceedings with her second venture. She became a serial entrepreneur and she had an ally in V&A Marketing Ltd, whom with she had entered a strategic partnership. Haberman’s risk was increased by the fact that her patents were in her name rather than in her company’s name. Therefore her personal belongings were at stake. Working with V&A Marketing helped to mitigate the risk and to limit the financial burden. Haberman held the view that large companies do not respect the IP of SME’s and lone inventors. ‘If they reckon you haven’t got the resources to protect your copyright, they’ll have a pop at you.’ (Insley 2012) Nonetheless Haberman is an advocate of patenting. Standing up for one’s rights is crucial in her opinion. She argued that, ‘if we had not taken action, every other competitor would have copied us too and we wouldn’t have a business left.’ (Pitts 2012) It follows that an IP strategy should also comprise a method of responding to perceived infringements. Haberman suggested that ‘You need to be prepared to enforce your rights.’ (Pitts 2012) Insights In relation to the litigation of the infringement through Jackel International, Haberman’s claimed: ‘I had to risk my house to do it and it used up a vast amount of man hours from the business – time which could have been put to better use.’ (Pitts 2012) This confirms that facing a competitor during the early-stage development can be very compromising. With respect to timings, it is also worth noting that the infringement took place five years after the first filing. This shows that competitors waited with launching a competing product until the AnywayUp cup had obtained market adoption, which confirms the claim that competitors refrain from copying technologies that lack proof of market. Competitors entered the market only after the AnywayUp cup had become a dominant design. To secure her monopoly in Europe and the in the US, Haberman extended her patents which involved additional IP investment. To increase her market penetration she invested in a redesign by Conran Associates which helped establish a dominant product language. In summary, the following conclusions can be drawn:

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• Whilst sharing ideas and concepts with investors is of low risk (Sect. 2.3), sharing information with prospective strategic partners can be dangerous, even if NDAs are involved. • Imitators are unlikely to invest in competing products and formal IP until an invention is proven to be viable (proof of market). • A niche market can provide a safer (less complex) environment for designer-entrepreneurs. However, such businesses may be limited in terms of scalability. • Where infringements occur, there are often multiple incidences involving a range of different industry stakeholders. One case may set a precedent, and encourage other competitors to imitate novelties (Note that none of the infringement cases observed involved investors, but ‘companies with strategic intent’ as claimed by de Pommes in Sect. 2.3). • The Haberman case confirms that product languages can significantly increase sales, and that these can be protected through design patents (US, China etc.), registered design rights (UK, EU, Singapore etc.) and 3D trade marks. The robustness of registered design rights remains to be assessed. • Designer inventors often succeed, not with their first invention, but with their second, or they need to re-develop their first invention in pursuit of success (see also: Roli, Concrete Canvas, and Orbel in Chap. 2). • Haberman filed the AnywayUp cup patent twice. Refiling or delaying patents, extends the lifespan and it can help iron out weaknesses in the patent application. At the same time it can lead to weaknesses in the appropriability regime if competing IP is filed by competitors in the meantime, because this can narrow the scope of patent protection and thus limit market dominance.

4.6

Towards an Innovation Business Development Framework

In chapter one and two we focused on the early-stage start-up business development period, which we have referred to as the fledgling business development period. In chapter three we learned about dominant designs and dominant product languages which attract market players to align their offerings to prominent industry stakeholders. With Mandy Haberman’s business developments we can identify three distinct periods which appear to align with Abernathy-Utterback’s product life cycle (PLC, see Sect. 3.2) if we are looking at a company that is built around a single-minded proposition. As dominant designs and product languages emerge, the

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pre-paradigmatic phase generalised equipment

Stage 1: Fledgling Period

paradigmatic phase specialised equipment

Stage 2: Transition Period

Stage 3: Established Period

Fig. 4.7 Typical business development periods

surrounding market converts from a pre-paradigmatic phase to a paradigmatic phase (Teece 1986), a market paradigm is established (Fig. 4.7). When aligning the PLC with the pre-paradigmatic phase and the paradigmatic phase, the fluid stage sits within the former, and the specific stage within the latter, provided the emergence of a dominant design and/or a dominant product language. The pre-paradigmatic phase is dynamic with many potential market leaders involved in a competitive scenario. During the paradigmatic phase a market leader emerges, and other market players align their offerings to the market leader’s product. A start-up in pursuit of a radical innovation will inevitably be confronted with a pre-paradigmatic situation at the outset, because the development of a paradigm requires market adoption which follows a period of ferment during which ‘alternative designs are largely crowded out of the product class’ (Tushman and Anderson 1986, p. 441). The use of the term period in relation to business developments, allows a dissociation from Teece who uses the term stage, and Abernathy and Utterback who use the term phase. Although the focus of this book remains the fledgling period, the ambition of filing for patents and of registering designs has long-term implications, which need to be taken into account when comparing the strengths and weaknesses of diverse IP strategies. When aligning the three start-up business development periods with Teece’s framework, we can assume the fledgling period to be pre-paradigmatic, and the established period to be paradigmatic. As the transition is likely to be gradual rather than instantaneous, there is usually a period of transition that connects the fledgling period to the established business development period. The Haberman case shows that decisions made during the fledgling period have a longitudinal impact, for example on the scope of IP, and the market position. It also suggests that the risk of imitation is low during the fledgling period. However, potential collaborators and strategic partners may challenge the inventor through imitations during the transition period when the proof of market is established. It took Haberman quite a number of years to become an established designer-entrepreneur (Fig. 4.8). The Haberman case confirms that brand assets become effective only during the transition period, as an innovation is being adopted by the markets. It also shows that it is easier to build credentials, brand assets included, in a niche market.

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Fig. 4.8 The business development periods can be applied to the diagram shown in Fig. 2.27. The business development attributes change as the business matures. The pre-paradigmatic phase and the paradigmatic phase can be mapped against this model

Although the business growth may be limited here, it is less likely for competitors and imitators to challenge the start-up. Haberman’s case also shows that Teece’s appropriability matrix (Sect. 3.1) applies not just to established businesses but also to start-ups. ‘A patent doesn’t automatically give you a monopoly in the market place’ (Pitts 2012). Complementary assets, in this case a collaborative relationship with a marketing firm, manufacturing sources, and later distribution facilities helped to strengthen Haberman’s business over time. Section 2.4 discussed technology-driven approaches in comparison to sales-driven and design-driven strategies. Haberman built on the exclusive use of technology innovations, but subsequently invested also in product languages. Despite the need for patents, she relied on bootstrapping as a funding strategy at the outset, making use of a modest bank loan. Complementary assets such as manufacturing, sales and marketing, were initially secured through strategic partnerships. The investment capacity needed for integration and IP litigation was developed gradually through sales. The development process of a single-product business can be strongly intertwined with the PLC so that ups and downs coincide. Conran’s redesign of the AnywayUp cup in 1997 marks the emergence of a dominant product language. One could argue that competition in design-driven product areas may not necessarily shift from design (as in technology) to price, but also—or perhaps instead—from technology to product language. Although Conran’s design is said to have led to ‘25% decrease in manufacturing costs’ (Conran Associates n.d.), it becomes clear that the visual appearance of the product can be a distinguishing factor as much as its pricing. Although low-tech, the technical aspect clearly came first in Haberman’s initial products, the Haberman Feeder and the AnywayUp cup. Conran’s redesign

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Fig. 4.9 This table shows the differences between the business development period with reference to some key characteristics

of the AnywayUp Cup, and the introduction of the Smiley Cup constitute design-driven efforts which helped to secure market dominance. The fledgling period begins with the inception of the idea. Teece refers to the design as floating during what he calls the fluid product development stage (Sect. 3.2). During this initial period, the team may be very small. Information is gathered to generate an understanding of the viability and feasibility. Funding may be scarce or non-existent. So is access to complementary assets. During the transition period the team grows, business relations are developed, and advisors may join the board. Complementary assets are established, the product becomes market-ready, and trade is initiated. Angel investment may be sought. During the established period, the business is financially stable. Investments or loans are needed only to further business grow. Expansion becomes the driving factor (Fig. 4.9). To map the developments out with more precision, key moments (Fig. 4.10) are listed in the following: • • • • • •

1984–1992: Haberman Feeder—invention, development and marketing 1990: AnywayUp Cup—idea inception 1991/1992: AnywayUp Cup—patent filing 1992–1999: AnywayUp Cup—strategic partnership, marketing and sales growth 1999–2008: AnywayUp Cup—legal disputes and battles over market share 2008–2015: – The manufacturing firm in charge of the AnywayUp cup went into administration. – Haberman integrates the production using angel investment. – By 2011, after 3 years of persistent effort, Haberman had sourced enough angel investment to set up her own manufacturing and distribution facilities in North Wales. – The product returned to the supermarket shelves in 2012.

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Fig. 4.10 Haberman—pivotal moments in the business development surrounding Haberman’s inventions. The first invention failed to take off, however, the knowledge gained accelerated the business development around the second invention, the AnywayUp cup

If we map the Haberman case against the development matrix, it would look as follows: 1984–1992: The Fledgling Period appears long because it involved two inventions, the first of which did not become a large-scale business. With her acquired business acumen and entrepreneurial credentials, Haberman took her second invention, the AnywayUp cup, to market comparatively fast. Only three years passed from the point of ideas inception to the first pre-order of 10,000 units. 1992–1999: The Transition Period: Sales grew, distribution partners and licensees were established in Europe and the Americas. The product was redesigned and relaunched, sales reached millions, Haberman became a brand: The first trade marks were registered: ANYWAYUP (1996), ZIPA (1997), SPILL-CHECK (1997), ANYWARE (1997), competitors began to challenge the product and imitations emerged. 2000–2014: Established Period: Competitive market performance, further sales growth, distribution was expanded across Europe and overseas markets. Imitators were successfully challenged in court. Valuable license agreements could be secured. Following the confirmation of patent validity in the US, the technology was licensed to established brands who used it for developing cups of their own design in exchange of royalties on those sales. In the UK, AnywayUp cups were manufactured in house using tools which were owned and placed by Haberman, which means that complementary assets were integrated.

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Insights Dividing start-up developments into three periods helps to assess the changing context that surrounds the business, and also allows to make predictions in relation to longitudinal impact of early-stage decision making, such as delayed filing or non-filing of patents. It helps to assess the significance of IP in light of changing circumstances. The Haberman case has shown that a one-year delay in patent filing can compromise market power and business growth in the long run. Haberman’s fear of follow-up imitators suggests that the vulnerability of a start-up increases, if owners of IPR do not litigate infringement, because it entices other industry stakeholders to follow suit and also consider producing imitations. The Haberman case also confirmed that product languages matter with respect to sales, even to a venture that is initially tech-driven. Conran’s design of the Beaker and the Classic cup became dominant designs which supports Verganti and Dell’Era’s theory surrounding design-driven innovation (Sect. 3.3). Haberman’s US design patent (Fig. 4.6) suggests that the hypothesis surrounding design-driven IP strategies (Fig. 2.22) is correct, and that design patents/ registered design rights can be deployed to pave the way towards a more all-encompassing and therefore robust IP strategy which involves designs, patents, and brand protection (Sect. 2.4). However, the case does not suffice to clarify whether or not product languages and registered design rights can effectively harness exclusivity of a novel product. The case study in the following chapter will shed more light into this question.

5

Trunki Versus Kiddee: A Historic Verdict

In sickness and in health, through success and failure, the course our lives take is often random and unpredictable, but how we deal with the randomness is not. That small slither of opportunity where we can manage the unpredictability that envelops us on all sides is what we can control. Rob Law, Magmatic Ltd, 2020 © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_5

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Abstract

This second longitudinal case study tells the story behind Trunki, a ride-on travel case, invented by Rob Law MBE in 1997. Following some introductory background information, the court battle between Law’s firm Magmatic Ltd and PMS International who marketed the Kiddee travel case, a competing product, is analysed in detail. This is the first case of design right infringement litigation in the UK that went to the Supreme Court to reach a final verdict. The analysis of this seminal case provides unprecedented insights into design rights, and explains the (perhaps limited) degree to which design rights and design patents constitute reliable means of IP protection.

Adversity can be a conduit to progress. Like Haberman, Rob Law has been faced with considerable challenges both in life and in business. In his book ‘65 Roses and a Trunki’ (2020) he describes how he lost his twin sister to cystic fibrosis, a condition that has significantly impacted not only her childhood but also his own. Law lost his sister when was preparing for his undergraduate design studies. In 1997, whilst still a design student at Northumbria University in the UK, Rob Law incepted the design of a ride-on suitcase called Rodeo that was aimed at children. An updated version of the design was registered as a design with UK IPO in 2002, and with the Office for Harmonization in the Internal Market (OHIM, now: EU IPO) in 2003 (Fig. 5.1). Six grey scale CAD renderings were used for the latter design registration. In light of the Trunki case, legal expert Margaret Briffa pointed out that registered designs are best filed using outline drawings (Briffa 2014). However, the Supreme Court verdict which was announced in 2016 suggests that there are many Fig. 5.1 Harley Ladybird Trunki [image source Magmatic Ltd., reproduced with permission]

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more criteria that determine the strength of a design right. This chapter will discuss the case, the first of its kind in the UK, and point out the lessons that can be learned. In 2003 Law licensed the design to a Chinese toy company, and in 2006 he started taking Trunki to market himself having obtained ownership over the production tools through trading in his royalties (Law 2015). After the Chinese toy company, who had struggled to produce a marketable product for Law, went into liquidation in 2005, the inventor transferred the production between four or five different factories in China, until he moved it to the UK for better quality control in 2012. Law initially started his company Magmatic Ltd in 2002 with just a £4000 loan from the Prince’s Trust, a charity who supports young talent in the UK. When he licensed the design to the company mentioned above, he invested the entire £4000 loan in solicitor fees in order to draw up the licensing contract (Coates 2013). Law explained that he did “a lot of the work by roping in family members and friends, paying them as little as possible” (Law 2015). Like some of the RCA incubator businesses who came to mention in Chap. 2, Law applied a bootstrap approach. Although he borrowed money and drew on favours from friends and family, he refrained from equity investment after his famous BBC Dragons’ Den pitch had (somewhat) failed in 2006. During the TV program Law had pitched for £100 K in exchange for a 10% equity share (BBC 2009). In addition to a production flaw, Dragons’ Den investor Peter Jones pointed out that ‘This product is not patentable.’ (BBC 2009) Rob Law confessed that it was not, and on those grounds Peter Jones subsequently claimed the company to be ‘worthless’. However, in 2009 Law raised £200,000 in exchange for 10%, and, during a second investment round in 2013, when Magmatic Ltd was valued at £12 m, Law raised a further £4 m worth of equity investment. In 2015 Magmatic employed 35 people at their head office in Bristol and 44 people at their factory in Plymouth (Law 2015). This confirms that high-growth businesses can be built around product languages. According to the Telegraph (Burn-Callander and Anderson 2014) profits had diminished dramatically following the appearance of a competing design that bore close similarities with Trunki: The Kiddee case, which was introduced to the UK by PMS International in November 2012. Some of the figures circulated in the popular press are thought to be inaccurate (Law 2016). Therefore it is difficult to precisely quantify the damage that Magmatic Ltd encountered. Reportedly the company dropped from a six-digit profit in 2012 to a heavy loss in 2013 (Burn-Callander and Anderson 2014). In February 2013 Magmatic Ltd issued proceedings against PMS International, and successfully challenged the competitor in the UK High Court. However, Magmatic Ltd subsequently lost against PMS International in the Court of Appeal. Magmatic then took the case to the UK Supreme Court. Whilst awaiting the hearing, Mr. Law revealed in an interview in 2015 that “… if we lose, then it raises questions about everyone’s registered designs being valuable” (Law 2015). They lost.

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The Case in the Eyes of the Law

Prior to the outcome mentioned above, the UK High Court had found that the PMS International’s Kiddee Case had infringed Rob Law’s/Magmatic’s Community Registered Design (CRD—the terms Community Registered Design, European Registered Designs, Registered Community Design and EU Registered Design Right are often used as synonyms). Following this high court judgment, PMS International appealed, and The Court of Appeal reversed the High Court judgment and judged in favour of the Kiddee Case. Magmatic subsequently turned to the Supreme Court to file an appeal against the verdict of The Court of Appeal. However, the Supreme Court unanimously dismissed Magmatic’s appeal claiming that ‘a design shall be protected to the extent that it is new and has individual character’ subject to ‘the overall impression created by it, and that potential customers will appreciate it on the basis of its distinctiveness…’ (The Supreme Court of the United Kingdom 2016) This statement connects with Briffa’s comment on the relevance of prior art meaning that the more novel a product the broader its scope of protection (Sect. 4.3), because the more iconic a design is, the more recognisable it will be to the customer. However, Trunki has been on the market for about six years when Kiddee was introduced. Therefore customers may have acquired the capacity to distinguish design features to a greater degree than in 2006 when Trunki first appeared. This means that the distinguishing features, i.e. the degree of novelty, depends on audience perception. The Three Key Reasons, Based on Which the UK Supreme Court Conrmed the UK Appeal Court’s Rejection of the UK High Court’s Initial Verdict in Their Original Wording

‘The first criticism was that the judge failed to give proper weight to the overall impression of the CRD as an animal with horns, which was significantly different from the impression made by the Kiddee Case, which were either an insect with antennae or an animal with ears [21]. The overall impression given by the CRD is indeed that of a horned animal; and the judge did not specifically refer to this when comparing the CRD with the Kiddee Case [37]. A trial judge cannot be expected in every case to refer to all the points which influenced his decision, but when a judge has given a full and careful judgment, conscientiously identifying a significant number of points which weigh with him, an appellate court can properly conclude that his failure to mention an important point means that he has overlooked it. This was the case here [39].’ ‘The second criticism was that the judge failed to take into account the effect of the lack of ornamentation to the surface of the CRD [21], i.e. that the absence of decoration reinforced the horned animal impression [40]. This has limited force; unless it simply consisted of items such as eyes and a mouth, any decoration could well detract from the animal impression and even such

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items could be said to distract attention from the horns [41]. The Court of Appeal’s second criticism was correct, although it is only a relatively minor point which mildly reinforces the first criticism [49].’ ‘The third criticism was that the judge ignored the colour contrast in the CRD between the body of the suitcase and its wheels [21]. He described the CRD as constituting a claim “evidently for the shape of the suitcase” and decorations on the Kiddee Case were therefore to be ignored [51]. The CRD consisted of CADs of an item whose main body appears as a uniform grey but which had black strips, a black strap and black wheels. The natural inference to be drawn is that the components shown in black are intended to be in a contrasting colour to that of the main body. Accordingly, the Court of Appeal was correct: the CRD claimed not merely a shape, but a shape in two contrasting colours [53] and the judge was wrong in holding that the CRD was simply a claim for shape [53].’ The Supreme Court of the United Kingdom, 2016 The following arguments were brought forward in support of Kiddee: • • • • •

It has ears/antennae instead of horns Leopard design (surface decoration) Animal-like appearance Rounded ‘more cuddly’ body shape The wheel caps (Fig. 5.2).

