Should Patents alone be the holy grail of innovators: Learning from Influenza virus

posted by Ravi Arora September 13, 2016

Most managers see R&D function as the owner of innovations. This view may not be incorrect but is surely limiting. Why? Customers and stock markets use their perception about the products that a company sells to form a view about innovativeness of that company. For several years, innovations in products were around ‘product functionality/features’, and was rightly owned by the R&D staff. R&D scientists have used patents to protect their outcomes from getting copied to get the most out of their research led innovations. Therefore ‘Patents’ had become one of the most critical metric for R&D scientists. This further created an impression that not only R&D owns innovations but also that patents and innovations are synonymous.

Let’s look at the following two trends. The first one is an Ngram outcome which shows that the number of books written on ‘Innovation’ were far less than the number of books written on ‘Patent’ in the first half of 20th century. Gradually the gap diminished and in the last decade ‘Innovation’ outpaced ‘Patent’.

The second one is from google trend that gives the trend of searches made on google. This is a 12 year data and clearly shows a steep drop in the trend of ‘Patent’.

The above two charts indicate that the interest of people has increased substantially (Ngram) or sustained (Google trend) on innovation. It could also indicate that the subject of innovation is still evolving and people are trying new ways of doing innovation (increase in ngram). This increased interest on innovation hasn’t resulted in corresponding increase on the subject of Patent. No doubt, patents were/are used to avoid/delay the competitors to copy the technology (research outcomes) which enables many innovations.

In the last 2-3 decades, we see increasing number of innovations that are not necessarily differentiated through patent protected functions or features or technology but through customer centric designs. There is also an increasing trend of research capabilities getting more dispersed, deeper and narrower that needs finesse in integrating them to make something meaningful and appealing. Other than using patent to protect and avoid competitors from copying their innovations, companies are using additional methods to discourage the competition. Let me would put them in three broad categories:

  • Those that make it difficult for competitors to copy the product from technical point of view: Examples of this would be Patents, trade secret
  • Those that make it difficult for competitors to replicate the success from the copied product (assuming that it was somehow possible to copy or mimic). Examples of such factors would be the Distribution strength, Network of partners, Customer (emotional) connect, the brand etc.

  • Finally the one that baffles & unnerves the competitors. This is achieved through the fierce and regular pace of innovations that have a good mix of incremental and bigger innovations. This method is becoming increasingly relevant for all industries in today’s environment, which is overwhelmed by the digital disruptions. All product managers across industries need to learn from the influenza virus, which constantly changes. It is important to know that this virus changes in two different ways:
    1. One way is called ‘antigenic drifts’, which are small changes in its genes that happen continually over time as the virus replicates. These small genetic changes usually produce viruses that are pretty closely related to one another (incremental innovations but rapidly). These genetic changes can be illustrated by their close proximity on a phylogenetic tree. Viruses that are closely related to each other usually share the same antigenic properties and an immune system exposed to a similar virus will usually recognize it and respond. The interesting fact about these small genetic changes is that they can accumulate over time and result in viruses that are antigenically different (further away on the phylogenetic tree). When this happens, the body’s immune system may not recognize those viruses.
    2. The other type of change is called “antigenic shift.” An example is H1N1 that quickly spread, causing a pandemic (Disruptive or radical innovations)

While influenza viruses are changing by antigenic drift all the time, antigenic shift happens only occasionally.