For instance, patents are not self-enforcing; patent infringement and trade secret misappropriation is frequent, sometimes leading to costly litigation. Moreover, many patents can be “invented around” at modest costs (Mansfield 1985; Mansfield et al. 1981). The pioneer’s business challenge is usually quite a hard one; followers often have it easier. To help with appropriability, the pioneer of a core technology can try to seek complementary patents on new features and/or processes and, in some cases, on designs, but these activities may delay efforts at licensing or commercialization. A key question before choosing this business model concerns the strength of the relevant intellectual property regime.
For example, the credit card industry has long provided a viable payment option that merchants will accept, that banks will join by issuing cards and processing transactions, and that cardholders find of value. However, the newer digital transaction platforms present an unprecedented opportunity to accumulate and leverage the knowledge voluntarily shared by its users. A platform is a combination of hardware and software that provides standards, interfaces, and rules that allow providers of complements to add value and interact with each other and/or users.
A paradigm example is eBay, which allows huge numbers of individual sellers and buyers located anywhere in the world to find one another with an ease that was previously unimaginable. While digitization has enabled transaction platforms in a growing range of industries, this transactional type of platform is not entirely new.
Collectively, the platform innovator and the complementors constitute an ecosystem that depends on continued innovation and maintenance of the platform by its owner for success. If one applies the PFI model, many complements are likely left to other firms to provide. These firms, which may supply inputs, accessories, or ancillary services, add value to the focal firm’s innovation and constitute the innovator’s business ecosystem.
If the innovation can be imitated and intellectual property protection in the relevant jurisdiction is weak, then licensing may not be viable, and the innovator may be forced to integrate in order to have a decent chance of capturing some value. Of prime import is how the elements of a business model create differentiation from competitors in the market. Although many business models, such as power-by-the-hour, can be copied by rivals, in practice it may take many years for this to occur. Competitors may calibrate their own opportunities differently, plus they may be short of the organizational versatility to switch company models. In a few cases, an present business structure can become rejuvenated by changing only a few of the elements. For example , Rolls-Royce changed its income model in the 1960s in order to “power-by-the-hour”, or “jet engines like a service” (Rolls-Royce 2012).
The particular customer, instead associated with paying the high set price of the motor in advance, pays just for the hrs when the motor is operational. Rolls-Royce has strong bonuses to keep the particular customer’s engines inside good working purchase, as opposed to the old program by which its motivation was purely to market engines. Furthermore, a good hourly contract allows Rolls-Royce to lower rivalry from third-party service providers, assisting it capture the particular lucrative service partnership that has usually been more lucrative than selling the particular engines themselves. Many “new” business versions will be much like older ones, including a permutation or even hybridization of current models. While presently there are a finite quantity of business structure sorts, the opportunities with regard to recombinations are practically endless.
A licensing model may also require that technology be transferred to licensees. Moreover, the technology’s use may not be easy to monitor (Somaya et al. 2011). A further complication in recent times is the emergence of cybertheft and other cybersecurity problems. Being secure to market must often take precedence over being first to market. The strength of intellectual property such as patents, trade secrets, and copyrights is often illusory.