Fig. 5.2 Visual comparison of Trunki and Kiddee. On the left is one of the 3D renderings which were used for the design rights application, and on the right a photo of the Kiddee case. At the centre an outline drawing. It has been suggested that design rights granted for outline drawings, are stronger than renderings or photos, because they are more difficult to design around. [image source Magmatic Ltd., reproduced with permission]

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In March 2016 the Supreme Court confirmed the judgment of the Appeal Court, who claimed that High Court judge who first ruled in favour of Trunki, Arnold J, ‘failed to give proper weight to the overall impression of the CRD […]’. Whilst expressing ‘sympathy for Magmatic and Mr Law, as the idea of the Trunki case was a clever one, but Design Right is intended to protect designs not ideas’, the Supreme Court listed three key reasons for confirming the Appeal Court’s rejection of the initial verdict: 1. The difference in the overall impression which either of the two designs have on ‘the informed user’ (At para 55, [Arnold Judge] identified “the informed user” primarily as the parent, carer or relative of a three to six-year-old child) 2. The absence of surface decoration in the registered design 3. The colour difference between individual product components of the registered design Inspiration Versus Imitation Haberman’s patent for a valve was reduced in scope due to prior art produced by the Belanger patent (Sect. 4.4). Prior art also impacts the validity of registered design rights. The so-called squeeze argument relates to prior art which may reduce the scope of protection of a registered design right due to the prior art created by Unregistered Designs: In the Trunki-versus-Kiddee case, the squeeze argument meant that if ‘the CRD covered the Kiddee Case then it also must extend to the Rodeo, and therefore it [the CRD] was invalid as it did not have “individual character” because it did not produce a “different overall impression” from the existing “design corpus” [i.e. the Rodeo]’ Supreme Court, 2016, p. 6. This means that in principle a UK unregistered design, if in the public domain for longer than the twelve-month grace period, can invalidate a registered design that looks similar. The squeeze argument had little weight in the Trunki-versus-Kiddee case. Arnold J. stated ‘the Rodeo was a prior disclosure but that the relative obscurity of the Rodeo ensured that it did not form part of the design corpus of which the informed user would be aware’ (Hogarth Chambers 2013). What Arnold J meant with relative obscurity was the way in which the Rodeo was depicted. A blurry low-resolution image (Fig. 5.3) provided limited detail with respect to specific design features. However, in principle the premature publication of designs can have a counter-productive impact on the strength of subsequently registered design rights. Roland Lamb, the inventor of the Seaboard (Sect. 2.1.2), timed the design registration to perfection making maximum use of the 12-month grace period in the UK. He filed his registration precisely a year after his product was exhibited at the RCA degree show. In conjunction with Trunki-versus-Kiddee, Arnold J, the first judge to rule over Trunki-versus-Kiddee, argued that, ‘as the Trunki was the first product of its type, the CRD is entitled to a broad scope of protection compared to a design in a more

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Fig. 5.3 Rodeo Concept Board—some of the design details are not clear. [image source Magmatic Ltd., reproduced with permission]

crowded design field.’ (Hogarth Chambers 2013) However, the Court of Appeal as well as The Supreme Court did not uphold this point, and ruled that PMS International had not infringed Magmatic’s CRD. It follows that, as the degree to which users and end-customers can differentiate between variations in product languages increases, the novelty even of a radical innovation wears off over time. Therefore the scope of registered design rights diminishes gradually.

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Fig. 5.4 Unregistered design: Incremental changes in the design since its registration [image source Magmatic Ltd., reproduced with permission]

The Unregistered Design Rights Involved Arnold J. ruled that ‘the Kiddee Case also infringed four UK Unregistered Design Rights (UDR) which dealt with specific parts of the Trunki, namely the lock, tow strap and inside retaining straps.’ PMS International did not appeal against the infringement of UDRs involved. Rob Law claimed to have received around £3000 in damages, whereas the legal case in its entirety has cost the company nearly a million (Law 2016). This suggests that unregistered design rights are of limited benefit to the innovator (Fig. 5.4).

5.2

The Impact of Litigation on the Inventing Firm

The Trunki case shows that designer-entrepreneurs must not underestimate the risk for product languages to be imitated. “We have had a lot of copies of ride-on suitcase concepts, many working very similarly to our product.” (Law 2016) The first known imitation appeared in 2008, roughly two years after Law pitched the product on Dragons Den (Laura Breen 2017). The timing supports the hypothesis that imitations are unlikely to become a threat until proof-of-market has been established. This means that it is very unlikely for IP infringement to occur during the fledgling business development period. Individual imitators may then set a precedence that encourages others to copy an idea or a design. Haberman feared this possible scenario in relation to her AnywayUp Cup (Sect. 4.2). For an imitation to become the market lead or for it to dominate a market niche, it takes more than just a design. Law explained: Selling a product in the area what we call children’s travel is really difficult, because the category does not really exist. So all these copies seem to be failing at the first hurdle. They cannot get the traction, they cannot get the buyers. There is not the marketing behind it that would grow the awareness for the product. (Law 2016)

The fact that disruptive innovations can be difficult to align with existing market segments, makes it clear that taking a radical product innovation to market, requires an appropriability regime within which the novelty can flourish. IP as well as

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complementary assets are key components of a tight appropriability regime. The concerns articulated by the designer-entrepreneurs who went through InnovationRCA were mostly connected to the lack of a strong appropriability regime, and to the skills and knowledge required to nurture it. Trunki was difficult to position within a department store, because it connected with various product areas, children’s toys and travel. The fact that a product is difficult to categorise according to established conventions, can be seen as a testimony of the product’s radically innovative qualities, although in this case the product did not disrupt existing markets in as much as it motivated the development of a new one. Whilst potentially costly in monetary terms, law suits can be profile-building. Law explained: The morale of the business was hugely lifted by the press coverage on the day of the announcement [of the Supreme Court judgment], where we have never been in every single national newspaper with colour photos before on the same day. And they all went with our story and not with PMS’ story. Everyone was reading about Trunki. … (Law 2016)

He further stated that “We got a lot PR out of it. The equivalent advertising spend is probably about the equivalent of our legal cost. […] To some extent we could pull back on our marketing budget.” (Law 2016) It is noteworthy that Trunki had been on the market for about nine years by the time it was imitated by PMS International, and Law’s business had been growing over a period of over six years. This meant that the business was already in its transition period and there was a high level of brand recognition already prior to the litigation process. It is questionable if such PR value would apply to designer-entrepreneurs during the fledgling stage of their business development, because they would have significantly less media presence. Kiddee was by far not the only case of imitation. Outsourcing the production to Chinese firms may have been cost-effective but it involved risks. Law highlights that “China is the biggest market and the biggest market for copying.” (Law 2015) Therefore Magmatic Ltd invested in a design patent in China. Law explained: In China, a bit like the Community Registered Design [and indeed with the UK Registered Design], there is no [novelty] check beforehand. So we had copycat factories register design patents, which were identical to our shape, which clearly will be invalidated. But this process takes 18 months. So for 18 months they [the imitators] have got a piece of paper they can wave around, and it stops us from taking them off exhibitions, and it prevents us from removing their products from Alibaba. It is frustrating. (Law 2015)

To counteract the issue, Magmatic Ltd engaged a brand protection agency in China. He further explained: The front-line is the web […] and second to that are the trade shows. […] After that you probably have to go directly to retailers and after that to factories themselves. But we have not yet gone after a factory, as this requires a huge amount of time and resource. (Law 2016)

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This again proves that the threat of being copied is real, not only in the field of patents and technology, but also in relation to designs and product languages (Figs. 5.5 and 5.6). When exactly this threat arises, and at what point in time it is best to register a design, is not yet clear. If a design is registered too late, prior art is created through the publication of the (unregistered) design, and this can invalidate the registered design right or limit its scope. In the case of Trunki, the unregistered design right created through a blurry low-resolution image, had little impact on the validity of the registered design right. But many designers and designer-entrepreneurs are not aware of the danger surrounding prior art which can invalidate or weaken the registered design right. Whilst acknowledging the beneficial PR that resulted from the public discussion of the Trunki-versus-Kiddee case, Law claimed that the litigation process “suck[ed] away a lot of time and energy and resources that would have otherwise been invested in marketing.” This corresponds with what Haberman stated about her experience with litigation. After the Trunki-versus-Kiddee case came to a closure in the Supreme Court, the highest possible court in the British jurisdiction, Law pointed out that the process took almost four years in total (Law 2016). If Haberman is correct assuming that giving in to imitators will entice others to copy designs, Magmatic Limited did not really have any option other than to fight the case all the way to the end. Once a case is exposed to the wider public and intensively debated, a designer-entrepreneur who backs down, risks to be perceived as an entrepreneur who does not stand up for his or her rights. The fact that Magmatic Limited lost, exposes weaknesses surrounding the registered design right as a form of formal IP, and this may encourage others to try to circumvent existing designs in the future.

Fig. 5.5 Infringement scale—The number of occurrences of one single copy. If a company seeks to establish and defend a dominant product language internationally, a carefully developed IP strategy is essential. [image source Magmatic Ltd., reproduced with permission]

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Fig. 5.6 A range of Trunki imitations found by Magmatic Ltd [image source Magmatic Ltd., reproduced with permission]

5.3

IP Strategies for Design-Driven Innovations

Registering a design in the UK and/or in Europe is cost-effective, even though the costs increase gradually as the registrations are renewed every five years. The costs multiply if a design is traded internationally, e.g. beyond the boundaries of the UK or the EU. Registering a design or filing a design patent in multiple countries leads to spiralling costs. However, Rob Law did not see the need for that. “We have used our registered design as a basis for copyrighting in other countries. So our copyright in China is based on our registered UK design and European design.” (Law 2016)

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This means that Magmatic Ltd use UK and EU registered design rights as a precedence to refer back to, when enforcing their copyright in other countries such as the USA. These rights can serve as a time stamp that proves the creation date. According to Rob Law, the EU registered design is a more reliable point of reference by comparison to the UK registered design. He explained: “I do not know if the people who sit in China who manage Alibaba or other websites, recognise any UK registered designs. But they do recognise European registered designs.” (Law 2016) When questioned about the robustness of his registered design rights in relation to his lost lawsuit, the inventor explains that “The registered design has been a hugely powerful bar in the UK, and it has been successful in the UK when we sent it to UK retailers. It just has not been successful in court.” (Law 2016) “The registered design that was overturned in the Supreme Court was the same piece of paper that had 4 times listings removed from various global trade websites, and from around 150 odd retailers around the world. […] Only in our own country it seems to have no value.” (Law 2016) This means that a registered design right provides a strong signalling effect that can be used to discourage retailers from trading imitations. In court, the registered design right may not prove to be an effective means of protection. During both interviews conducted, Rob Law highlighted the significance of branding: “Branding is most important for us and for most markets, except for pharmaceuticals and high tech where brands cannot carry quite the same power. But in the business-to-consumer industry the brand is more powerful than patents and intellectual property.” (Law 2015). Might branding be a more significant asset than IP in the long term? Note that branding is not to be confused with the trade mark. A trade mark is at best a symbolic visual or verbal representation of a brand ideology, and that is only the case if the brand is understood and remembered in line with the values which the brand communicates. When asked how the IP legislation in the UK could be improved, Law argues that “We need something very similar to what we have got in Europe which is an ‘Unfair Competition’ rule. […] [In the UK] We have ‘passing off’, which is notoriously difficult to pursue, and we were actually advised by the High Court Judge in the first case to drop our passing off claim, because it is so difficult to prove.” (Law 2016) In a conversation in 2015, Dids Macdonald, Founder-CEO of Anticopying in Design (ACID) in the UK, reported of a focus group discussion with legal experts during which she raised the question whether or not the Trunki-versus-Kiddee case constituted a case of unfair competition (Macdonald 2015). Most of the delegates were said to have confirmed this. The fact that unfair competition cannot be litigated in the UK, weakens registered design rights. The country within which a start-up is incepted is hardly ever chosen based on the strength of its legal system. However, jurisdictions are certainly worth considering when developing IP strategies, in the least when it comes to expanding a start-up into new market territories.

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Insights In the first instance Rob Law licensed his design out. Although this approach proved non-viable, he succeeded in establishing the product on the market. This supports Clarysse and Kiefer’s point that ‘the majority of patents don’t earn substantial revenue through this passive method [i.e. licensing]’ (Clarysse and Kiefer 2011, p. 106) applies not only to patents but also to designs. However, Trunki shows that a product can be tested on the market through a licensing route. • Viable businesses can be built through a design-driven approach and without an IP strategy that relies on patents. The Trunki case study does not confirm whether or not equity investors can be attracted to a design-driven start-up because Rob Law did not rely on equity investment during the fledgling period. The Dragon’s Den situation suggests that angel investors prefer a technology-driven approach towards a design-driven approach. • In line with Haberman’s AnywayUp cup (Chap. 4), this case study suggests that novel products are unlikely to be infringed until proof of market has been established. The invention was publicly disclosed in 2006 through TV broadcast, the first case of infringement dates back to 2008, approximately two years after the product was introduced to the market in the UK. • The Trunki case suggests that design rights are not a robust enough a means of protection in the UK. Design rights and design patents are comparatively easy to circumvent through adjustments in the product language as hypothesised by Mandy Haberman (Sect. 4.3). • The fact that different judges arrived at different verdicts makes it clear that there remains confusion about what can and what cannot be protected through design rights. Outside of the UK it is thought to be easier to challenge imitators than within the UK. Infringement letters appear to be an effective means to get retailers to take imitations off the shelf. • Branding can be a more effective means to protect product languages than design rights. None of the imitations found carried the Trunki logo. But branding requires a brand recognition within the target sector. It takes time to establish such brand presence. • Prior art created through Unregistered design rights can impair the scope and validity of registered design rights in the UK, if the latter is registered after the twelve-month grace period has lapsed. • The community registered design right (CRD), now known as EU registered design right, is considered stronger a means of protection than the UK registered design right in comparison, although post-Brexit, it no longer covers the UK. • The CRD can support the copyright in territories outside the UK. As it provides documentary evidence of what exactly was designed, by whom

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and when, the CRD sets a precedent which innovators can refer back to when enforcing their informal IP overseas. Thus it can be used in support of later amended versions of a design, provided that a close resemblance remains between the new and the registered versions. When contemplating design innovation strategies in Sect. 2.4 we speculated whether or not registered design rights may help to delay patenting and consequently speed up the route-to-market, we can argue that according to the Trunki case this assumption is in principle valid. However, this can be said with certainty only in the event that equity investment is not required, because investors can usually not be attracted through design rights. Rob Law used a bootstrap approach whilst developing his business, therefore managed without major investment during the fledgling stage. The signalling effect, one of the key IP values mentioned in Sect. 3.5, is likely to deter competitors from infringing, and it did work for Trunki, at least outside the UK, but it does not necessarily entice investors to invest in a business. Although viable businesses can be built around design-driven innovations, the robustness of design rights and design patents is questionable.

6

Sebastian Conran Associates: Appropriability Regimes in the Context of Design Entrepreneurship

The path to success is also paved with failure. Sebastian Conran, Sebastian Conran Associates, 2014

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_6

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Abstract

This third longitudinal case study investigates Sebastian Conran’s approach to managing IP. Sebastian Conran, son of Sir Terence Conran, is a prominent design consultant and a serial entrepreneur based in the UK. This chapter showcases a range of his initiatives including commissioned work and self-initiated projects. Using extracts from various exclusive interviews, this section provides a glimpse into the wealth of Sebastian Conran’s experience. The insights obtained help to understand how multiple mutually complementary inventive steps can strengthen disproportionately the success prospects of design-led start-ups.

