If your growing company has proprietary technology and you'd like to expand your business beyond your current markets, you can either pursue alliances with larger businesses, license your technology to other users or spend your resources for more internal development. The most successful way to expand appears to be through external partnerships, and the best way to do that is by turning your internally generated technology into a "portfolio" of resources.
In "Leveraging the Value of Proprietary Technologies" (Journal of Small Business Management, January 2002), Donna Kelley and Mark Rice studied 67 emerging firms in the computer and telecom industries during their first nine years of operation and the success factors used to build marketing alliances using intellectual property (IP). They found that the condition and packaging of your company's IP is far more important in getting external partnerships than your sales force, your years in business, your senior management team or your current customer base.
The best way to package your IP is as a "portfolio" of resources. Firms that do this have a much higher success rate in securing outside strategic partnerships. Creating a range of patents for your IP gives your company more legitimacy when you pursue larger firms for partnerships. Getting patents for subcomponents of your IP and for each specific application variation is also crucial to demonstrate to big companies the value your firm brings to the alliance. Patent citations (other firms mentioning your prior patent in their later patent work) also build the IP portfolio's perceived value by demonstrating your IP's similarity and/or compatibility with numerous subsequent technologies.
Even if you only have one patentable IP component, you can patent subcomponents of it, list specific applications for it, record all its patent citations, and otherwise create a "package" delineating all your IP's commercial links. Turning your IP into a portfolio greatly increases your chances of securing external alliances.
David Newton is a professor of entrepreneurial finance at Westmont College in Santa Barbara, California. For more journal summaries, visit www.techknowledgepoint.com.
David Newton is a professor of entrepreneurial finance and head of the entrepreneurship program, which he founded in 1990, at Westmont College in Santa Barbara, California. The author of four books on both entrepreneurship and finance investments, David was formerly a contributing editor on growth capital for Industry Week Growing Companies magazine and has contributed to such publications as Entrepreneur, Your Money, Success, Red Herring, Business Week, Inc. and Solutions. He's also consulted to nearly 100 emerging, fast-growth entrepreneurial ventures since 1984.