Stickiness

No this blog is not about glue or adhesive. Rather, it looks at the degree to which the existing use of a product or service  – in this case a IP products or services – encourages it’s continued use as opposed to that of a competitor. This stickiness is sometimes called ‘lock-in’, customer retention or simply loyalty, although some would argue that these are similar but not identical.

“Stickiness” may be defined as a method of acquiring and retaining customers, by provided outstanding, products or services plus excellent customer service. Another definition is the nature of your customers to continue to use your products or services, to “stick” with you, to renew, upgrade, and never leave you. I would like to specifically focus on the stickiness of the products or services supplied by IP Firms (those focused on the legal aspects of IP), IP Service Providers (those focused on the non-legal aspects of IP) and IP Solution Providers (those focused on IP systems, IP tool and IP data) to their corporate in-house IP function clients.

Product or service stickiness

Product and/or service stickiness can be hard to create, but there are a few proven ways to succeed. The first, perhaps not surprisingly, is good old-fashioned customer service and delivering a high-quality, seamless experience to clients. Another approach to stickiness requires moving from a product-focused business to a product-and-long-term-service business by guaranteeing productivity gains to clients. Almost all suppliers can create stickiness by sharing knowledge. Finally, some businesses can create stickiness by building user communities. There are other approaches which help create this stickiness.

It is also worthwhile examining specific ‘sticky’ aspects of your products or services:

• Integration: in terms of how well the products and services are fused or meshed into the core activities of the corporate in-house IP function
• Data: Collecting, storing, retrieving, and analyzing data is essential to improving business processes, and this applies just as well to IP related data and IP related processes. The more your IP related products or services can help and support your in-house IP function clients here, the stickier you become.
• Usage: In general, the more frequent your product or service is used by your in-house IP clients, the stickier it becomes. The more critical the IP process, the better.
• Users: Stickier products and services are used across organizations, from those deep down in a certain IP workflow to the GC, CIPO or IP Manager looking at dashboards and seeing results.

Regardless of which approaches are selected to create stickiness, they involve a cultural shift within the supplier. Organizations must come to see the world through customers’ eyes, otherwise stickiness just will not happen.

In-house IP function

It should be stressed that there is no one size fits all when it comes to such corporate in-house IP functions. They vary greatly in terms of their size, their budget, their focus, their remit from management, their level of IP maturity and sophistication, their people’s skills and competencies, their knowledge and experience, the position of the Department within the overall corporate organizational structure, their internal structure and mode of operation, their processes, the KPIs which they have been taken into use, the level of IT usage within the Department, how data is utilized within the Department, plus much more.

Corporate in-house IP functions may also differ from another in respect to their IP strategy and associated action plans, and the manner in which the function and its various activities adds value to the business. They may also vary in terms of how much time and attention they have given to IP Governance issues.

Last but not least, they vary in terms of what tasks are done in-house versus what tasks are outsourced to their network of external IP Firms and IP Service Providers, plus the IP systems and tools from IP Solution Providers they have taken into use.

IP Firms, IP Service Providers & IP Solution Providers

There are plenty of potential partners for a corporate in-house IP function to choose from, from IP Firms to IP Service Providers, from large to smaller boutique Firms, from local to global players and from on-shore to off-shore.

No two IP Firms or IP Service Providers are the same. They will of course differ in terms of their actual product or service offering. They will also vary in terms of their responsiveness and timeliness; the levels of advice and recommendation they are willing to offer their clients; the strength of their dedication; the communication channels they utilize; their proactive behavior; and their pricing models and price levels. They will also vary in their invoice-handling processes; the legal, IP and technical skills of their personnel; their knowledge and insights into very specific IP matters; and the manner in which they assign individuals or teams to specific clients.

There are a number of IP Solution Providers offering a range of IP systems and tools to help manage the running of any corporate in-house IP function and to help the IP personnel and others involved in the IP processes to perform their tasks effectively and efficiently. The growing strategic importance of intellectual property means that there is a demand for better, more powerful systems and tools and for more and more applications to assist people who are directly and indirectly involved with intellectual property matters.

The level of stickiness

I would argue that there has traditionally been a high level of stickiness in these relationships.