Having worked as Head of Design for Mothercare, as well as a design consultant for Nigella Lawson, Sebastian Conran is listed as an inventor in over a dozen utility patents and in several dozen design patents. Only a few of the latter are attributed to his own firm, Sebastian Conran Associates. The majority of inventions were filed by clients. Conran (2014) explained: “I do not patent things, because I would not be prepared to fight to protect them. I work for other people and it is their responsibility to patent them.” He spoke from the perspective of a design consultant when arguing that formal protection should not be necessary to fend off imitators, and that designers deserve a more robust IP legislation than that which currently exists. This

Fig. 6.1 Designing creating value: These concepts surrounding design value connect with the Offenbach Theory of Product Languages (Fig. 3.2) that was discussed in Sect. 3.3. (Visual © Copyright of Sebastian Conran Associates 2017, reproduced with permission)

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would allow designers to better defend themselves. According to Conran, the current limitations in the UK IP legislation (as introduced in 2014) result in design not being taken seriously enough. Conran explained that “if I write a piece of music, or I write a book, I automatically own it. I do not have to write Sebastian Conran. If I design something, I need to register the design in order for the current IP legislation that is going through, to take effect. [The current UK IP legislation] does not work on unregistered designs.” (Conran, 2014). Before moving on to examining various initiatives, a few points in relation to Conran’s innovation management principles are worth highlighting. The following visuals were shared and discussed by Sebastian Conran: A value map drawn by Sebastian Conran Associates (Fig. 6.1) suggests that design carries value in excess of the functional aspect. Product languages are part of the value proposition here, and they address both performance-related semantics as well as emotional aspects. Conran distinguishes between need and want, which tallies with the discussion surrounding the dialectical juxtaposition of the demand-push and the market-pull paradigms in Sect. 3.4. Need-pull and demand-pull are fundamentally different and demand can be pushed, if it does not exist a priori. One could argue that want can be both conscious and subconscious. Indeed, the same applies to need. Need, however, may escape the audience’s awareness entirely. In pursuit of product innovations Sebastian Conran Associates deploy an approach that comprises a variety of convergent processes (Fig. 6.2). This is not unusual and often expressed in ideation flow charts. A brief emerges from research and analysis. A concept is developed in response to the brief, and subsequently put to the test (validation) before implementation and production process follow. This multi-linear process diagram is perhaps a slightly simplified representation of what

Fig. 6.2 The product innovation journey according to Sebastian Conran (Visual © Copyright of Sebastian Conran Associates 2017, reproduced with permission)

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Fig. 6.3 Collaborative accountability: Key Partner/Stakeholder Typical Input (Visual © Copyright of Sebastian Conran Associates 2017, reproduced with permission)

happens in reality. If tests fail, strategic partners withdraw from the project, etc. the overall process may be significantly more complex. The diagram shown in Fig. 6.2 relates to two of the three business start-up development periods discussed in Sect. 4.6: the fledgling business development period, and the transitional business development period. The production stage which typically falls within the latter, precedes the established business development period which often paves the way for business scaling. What is not included here is the introduction of sales. Sebastian Conran Associates is a firm established through consultancy work. According to Conran the route to market outlined above takes commonly around 18 months. The start-ups examined in Sect. 2.1 took approximately 3–4 years until they had a market-ready design proposition. Conran draws on significantly greater amount of experience, an extensive network of professional contacts, and he enjoys an exceptional industry reputation. The reason why it took the RCA alumni (Chap. 2) significantly longer to take their inventions to market than it took Sebastian Conran, may also have to do with the stakeholder input that is illustrated in the bar chart in Fig. 6.3. Design projects that originate in academic studies are not pre-dominantly marketing-driven at the outset. They are usually limited to the conception stage, and sometimes cover part of the development stage, both of which are design-intensive processes. The validation and implementation stage are processes that require different knowledge competencies. These are the knowledge areas which the designer-entrepreneurs commonly lack (see Roland Lamb’s respective comment in the review of Sect. 2.1.2 for example). Some if not most of the designer-entrepreneurs discussed in Chap. 2 appear to have struggled during the first, the fourth and the fifth stage shown in Fig. 6.3. Many of the ideas shown in

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Chap. 2 were not developed in response to specific briefs. Instead they were ideas that evolved from the identification of opportunities following observations. This meant that research needed conducting and market opportunities exploring after concepts such as RoboFold and KwickScreen had already been developed. Squease and Cupris are exceptions here. These concepts evolved from expert research which helped identify market-need. By comparison to postgraduate students, an experienced and connected designer such as Sebastian Conran has a better understanding of markets and will find it easier to validate inventive steps, sometimes in collaboration with partners, and to identify implementation options.

6.1

Conran Associates—Consultancy Services

Although Sebastian Conran called for stronger IP legislation in the UK, in particular around unregistered design rights, he acknowledged the problems surrounding duplication of innovation: “I have experienced myself several cases where we have been working on projects and we have come up with a solution, where someone on the other side of the world has come up with the same solution.” (Conran 2014). One example is Conran’s design of a bathroom suite for Villeroy and Boch (Fig. 6.4a). Just prior to the launch he received a phone call from the client suggesting that his designs had been copied. Shortly after he received a further phone inquiry whether Conran might have copied somebody else’s design. Finally he received an image showing an Alessi design that was remarkably similar to Conran’s (see Fig. 6.4b). Fact was that neither of the two design firms knew of each other’s design developments at the time. “We were both aware of the Zeitgeist, and we were both going for something that was countering the current trend.” (Conran 2014). Both designs were launched,

Fig. 6.4 a, b Sebastian Conran’s design for Villeroy and Boch on the left (Image courtesy of Sebastian Conran Associates, reproduced with permission) versus Stefano Giovannoni’s Il Bagno Alessi design on the right (Photography Fabrizio Bergamo, image courtesy of Alessi, reproduced with permission)

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and both were reported to be a success. Upon close inspection, some differences in the design could be noted. Conran explained: “Actually they were different, and the Villeroy and Boch were cheaper, and it is still their flagship range.” (Conran 2014). The competition between both designs discussed above did not seem to have a critical impact on the economic stability of any of the stakeholders, i.e. Villeroy and Boch, Conran Associates, Alessi, Giovannoni. This may be due to the fact that none of the firms involved here were companies built around a single product as was Magmatic Ltd, where the company name is much less known than the product name Trunki. It seems clear that the impact which the drop in Trunki-sales had on Magmatic Ltd was much more significant than that which the potential reduction in numbers of sales of any of the two aforementioned bathroom suites may have had on Alessi and Villleroy and Boch respectively. The possible reasons for this are as follows: • Conran’s Villeroy and Boch bathroom suite was an incremental innovation rather than a disruptive novelty, whereas Trunki was novel (disruptive) to such a degree that it provided Magmatic Ltd a high level of exclusivity. It created a new market, but this market was still subject to growth. • Villeroy and Boch, Conran Associates, Alessi, Giovannoni had other income streams, i.e. products, and these could compensate for the possible drop in sales of the products discussed here. • All stakeholders involved in the design and in the sales of the bathroom suites, design firms and traders alike, were established firms rather than start-ups.

Insights

• Competition in a market with few market players impacts the individual stakeholders much more profoundly than competition in a loosely controlled mainstream market, where market shares are more or less evenly distributed. • Designer-entrepreneurs who entertain multiple income streams, can mitigate the economic impact if one income stream is compromised. • Established firms that are developing side-line businesses or spin-outs, are less vulnerable than single-product start-ups during the transition period. The first two insights suggest that there is an inverse relationship between the number of a venture’s innovation propositions and a venture’s reliance on market exclusivity, the third leads to the question how a start-up can establish a status of similar stability, despite the given restrictions in relation to finances, market position, and access to assets.

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IP is generally of greater significance for entrepreneurs who focus on tightly controlled markets in a high-risk-high-returns manner than for those who aim their innovations at a loosely controlled market setting with where market power is decentralised. Conversely one could argue that the likelihood of duplication of innovation may be proportionate to the number of competitors, which is likely to be higher in a mainstream market than it is in a niche market, and this means that IP can still play an important role. Incremental innovation is more likely to be duplicated than radical innovation, because here the market environment is conducive to coherent innovative thought processes. Need-pull and demand-pull initiatives, i.e. market-driven innovation (as discussed in Sect. 3.4), can also increase the likelihood of duplication of innovation.

6.2

Universal Expert

The previous example illustrates a relatively typical design consultancy scenario. However, Sebastian Conran operates not only as a design consultant, he is also an entrepreneur. Universal Expert is the brand name used for a collection of kitchenware designed by Sebastian Conran Associates. This initiative does not make Conran a designer-maker in the strict sense (Fig. 1.2 in Chap. 1), as the products are manufactured by a project partner. However, he did initiate the project and sustain the authority over the project due to his IP ownership (Fig. 6.5).

Fig. 6.5 Conran’s Universal Expert collection of kitchen ware. This project was self-initiated and marketed with a partnering firm based in Hong Kong. The collection featured over 200 products. (Image Courtesy of Sebastian Conran Associates, reproduced with permission)

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Following the design and production of the Universal Expert collection, Conran first worked with the UK-based retailer, John Lewis, in order to market it. As John Lewis had no more than 40 shops in the UK at the time, trading through John Lewis alone was not viable for a project of this scale. Conran claimed that “to get the volume efficiency, you need about 1000 outlets.” He knew that it takes much more than just robust IP to successfully market design solutions. “To launch something like this costs several million Dollars.” (Conran 2015). Luen Fung, a Hong Kong based export trader, shared the costs for the design and the marketing, and they covered the entirety of costs involved in stocks and tooling. Given these complementary assets and his brand, Conran was able to establish distribution in the USA, Japan and Europe by 2014. Scandinavia and South Africa were meant to soon follow. Conran hoped to extend distribution across about 40 countries in total by May 2014. Despite the scale of this endeavour, Conran addressed issues with the IP: “I think we started off registering, but once you have got 200 items. It takes £200 an item to register [this figure has since been reduced through implementing online filing options]. It is not feasible.” (Conran 2014) The expense needed would be considerable if one was to protect the designs internationally, in particular if we take renewal fees into account. Conran explained that he has “to design these products for £2–3000 a product, and at that level you cannot justify paying four or five times that for patenting.” When asked how he protected his work, he pointed at the label at the bottom of an oil and vinegar dispensers: “It is this bit: Design Sebastian Conran. It is using the brand. It makes all the difference.” (Conran 2014). The Trunki case confirmed that brand imitation is comparatively rare, and Rob Law claimed to have sensed the value of branding at an early stage. Whilst branding strengthens a designer’s market position, brand reputation needs establishing over time. Registering a trade mark helps little if there is no positive brand recognition within target audiences. However, in business-to-consumer environments, a strong brand can be invaluable. The above scenario is based on data collected through an interview in 2014, and on secondary data obtained in the following year. When spoken to on 21 June 2017, Sebastian Conran admitted to difficulties in the marketing of the Universal Expert range: The partnering firm in Hong Kong had closed down. As a consequence, both the supply and distribution chain needed redeveloping. When asked whether or not the Universal Expert was still being produced in Hong Kong, Conran stated that “there are basically five makers on the Universal Expert […] The five makers call their supplier out of Hong Kong” (Conran 2017b). Conran could draw from experience when engaging a strategic partner based in Hong Kong in the production and distribution of the Universal Expert products. He had opened his first office in Hong Kong in 1988. Conran engaged his business partner in pursuit of both upstream and downstream value chain access. As pointed out in Sect. 2.1.7, giving away too much control over value chain components increases the risk for start-ups, because this leads to a high dependency on the collaborating partner. Conran’s progress between 2014 and 2017 was not as expected since the partner did not perform as well as hoped. Conran could rely on his consultancy business as a fall-back option. A start-up could suffer significantly,

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perhaps grind to a halt, if the sole project partner proves unreliable. Conran, on the other hand, managed to identify other innovation opportunities (see Sects. 6.3–6.5). He also found alternative business partners to continue his pursuit of manufacturing and marketing the Universal Expert range. Giving away control over both upstream and downstream value chain assets can be very dangerous in a tightly controlled market. Clarysse and Kiefer referred to the example of Artica when discussing potential value chain bottle necks (see also Sect. 1.3.2). This risk did not present itself to Conran’s Universal Expert since the market of homeware products is not tightly controlled as opposed to the sector of HVAC in the UK. Therefore alternative strategic partners could be found and the need to speed up the route-to-market was not as strong as it is in an uncertain market environment. This case study makes it clear that registering a large range of products as designs, and to do so across number of territories, is not viable, not even for an established firm. Relying on informal IP such as copyright and unregistered design rights, remains the only option here. However, these forms of IP are perceived as comparatively weak as the Trunki case study has shown (see Chap. 5). Brand assets and industry reputation can significantly enhance the strength of informal and formal IP. Insights

• IP alone does not warrant for value chain control. Relinquishing too much control over the value chain, and engaging individual partners both upstream and downstream can be risky, since the dependency is increased. • Formal IP is often unaffordable for series of products, in particular if they require international protection. • Formal IP that is not subject to a novelty check, such as registered design rights for example, may prove unreliable when challenged. The fact that two very similar bathroom suites appeared almost simultaneously suggests that registered design rights related to incremental innovation can easily be challenged in court. • Brand value can be a more valuable asset than IP in the context of consumer products.

6.3

Gifu

The Gifu project is a collaboration between Sebastian Conran Associates and a collective of artisan-makers based in the prefecture of Gifu, Japan. The products, which comprise lighting, ceramics, stationery and kitchen tools, but also furniture

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items, are marketed as a collection but can also be sold individually (Figs. 6.6 and 6.7). Sebastian Conran Associates are paid for their design services, and in addition receive a percentage of the revenues generated through the Gifu range in royalties. Production and distribution are managed by the collaborating partners. Sebastian Conran and his staff visit Gifu regularly to meet the project partners. Conran expresses reservations about royalty-based income streams: “I’ve got outgoings in the form of people’s salaries, six double heads and if I’m thinking too much about percentage of sales, we will lose out; because of the tax flows. So, the idea is that you get a royalty revenue stream. Having royalty revenues in products that are in production in twenty years is a good thing. Gaining royalty revenues of products that are only in production a few years … You know, I would never do an iPhone on a royalty revenue because it is around for such a short time. Whereas designing a chair or something that will probably be in production for twenty or thirty years, it’s very worthwhile.” (Conran 2017b). Conran further points out that success prospects of royalty-based projects can be limited: “… one in ten royalty projects is fantastic, outstanding. Probably the next 40% are good and you get more out of doing that than you would else if you just start paid fees. You’d get probably twice the revenue than fees. Then, the next 30% are okayish, not amazing. Actually, you need to be taking fees. Then, 20% just… They never get made, you know. It’s a waste of time. You have to sort out the time wasters.” (Conran, 2017b) This point of view connects with Clarysse/Kiefer’s argument related to patents, which suggests that licensing alone does not tend to generate substantial revenues (see Chap. 1). Looking at the four categories of design businesses as defined by The Big Innovation Center (see Sect. 1.2), it becomes clear that Sebastian Conran Associates combines a range of business models. The firm acts not only as a design services business, but also as a designer-maker in collaboration with strategic partners. The conversations which I had with Sebastian Conran suggest that using

Fig. 6.6 a, b Aero Collection by Ozeki, a lantern maker whose practice dates back to 1891 (Image Courtesy of Sebastian Conran Associates, reproduced with permission)

6.3 Gifu

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Fig. 6.7 a, b The Hikari Collection by Oda Pottery, who started out in 1921, is part of a portfolio of thin translucent white porcelain tableware. (Image Courtesy of Sebastian Conran Associates, reproduced with permission)

different design business initiatives in combination can stabilise the business on the whole. Conran did highlight that his wide-ranging industry experience was of great benefit in his pursuit of design business partnerships. His understanding of materials and fabrication processes is not something that design novices tend to have when exiting college. We can deduct from the Universal Expert example that even experienced designer entrepreneurs are not safe from the occasional pitfall, and Conran (2017b) admits that “The path to success is also paved with failure.” However, an experienced designer such as Conran will find it easier to estimate and negotiate royalty revenues and to assess the potential risks involved. An established firm such as Sebastian Conran Associates with a variety of revenue streams finds it easier to manage adverse circumstances than a firm that focuses the entirety of its resources on a single product that is aimed at one particular niche market. In a product-innovation-oriented business environment, royalty-based revenues can usually only supplement business-developments. Insights

• The example of Sebastian Conran Associates confirms the categorisation by The Big Innovation Centre as discussed in Chap. 1 (Fig. 1.2), and shows how different business models can be combined to mitigate risks. • Sebastian Conran’s explanation related to royalty payments concurs with Clarysse/Kiefer’s statement that licensing alone rarely suffices needs for a viable business model. • The value of royalty arrangement is proportionate to the product life-span.

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• Conran’s explanations highlight the benefit of experience surrounding materials and production, knowledge assets, which designer-entrepreneurs who exit academic studies often lack.

6.4

Consequential Robotics

In 2016 Conran Associates engaged in a new venture under the title Consequential Robotics, a new ‘service-robotics start-up developing solutions for applications in homecare, health, education, and life style’ (consequentialrobotics.com, June 2017). Conran’s co-founders are Professor Tony Prescott, Director of the Sheffield Robotics research institute, and Dr. Ben Mitch, an expert in the field of biometric robotics. A combined sum of £100 K had been invested, and each of the three founders held 30% equity in the business. David Lane, Founding Director at Edinburgh Centre for Robotics, was Consequential Robotics’ chairman at the time.

Fig. 6.8 The firm’s flagship product is MiRo (the name stands for biomimetic robot), an assistive robot that looks like a mix of a small dog and a bunny. For economic reasons, the robot moves on wheels, which according to Conran use thirty times less energy than legs. The eyes on the side reflects the characteristics of prey who need 360 vision and are generally perceived as cuter than predators. However, Miro’s cameras are directed to the front, which provides the robot with stereo vision. (Image Courtesy of Sebastian Conran Associates, reproduced with permission)

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The company received a £600 K investment offer in exchange of 10% of the business. This would suggest that the company value had increased to about £3– 6 m within the first year of its existence. However, the investment was rejected to allow for continued business development and value growth. Equity investment was considered only for later stages of the business development. Conran highlighted his keen interest in creating emotionally engaging products. He explained that it is key to get the product personality right (Conran 2017b). This highlights not only the value of product languages, but also indicates a new dimension in relation to Steffen’s indicative function (Sect. 3.3): The indicative function here went well beyond the ambition to ‘visualise and explain the various practical functions of a product and how it should be used’ (Steffen 2010), since MiRo was designed to be a mimetic device which users interact with as if it was a living entity (Fig. 6.8). The mimetic quality, in terms of not only behaviour but also visual appearance, determines how users react to a device. Consequential Robotics was well-aware of this: “Being animal-like rather than human-like, people respond to MiRo with a different set of expectations that are more easily matched by today’s AI.” (Consequential Robotics nd). Therefore the field of artificial intelligence may provide entirely new perspectives in relation to aesthetics, which in turn may further enhance the significance of product languages in the long-term future (Fig. 6.9). As the next steps Conran pointed out the software development, namely the system control architecture. He also highlighted the need for a commercialisation strategy. Consequential Robotics “rely on other people to write what we call behaviours and skills, what you would call actions” (Conran 2017b). The company

Fig. 6.9 MiRo is a hardware device. The product connects with an open source software platform. A 3D simulator called MIROism provides a virtual test environment which allows software developers to test software algorithms in a virtual before transferring them to the robot. Using an open source physics engine called Gazebo, developers can bring MiRo to life. (Image Courtesy of Sebastian Conran Associates, reproduced with permission)

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Fig. 6.10 Prototypical MiRo gathering in Sebastian Conran’s office

deployed open innovation methods such as university challenges to allow for other innovators to contribute to the technology development. At the same time Conran expressed that his “last three employees have come from engineering college rather from art college” (Conran 2017b), which might be an indication that technology is becoming more significant than the visual design aspect (Fig. 6.10). MiRo sold for £2200 a piece in 2017. A software enabled version was planned for release in September 2018, and a simplified version was to be made available for £600 in the future. In 2017 there were seven people working on MiRo, two in marketing and administration, and five in design and development. Conran and his business partners had rejected an early investment offer. All partners had alternative income streams to rely on. This distinguishes this case from those in Chap. 2. Various designer-entrepreneurs such as Korn and Anscomb (KwickScreen) decided to avoid early-stage investment. This was usually to avoid interference with the business development strategy, and to limit the dilution of equity. The seed investment used for MiRo was slightly higher than that which was offered during the Design London/InnovationRCA incubator phase, £100 K as opposed to £75 K. The fact that all partners, Prescott, Mitch and Conran, could pursue MiRo as a sideline business might appear to some as a draw-back. However, this did not appear to refrain investors. There is always a risk that confidence drops, and individual partners withdraw from the business. The advantage of having senior stakeholders involved in the development and management of a start-up is two-fold: • financial stability since the partners do not need to draw any salary • a high level of experience in relevant fields: design business management, knowledge that speeds up the access to complementary assets

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Insights

• The longer a designer-entrepreneur can delay equity investment, the better the bargaining power will be. • In the context of robotics, a new facet presents itself in relation to product semantics: the way in which a product resembles a lifeform through shape (form) and behaviour (function), e.g. expressive capabilities. • The expressive capabilities of a robotic device matter in relation to the emotive user interaction. • Two of the three founder-partners were robotics experts rather than designers, and so was the company’s chairman. According to the categorisation proposed by The Big Innovation Centre (Chap. 1), Consequential robotics is not a design-intensive firm, since only one of the partners is a core-designer.

