3

LEVEL THREE—PROFIT CENTER

COMPANIES THAT HAVE moved to Level Three have crossed the Rubicon. They now realize that their IP generates value that transcends the revenue from their products and services. Whereas companies at Levels One and Two are focused on the defensive use of IP, companies at Level Three realize that they possess two kinds of intellectual assets. The first are the company's innovations themselves—the ideas that yielded the products and services that generate the company's prime revenue stream. But in addition, Level Three companies realize that the IP itself has value—notably in tactical (rather than strategic) positioning, and in the profitable generation of revenues (see Exhibit 3.1).

WHAT LEVEL THREE COMPANIES ARE TRYING TO ACCOMPLISH

Companies at Level Three see their IP as business assets, not just as legal documents. As business assets, the bits and pieces of a company's IP can become puzzle pieces in answering the great question: How can we succeed in building this company's value?

At this level, companies typically want to do two things:

  1. Extract value directly from their IP as quickly and inexpensively as possible

    EXHIBIT 3.1 The Value Hierarchy

    images

  2. Focus on noncore, nonstrategic IP that has tactical (as opposed to strategic) value

Companies newly involved with Level Three tend to look, quite naturally, for what is often called “low hanging fruit,” which ...

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