The Chinese people began to build the Great Wall of China in the 5th century BC. The great wall is for protecting the country from invasion, theft and plunder. Today, as we enter the globalized technical-oriented industrial/business world, protection like the Great Wall is still needed, even more essentially. That Great Wall needs to be built by you, my fellow scientists and engineers.
Recently, I have been heavily involved in plenty of international business development activities. Mostly technically oriented. Despite the high excitement of the vast potential market in some countries, a few things that we noticed certainly raised flags to our decision makers.
First, as a long time topic, IP protection. Currently, almost all the companies understand that the intellectual property will be at risk of being stolen if they enter another country without that country’s patent. Obtaining the patent does help a lot in this situation. As a lot of countries tighten up their legal system and law enforcement, IP protection is becoming less difficult. However, as we found out, other forms of risk still exist.
For example, in the chemicals industry, many foreign manufacturers are seeing more and more local chemical producers come up with large amounts of low-priced, low-quality products (similar to the import products). Technically, they didn’t steal the formula from you, but they can legally learn the concept of the products and make cheap low-end equivalents. Theoretically that shouldn’t affect the better products’ market. However, sadly, in fast-growing countries, many customers would rather compromise with cheap low-end products because of intense competition in their market and industry. Thus, even if you are well protected, you still lose.
Another interesting thing is the model of nationalization and local-take-over. We have seen examples like this: in some high volume, high margin industries, one of the key chemicals for production is mostly imported products. The biggest customers are mostly state-owned enterprises. For the first 5 years, the state-owned enterprises keep buying from imports. At the same time, they invest big on their own R&D or local R&D, study your product, and try to figure out how to come up with similar products, also with good quality and performance. When the time comes to the end, there will be two possible scenarios:
1. They have a product that could match the imports, they cut you loose.
2. They couldn’t come up with as good a product, they offer to buy you out.
Either way, that’s kinda the end of your business there.
Despite all these risks, we can still protect ourselves. And that protection is what I call “the technical barrier.” It is simple: make your technology advanced and difficult enough so your competitors and customers can’t figure it out. At least for a period of time, they can’t. Never stop the innovation. Before they figure it out, you need to come up with a new generation of product to replace your own. Thus, you are always one step ahead of them in this battle. Look what Apple did: you make similar mp3 players to the Ipod? I come up with an iphone. You make a smart phone too? I give you an Ipad. You make tablets too? I got an Ipad 2!!! “What up, followers??? Catch me if you can, but our innovation never stops.”
And look at the pharmaceutical companies. Pfizer comes up with some great drug and makes big bucks for 10 years. After that, they are obligated to reveal the formula to the public. It will lose its value. Did they just stop making profit? No, they start selling a new drug for higher profit! And all of this comes from the innovation of R&D.
The Great Wall of China could defend against the Huns with horses and swords thousands of years ago. But our competitor is a lot smarter and faster in the business battle field. The patent attorneys and government regulations might help, but the ultimate guardian is you yourself. To protect your product after years of research, you need to build up a dynamic technical barrier. Make your technology more advanced, so they can’t figure it out and copy it. And never stop innovation, so you are always one step ahead of your competitors. That is your real ultimate Great Wall.