6.5

Inclusiviti

In addition to Consequential Robotics, Sebastian Conran also started Inclusiviti, another firm focusing on robotic assistive devices. This company, which was set up in September 2016, benefited from £1 m of UK government funding that was secured in pursuit of developing OmniSeat, a smart wheel chair for elderly, as well as IntelliTable, a semi-autonomous work table for home use as well as for hospitals (Figs. 6.11 and 6.12). At he time of the study, Conran owned half of the company shares. His wheel chair design benefited from his experience with having designed push chairs for Mothercare.

Fig. 6.11 IntelliTable (Image Courtesy of Sebastian Conran Associates, reproduced with permission)

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Sebastian Conran Associates: Appropriability Regimes …

Fig. 6.12 OmniSeat wheelchair which uses patented wheel technology (Image Courtesy of Sebastian Conran Associates, reproduced with permission)

Conran’s interest in consumer-facing robotics and digital unaided devices led to other inventions: One product under development was the IntelliTable, a semi-autonomous table that could be voice activated, and used sonar and ceiling tracking optics. The product was aimed primarily at hospitals, but could also be suited for the domestic market. Conran pointed towards ‘a market of ten million hospital work tables worldwide’ (Conran 2017b). The product launch for IntelliTable was scheduled for March 2018. It seems striking how much faster the route to market was for Conran by comparison to the InnovationRCA start-ups, who took typically at least 2–3 years to secure first sales. Conran highlighted that ‘we allow that 18 months’ (Conran 2017b). His grip on upstream and downstream value chains becomes apparent the strategic partnerships listed online: Tharsus, ‘UK’s number one designer and manufacturer of autonomous system robots’, designability (Bath Institute of Medical Engineering), and Consequential Robotics were listed as partners of Inclusiviti. The list of Consequential Robotics’ research partners comprises Sheffield Robotics (where Sebastian Conran is Designer in Residence and Tony Prescott holds a professorship), Tharsus, Buzzamo, an electronic systems developer based in California, Gadget Lab, a production firm, and, perhaps unsurprisingly, Inclusiviti. Both Inclusiviti and Consequential Robotics were part of a stakeholder network that combined a complementary competencies and possibly complementary assets. Insights

• The different development stages articulated in Fig. 6.3 make it clear that priorities shift in the course of the design business development. • Smart-funding can help to delay equity investment and thus to increase the company value prior to shredding equity. • Building credentials in a B2B environment (e.g. hospitals) can benefit the entry to a B2C market (e.g. elderly homes). • Nesting inventions in different ventures, and connecting these through partnership agreements can serve as a means of risk mitigation.

6.6 The Triangulation of Multiple Inventive Steps

6.6

151

The Triangulation of Multiple Inventive Steps

Sections 6.1–6.5 make it clear that Sebastian Conran applied a mixed business model. The reliability of his consultancy business as a main income stream allowed him to mitigate risks whilst exploring a range of design-entrepreneurial opportunities. In the event that one of the opportunities under pursuit did not work out, respective investments could be written off and focus can be shifted towards the others without the change in circumstances leading to major cash flow problems. Careful judgment on resource allocations and the continuous assessment of risks are important in such a combined set-up. Sebastian Conran Associates uses a hybrid business model combining customised services and consulting with the engagement in technology developments in relation to which intellectual capital is accumulated. Given the gradual shift in emphasis away from consultancy services and towards enterprising opportunities that could be observed between 2014 and 2017, Conran Associates can be considered as a typical example of what Clarysse and Kiefer (2011) refer to as a transitional start-up, i.e. a company that shifts emphasis from a consultancy model towards an entrepreneurial proprietary business, a business with disproportionately large growth potential. Not only did Conran engage in start-up businesses, he pursued multiple initiatives in parallel. The initiatives discussed in Sect. 6.4 and 6.5 are particularly interesting in the context of design innovation management. Two products fostered through Inclusiviti—IntelliTable and the robotic wheel chair—form a set of products in combination with MiRo: These products are designed to enhance people’s lives, be they used in combination or individually. Once connected with a software system for the domestic environment, this suite of products constitutes a very strong set of innovative propositions, which competitors will find very difficult to imitate in its totality. Even if the unique selling point (USP) surrounding one or two of the devices were challenged through competing products, the other components in the system would provide the designer-entrepreneur with a market advantage and a degree of exclusivity. This means that the threat of imitation and competition can be mitigated through triangulating multiple inventions or innovative steps. Rather than focusing on a single USP that is protected through formal IP, a designer-entrepreneur ought to triangulate multiple USPs through developing innovations that are mutually complementary (i.e. relevant to the business) but can also function and be marketed individually. Both Consequential Robotics and Inclusiviti were incepted within the same year. The inventions related to both initiatives can be aimed at the same, or similar markets. Insights gained can be deployed for the benefit of both ventures. The inventions related to each of the two ventures can be taken to market individually. But they can also be promoted in a combined fashion since they can potentially complement each other. The wheel chair and the IntelliTable can both enhance the domestic live of elderly, as can MiRo. One could argue that the inventions themselves become mutually complementary products.

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Noteworthy with respect to Inclusiviti and Consequential Robotics is the fact that each of the three devices under development can work effectively in combination whilst aimed at very similar market sectors. Here the whole combination of design propositions may be greater than the sum of its parts. In combination, the products may be deployed as part of a system of semi-autonomous assistive devices, which can be connected through a bespoke platform. We can refer to this set of circumstances as a triangulation of inventions or as a triangulation of design propositions. The hypothesis that emerges is that the triangulation of inventions significantly enhances the success-prospects of a design-led start-up. Not all inventions need protecting through formal IP. In fact, it may be preferable if they are not. Secrecy, formal IP, and open innovation principles can be combined in a strategic manner. Through the triangulation of inventions, designer-entrepreneurs can establish an IP ecosystem that is flexible and allows the designer-entrepreneur to dynamically respond to unexpected circumstances. This opens room for new business- and IP strategies. The assumption aired earlier in the book was that different modes of protection, secrecy, design rights, utility patents, open innovation principles, etc., should be emphasised strategically at different times during the start-up and fledgling phases of the business (Sect. 2.4). However, this alone cannot eliminate the various uncertainties that tend to threaten a start-up’s success prospects. The biggest threats relate to the fact that most inventors develop single-product companies. This applies to most of the start-ups examined in Chap. 2 as well as Rob Law’s business which was built around Trunki (Chap. 5). Although a novice designer-entrepreneur may not be able to engage in multiple ventures simultaneously like Sebastian Conran, he or she may still able to conceive codifiable and tacit knowledge related to a variety of inventions that are pursued by one venture. As highlighted in the beginning of the book, knowledge surrounding concepts, ideas, production processes, and market opportunities are the only selling points which independent designer-inventors tend to have at the outset. Securing exclusive knowledge in relation to a range of mutually complementary inventions is not only possible, it is highly recommendable. The idea of triangulating mutually complementary inventions or inventive steps is distinct from strategies such as patent fencing and patent thickets, because it does not focus exclusively on patents or other formal IP. Instead it is a principle that builds on a degree of complexity that derives from the increase in the number of possible combinations of formal and informal forms of IP and of IP in the loose sense (Fig. 3.5 in Sect. 3.5) where numerous innovative steps are combined. Some of the InnovationRCA incubatees interviewed in Chap. 2 have combined different novelties in a simple way, such as Roland Lamb who acquired Juce, an established software development platform, or KwickScreen who developed Romulus, their own bespoke client management platform. Both ventures appear to have developed more strongly than some the others who banked on one invention alone. These added assets, be they integrated through acquisition or developed internally from scratch, can significantly enhance a venture’s success prospects.

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The most important insight obtained through the case study examined in this chapter is the advantage that can be gained through the triangulation of mutually complementary inventions. As this multiplies the range of IP-strategic possibilities, it allows the designer-entrepreneur to respond to emerging threats including competition, imitation and value chain bottlenecks. Such flexibility is particularly beneficial in an appropriability regime that is underdeveloped and subject to uncertainties. Rather than using different modes of IP protection in combination to harness one proposition, two or more inventive steps ought to be triangulated in order to secure a market advantage. This triangulation of inventive steps extends Teece’s concept of complementary and integrated assets, because inventions here become assets that are complementary to other inventions that are fostered and owned by a single design-entrepreneurial start-up.

7

Towards a Dynamic Business Development Framework

The dynamic capabilities of start-ups usually exceed those of established firms. A well-crafted IP strategy that is managed continuously and effectively in relation to other business development factors enhances a start-up’s dynamic capabilities further. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_7

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Abstract

This chapter draws on the book’s key insights—the business development framework, the innovation management principles introduced in Chap. 3, and the insights gained in relation to the triangulation of multiple inventions. It discusses those principles in the context of business development and risk mitigation. It explains how IP strategies can be devised as time-based flexible systems comprising multiple forms of IP, and how such evolutionary IP strategies can strengthen a start-up’s dynamic capabilities.

This chapter revisits three key most significant content elements of this book, the businesses development framework discussed in Sect. 2.5, the theory aspects discussed in Chap. 3—product life cycle, complementary assets, dominant design paradigms etc.—and the insights surrounding the triangulation of inventive steps as discussed in Chap. 6. The designer-entrepreneur’s fundamental aim is to establish a dominant (or at least a prominent) design through disruptive innovation, and in doing so to secure control over as large a market share as possible. It is understood that radical and incremental innovations mark the polar opposites on a continuous spectrum and most inventions fall somewhere in-between. Whilst we need to also acknowledge that incremental innovations can be commercially viable and sometimes also easier to market, establishing a dominant design within an existing market, a market sector, or within an emerging market is perceived as the designer-entrepreneur’s principle objective here. The framework introduced in Sect. 2.5 maps the key business development aspects (meta variables) along a time-line. If used effectively, this framework allows designer-entrepreneurs to better orientate in the course of their decision-making processes, and to therefore devise comprehensive strategies more effectively and in consideration of all key business development attributes.

7.1

Framing the Key Business Development Attributes

Unless innovation is market-led, in which case market-relevant knowledge and market access capabilities constitute the driving factors, IP related to the design proposition is most central to a start-up’s success prospects in the early stages (Fig. 7.1). Start-ups founded by industry practitioners are often incentivised through market observations. Start-ups that are incepted in the conjunction with academic studies are more likely to be design- or technology-driven. IP which derives from tacit and codifiable knowledge about the proposition is usually designer-entrepreneurs’ strongest asset at the outset. Consequently knowledge impacts the development of many other business attributes such as finance, access to complementary assets, and so on.

7.1 Framing the Key Business Development Attributes

team

knowledge

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market analysis and strategy development

market positioning

market power

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brand policing

IP strategy development

IP strategy implementation

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smart funds and angel investment

investments and revenues

revenue growth

complementary asset access

complementary asset deployment

complementary asset integration

business growth

Fig. 7.1 Knowledge, be it tacit or codifiable, is key to the early stage (fledgling) start-up. It can be protected through filing formal IP, sharing or secrecy

At the outset, the start-up comprises three key components: the team, the proposition itself and the team’s knowledge that is related to the proposition and its development potential. In Fig. 7.1 yellow represents knowledge related to the proposition directly or indirectly. Over time, this needs to culminate in an IP strategy that has to be continuously negotiated in relation to surrounding variables. Not all factors within fall within the designer-entrepreneur’s control. Market constitutes a conditional factor—although the designer-entrepreneur can choose a focus—and market power a consequence which is dependent on the designer-entrepreneur’s intervention (sales strategy etc.). In line with Creswell (2014) we can distinguish here between dependent, determining and intermediary variables. The determining variables impact other development factors which constitute dependent variables, or intermediary variables. It is important to note that to some extent the designer-entrepreneur can choose which variables are the determining ones through setting priorities. Through the analysis of data that is grounded in the interviews with designer-entrepreneurs in Chap. 2, seven key business development attributes (meta variables) were identified (Fig. 2.24): team, the proposition itself, knowledge as well as intellectual property (a derivative of the team’s knowledge), finance, brand assets, the market (route-to-market and sales strategy), and non-financial assets related to production and distribution. These seven meta variables sum up the most significant aspects in relation to the development of a design-led start-up. In conjunction with pre-trade early-stage start-ups, the sales strategy is often referred to as route-to-market strategy. One could argue that the market provides a condition due to its characteristics, the route-to-market strategy is developed by the designer-entrepreneur in response to this condition in order to position the business within the respective market context. Market power is the desired result of this process as it constitutes a prerequisite for business growth. Brand assets can be deployed to secure market capture, but may be less significant in a business-to-business (B2B) environment as opposed to a business-to-consumer (B2C) market.

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The three components mentioned above, team, proposition and knowledge are strongly interlinked. They mark the starting point. In fact the team, the knowledge held within the team, and the proposition itself are so closely intertwined at the outset of a venture that any change in the team constellation will inevitably affect both other two factors. Conversely, changes to the proposition will most likely impact the value which individual team members can contribute to the initiative. Changes to the proposition may lead to the redundancy of individual team members and/or trigger the need for additional team members to be appointed. The knowledge is further developed in conjunction with the proposition in the course of the business development. Therefore all three variables are to be considered as strongly inter-dependent and can be treated as a unit during the fledgling period of a design-led start-up. The IP strategy is not something that emerges at one particular point in time and remains unchanged from thereon, instead it is constantly emergent and adjustable. IP should not be limited to IP in the strict sense but also comprise IP in the loose sense (see Sect. 3.3). Not all IP is codifiable, and tacit knowledge can be equally significant.

7.1.1 How the Variables Relate to Each Other As explained in the paragraph above, team, knowledge and proposition form a tightly connected unit. As a whole, this could be seen as the independent variable at the outset. To establish clarity about development opportunities, challenges and development needs, it is important to establish the dependencies between meta variables (vertical arrows in Fig. 7.1) during each individual business development stage. These allow for the assessment of the situation. The IP strategy often depends on the funds that can be secured, and conversely the prospects of securing angel investment may depend on the exclusive access to IP. Which IP strategy lends itself to the pursuit of a start-up may depend on the market environment on the one hand, but also on the accessibility of complementary assets. The market analysis may also inform the asset access strategy because it may reveal possibilities to engage in strategic partnerships. The financial position determines to what extent asset access can be afforded, and conversely assets required for production and distribution may shed insight into funding needs. It becomes clear that at this holistic level, interdependencies dominate the framework, in particular during the early stage of the development. Chapter 2 revealed that access to production- and distribution-related assets often depends on available budgets (finances) or strategic partnerships (a market-related sub variable), and which markets can be taken into consideration depends on the proposition itself. It has also been highlighted that IP and finance are strongly interdependent, and that this can lead to a catch-22 situation. Financial needs also depend on the proposition, as do the complementary assets which need accessing. The nature of the market has an impact on both, the sales strategy and options for market positioning. The significance of an IP strategy is also dependent on the market environment, and the sales strategy may be affected by the financial

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needs. The sales strategy (route-to-market), the market position, and the IP strategy all depend on each other. This makes apparent the difficulty. Interdependencies are derivatives of unanalysed relationships (Creswell 2014, p. 56) and these make it difficult for designer-entrepreneurs to take clear decisions based on cause-and-effect principles. As indicated earlier, the meta variables are composed of numerous sub-variables. Finances comprise multiple incoming and outgoing funding streams such as office rent, legal costs, seed funding, loans, perhaps initial sales. Non-financial assets comprise office use, equipment, production tools, material supplies, and so forth. This means that the interdependencies between meta variables can be broken down into unilateral dependencies between sub variables. Establishing the latter can be difficult for the designer-entrepreneur, because a lot of the issues are speculative, and some even escape the designer-entrepreneur’s knowledge and experience. The UK’s first design right infringement survey, for example, revealed in 2016 that a large proportion of industry stakeholders in the UK were unaware of the existence of an EU registered design right, and a significant majority of survey respondents were unaware of the fact that there was an EU unregistered design right, a form of IP which all designers in the EU receive by default, when creating a three-dimensional design (note that unregistered EU rights do not protect designs created in the UK after Brexit). As the Trunki-case has shown (Chap. 5), the situation becomes gradually simpler, once a venture is further-developed: Market power is determined by both, the sales strategy and the market position, but also by the IP strategy, brand management, and asset integration (Fig. 7.1). The control over complementary assets, which can be secured through either integration or exclusive contracts, connects with the market position and with market power, but also with the financial position (e.g. revenue growth). The higher the degree of market power and the better the market position, the easier it will be to secure exclusivity in relation to complementary assets. Conversely market power can be enhanced through securing exclusive access over complementary assets, which means that the dependencies at this level are likely to be bi-lateral. As shown in Chap. 2, KwickScreen, for example, secured an exclusive license within the medical sector for the use of a material required for their room divider to function. With the access to the IP, the team behind KwickScreen also secured a material supplier. This shows that control over complementary assets can also benefit from a sound IP strategy. The combination of variables and their interrelationships determine the degree to which the business can grow. To convert bi-lateral dependencies which indicate ambiguity, into uni-lateral dependencies, the meta-variables need breaking down into sub-variables. Here the framework ceases to be universal, it becomes specific to the individual start-up (Fig. 7.2). In Fig. 7.2 the meta variables are de-emphasised in relation to the fledgling business development period, and the corresponding sub variables are identified. With a view on the sub variables, it is significantly easier to establish the unilateral dependencies. In the example displayed it becomes clear that the company setup and the legal advice play a central role. In the example illustrated in Fig. 7.2, the website launch should follow after a PR strategy has been devised, but before engaging in trade fairs. Market research also constitutes a determining variable. It

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market characteristics (niche or mainstream)

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brand activation

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company setup

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market power

NDAs

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running costs

market positioning

brand design

production tooling

distribution chain

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Fig. 7.2 The business development framework in application. Allocating sub variables to meta variables allows to establish clarity about dependencies between diverse business development aspects

becomes clear that the framework discussed thus far is only a back drop, a canvas that hosts a whole range of business development aspects which depend on each other in some shape or form depending on the individual business situation. The framework, or canvas, once adapted for an individual business, may turn out to be rather complex. It allows for the development and extraction of concise decision trees. It is important for designer-entrepreneurs to see this as a dynamic tool. Development priorities may change, and so may the direction of arrows. New development aspects (sub variables) may enter the equation, others may become obsolete and disappear (The patent strategy in the Squease case in Chap. 2 was discontinued, for example). The business development canvas is a tool to establish clarity about development priorities, dependencies, decision trees and action plans. It can serve as a mirror to reflect the company development, as much as it can be used as a future-oriented planning tool.

