The issue of proprietary tech IP and whether to hold it tight at all times isn’t a common strategic topic that I’ve run across often in the high tech world. It does get discussed on a piecemeal basis, as the need to disclose something sensitive to a customer or partner pops up. In general, I’ve found folks tend to hold such information tight. Many senior managers of software and hardware companies have a long-held tendency toward rigid secrecy. Maybe they’ve been burned in the past – or maybe they are just naturally paranoid! In any case, I believe that in most companies this is a topic that deserves a bit more attention and thoughtfulness as a strategic corporate topic. Here’s my view on some ways to frame the discussion:
Understand fully the nature of your business?
Is your company’s competitive advantage based up on proprietary IP, the power of your brand, or a fundamental cost advantage due to size and scale? Or something else? In my opinion, the place to start this strategy discussion is to fully understand your business and the role information plays in competing in the marketplace. If your advantage is heavily IP based with strong patent protection, the initial impulse may be to protect your IP at all costs. But if the patent protection is very strong, what is the advantage to your competitors getting a hold of it – if there isn’t much they can do about it anyway? Besides, much patent information is necessarily disclosed in you filings anyway. Plus, it might give you an even STRONGER competitive advantage to use this proprietary information freely in discussions with potential partners and customers. People like to work with “winners’ and those with strong technological advantage; giving them a glimpse of how powerful your advantage is can be used to great effect. This is just one example of how a deeper strategic analysis of your business, with respect to disclosure of proprietary company information, may lead you to a different policy on the topic of secrecy vs. transparency than might be obvious on the surface.
Honestly appraise the value of transparency vs. protection of tech IP
Once you’ve decided that you have tech IP which, all things considered, you’d prefer to remain low-key or completely secret, you still need to consider the risk vs. return of disclosing it in any particular situation. The point here is that even if you have something that is important, paranoia can work against you if you take IP protection to an extreme. After all, IP is only valuable if you are able to use it. Sometimes this means embedding it deeply in a software, SaaS, hardware or semiconductor offering where it appears to be safe from prying eyes (although this often is just a false sense of security). Other times, to exploit your IP to the fullest necessitates the carefully considered, prudent exposure of it to potential customers, partners and investors. This of course a bit scary when you’ve put so much time, money and effort into creating an IP competitive advantage. To some, it’s downright terrifying. But you can’t let this emotion cloud your judgment, when it comes time to decide on how much to disclose in an individual business situation. Nearly EVERYTHING in business is about weighing risk vs. reward. Try your best to be objective in this important decision.
A balanced approach with basic guidelines but allowing for case-by-case exceptions is usually best
Years ago I worked for a company who’s base business was in defense industry services. I came in to start up a commercial software product startup business – nearly the polar opposite in many ways from the existing business. Because of the nature of the base business (government contracts, often involving “black ops and other highly classified activities), the culture with respect to disclosure and publicity was very secretive. All of this made perfect sense for the existing business – but not at all for the new venture I was starting up. Yet I remember being in a meeting discussing launch activities for our first product. I mentioned that we needed to hire a PR firm; the response was “we don’t do PR here – next topic”. I was shocked and taken aback, since this is such a basic business tactic on the commercial side of the tech industry. After a lot of discussion, explanation and time, I finally got my PR firm. But due to the differences between my startup venture and the bread-and-butter defense business of the parent company the topic of transparency — even when it was normal and important — was a constant struggle.
What damage will disclosure do? In the long-run almost all information becomes transparent
One of the things to consider when weighing this often difficult decision is to ask yourself “What’s the worst thing that could happen?” both in considering the decision to disclose — or not disclose. This puts a “floor” on the consequences of your decision. It’s also a good idea to take sound, basic steps such as getting a signed NDA agreement before disclosure of tech IP (if this is practical given the situation).
One example of asking this question “what’s the worst that can happen?” is what I find is often be the folly of executives reflexively not discussing their financial or business metrics because they are a “private company”. When I hear “We’re a private company, we don’t discuss that” when I ask a simple question such as how many employees a company has, or what their revenue run rate is, I tend to smile and shake my head. Why not? What is it that you would expect me to do with this information? Run off and immediately tell your most hated competitors? Not only do I have no reason or interest in doing such a thing for ethical reasons, but in this Internet era I would severely risk ruining my reputation and impacting my ability to make a living. Even if I was so inclined to report this information to a competitor, what would THEY do with it? They might be interested in hearing it, but the likelihood that it would provide them with some significant competitive advantage is very low. But by not disclosing this basic information, often people assume the worst; that you’re not disclosing it because you are very small, revenue is low, etc. In many business discussions the context of the developmental stage of your business can frame a discussion in such a way that makes the discourse more valuable to you. This is just one simple example; if you think about it I’m sure you can envision others.
This discussion of transparency and tech IP is a bit of an odd one which is not discussed often from a strategic perspective. But I believe it is very important nonetheless. What’s you view on how to balance these two disparate approaches? Leave a comment below with you own opinion and business experiences.
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