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Martin coulthard - keeping an edge - sustainable competitive advantage
- 1. © 2010 Martin Coulthard
winning
a 3 level
approach to
business strategy
Martin Coulthard
BCS/BEN Tech Startup School
core 4: Competitive Strategy
8 November 2010
- 2. © 2010 Martin Coulthard
overview
• context
• approach
• kinds of competitive advantage
• examples
- 3. © 2010 Martin Coulthard
context
• business is competitive
• a team, contact sport like rugby
• what does ‘winning’ mean to you?
– get your idea/product out there?
– social benefits?
– lifestyle business, to pay the bills?
– fast growth of sales and profit?
– a big exit?
- 5. © 2010 Martin Coulthard
level 1 – broad
competence
• do (almost) everything
well
• actually, basic
competence in all areas
is often enough!
• a ‘me too’ business can
achieve a level of
success if it consistently
deliver good quality
product/service, on time,
in the right market
- 6. © 2010 Martin Coulthard
level 2 – competitive
advantage
• different + better
• what could you do or offer
that is different to and
better than your
competitors?
• if this is not protectable /
sustainable then others
will quickly copy
- 7. © 2010 Martin Coulthard
level 3 – sustainable
competitive
advantage
• you keep your advantage
• because the competition
is not able, is not
allowed, or does not
want to copy it
• or you keep getting
better at it, changing it or
finding a new one!
- 8. © 2010 Martin Coulthard
where is the edge?
kinds of competitive advantage
intellectual property protection other strategic elements
formal intellectual property rights
• patents
• trademarks
• copyright
• design rights
know how / unique skills of team
complexity / difficulty of product / service
'sticky' products
brand / reputation / trust
team expertise
pricing
control of routes to market
domination of target market segment (not worth competitor
trying to take it from you)
quality
design / user experience / object of desire
‘the whole product’
first to market
hard work
passion
location
funding
size
continual development / improvement
innovation!
other protection
• copying is not illegal!
• confidentiality agreements
• employment/consultancy contracts –
and other legal agreements
• secrecy
• copy protection technology – e.g.
encryption, DRM (Digital Rights
Management)
- 9. © 2010 Martin Coulthard
intellectual property rights
1. patents - protect what makes
things work - like what makes a
wheel turn or the chemical formula
of your favourite fizzy drink
2. trademarks - signs (like words
and logos) that distinguish goods
and services in the marketplace
3. copyright - an automatic right
which applies when the work is
fixed, that is written or recorded in
some way
4. design rights - protect the
appearance of a product/logo
©
Reg. Des. 1111111
TM ®
- 10. © 2010 Martin Coulthard
software patents – a dilemma
• even if you can get a patent relating to your software…
• it will disclose key aspects of your invention (so that
someone else can reproduce it) – that is the deal
• when those aspects may otherwise be hidden
• so others can then ‘copy’ the invention far more easily
• but how they do so may also be hidden!
• so you cannot be sure, or prove, that they are infringing!
- 11. © 2010 Martin Coulthard
other approaches to IP protection
• if not legally protected by IPR,
copying is not illegal!
• so what else can you do?
• confidentiality agreements – and other legal agreements
• employment contracts – confidentiality, IP ownership, non-
compete clauses – also consultancy & supplier contracts
• secrecy SSSHHHH!
• copy protection technology – e.g. encryption, DRM (Digital
Rights Management)
- 12. © 2010 Martin Coulthard
competitive advantage –
business areas
product or
service
team market
funding strategy
know how (tech, market)
unique skills
connections
hard work
passion
culture
quality
complexity / difficulty of product
design / user experience / object of desire
‘the whole product’
range of complementary products
first to market
cost structure
'sticky' products
brand / reputation / trust
choice of market segment / focus
control of routes to market
domination of target market segment
location
pricing
size
funding
but which are
sustainable?
- 13. © 2010 Martin Coulthard
startup & early stage – where’s the edge?
1. flexibility and speed
2. low costs
3. entrepreneur’s / founder’s
• skills, technical knowledge
• market knowledge, experience, connections, reputation
• vision, passion, commitment, determination, hard work!
• look at yourself!
4. ability to innovate
- 14. © 2010 Martin Coulthard
case study 1 - Renishaw
• Sir David McMurtry and John Deere –
Rolls Royce
• invention at RR of touch probe to measure
Concorde engine parts
• RR supported them to get patents and
start own company
• fought US infringement battle (cost $1M+)
• focus on innovative precision metrology,
supported by IPR (36 UK patents)
• “success comes from patented and
innovative products and processes, high
quality manufacturing, and the ability to
provide local customer support in all its
markets around the globe”
- 15. © 2010 Martin Coulthard
case study 1 - Renishaw
• virtuous circle of patents
• patents let Renishaw charge a premium price
(as competitors cannot copy)
• which leads to good margins
• which allows high spend on R&D - “18% of
annual sales invested in R&D and
engineering”
• and a long term approach to business strategy
• leading to more innovation and patents
(though maintaining this in a large company is
challenging)
- 16. © 2010 Martin Coulthard
case study 2 –
IPL Information Processing
• software projects and consultancy
services – not products or applications
• 0 patents
• focus on large corporate/public clients
• and quality of delivery
– business & technical
– trust & reliability
– responsiveness & agility
– excellence
- 17. © 2010 Martin Coulthard
case study 3 – Stonecube Ltd - IPR
• invention: realistic, moving
visualisation of objects with
printed/decorated surfaces
• key inventive step was a
way to model the physical
printing process to
generate a 3D model
• UK application went
• US patent granted!
- 18. © 2010 Martin Coulthard
case study 3 – Stonecube Ltd – strategy
story
1. idea that there was a business opportunity if 3D
graphics in PCs & Macs could be applied to
commercial applications
2. visualisation of ceramic tiles
3. print
4. packaging and greetings cards
5. selling direct at relatively low price
6. ‘partnering’ – global sales +
complementary products
- 19. © 2010 Martin Coulthard
case study 3 – Stonecube Ltd
• how did the patent help?
• probably discouraged competitors
• encouraged customers, investors, partners, potential acquirers –
perception matters
• at least doubled valuation for both angel investment and exit
• even though we probably could not have fought infringement
action (especially in USA)
• even acquirer was reluctant to do so
• you must be in the game – if you can be
- 20. © 2010 Martin Coulthard
conclusions
• think about climbing through levels 1, 2 and 3
• whatever your strategy, it must build on broad
competence (no business excels at everything)
• in a tech business IPR is often a key source of
sustainable competitive advantage –
look for the patenting opportunities – get in the game
• but there are many other strategic elements
• finding the right mix of elements for an effective
competitive strategy is a journey
• continuous improvement is essential
- 21. © 2010 Martin Coulthard
image attribution
• slide 1: England Rugby Squad 2003 by BombDog CC-BY-2.0, via Wikimedia Commons
• slide 5: stack of cards by Fraser Waters CC-AN-2.0 CC-BY-2.0
• slide 6: Wood and CFRP tennis rackets overlayed by CORE-Materials CC-AT-2.0
• slide 7: Jahangir Khan by Mr Ian CC-AT-2.0