7.2

On Complementary Assets and Evolutionary Strategies

In this section we want to briefly return to Abernathy and Utterback’s three stages of the product-life-cycle, the fluid stage, the transitional stage, and the specific stage, which are connected to the pre-paradigmatic phase and the paradigmatic phase (see Sect. 3.2). Due to the tight connectivity between team, proposition and knowledge in the very early stages, the product cannot be examined in isolation when it comes to enterprising design set-ups which are typically built around a single product or design proposition. As such start-ups dependent exclusively on

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the success of the product, the development cycles need to be related not only to the product itself but also to the start-up in its entirety. This is why we replaced the product-life-cycle-specific stages (discussed in Sect. 3.2) with the start-up business development periods: the fledgling period, the transition period, and the established period. Note that you need to establish a business before you can scale it. Section 4.6 revealed how these three business development periods connect with the distinction between the pre-paradigmatic and the paradigmatic paradigm. Whilst the fledgling period falls within the pre-paradigmatic phase, and the established period within the paradigmatic phase, the transition period sits in between both. The reason why emphasis is shifted from the individual product to the business development here, is because this book examines the survival prospects of firms as opposed to the success chances of individual products developed by established firms. During the fledgling period financial needs are established, knowledge surrounding possible target markets is gathered, stakeholder networks analysed. It is worth noting that none of the start-ups examined in Chap. 2, followed a market-pull approach. Some concepts, e.g. Squease, were built around perceived needs, but even here no developed market presented itself at the point of business inception. Most other initiatives, such as Concrete Canvas, the Seaboard, etc., were technology-push initiatives. As a consequence there is often very limited market knowledge at the outset. The latter could only be established through continued research efforts and engagement activities. To develop their propositions, start-ups require access to complementary assets. Asset acquisition (termed by Teece as integration) is most often unaffordable at the outset of an independent start-up. The ventures examined in Chap. 2 were either bootstrapping whilst securing a growing funding stream through sales (KwickScreen, RoboFold etc.), or they were focusing on IP in order to secure equity investment (Seaboard, Artica, Orbel etc.). The second column of variables in Figs. 7.1 and 7.2, which comprises market positioning, as well as initial revenues and the implementation of the IP strategy represents the transition period. The variables furthest to the right relate to the established period. Once a degree of market power has been established, and the necessary complementary assets have become accessible, the business is established and can focus on growth and asset integration. During the time of the first series of interviews (2013–2014) Concrete Canvas was already in this position. KwickScreen and Orbel were close. However, Orbel was pushed back into the transition period following issues that had arisen after their strategic partner Kyosay had gone into administration (Sect. 2.1.7). As explained in the previous section, two-headed arrows represent unanalysed relationships (Creswell 2014, p. 56), and mark out areas of ambiguity. These ambiguities can be reduced through focusing on sub-variables and the dependencies between those. It is important to note that this framework is not prescriptive. As much as the sub-variables vary from case to case, so do the dependencies. The interviews in Chap. 2 revealed that a patent-focus can delay market entry due to the time and finances which the pursuit of patents commonly consumes. This is different for established businesses who are cultivating spin-out initiatives

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because established businesses tend to have dedicated teams, e.g. experts in charge of legal matters, as well as sales teams. In an early-stage independent start-up, the team members involved need to attend to all matters. Start-ups like KwickScreen and Squease who apply a sales-led approach enter markets more quickly than those who focus on patents such as Orbel or Roli. Not only are the sales strategy (route-to-market strategy) and the IP strategy connected through strong dependencies, they also relate to the market, e.g. its size and its complexity. Such a set of intermediate variables leads to uncertainties, and these uncertainties may grow towards the transitional business development period, when sales strategies and IP strategies are implemented in pursuit of a strong market position. Designer-entrepreneurs need to be constantly mindful of changes in the business environment which may affect their appropriability regime. The level of flexibility that is sustained through the adaptability of the business development framework is directly proportionate to the dynamic capabilities which may give the start-up a competitive advantage. Start-ups tend to be not hindered by integrated assets as are existing incumbents.

7.2.1 IP in Relation to the Three Business Development Periods Segmenting the business development process of a design-led start-up in no more than three phases may seem simplistic at first glance. However, the sets of sub variables, which these segments need to accommodate are complex, and such are the dependencies which link them. The simplicity of the framework makes it easier to manage the data that arises from the analysis of meta variables. Focusing on IP in light of the contextual understanding that has been established, makes it clear that the value of IP develops only gradually from one period to the next. Chapter 3 has analysed three key benefits in relation to patents: • Signalling effect: The signalling effect can help to negotiate favourable terms during fundraising, team building and in pursuit of strategic partnerships. In the eyes of investors, the patent, in particular if granted, provides confidence that third party rights are not infringed (see Sect. 2.3). • Market Power: In pursuit of a dominant design paradigm, the designer-entrepreneur aspires towards a prominent market position. Exclusive access to relevant IP can help to establish and defend a market position, to foster meaningful strategic partnerships, and to scale the business once established. • Licensing: As previously articulated, licensing can be a means to access new market territories, e.g. overseas markets (e.g. Concrete Canvas in the US), or into new market segments. Proof of market is usually required prior to securing license agreements (e.g. Romulus in Sect. 2.1.3). As pointed out by Clarysse/Kiefer (2011, p. 106), licensing alone does usually not generate viable businesses (e.g. early-stage Trunki as discussed in Chap. 4).

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These three key benefits can also be attributed to other formal and informal forms of IP, with the exception of licensing, which requires exclusive ownership over codifiable knowledge. But different forms of IP are not equally strong, since not all warrant for exclusivity, and not all of the three benefits are felt by designer-entrepreneurs during the fledgling period. Here the benefit of formal IP does not go beyond the signalling effect. It attracts angel investors, although both investors and designer-entrepreneurs know that the litigation of IP infringement could prove unaffordable at this point in time. IP may also help to increase negotiating power when discussing strategic partnerships that may be required for accessing complementary assets. During the transition period, IP strategies are often put to the test. There is a risk of start-ups without robust IP being edged out of the market. Once proof of market is established, competing firms may surface. This is where the risk of imitation is the highest (see Chaps. 4 and 5). Competitors may also circumvent IP through alternative design solutions. The acquisition of market power marks the beginning of the established business development period, IP can help to expand market power as it provides a degree of exclusivity. It can also help to access new markets through licensing. Concrete Canvas, for example trade their materials in the US under a licensing agreement. KwickScreen and Orbel benefited from their IP to attract distributors in the US (Chap. 2). Haberman secured numerous lucrative license agreements through establishing the validity of her US patent as a result of the litigation process (Chap. 4). Without exclusivity warranted through IP, distributors are unlikely to invest in developing distribution chains. The signalling effect surrounding IPR works in multiple directions, investors, competitors, strategic partners.

7.3

The Benefit of Pursuing Multiple Inventive Steps in Parallel

In line with the findings discussed in the previous chapter, we can argue that the triangulation of multiple different inventions can significantly enhance a venture’s success-prospects (see Sect. 6.6). The triangulation of multiple inventive steps leads to a significantly increased degree of flexibility in defining a flexible IP strategy, provided that the innovations are mutually complementary in their functions and aimed at one specific market. Function here may be seen as articulated in the Offenbach theory that is illustrated in Fig. 3.2 in Sect. 3.3. In terms of market application an iconic design such as Conran’s MiRo (Sect. 6.4) can be indirectly linked to the function of OmniSeat which benefits from Conran’s patented wheel design, and IntelliTable, because all three innovations are of benefit to elderly and they all can also be used in a hospital setting. Bespoke software platforms may further enhance and connect the functionality of all three products. Should one of the products fail or be challenged successfully through a competitor or imitator, the remaining set of inventions are likely to suffices to future-proof the start-up

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initiative. In Conran’s case the innovations are fostered through multiple start-up initiatives which operate in parallel. Conran’s involvement in each of the ventures gives him a strong position within the stakeholder network. An early-stage high-risk-high-return start-up cannot afford to diversify the stakes in this way, i.e. through launching multiple companies in parallel, because it would compromise the signalling effect which the combination of inventions has on potential investors. Instead all relevant inventions are best owned by one start-up if the latter is developed by novice entrepreneurs, because then all inventions can become part of one and the same business development model.

7.3.1 Identification of Multi-layered Variables Through introducing multiple inventions (or multiple inventive elements) to the proposition, some of the variables which form the business development canvas, become multi-layered with individual layers corresponding to individual innovations. Some variables such as the team, the knowledge held, the market, will remain single-layered (holistic—connected to the business as a whole), others will be multi-layered such as the design proposition itself, and the IP that relates to its individual elements. The funding strategy and sales strategy might also be multi-layered. For example, some parts of the proposition could be made available for purchase, whilst others are offered through a subscription model, or even free of charge. To cater for multiple inventions, the business development canvas needs to be re-configured (see Fig. 7.3). To facilitate this adjustment, we will discuss the individual components in the following. The team, which commonly consists of very few members only during the fledgling period, is usually required to attend to all inventions. The situation here differs from single-purpose vehicles that are fostered within and spun out of a

team

inventions

knowledge

market analysis and strategy development

market positioning

market power

brand design

brand activation

brand policing

design IP secrecy technology IP

IP strategy

IP management

finance needs

investments/revenues

sales/revenue growth

complementary asset access strategy

complementary asset deployment

business growth

complementary asset control / integration

Fig. 7.3 This diagram is a variation of the one shown in Fig. 7.1. It illustrates that various inventions can be protected through a various forms of IP—indeed through various combinations of IP—and although this leads potentially to increased funding needs, it increases the number of possibilities in crafting an IP strategy. Investments can be streamed according to inventions and multiple revenue streams can be established to compensate for potential pitfalls

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medium-sized or large established firm. Here small teams can be dedicated to ventures and cease involvement in other operations of the firm. A micro-scale start-up needs to optimise resource utilisation and commit all team members to all inventive components that are part of the system. Instead of a single product, the design proposition consists of multiple components which constitute individual inventions or inventive steps. They all serve purposes or objectives that are identical or closely aligned, e.g. enhancing the lives of the elderly or disabled. This means that in combination, they form a single-minded proposition (SMP). If the alignment of purposes is not given, the venture will appear disjointed, and conflicting situations are likely to evolve during moments of strategic decision-making. Although the SMP’s individual innovative components need to be aligned in terms of their purposes and applications, it is important that they can function both in combination (system), or individually. If they do not, then the other components cannot serve as a fall-back option, should one of the components be successfully challenged. None of the inventive components ought to be indispensable. The market: provided that all inventive steps are united behind a SMP, a start-up can focus on a single market context or a specific market segment. If multiple markets or market segments are under consideration, then these would need to be closely linked to allow for the focus that is needed to generate a workable market-access-strategy. The markets which Sebastian Conran Associates focused on in relation to their robotic devices were the healthcare sector on the one hand, and elderly home-care on the other. Both markets are closely linked, and insights gained with respect to one, may be transferable to the other. In fact if the healthcare industry, which supplies a public sector, can be successfully accessed, then the credentials gained may pave the access to the private sector of elderly care homes. Here the proximity of markets is given. The finances are scarce at the outset of a start-up. Although splitting funds into multiple separate pots may compromise the start-ups financial agility and credibility, seed funding can be obtained for individual inventions. These injections are likely to be part of an overarching finance strategy. Whilst finances can be multi-streamed, entrepreneurs may wish to retain the flexibility of shifting funds between inventions. Finance requirements of a start-up in pursuit of a set of triangulated inventions will be likely to be higher than those of a venture with only one invention under development. However, since certain assets such as team, market knowledge remain centralised, the need for financial resources will be more effective in comparison to the sum of finances needed by ventures that are operated separately. We may assume that two inventions are likely to require less than double the financial resources by comparison to a start-up that is built around one invention alone. Access to complementary assets and the prospects of integrating such, may potentially benefit from the increase in credentials that a start-up enjoys if multiple innovations are involved. This book uses the terms complementary assets and integrated assets exclusively in relation to resources that are neither team-related, nor IP- or knowledge-related. Complementary assets are resources which are needed to

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gain and increase control over the value chain control, both upstream (material supplies and manufacturing-related) and downstream (distribution-related). Tooling, a manufacturing-related asset, is product-specific. So is the acquisition of materials, unless a specific material such as a polymer is used for a variety of products. Complementary assets are treated as a multi-layered meta-variable. IP connects with the individual components (innovative elements) which are part of the single-minded proposition mentioned above. Each of the components will have a specific set of IP—each comprising a combination of strict forms and loose forms of IP—attached for the benefit of protection. The degree to which IP strengthens the venture’s appropriability regime lies in the combination of IP and how effectively these work in conjunction with each other. Not all IP needs to be first hand. Exclusive license arrangements as in the case of KwickScreen or Seaboard can strengthen the IP strategy. Knowledge related to markets (e.g. demographic information, market value, market growth etc.) or complementary assets (e.g. material specifications, production facilities, distribution options etc.) are excluded here, because these are treated as a separate category. It is noteworthy that the multi-layered meta variables in Fig. 7.3 are the only elements in the diagram, over which the designer-entrepreneurs have true control. Market characteristics are given (although the entrepreneur can choose a focus with a view on positioning), and finance needs depend primarily on the proposition. At the outset, we may consider both market and finance needs as conditions, and the SMP as the independent variable. Access strategies with respect to complementary assets, route-to-market strategies, and IP strategies become the intervening variables, which the designer-entrepreneur has control over, and market position, market power, and control over complementary assets are the dependent meta variables, which result from the team’s decision making and actions. As pointed out before, priorities and dependencies are likely to change over time as the business develops, none-the-least since markets can be very dynamic.

7.4

Preliminary Conclusions—The Business Development Canvas

The aim of the book is to establish how knowledge and IP is best managed in relation to other business development factors throughout the innovation business development process. In pursuit of this issue, we touched on three key questions: • How effective are patents and registered design rights with respect to the success prospects of a start-up business, be it design-driven or technology-driven? • What other key development factors determine the commercial success prospects of a design-led start-up business? • In what way do IP protection methods and other key business development factors depend on each other over time?

