Chapter 11 and 17

Chapter 11 – Appropriating the Gains from Innovation
Wharton Chapter 11 discusses one of the most important issues surrounding emerging technologies– how to make profits from the technology and block other from profiting. The chapter discusses three common misunderstandings about intellectual property and profitability, and then presents four ways to secure value from a technology.
Too much emphasis is put on intellectual property law as a way to secure profits from emerging technologies, and this can actually have a negative impact on a company. By assuming that patents and other legal protections are the best way to make money, attention and resources are heavily devoted to securing that legal protection that probably won’t pay off in the long run. Projects and technologies that might be very profitable are often overlooked if legal protection can’t be secured. The book uses Starbucks and their business as an example; they are able to be successful without using legal protection such as patents.
While the chapter first dismisses the myths surrounding intellectual property, patents and other legal protection is listed as a way to appropriate gains from innovation. The chapter cautions that while patents are costly and do not prevent other companies form “inventing around” the product, they have shown to be highly effective in varying industries.
The second way to appropriate gains from innovation is secrecy. Secrecy is the available means to provide protection. Secrecy would appear to be most beneficial in the early stages of development, while maintaining secrecy in later stages may hinder commercialization of the product. Secrecy runs the risk of negatively impacting the flow of communication within a company, hurting future R&D efforts, and stopping the flow of communication coming into a company. Once again I think the effectiveness and practicality would vary by industry and even in regards to processes and products.
Complementary assets are another way to make profits from technology. The book has touched on this in previous chapters, and it is again emphasized that complementary assets can be extremely beneficial to a company. The chapter uses the Biotech industry and IBM to illustrate complementary assets benefiting the companies. Assets such as established marketing and distribution channels, external relationships, R&D, manufacturing processes, etc. can be leveraged to accommodate for not being first to market with a product.
Finally lead time is presented as the most effective way to achieve profits. The more durable a product is, the more valuable having a lead time advantage is. Lead time can provide a company with a unique opportunity to get to further know the customers and develop relationships, while capturing any complementary assets that emerge.
The chapter concludes by saying that there is no one right way to make money from a technology, but by knowing the uncertainties involved and by assessing the business environment and paying close attention to rivals, patents, changes, etc., a company can select the best way to obtain profits from a technology.

Chapter 17 – Design of New Organizational Forms
Chapter 17 discuses how the presence of emerging technologies has caused retooling of the normal organizational forms. The six elements that constitute organizational forms - goal, strategies, authority structure, technologies, markets, and processes - need to be recombined accordingly to meet the changing business environment needs. The chapter discusses six current emerging organization forms.
Virtual Organization
Employees, suppliers, and customers are not physically located together but are connected by technology. This has proven to be very effective because it dramatically lowers overhead costs and creates unique opportunities for customer relationships. This has proven challenging as far as team collaboration and authority and accountability.
Network Organization
Self-governing work groups work together to provide a completed product or service. There can be external networks, which the book refers to “outsourcing in the extreme,” or internal networks. In external network organizations, independent companies work to collectively provide an end product or service. Internal networks functions the same way, but maintained within an organization.
Spin-Out Organization
Parent/child relationship where a new company is created inside a larger company, and then spun out into its own organization. The child company can take advantage of the resources of the parent company, and this a very useful way for a company to develop risky and expensive emerging technologies.
Ambidextrous Organization
Existing businesses and new businesses operate side by side within an organization. Separation is limited so potential issues can be addressed and resolved quickly. Current business can still be maintained while new business is developed.
Front-Back Organization
The customer is the front of the business and the business works to support that customer. There are hybrid variations of this form, where vertical reporting lines can be bypassed if needed. This would apply more in the service industry.
Sense and Respond Organization
Company is designed around meeting the ever-changing customer needs. A company must be able to remain flexible, sense the customer’s needs, and be able to change as needed.
Chapter 17 concludes by saying that as with everything else to do with emerging technologies, there is no one right form for an organization. There are many different variables to take into account, and by using these six organizational forms as starting points, a company can create an organizational form suitable to their nature.

I really enjoyed chapter 11, especially the information about patents. Before this I was under the impression that patents were a sure way to earn profits, but after this chapter and initial research for the chapter presentation, it seems like patents are a better defensive mechanism to prevent a company from being sued. If a company has a patent on a specific process or product, they have some protection against other companies who could potentially sue them. As the chapter stated, patents are not always efficient at stopping competition from inventing around the original product, but they can act as “speed bumps” to delay the competition and allow the company with the patents to secure lead time. It seems to me that there would be differences between patenting processes/business methods and products, and the degrees of security from the patent would vary by industry. The book only really touched on the worth of individual patents, not large corporations and their patent portfolio. One of the articles I read stated that Texas Instruments actually makes more money from their patent royalties than they do from their actual products, but I would imagine they are a minority in that aspect. What I really gathered from both these chapters is that there is no right way to achieve profitability or a right organizational form for a company. By being aware of the different options and picking the characteristics that fit the specific company and circumstance a company will be more likely to be profitable and remain competitive.

Safeguard Scientifics, Inc. and Novell Inc. were both mentioned in Chapter 17, Safeguard being the holding company that provided Novell with enough support to get up and running. Both companies are both in business, and Novell has been credited (or at least, credited itself) with developing the concept and technology of the WAN. Since then they have branched out into a cross-platform company, offering many software platforms from operating systems to email, to consulting and training. They have strategic partnerships with Microsoft, and have branched into security products as well. They really seem to have quite a diverse portfolio, which could be why they have remained in business and competitive for so many years.
http://www.safeguard.com/
http://www.novell.com/news/press/pressroom/history.html