Corporate in-house IP functions have in general been very reticent to change away from their existing network of external IP Firms, IP Service Providers and IP Solution Providers to others. Obviously, there are corporate in-house functions satisfied with the products and services being provided by their existing suppliers. Even when there have been issues with costs, efficiency and/or quality, the in-house function has generally stuck with the supplier.

The pressure on in-house IP is intense. In house IP management is like juggling, the manipulation of many objects at the same time. The juggler cannot afford to let one object fall to the floor, each one needs to be mastered. Making changes to its network of external IP Firms, IP Service Providers and/or IP Solution Providers is not top of the agenda for many in-house IP functions as they have other more important and critical challenges to tackle. It takes times, energy and resources to change even if there is a desire to change. There are risks associated with any change and as the IP profession tends to be risk averse, change tends to be avoided anyway.

There is a market failure in the provision of such coups. A market failure exists when something that is clearly in the interests of a corporate in-house function is not provided because no individual thinks it is worth the burdens, costs and risks of providing it.

Stickiness is not consistent

However I would argue that this stickiness is not consistent and will vary over time.

This 2×2 matrix is a helpful guide to understanding the relationship, between patent strength, revenue at risk and the likely behaviors of market participants. This matrix is often times used to explain a company’s approach to IP licensing and IP litigation.

However, I would argue that it is also a useful matrix when examining this issue of stickiness. While a company resides within one quadrant of this matrix, the stickiness is high. Such corporate in-house functions tend not to look at changing their IP Firms, IP Service Providers or IP Solution Providers. It should be noted that a company may reside within a specific quadrant of the matrix for many years. However, when a company transitions from one quadrant to another, then the stickiness reduces and they are much more likely to consider such changes. When a company makes such a transition, their IP current state has changed, the position of the IP maturity ladder has most likely altered, their IP environment is now different, their IP strategy has to be re-visited and updated, the way in which IP adds value to the company has changed, and their IP risk profile is not the same. The IP ‘game’ has changed for that company.

When a company’s position in the matrix changes, then this is when the in-house IP function is much more likely to consider changing its relationships with its external network of IP Firms, IP Service Providers and IP Solution Providers.

Alternatively, one may choose to look at the different phases a company may go through in terms of their IP focus:

• Focus on proprietary IP
• Focus on cross-licensing for freedom to operate
• Focus on leveraging IP to generate revenue
• Focus on leveraging IP for business growth

Again, as a company transitions from one phase to another, then the stickiness reduces and they are much more likely to consider changes to their network of external IP Firms, IP Service Providers and IP Solution Providers.

Stickiness is a Biz Dev issue

Business development comprises a number of tasks and processes generally aiming at developing and implementing growth opportunities within and between organizations. It is a subset of the fields of business, commerce and organizational theory. Business development is the creation of long-term value for an organization from customers, markets and relationships. At its heart, business development is all about figuring out how the interactions of those forces combine together to create opportunities for growth. The primary objective of business development is to increase opportunities which translate into revenue, regardless of the type of IP Firm involved.

Business development is a key issues for IP Firms, IP Service Providers and IP Solution Providers. Stickiness should therefore be a subject of great interest to those involved in business development, both those working to maintain existing client relationships as well as those hoping to usurp the incumbents and gain new clients.

Looking ahead

I suspect that this stickiness which has been strong in the past will reduce somewhat going forward for a variety of reasons. Corporate in-house IP functions have more and more external IP entities to choose from. There are a number of IP entities today who did not exist 5 or 10 years ago. Corporate in-house IP functions are more and more having to follow corporate processes, for example the sourcing and procurement of external services and the use of formal RFQ techniques. The switch from hourly billing to fixed fees will have some impact on stickiness. IP is more and more on the corporate agenda so there is greater scrutiny of IP and the activities of corporate in-house functions.

All this means that there will be greater opportunities as well as greater challenges for IP Firms, IP Service Providers and IP Solution Providers going forward.

Final thoughts

Stickiness is the quality that every IP product or service needs in order to ensure client retention and build their client base into brand evangelists. The key to thinking about stickiness is that if the corporate in-house function gets rid of an IP Firm, IP Service Provider or IP Solution Provider, will they miss you?

Donal O’Connell, IPEG Consultancy