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Through the case studies, it has become clear that: The effectiveness of registered design rights remains within limits. This form of IP provides signalling effects to imitators and competitors, but does not appear to convince angel investors. It can be secured faster and more cheaply than patents. However, it is easy for competitors to circumvent and thus to challenge this form of IP. The key development factors (variables) far exceed IPRs, and the latter are often overrated by designer-inventors. IP, which may involve strategic knowledge sharing, secrecy, licensing etc., is linked to a wide range of other variables. The latter can be categorised as finance-related assets, market-related aspects, finance, and supporting resources such as complementary or integrated assets that support the production or distribution. The dependencies between variables vary between businesses, because they depend on business development priorities and market environmental factors. A distinction was made between bootstrap approaches and investment-intensive aspirational approaches which inevitably impact IP strategies or vice versa. Dependencies change over time as a businesses matures. Additional issues that were raised in earlier parts of the book relate to: • Potential changes in the vulnerability of businesses • Changes in the value of patents and registered designs • The significance of other business development factors. It has become clear that the fear of IP to be infringed during the fledgling business development period, i.e. the early stages is not justified. The longitudinal case studies in Chaps. 4 and 5 suggest in that imitators wait until proof of market is established. Sales revenues can then help fund litigation processes. However, court processes tend to be lengthy regardless whether they involve design rights, patents, or both, and loss of sales can usually not be recovered. Therefore infringement remains a significant threat for inventors. If the latter lose in court, the financial impact can seriously compromise the survival prospects of the inventing firm. The value of IPR is proportionate to the lifespan of the IP, and more importantly to the lifespan of the product which tends to be lesser. The value of IPR, i.e. the degree to which it is worth securing formal IP is also proportionate to the risk of being imitated. As this risk increases only over time, the true value, i.e. the value related to market power and the ability to license out designs, is minimal in the early stages of a start-up. Prior to market entry, the patent fulfils a signalling effect to investors, whilst the registered design right does not. This means the value related to design rights and design patents is only of longitudinal significance. The Trunki case and the Conran case suggest that brand values can strengthen IP. However, brand reputation also requires time to develop. Registered IP in the early stages is little but a burden, however, one that is often considered as necessary in order to prevail in the long term. The significance of certain business development factors related to a venture’s appropriability regime is often underrated. IP is only one of a range of business development attributes, the dependencies between which require careful and

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continuous assessment. IP extends beyond formal IPRs, and can be protected through secrecy, open innovation and strategic partnerships, as well as first-mover-advantages. Other factors such as market knowledge, and initial sales also strengthen the business’ development prospects. How effectively these factors (variables) can be managed depends on the start-up’s dynamic capabilities. According to Abernathy and Utterback (1978, p. 5), the adaptability—or dynamic capabilities, to use Teece’s term—of start-ups usually exceed those of established firms. A well-crafted IP strategy that is managed continuously and effectively in relation to other business development factors enhances a start-up’s dynamic capabilities further. The discussion surrounding IP, knowledge and other business development attributes was further guided by three speculative ideas: • Sales-driven strategies help to speed up the route-to-market, but may limit the business growth potential. • Tech-driven strategies harnessed through patents require more development time, but may increase the potential for business growth in the long run. • Design-driven strategies allow for faster access to market because design IP is easier, cheaper and faster to secure, but IP related to product languages may not be robust enough to protect novelties against imitators. When compared, the case studies in Chap. 2 suggest that sales-oriented start-up teams access markets faster than those who focus on technology IP (patents). However, it has not been possible to establish through the primary research findings, whether or not a sales-oriented bootstrap approach limits the long-term growth prospects. The limitations in the business growth of KwickScreen could be related to the IP strategy, but it could also be due to the market-environmental specifics. The Haberman case (Chap. 4) confirms that changes in product languages (compare Figs. 4.2 to 4.3) can significantly increase sales, at least in the retail sector, although product languages can be difficult to protect. The success of the Trunki travel case (Chap. 5) suggests that design-driven approaches can pave the way towards scalable businesses. Even if design-driven strategies allowed for faster access to market, they are of limited benefit if they are not sufficiently robust to fend of imitators. The most successful start-ups examined in Chap. 2 (Roli and KwickScreen) used a combined approach, i.e. a variety of IP including both registered design rights and patents, without de-emphasising other business development attributes such as complementary and integrated assets as well as market-related development aspects. The examples of MiRo and OmniSeat, which were examined in conjunction with the Conran case (Chap. 6), suggest that developing product languages is less time consuming than resolving technical issues such as those related to the software required to operate MiRo, or the wheel technology needed for OmniSeat. It also shows that the product language can be marketed whilst the technology development continues, and the combination of technology concepts and novel product languages can attract investors (e.g. MiRo). Conran claims that different challenges

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related to design, technology development and marketing, need addressing simultaneously with the emphasis to be shifted periodically (Fig. 6.3). The key question is when and how to shift priorities, and how to monitor and manage these shifts. The next and final chapter will shed light into these questions. It builds on the following three key concepts: The business development canvas consists of five business development attributes (market, brand assets, knowledge and IP, finance, complementary assets) which manifest themselves as a range of meta variables depending on the business development period (Fig. 4.8). The business development canvas describes prospectively or retrospectively the way in which business development attributes evolve individually and in relation to one another over time. Start-up business developments undergo different phases which we have referred to as business development periods: the fledgling period, the transition period, and the established period. Business developments and survival prospects can be enhanced through the triangulation of inventions. Although this may increase the overall finance needs, it also increases the number of options for developing funding strategies and IP strategies. In the next chapter we will revisit the business development canvas in consideration of the possibility that multiple inventions are involved in the business proposition. The next chapter discusses IP-strategic options in conjunction with dynamic capabilities, and with the business model frameworks mentioned in Sect. 1.3. Building on the dependency diagrams in Sects. 2.4, 2.5, 7.1, and 7.3, the next chapter further explores the business development canvas that maps out business development factors (variables and meta variables) with a view on the three business development periods mentioned above. Towards the end of the chapter, the business development canvas is explored in relation to the case studies featured in Sect. 2.1.2. This illustrates how the business development canvas can be deployed to enhance the strategic decision making in relation to business start-up developments, even if multiple inventive elements are involved.

8

Strategic Tips for the Aspirational Designer-Entrepreneur

Abstract

This chapter discusses different aspects of the business development canvas. It introduces three distinct start-up business development phases and explains how the business development factors and the dependencies between, may change over time. It also articulates how IP strategies can be developed and implemented more effectively, if multiple innovations are at play. The business development canvas is discussed in relation to re-innovation and a conclusive set of recommendations outlines how the success and survival prospects of start-ups can be systematically enhanced through the dynamic management of formal and informal IP.

8.1

Invention Alignment—Defining the Unique Selling Points

In this book we have examined the success-prospects of independent design-led start-ups built around inventive designs. The outcome of this critical-analytical discussion is a model referred to as the business development canvas which forms a diagram that helps to strategically manage the business development attributes related to single-minded propositions (SMP) over time. The argument behind the pursuit of multiple parallel and mutually complementary inventions as raised in Sect. 7.3 with reference to various case studies including Conran (Chap. 6), Seaboard (Sect. 2.1.2) and KwickScreen/Romulus (Sect. 2.1.3), is based on the fact that the SMP is not synonymous to a unique selling point (USP). The latter relates to the exclusive access to the proposition or a specific characteristic of the proposition, the former to the fundamental purpose, which the USP(s) is (are) designed to fulfil. Each inventive component may be a USP in its own right. If they © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1_8

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are all aligned in terms of their purpose, function and market application, they form part of and carry value towards one SMP. This, of course, raises the question how significant a USP related to form and/or function is with respect to the SMP’s overall performance and its chances of becoming a dominant design. Securing exclusivity is important to establish a USP. This can also be achieved through IPRs or other means such as secrecy, exclusive licensing, or through controlling critical value chain components and through strategic partnerships. The value of individual forms of IP is proportionate to the significance of the USP to the inventor and to the SMP itself, i.e. the degree to which IP enhances the SMP. This determines how useful or necessary the added form or function is. If the USP does not significantly enhance the SMP, the IP can easily be circumvented. For example, Magmatic Ltd secured a patent for the closing mechanism of the Trunki travel case (Chap. 5). The case had sold at high volumes prior to the patent filing. Whilst the closing mechanism does provide a certain market advantage, it is not fundamental to the market position. The closing mechanism may constitute a USP. However, it is not critical to the product performance. On the other hand, the Rollotube material, which KwickScreen used through an exclusive license, was essential for the screen to be unfolded without collapsing. Here the licensed IP proved critical to the function of the product. What led to a high dependency on patents for many of the start-ups examined in Chap. 2 was the fact that their single-minded proposition consisted of one component (invention) only. Most of the designer-entrepreneurs were focused exclusively on one individual invention. The exceptions are KwickScreen who later added Romulus (Sect. 2.1.3), and Roli who acquired Juce (Sect. 2.1.2). It is easy to envisage the degree to which these two additions have enhanced the respective ventures’ appropriability regimes, and also their flexibility in strategising IP. Conran used open innovation principles with respect to the software platform designed to control MiRo. Having control over a set of multiple novelties, means that the risk of being edged out of the value chain through a competitor is significantly minimised, and engaging in open innovation processes becomes less risky.

8.2

Risk Mitigation Through Diversity

As highlighted in the section on formal and informal IP under 3.5, the potentially damaging impact of competition and imitation is increased if inventors limit their single-minded design proposition to one single inventive step. To strengthen the appropriability regime most effectively, different inventions or innovative steps related to the SMP need to be mutually complementary, and so do the forms of IP which protect them. Each component of the proposition needs to be of key significance to the start-up’s SMP, i.e. to the problem which the design proposition seeks to resolve. At the same time, the individual element ought not be too critical to the success of the firm overall, because this would increase the adverse impact in event of IP infringement or competition. Inventions or inventive steps ought to be

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of key benefit, but not indispensable to the way in which a firm addresses the issue (s) which it seeks to resolve, i.e. the SMP. This means that the innovator can resort to the other inventive component(s) and shift emphasis if one of the inventive steps (proposition elements) is challenged by a competitor through imitation or invalidation of the exclusive IP. An effective IP strategy must leave room for the tactical response to unforeseen circumstances.

8.3

IP Strategies and Dynamic Capabilities

It is important to bear in mind that not all inventive elements need protecting through formal IP. In fact, depending on the circumstances (the design proposition itself and market environmental factors which surround it) a combined IP strategy may be more effective if some of the inventive elements do not rely on formal IP. Secrecy, formal IP, informal IP and open innovation principles can be combined in a strategic manner. Using a sound combination of various methods, an IP system can be established that is dynamic and that allows the inventor to adapt to unexpected changes. The combined IP strategy thus enhances the start-up’s dynamic capabilities. As highlighted in Chap. 2, independent budding designer-inventors often lack access to assets other than the knowledge that surrounds their concepts and ideas. Without access to complementary assets, it is particularly important to protect IP effectively (see Fig. 3.1 and the respective explanation surrounding Teece’s concept of appropriability in Sect. 3.1). The triangulation of mutually complementary innovations strengthens a start-up disproportionately because it mitigates the risk of being edged out of the market through imitators, and it multiplies the possible options of combining different forms of IP. Commonly designer-entrepreneurs focus on a SMP that is carried through a single inventive step (Fig. 8.1). This can prove compromising as highlighted in the Trunki case (Chap. 5). The possible number of combinations of different forms of IP in relation to one single invention is usually very limited. Although various forms of IP can be combined to protect one individual inventive step, certain forms of formal, informal and loose IP, cannot be combined. Secrecy is needed in the run-up of a patent filing process, but once the application is being made public, secrecy cannot be sustained. Public relations that are often required to generate credentials, may conflict with certain objectives and requirements related to patenting and secrecy. Design right protection does not provide an alternative to patents, but it can provide a useful addition. A SMP may comprise several independent but mutually complementary inventive elements, as illustrated in the examples of Consequential Robotics and Inclusiviti (Sects. 6.4, 6.5). Where possible, a design-led start-up is best developed around a combination of two or more inventive steps that can be taken to market individually, but also in combination. The triangulation of mutually complementary innovations (Fig. 8.2) strengthens a start-up disproportionately, because it multiplies the number of possible combinations of different forms of IP, and this

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proposition

patent

dependency

Fig. 8.1 With the significance of the IP, respectively the function which the IP protects, the venture’s exclusive reliance on the IP increases too. A lot of the ventures discussed in Chap. 2 depended strongly on one patent, and few had carved out fall-back options

design

patented technology significance

significance

proposition dependencies

dependencies

software system significance

significance

knowledge related to utilisation

Fig. 8.2 If multiple innovative elements form part of the design proposition, the dependency on individual components, and consequently on the IP that protects each of them, can be mitigated

mitigates the risk of being edged out of the market through imitators. The triangulation of inventions allows designer-entrepreneurs to make use of a wider range of IP options including secrecy, design rights, patents, and also open innovation principles. The latter can also enhance public exposure and support marketing efforts, and the strengthened market position which results from these PR- and advertising related efforts, can in turn strengthen certain forms of IP such as design rights as well as the start-up’s brand-position in general.

8.4

Managing Complexity and Managing Change

The conventional business model canvas as introduced in Chap. 1 can be useful in that it illustrates a situational snap shot of a company’s key particulars. It organises these particulars according to nine categories: key partners, key activities, key

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resources, value propositions, customer relationships, channels, customer segments, cost structure, revenue streams. All these criteria describe a venture’s status quo. Fledgling start-ups are not aimed at stability but at growth, and this requires the articulation of change. The lean canvas, a derivative framework (Fig. 1.4), lends itself better to action-oriented decision making, however, it can articulate only one strategic intervention rather than a string of decisions. What is required for the latter, is a dynamic system that allows for the continuous monitoring of the most significant business development aspects (meta and sub variables) over time, i.e. the inter-relations between the critical business development factors that are related to team, proposition, finance, complementary assets, market, and branding. IP can become a flexible fabric that supports the development of all other business development attributes. However, the start-up team needs to be able to manage the respective developments in a context of unforeseen circumstances through their dynamic capabilities. Market knowledge, for instance, is generated over time. Radical innovations are often situated in market niches or in emerging markets. Therefore the business environment itself is likely to undergo changes, potentially very significant changes. Negotiating these dynamic interdependencies needs a fundamentally different model compared to those that have been deducted from the investigation of the management of established corporations. Whilst I acknowledge the usefulness of both versions of the business model canvas—I am using them myself in teaching and in practice—I recommend the business development canvas for the longer term management of start-ups, in particular if the latter are built around proprietary IP. The business development canvas allows to continuously negotiate the dynamic relationship between the critical business development attributes throughout the fledgling period, which is particularly useful if multiple mutually complementary inventions are at play. Whilst its fundamental structure is rather simple, it is highly customisable through shifting the focus from the meta variables to the sub variables. It is important not to lose sight of the bigger picture. But simplified static diagrams can often be misleading and overly prescriptive. To understand the entirety of development aspects, and how these relate to each other, entrepreneurs may need to look at the business characteristics on a more granular level. The shape of a product, for instance, can be protected through copyright, unregistered design rights, registered design rights, through a 3D trade mark, and through passing off, a law that seeks to prevent industry stakeholders from misleading their audiences to perceive their products as those of a competitor. This means that analysing one aspect of an IP strategy alone, can be a complex process, in particular if this is done in relation to market environmental particulars, finance and brand position. The business development canvas—if I may call it that even though it was designed neither in response to, nor as an alternative to Osterwalder’s and Maurya’s concepts—will be discussed in greater detail throughout the remainder of this chapter.

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8 Strategic Tips for the Aspirational Designer-Entrepreneur

The Business Development Canvas as a Change Management Tool

To provide an oversight of how the different business development attributes, i.e. the series of meta variables, relate to each other, and what ought to be the driving factors behind the designer-entrepreneur’s decision making, we need a time-based business development model. The qualitative inquiries carried out in conjunction with the development of this book, highlighted that all business development aspects (sub variables) fall into one of the five categories—market, branding, IP and knowledge, finance, complementary assets—which have been defined as meta variables. It is important to bear in mind that the meta variables are generic and applicable to all ventures, whereas the sub variables are specific to the individual start-up. As we have seen in Sect. 7.1, when working with meta variables, it is highly likely that we end up looking at interdependencies, ambiguous relationships which are marked with double-arrows. The interdependency between the need for equity investment and patents was prominent in most of the case studies discussed in Chap. 2. To resolve this dilemma surrounding ambiguous relationships, designer-entrepreneurs need to shift focus towards the sub-variables. This section discusses how dependencies can be identified through this shift. One could argue that the dependencies between sub variables are in fact more significant than the sub variables itself. The acquisition of funds, for example, is of little benefit if the designer-entrepreneur is not clear about the utilisation of finance injections, because funds can swiftly go to waste unless they are allocated wisely. However, knowing why funding is required, may also inspire the designer-entrepreneur towards alternative ways of addressing the need which often lies beyond the finances, e.g. towards possibilities of reducing funding needs through savings and bootstrap options. As can be seen in Fig. 8.3, the dependencies comprise vertical and horizontal dependencies. The dependencies which connect meta variables horizontally describe benchmarks that need to be met, before entering the next business development period. It is worth noting that some business development attributes may develop at a faster pace than others. However, entrepreneurs ought to try to not prioritise one over another because this can jeopardise the business. For example, if demand is grown too rapidly without developing the supply chain and without the financial capacity to fund production at a sufficient rate, then the business may soon be faced with a decline in credentials. Whilst the horizontal arrows indicate progress to be made over time, the vertical arrows signify imminent dependencies, issues that need addressing either immediately or in the near future. Of course one would also envisage diagonal arrows. The market position, one could argue, may to a good degree depend on the brand strategy and design, for example. Shortfalls in the design of a brand may lead to difficulties in the implementation of an IP strategy. If a trade mark resembles that of a competitor too closely, it can be challenged and invalidated. These, slightly more complex dependencies, will be addressed towards the end of this chapter.

8.5 The Business Development Canvas as a Change Management Tool

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three sets of meta variables

team

knowledge

proposition

market analysis and strategy development

market positioning

market power

brand creation

brand activation

brand policing

IP strategy development

IP strategy implementation

IP portfolio management

smart funds and angel investment

investments and revenues

revenue growth

complementary asset access

complementary asset deployment

complementary asset integration

business growth

Fig. 8.3 If multiple innovative elements form part of the design proposition, the dependency on individual components, and consequently on the IP that protects each of them, can be mitigated

The way in which the vertical arrows are pointed in Fig. 8.1 and throughout most of this chapter (except Figs. 8.7 and 8.10) is just an abstract example. In reality the dependencies depend on the business-specific context, and on the entrepreneur’s development priorities and preferences. In Chap. 2, teams who decided in favour of a bootstrap approach such a KwickScreen, would prioritise the finance needs as the independent variable, and IP investment would be limited in line with funding capacities. Here the IP strategy depends on the finances, not vice versa. The business development canvas is designed to be an interactive decision-making aid. It helps the designer-entrepreneur to identify, discuss and confirm priorities and dependencies. As expressed before, double arrows must be avoided in order to facilitate effective decision making. The inventors involved in Design London/InnovationRCA frequently reported that they needed a patent to attract angel investment. Conversely, the angel investment was required to invest in a patent portfolio. Investment and funding was perceived as inter-dependent, which often impaired the inventor’s decision-making. Whilst it is important to articulate what are the independent and the dependent variables, dependencies also require continuous monitoring. If priorities change, arrows may need reversing. These dependencies are decided at the discretion of the designer-entrepreneurs, and with a view on the circumstances, which inevitably change over time. Therefore it is highly likely that these dependencies also change over time, and their direction and description may need periodically adjusting. But if dependencies are amended too frequently, e.g. day by day, then progress will be compromised. The Business Development Canvas in Relation to Design Business Development Periods The following passages explore how the framework can be used to articulate which kind of dependencies link neighbouring variables. Articulating in what way the meta variables depend on one another, helps the designer-entrepreneur establish clarity about what are—or ought to be—the independent variables (driving factors) and which are the dependent and intervening variables. One could, of course, argue

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that all dependent variables are intervening variables, because the business development never stops, at least not until an exit is performed. One outcome paves the way to another opportunity. Creswell refers to independent variables also as predictors (Creswell 2014, p. 52), as they can be used to predict an outcome. Depending on the circumstances, these predictors can be used as development benchmarks. After segmenting the framework into the three different business development periods that were highlighted in Sect. 4.6, the model can be adapted for strategising the transition from one stage to the next. To determine clear dependencies, the three periods are best examined individually. The Fledgling Period As explained in Sect. 7.1, knowledge, the team, and the proposition can be seen as a strongly intertwined unit which can be difficult to dissect. At the outset, the target market needs identifying, and finance needs must be established. The interview findings in Chap. 2 suggest that the biggest challenge for designer-entrepreneurs at this point in time is to specify the complementary assets needed in pursuit of proof of concept and to strategise the route-to-market. Experienced designers such as Sebastian Conran (Chap. 6) find this much easier by comparison. These secondary variables related to market, brand assets, knowledge and IP, finance, as well as complementary assets, depend not only on the start-up (team, proposition, and knowledge), they also depend on each other. The only way in which a designer-entrepreneur can make effective use of the business development canvas, is to lock specific meta variables in order to determine the others. In the example illustrated in Fig. 8.4, the need for access to complementary assets determines the degree to which financial assets are needed, not the other way round. The dependency between two or more variables can be, perhaps needs to be, re-configured from time to time. What needs avoiding is to constantly switch between conflicting options, and to specify dependencies which lead to circular constellations of dependencies, which can pave the way towards a catch22 situation. The Transition Period During the transition period, the market position, the funding strategy (investments, sales) and the IP strategy implementation need negotiating. But which of these meta variables determine which? Complementary assets and finance are also closely linked. Considering that downstream value chain access constitutes part of the complementary assets, the latter may be dependent on the market or market sector. The close relationship between the IP strategy and the finance needs led some of the ventures examined in Chap. 2 to focus less on the market- and sales-related issues. However, the fact that exclusive IP can pave the way towards complementary assets and to equity investment, makes IP appear particularly significant in the eyes of many designer-entrepreneurs. If the positioning within a particular market proves difficult, a re-examination of the market may be necessary and this involves, at least temporarily, a shift in focus. Then dependencies may need reversing. Artica experienced this, when confronted

8.5 The Business Development Canvas as a Change Management Tool

team

proposition

dependencies: e.g. choice of names for company and product; url; brand philosophy etc.

brand creation

dependencies: e.g. a proposition lends itself to certain applications / markets (tech- / design push)

market identification / analysis

dependencies: e.g. a proposition requires specific design and technology features

179

dependencies: brand definition must be distinct from existing market players.

dependencies: the need for IP depends on how tightly controlled the target market is.

technology IP

IP strategy development

design IP

knowledge

dependencies: e.g. funding is needed to secure workspace and support

dependencies: if tech IP is required, funding needs will increase

finance needs / seed funding

dependencies: e.g. facilities are needed to produce a prototype

dependencies: asset accessibility, or the lack thereof, determines funding needs

complementary assets access

fledgling period

Fig. 8.4 Possible dependencies during the fledgling period of a design business development. In order to generate IP strategies, IP options may need separating, perhaps inclusive of other means of protection such as secrecy and knowledge sharing

with value chain bottlenecks (Sect. 1.3.2). Here the difficulty of positioning the business within a main stream market, forced the team to re-orientate. Through focusing on period properties, a market niche could be identified. In this case, the target market became dependent on the market position and on the lack of assets in the downstream value chain. Changes in the business orientation during the transition period can also have a reverse impact on what were the independent variables during the start-up period: team, proposition, knowledge. It may imply that the proposition needs adjusting, or a fundamentally different design solution is more suitable for addressing the market need (need-pull). This in turn may mean that existing team members either have to up-skill (knowledge) or cannot contribute meaningfully to the business. This reverse effect can lead to challenges. In the case of Artica, the designer-entrepreneurs secured an early trade sale, having been faced with a tightly controlled market-environment. In this case the inventors’ three patents proved critical for the successful exit. The experience gained in conjunction

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with this design-entrepreneurial endeavour allowed some of the team members to engage in other start-ups subsequently. Having once been asked what happens to all those failed initiatives, I am inclined to think that the value is retained in the entrepreneurial knowledge that is generated, because this can be used to the benefit of other initiatives. On the basis of this insight, one could argue that the most valuable knowledge is the tacit, i.e. non-codifiable, knowledge that surrounds the development that is retained by the individual designer-entrepreneur who can share it with others for the benefit of new initiatives. The Established Period The modus operandi of established businesses is not the core focus of attention in this book—this has been thoroughly explored in the existing literature and theories by Schumpeter and Teece (although one could argue that market conditions today are much more dynamic than they used to be in the twentieth century). It is important to be clear about how the business attributes of an established business connect with the development aspects in the transition period. This allows to assess the longitudinal impact of the early-stage decision making surrounding the business development attributes. It has been stated earlier that a disruptive innovation cannot be predicted, it is established in arrears depending on how other market stakeholders respond to the novelty. In Fig. 8.6 one of the dependencies is reversed. In Fig. 8.5 market research influenced the brand positioning, later in the development journey, effective brand management can help to increase market penetration, at least in the retail sector. A distinction has been made between technology IP and design IP to allow for the articulation of priority shifts. More aspects such as secrecy or strategic knowledge sharing could be integrated if appropriate. The diagrams shown in Figs. 8.4, 8.5 and 8.6 are still only abstract representations to illustrate how dependencies can be marked out and evaluated in principle. There can be many more dependencies linking the meta variables than illustrated here. The following paragraph and diagram (Fig. 8.7) make it clearer how the framework manifests itself in relation to a specific business case. The Business Development Canvas in Application As explained in Chap. 5, Magmatic Ltd’s defence of their registered design rights was ultimately unsuccessful in the UK. However, their market participation led to a degree of market power that ensured the survival of the firm during the legal battle against PMS International, a multinational corporation. With reference to the legal case Trunki-versus-Kiddee, Rob Law stated that his firm “got a lot PR out of it. The equivalent advertising spend is probably about the equivalent of our legal cost.” (Law 2016). With reference to his product’s social media presence, Law claimed: ‘We have a 30% unprompted awareness of our brand with mums, 70% prompted awareness in the UK, and 70+ thousand following on Facebook which is our core marketing machine…’ (Law 2016). Public awareness may encourage an IP-active approach. With reference to the AnywayUp cup, Mandy Haberman explained: “We realised that if we did not stop them, then everybody else would infringe”

8.5 The Business Development Canvas as a Change Management Tool brand creation dependencies: effective brand activation can enhance the market penetration.

market identification / analysis dependencies: the need for IP depends on how tightly controlled the target market is.

technology IP

IP strategy development

dependencies: a dominant design can disrupt the distribution of market power

brand positioning

dependencies: market strategies are deployed for the systematic positioning, and benchmarking.

market position / market penetration

dependencies: IP strategies may entail a need for secrecy (NDA etc.), partnership agreements, licensing arrangements etc.

design IP

dependencies: if tech IP is required, funding needs will increase.

finance needs / seed funding

dependencies: asset accessibility, or the lack thereof, determines funding needs. complementary assets access

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dependencies: market research and insights facilitate the effective brand cultivation.

dependencies: IP ownership determines the degree of exclusivity in the market.

technology IP

IP strategy implementation

design IP dependencies: funding needs may increase, whilst added credentials increase prospects to secure investments.

dependencies: e.g. facilities are needed to produce market-ready products.

dependencies: funding needs depend on the IP strategy (tech vs design emphasis).

smart funding / investment / sales

dependencies: with increased need of comp. assets, funding needs may grow. complementary assets utilisation

transition period

Fig. 8.5 Dependencies during the transition period. There is a mutual dependency between sales and equity investment. The more funds can be acquired through sales, the less investment may be needed, and vice versa. Priorities need to be set in consideration of the specific circumstances

(Haberman 2014). The greater the public exposure, the bigger the commercial traction, the higher is the risk of infringers to emulate a design or a technology, and the greater the pressure on the inventor to litigate IP infringement. Following the cost-intensive legal battle surrounding Trunki, Magmatic had to go through an equity investment round in order to prevail. Law retained a controlling majority of the business (Law 2017), but had to relinquish a sizeable proportion of the business ownership. Here the IP defence impacted the financial strategy. The adjustment made to the relationship between market and brand position between Figs. 8.5 and 8.6 (i.e. the reversal of the dependency direction) is to indicate that the business development framework is not a prescriptive unchangeable model. In the abstract example shown in Fig. 8.6, the investment for growth depended on the IP defence, not vice versa. The business development canvas is a thinking and decision-making tool.

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brand position dependencies: brand positioning can enhance the market penetration.

market position / market penetration

dependencies: IP ownership determines the degree of exclusivity in the market.

technology IP

IP strategy implementation

dependencies: a dominant design can disrupt the distribution of market power.

dependencies: a dominant design can disrupt the distribution of market power

brand awareness

dependencies: Market power strengthens the brand (re-enforcement). market power

dependencies: Market exclusivity leads to market dominance (market power).

dependencies: initial IP can motivate renewed innovation; IP portfolios comprising IP in the strict senses and IP in the loose sense, can grow.

technology IP

IP portfolio expansion

design IP

design IP

dependencies: funding needs depend on the IP strategy (tech vs design emphasis).

dependencies: as sales grow, the dependnce on investments is reduced.

dependencies: funding is required for litigation of IP infringement.

dependencies: the potential of controlling assets through contracts / integration increases.

dependencies: depending on revenues, funds can be invested in asset integration.

revenue / growth investment

smart funding / investment / sales

dependencies: with increased need of comp. assets, funding needs may grow. complementary assets utilisation

business growth

complem. asset control / integration

established period

Fig. 8.6 The established business development period. Which variables constitute the driving factors and which constitute dependent variables, is contingent on the individual business, and on the priorities as determined by the start-up team. Priority shifts can lead to re-innovation opportunities

With Trunki, Magmatic Ltd held a monopoly position, because the product was worldwide unique, and a market had been cultivated around it. Market power was facilitated through the lack of competitors, and it was reinforced through social media marketing and customer support. Where look-alike products emerged, Magmatic could intervene and, with reference to their IP, encourage retailers to cease their sales. As explained in Chap. 5, the business was developed and established largely without equity investments. PMS International’s market launch of Kiddee challenged Magmatic Ltd’s market monopoly in the UK. Rob Law, Magmatic Ltd’s founder director, responded with litigation, which first succeeded (High Court), but ultimately failed (in the Appeal Court and in the Supreme Court). The costs involved in the legal process led to a severe reduction in profits, and this gave rise to the need to raise equity investments. This marks one of the feedback loops in the diagram above (Fig. 8.7). Another was the adjustment in the IP strategy: Having realised that the registered design right was no longer sufficiently reliable in the UK, “a further 10 designs in line drawings [were registered to] protect against anyone who would try to come up with one that looks visually

8.5 The Business Development Canvas as a Change Management Tool monopoly position

brand position

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brand awareness

loss in market power leads to increased social media engagement market position / participation

technology IP (of reduced significance to magmatic ltd) IP strategy implementation

design IP

equity investm.

sales

complementary asset utilisation

monopoly position increased media awareness surrounding Trunkivs-Kiddee IP defence fails; IP portfolio expansion requires other means of protection

investment stabilises magmatic ltd during litigation proceedings.

acquisition of production tooling, moving production from China to UK, etc.

market power

market monopoly challenged; loss in market power

IP defence / IP portfolio expansion

business growth

imitator challenges IP, court proceedings, legal costs, profit reduction, development of follow-up product Jurni delayed

revenue / investment for growth

complem. asset control / integration

litigation costs lead to a need to raise investment capital IP strategy adjustments

Fig. 8.7 This visual shows how an established business, Trunki, was forced to revisit some of its priorities and to re-strategise following the emergence of a competing product which challenged Trunki’s market monopoly

different” (Law 2016). More importantly, the court battle which was discussed in detail in the mainstream media, led to an increase in public awareness. Magmatic Ltd used this opportunity to re-intensify social media engagement which improved the market position and also the brand awareness in the public domain. The Trunki case shows how a young firm which was reasonably well established, had to take a step back and to re-position itself as the market leader in order to sustain market share and revenues. One of Magmatic development aspects was adversely affected, the market launch of Jurni, a travel case for adults was delayed due to the legal dispute. In business-development-strategic terms, this meant that certain priorities set during the transition period, had to be reviewed and certain decisions surrounding protection and market participation needed revising. Such innovation strategic loops may be essential for established businesses to re-innovate, be it internally or externally. Innovation-Strategic Loops Whilst radically innovative start-ups are dedicated to disrupt existing market conditions through introducing ‘competence-destroying technological discontinuities’

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(Tushman and Anderson 1986, p. 444), one could argue that an established business strives for stability, perhaps steady growth, rather than radical change. However, continued innovation is important for an established firm to remain competitive in a market environment, the conditions of which are increasingly subjected to changes, be these due to technological developments or socio-cultural progress. As previously explained, the business development framework does not offer a single solution or a prescriptive approach. Instead it offers the flexible choice between different possible sets of priorities that are determined through the selection of independent variables. As there is no magic formula that covers all start-up business development factors involved, it is for the entrepreneur to determine which development aspects constitute independent variables and which are intervening and dependent ones. Whether a patent-based IP strategy is needed or not, is a choice that an entrepreneur may have to make. The consequence of an IP strategy that omits patents could be that one incubator or another will not accept the start-up in, and angel investors may be more hesitant to commit their funds during the initial development. However, this does not mean that the business cannot develop and prosper. The business development canvas allows sketching a number of possible scenarios, which enable designer-entrepreneurs to take an informed decision on how to proceed. For future planning, an entrepreneur could start at the desired outcome—business growth—and try to reverse-engineer the path that leads towards it. However, unforeseen circumstantial changes may then require the entrepreneur to consider revisions, as explained with reference to the Trunki case. Insights gained in the course of the business development, e.g. emerging opportunities, may also demand for the occasional re-development of the business development canvas. Renewed innovation may lead to changes in circumstances, to the introduction of new variables, and/or to the changes in the characteristics of existing ones. In such a case, independent variables may become dependent variables. Figure 8.8 illustrates abstractly how certain developments may can lead to re-adjustments (loops). Figure 8.8 expresses that, depending on the develop of the business and its single-minded proposition, new knowledge may need acquiring, existing propositions reconfiguring, the team may need to grow or change, additional complementary assets may need accessing through contracting or integration. It is possible that new markets or market sectors are identified, or existing ones are expanded into new territories. New funding opportunities and income streams may emerge, and the IP strategy may need to change, perhaps through the integration of open innovation elements, or through implementing the IP strategy in a different way such as adding license revenue streams instead of relying on direct sales alone, in particular if trade is expanded into overseas territories. The black arrows in Fig. 8.8 indicate such loops, where growth may lead to possible adjustments. Figure 8.8 offers an abstract illustration of the complete business development journey. The horizontal arrows pointing from left to right indicate how individual business development attributes (brand assets, market, knowledge/IP, finance and complementary assets) transform over time. The vertical arrows indicate possible

8.5 The Business Development Canvas as a Change Management Tool market analysis and strategy development

market positioning / market penetration

market power

brand design

brand activation

brand policing

IP strategy development

IP strategy implementation

IP portfolio developm.

equity investment

revenues

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team

proposition

knowledge

finance needs / seed funding

fledgling

IP defences

sales revenues smart funding

complementary assets access strategy

business growth

complementary assets deployment

transition

growth investment complementary assets control

integration

established

Fig. 8.8 As a business establishes a dominant design paradigm, it may re-define individual business development attributes

dependencies between different meta variables. Defining these vertical dependencies provides the designer-entrepreneur with better clarity about the business development strategy, and the primary business development needs. The black arrows starting with business growth, indicate certain variables which will need revisiting as the business development progresses beyond its start-up development process. Please note that control over complementary assets does not necessarily require integration. As pointed out with reference to Abernathy and Utterback (Sect. 3.2), exclusive contracts may be preferable for the designer-entrepreneur, because this can help to keep a business lean and flexible. A strong appropriability regime increases the control over complementary assets. Managing the Business Development Flow for Multiple Inventions Where multiple mutually complementary inventions are pursued in line with a single-minded proposition, all inventions are carried through the same start-up team and are aimed at the same or similar markets, although each invention may have different constellations of variable dependencies. This can be difficult to illustrate in a simple static flow chart. Although the configuration of variables is always the same, the direction of the arrows which connect them may differ, and it may also change over time. An inventor may seek the finances needed through a variety of means, from income generated through sales of existing offerings, or through loans or capital investments. Whilst the IP strategy takes into account all inventions or inventive steps involved, the IP strategy implementation is specific to the individual invention (Fig. 8.9).

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invention 1 invention 2 invention 3

8 Strategic Tips for the Aspirational Designer-Entrepreneur market identification / anaysis

market position / penetration

development of comrehensive IP strategy: combining different forms of IP incl. formal and informal IP; IP in the loose sense and IP in the strict sense)

IP strategy implementation IP strategy implementation IP strategy implementation

proposition

finance needs / seed funding

finance strategy: smart funding, equity investment, sales

complementary asset access

complementary asset utilisation

Fig. 8.9 The fledgling and transition period for a start-up using multiple inventions. In this abstracted example the IP strategy as well as the degree of access to complementary assets determine the level of funding needed. The implementation of this strategy with respect to multiple inventions influences the longer-term finance strategy

Since all inventions are aimed at the same market, the complexities arise mainly in relation to IP and finance. More finance is needed, although the fund allocation to individual inventions can be flexible, and revisited from time to time. The IP strategy itself is more complex than one that would focus on a single invention only, and it culminates in the combination of a variety of protection strategies for each individual invention. The route-to-market can combine equity-investmentbased approaches with sales-led approaches. Each invention can be strategised individually here. There can be different market entry points for individual inventions, although they ought to be aimed at one and the same market. Otherwise the start-up’s resources would be spread too thinly. Depending on the route-to-market strategy used for each individual invention, the dependencies between the implementation of IP strategies related to the individual inventions and route-to-market strategies (equity investment versus sales) may differ, as may the dependencies between IP strategy and finance (investment/loans versus sales). Business Development Attributes (Variables) and Relationship Nodes The diagrams shown in Figs. 8.4, 8.5 and 8.6 connect mainly neighbouring variables through dependency arrows. Throughout the book, the meta variables which, according to literature review findings and qualitative research insights, are likely to be most strongly connected have been positioned next to each other to facilitate the analysis. However, as indicated through the overarching arrows shown in diagrams 7.1, 7.2, 7.3, and 8.3, it is perfectly conceivable, in fact almost certain, that other meta variables are also interlinked. The access to complementary assets, for example, may impact directly the IP strategy or vice versa. The choice of a target market and the market analysis may reveal insights with respect to the access to complementary assets. This shows that there can be more dependencies than those

8.5 The Business Development Canvas as a Change Management Tool

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that have been expressly articulated so far. With the diagrammatic design approach used before, it can be difficult to visually express possible relationships between variables that are more distant in the diagram unless they are extracted from it and organised separately. It also becomes clear that the number of dependencies that need articulating in conjunction with a design-led start-up may be greater than those in the diagrams shown in Figs. 8.4, 8.5, 8.6, 8.7 and 8.8. This in combination with the fact that fundamentally different approaches—such as bootstrapping, equity investment financing, secrecy etc.—can be applied to different individual inventions at the same time, makes it difficult to articulate all dependencies in one diagram. To avoid confusion and contradictory circumstances, it is important to limit the number of the dependencies to those that are most significant. Double arrows also need avoiding as this would lead to ambiguities. However, multiple inventions can be mapped out in parallel and this makes it possible to highlight variables and dependencies that are related to individual inventions. Figure 8.10 shows how the business development canvas might look if applied simultaneously to KwickScreen (in black) and to Romulus (in grey), a comparatively simple example which we discussed in Sect. 2.1.3. The two inventions involved here, KwickScreen, a somewhat disruptive novelty, and Romulus, which is an incremental innovation, do not necessarily depend on each other in regards to their commercial successes. However, for the inventing team the marketing of one benefited the marketing of the other. Romulus, a bespoke digital customer management system, evolved in the course of the team’s KwickScreen marketing efforts. The expansion of the client base around KwickScreen (mainly NHS hospitals in the UK) led to the identification of a market-need for better customer management tools. The new insights gained through the team’s marketing and sales efforts led to the development of Romulus which started off in 2012. Dependencies related to this initiative are marked with grey boxes and grey arrows. Both initiatives were fostered largely in parallel using a bootstrap approach. However, Romulus was a particularly lean development which was initially funded almost exclusively through licensing revenues. Customers needed adaptations to the system and these were paid for. Formal IP was not required because the customisations made the system solution bespoke and non-transferable. Revenues were re-invested in the optimisation of the system. In Fig. 8.10, one can see some vertical arrows reaching over other variables, connecting market identification, in this case the NHS, with funding for example. KwickScreen was initially part-funded by the NHS. Later the ventures were funded mainly through revenues (KwickScreen: sales, Romulus: licenses) and NHS-funded hospitals in the UK were KwickScreen’s most prominent clients in Europe. In this model, the grey-shaded and yellow boxes, which represent some of the key business development attributes in their various incarnations over time, always remain consistent. Investments and loans did not play a major role in either of the two businesses. Brand-related assets have not been illustrated here because they did not influence the development of either of the two businesses, both which evolved exclusively around business-to-business marketing efforts. Generally the meta variables do not tend to vary from venture to venture,

knowledge

nil

access to work premises mobility

nil

smart funding bootstrapping

nil

patent design right

nil

complementary assets access

bootstrapping

access to programmers

sales management software

development of a production line

license / customisation

smart funding bootstrapping sales

secrecy / speed to market

exclusive license patent

client base

expansion of client base

* NHS = National Health Service

part-funding through NHS*

finance needs / seed funding

financial requirem. limit IP investment

IP strategy development: tech IP / design IP (incl. licensing)

marketing focus customer relations

market identification / anaysis

marketing

potential use in the medical sector

complementary assets utilisation

sales revenues invested

equity investment / revenues / loans

Romulus

KwickScreen

exclusive license patent

market position / market penetration

customer feedback reveals that the device is not of medical but of psycological benefit —> new marketing strategy

Fig. 8.10 The business development framework used on a venture that pursues multiple inventions. This model illustrates the development behind KwickScreen, which led to a follow-up initiative around a novel customer management system

proposition

Romulus

KwickScreen

team

hospitals

The expansion of the client base triggers the need for better customer management processes, and the idea for Romulus.

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8.5 The Business Development Canvas as a Change Management Tool

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however, the sub variables which connect them, do, and these dependencies may change in line with emerging strategies and strategy adjustments. Whilst evaluative descriptors can be added to the meta variables to explain how they manifest themselves in conjunction with an individual business, the focus should remain on the relationship between them. The strength and weaknesses of a start-up are typically tied to the relationships that connect the business development attributes, more than the individual attributes per se. A sizeable seed fund can easily be wasted on the wrong business development aspects if the impact of the individual investments and budget lines is not understood. In the course of the book it has become quite clear that the true potential of the business development canvas can be explained only to a certain extent without applying it to a specific business case, because a meaningful analysis can be carried out only with a view on the case-specific sub variables, and the way in which these link the business development attributes together. The arrows shown in Fig. 8.10 reveal how significant the revenue-based funding strategy was, first for KwickScreen, and later for Romulus, which was almost exclusively funded through service fees received from customers who paid the team for the customisation of the Romulus system, and for consultancy services in relation to its usage. IP was not without significance, but it was thought to have provided little more than a deterring signalling effect to competitors only. The diagram discussed here has been drawn based on data collected in 2014/2015, around 8–9 years after KwickScreen was incepted. A few years later Rolumus was re-developed into a system that uses weband email-based data analysis to track communications in order to identify potential sales opportunities. It was then renamed Index and introduced to an accelerator in San Francisco. Due to the fact that Romulus needed to be adapted for each individual client, the scalability of the business was limited. A profound reconfiguration of the system was needed in order to enhance its commercial potential. Thus Index emerged. As highlighted earlier in this section, start-up business scenarios can be complex, and they are never static. It is important to focus on the most prominent development criteria without denying the complex nature of the dependencies between. The starting point for this book was the idea that IP should not be treated in isolation when developing strategies for start-up businesses because this makes it difficult to establish the holistic systemic understanding needed for effectively managing the development of innovative start-ups. To sum up the key insights, the following points are worth noting: Despite the fact that design-driven approaches as advocated by Verganti and Dell’Era (2014) can help to speed up the route-to-market for designerentrepreneurs, it has to be acknowledged that due to the limited value which stakeholders in the innovation framework attribute to the visual aspect of design, a shift of focus from technology to product languages cannot be recommended. The prominence of technology advancements in the context of product innovation is sustained, and the commercial value that can be appropriated from product languages must be assessed on a case-by-case basis and with considerable caution. It is

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also noteworthy that it can be extremely difficult to protect abstract concepts such as that of a ride-on travel case for children. Despite their positive signalling effect, the value of patents for design-led start-ups remains at question because of the amount of time and financial resources required to secure them. Dodgson et al. critique ‘the frequent inappropriate association of patenting with innovation’ arguing that ‘Patenting is at best a proxy measure of an element of innovation that is important in some sectors and irrelevant in others.’ (Dodgson et al. 2014, p. 10). Teece (1986) argues that IP in the form of patents can be deployed to compensate a lack in access to complementary assets, and thus enables inventors to strengthen the appropriability regime around their inventive propositions. However, with complementary assets beyond reach, lone inventors and independent start-ups find it difficult to secure their position within the market environment through patents alone. The book introduces a new perspective in relation to the strategic management of innovative start-ups through raising the question what means other than patents and complementary assets, designer-entrepreneurs can deploy in order to strengthen the appropriability regimes within their target market environments. The answer to this question can be found in the context of dynamic capabilities. Although this is an expression coined by Teece, Pisano and Shuen (1997), its origins can be traced back to Abernathy and Utterback, who argued that ‘In the initial fluid stage, market needs are ill-defined and can be stated only with broad uncertainty’ (Abernathy and Utterback 1978, p. 7). They further claim that ‘units in different stages of evolution will respond to different stimuli and undertake different types of innovation’ (Abernathy and Utterback 1978, p. 8). According to Abernathy and Utterback, small units, i.e. SMEs or lone inventors, are better positioned to introduce radically innovative propositions, whereas large established incumbents find it easier to pursue incremental innovations.’As the enterprise develops, however, uncertainty about markets and appropriate targets is reduced’ (Abernathy and Utterback 1978, p. 7), and thus the stimulus changes. What Abernathy and Utterback are indicating in their seminal paper on ‘Patterns of Industrial Innovation’, is that start-ups are best placed to respond to the uncertainty surrounding emerging market, not despite the fact that they have few or no integrated assets, but because they have no or few integrated assets. The paucity of integrated assets makes start-ups flexible. It enhances their dynamic capabilities. Access to complementary and ownership of integrated assets is the strength of established businesses, dynamic capabilities constitute the competitive advantage of start-ups. This book has shown that IP strategies are best approached as dynamic knowledge management systems. These may comprise not only exclusive formal IP rights, but also informal IP which can be shared or licensed as well as tacit knowledge, which can be kept secret. Dynamic IP systems can orchestrate knowledge through the combination of formal IP, of open innovation initiatives, of secrecy and of continued knowledge generation. IP strategies should be regarded as dynamic continuously emergent systems that are developed, deployed, and

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monitored over time, and never remain static. They can be closely linked to finance, and also to market-relevant business attributes, because IP strategies may involve licensing IP in, or to share IP through the collaboration with other industry stakeholders. Knowledge can also be generated through customer feedback, in which case the target audience co-creates knowledge. IP strategies also connect with complementary assets because the use of such assets may lead to new insights. Conversely exclusive IP can facilitate access to complementary assets, because it can serve as leverage during negotiations. The study, on which this book is based, culminated in the definition of a framework which we referred to as the business development canvas in Chap. 7 and 8. This framework comprises and aligns the most prominent business development attributes (meta variables), in order to systematically connect IP to other business development aspects. This dynamic management framework is one of the key points of this book, and its discussion may encourage designer-entrepreneurs to look beyond static assessment models in pursuit of longer-term strategies. The second point is the enhanced understanding surrounding distinct business development periods, which has led to the insight that the value of IP changes over time. IP infringement in the very early stages, i.e. prior to proof of market, is highly unlikely. However, a start-up is particularly vulnerable during the transition from a fledgling business to an established business. With growing sales, however, potentially insufficient resources to litigate IP infringement against a larger competitor, the transitional business needs to devise effective IP and defence strategies. A third is the benefit of triangulating multiple mutually complementary inventions or inventive steps. This significantly increases the number of possible combinations of different forms of IP, which increases the number of ways in which an innovator can respond to threats. The likelihood of being edged out of the value chain can be significantly reduced, whilst market positioning is enhanced. Through combining multiple mutually complementary innovations that support a single-minded proposition, designer entrepreneurs can significantly enhance a start-up’s success prospects, because it increases the range of strategic options available to the inventor. The business development canvas that has been sketched out in the course of the book waits to be validated through further application in practice. It is a flexible model, that needs adapting, and further developing. I would like to invite creative entrepreneurs to modify it in whichever way necessary to suit their needs and preferences. It can be a useful basis for coaches and investors to discuss business cases in order to iron out weaknesses and to overcome development barriers. May your endeavours succeed.

Appendices

Appendix A: Extract from the Patent Examination Report Related to SafeView The first two pages of the examination report sent by the UK IPO in relation to the SafeView patent discussed in Sect. 1.3.1. A considerable number of claims have been called into question due to lack of novelty and others because they appeared obvious. Typically an attorney would file a number of broad claims, which can be rejected due to being excessively broad, and an additional list of more specific claims which serve as a fall-back option for the inventor to rely on. The patent application which resembled SafeView most closely, had been filed only a few months prior to SafeView.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1

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Appendices

Appendix B: Patents, Registered Design Rights, and Trade Mark Related to Seaboard At the time of the interview Roland Lamb had two patent applications pending. The first one was filed in June 2009, and published in January 2011 (Fig. 2.6a, Sect. 2.1.2). In June 2010, Lamb filed for PCT to secure the possibility of extending the scope internationally. Noteworthy is the fact that he applied as a person, not as a company. This means that the patents are tied to him rather than the firm. Lamb filed his second patent in June 2013 (Fig. 2.6b, Sect. 2.1.2). The illustrations and the abstracts shown on the diverse patent applications reveal how the project had progressed technically. A second patent is often necessary, if patents connected to academic patents are filed early.

Lamb’s EU Patent filed for in 2009 on the left, and his UK Patent filed for in 2013 on the right. The name of his company had changed between both filings. The two filings were carried out through the same law firm. In the years to follow, Roli Ltd filed numerous patents in addition, not only for the Seaboard but also for their other products, and the IP protection was expanded into the USA were a second office was opened. (reproduced with permission).

Appendices

195

Registered Design filed by Lambde Ltd. (Roland Lamb’s firm) in 2010. Lamb had made best use of the one-year grace period available for registered design rights. He used seven visuals, the maximum allowed, to illustrate his design. Like Rob Law (Chap. 5), Roland Lamb relied on digital renderings rather than outline drawings. The shape of the Seaboard would be difficult to depict effectively through outline drawings. (reproduced with permission).

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Appendices

In 2014 Lamb secured SEABOARD as a trade mark, whilst he kept changing his company name multiple times, until he ended up with Roli. It is noteworthy that Lamb secured SEABOARD as a word, not as a visual, which means that the trade mark has greater scope. The name is non-descriptive, and there fore permissable as a trade mark. Single product companies often emphasise the product name over the company name. (reproduced with permission).

Appendix C: Orbel IP Portfolio Below is a list of patents and designs filed by Adam Sutcliffe for Orbel. Entertaining patents and designs across a multi-national territory can be costly. Raising equity investment often becomes a necessity. Application no.

Registration no.

Title

Country

Property type

0611809.5

2439061

Hand Gel dispenser Hand Gel dispenser Hand Gel dispenser

United Kingdom United States Patent Cooperation Treaty Australia

Patent

8714853 PCT/GB07/002225

2007258990

1120596.0

Hand Gel dispenser Hand gel dispenser Hand Gel dispenser Hand Gel dispenser Sprung Dispenser

PCT/GB12/000870

Sprung Dispenser

10104608.4 13161437.2 2009-514904

5246718

002203687-0001

002203687-0001

002203687-0002

002203687-0002

86065

86065

86066

86066

Hand gel dispenser without on/off switch Hand Gel Dispenser with on-off switch Hand gel dispenser without on/off switch Hand gel dispenser with on-off switch

Hong Kong European Patent Japan United Kingdom Patent Cooperation Treaty European Community

Patent Patent

Patent Patent Patent Patent Patent Patent

Design

European Community

Design

Argentina

Design

Argentina

Design (continued)

Appendices

197

(continued) Application no.

Registration no.

Title

Country

Property type

12293/2013

349097

Australia

Design

12295/2013

349099

Hand gel dispenser without on/off switch Hand Gel Dispenser with on off switch Hand gel dispenser Hand gel dispenser

Australia

Design

China South Africa

Design Design

201330444263.8 A2013/00861

Reproduced with permission

List of Interviews

Date

Interview partner

Duration

Location

06/11/2012

Paul Thomas Cupris Thomas Hoehn Imperial College Mathew Holloway Artica Roland Lamb Roli Mathew Holloway Artica Itxaso Del Palacio University College London Kristien De Wolf Imperial College Business School Denis Anscomb

90 min In person 22 m In person 22 m Phone 41 m In person N/A E-mail 55 m In person

InnovationRCA, London

20/11/2012 07/12/2012 18/01/2013 15/03/2013 23/05/2013

24/05/2013

17/05/13 18/06/2013 03/07/13 04/07/13 28/11/13 8/12/2013 18/12/2013 21/02/14 18/03/14

Peter Brewin Concrete Canvas Sheraz Arif Squease Gregory Epps Robofold Bradley Hardiman Cambridge Enterprise John Hutton Cupris Adam Sutcliffe Orbel Sebastian Conran Conran Associates Julian Wilkins Blue Pencil Media

Imperial College Business School N/A Roli Labs, London Shoreditch N/A A café at London Old Street

64 m In person

Skype

52 m In person 32 m phone 70 m in person 62 m In person 50 m phone 30–40 m In person 28 m In person 1 h 15 m In person 1 h 24 m In person

InnovationRCA, London N/A A café, Liverpool Street, London InnovationRCA, London N/A InnovationRCA, London InnovationRCA, London Studio of Conran Associates, London British Library, London (continued)

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 M. Hillner, Intellectual Property, Design Innovation, and Entrepreneurship, Springer Series in Design and Innovation 11, https://doi.org/10.1007/978-3-030-62788-1

199

200

List of Interviews

(continued) Date

Interview partner

Duration

Location

07/05/14

Mandy Haberman

A cafe, Central London

01/07/14

Margaret Briffa

08/07/14

Dids Macdonald, OBE ACID Carlos de Pomme Cambiio Matthew Rappaport IP Checkups Mandy Haberman

1 h 45 m In person 23 m phone 32 m Skype

10/11/14 18/11/14 07/01/15– 12/01/15 02/02/15 12/07/16

20/07/2016 30/06/17 26/10/2017 16/03/2018

05/09/2018 06/09/2018 07/09/2018 25/03/2020 23/05/2020– 22/06/2020 29/05/2020 30/05/2020 01/06/2020– 04/06/2020 15/07/2020

Robert Law MBE Magmatic Ltd Robert Law MBE, Laura Breen Magmatic Ltd Mandy Haberman Sebastian Conran Conran Associates Laura Breen Magmatic Ltd Andy Brand Squease Sheraz Arif Squease Denis Anscomb KwickScreen Paul Thomas Cupris Adam Sutcliffe Orbel Adam Sutcliffe Orbel Adam Sutcliffe Orbel Mandy Haberman Mandy Haberman Andy Brand Squease

35 m Skype 49 m E-mail exchange 30 min approx. 1 h 45 m In person E-mail exchange 1h9m In person E-mail exchange 10 m approx. In person 49 m Skype 40 m Skype 43 m Skype 1h4m Skype E-mail exchange 53 m Skype 44 m WhatsApp E-mail exchange E-mail exchange

N/A N/A

N/A N/A N/A N/A Trunki Office in Bristol

N/A Studio of Sebastian Conran Associates, London N/A Singapore

N/A N/A N/A N/A E-mail exchange N/A N/A N/A N/A

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