True innovation isn’t about the size of your patent portfolio

innovation patent
Image credit: Andrii Yalanskyi / Shutterstock.com

Here’s a pro tip for every country trying to be the next Silicon Valley by fostering new innovation hubs for start-ups: patents don’t matter nearly as much as pragmatism.

A panel at this month’s RISE conference attempted to pin down where the next innovation hub would be – specifically, will China overtake the US as the world’s major innovation hub, especially for hot emerging technologies like AI?

However, with all panelists essentially agreeing that innovation isn’t a matter of geography or East vs West, the far more interesting takeaway from the discussion (for me, anyway) was that developing a successful innovation hub – regardless of location – starts with understanding just what counts as innovation.

Put simply, innovation isn’t about inventing something no one has invented before and patenting it – it’s about creating something useful that solves a particular problem.

“It’s really about pragmatism, and that means something new that can be applied to help make our business models and our business processes better,” said Arthur Hu, global CIO at Lenovo. “It’s the application of technology. It’s different than just invention, because novelty by itself isn’t useful.”

James Peng, co-founder & CEO of Chinese autonomous driving start-up Pony.ai agreed.

“Anything new that can create value can be considered as innovation,” he said. “I think the general misconception is that anything patentable, or a geek sitting in the room working on some innovative ideas – that’s innovation. But in fact, anything [enabling] new ways of doing things, or engineering ways of making things better – those are all innovations.”

That’s not to say patents have no value at all, or that there’s no point to them. Peng noted that while Pony.ai has over 100 of its own patents as “part of the routine business.”

Edith Yeung, managing partner at blockchain-focused VC fund Proof of Capital, said that getting a patent for a particularly unique innovation can give a company a slight edge in terms of market leadership.

But from a purely investment point of view, she added, the patent itself isn’t what impresses the VCs anymore.

“It is a nice-to-have, but it’s certainly not the key thing,” Yeung said. “I think the most important thing is always about the founder, the size of market, what sort of pain point they understand, what sort of problem that they really solving? It’s interesting to see that they have ten or 15 patents, but it’s definitely not the most critical thing.”

Execution is key

That said, Yeung explained that the importance of patents does depend to a large extent on the company’s business model and industry focus – for example, companies that expect their chief revenue source to be licensing IP.

“It depends on the type of company that you want to build – B2B and B2C companies are very, very different,” she said. “If you’re doing any sort of artificial intelligence, and hardcore semiconductors, do you want to be a Qualcomm, or do you want to be a Tencent? They’re just really different companies.”

Of course, one reason tech companies patent their technologies is because they don’t want competitors taking their own innovation and turning it against them. But Peng of Pony.ai said he didn’t see that as a risk – partly because “everybody borrows from everybody”, and partly because what really matters isn’t the innovation itself but how well you execute it.

“Ideas are cheap – execution is important,” he said. “How do you make the product better? For example, there are many messaging apps out there, but which one is easier to use, which one can keep the user more engaged? Those tend to be the product that will win in the end.”

Lenovo’s Arthur Hu agreed, coming back to the point that innovation and IP aren’t necessarily the same thing.

“It’s something that you can have as a competitive weapon, but if you don’t use it, if you don’t put it in motion, it’s useless,” Hu said. “History is full of companies that had great IP portfolios that have totally failed. So just having IP doesn’t mean you’re an innovative company.”

Peng said that at the end of the day, what matters isn’t having a patent but what you do with it. “You have to do demos – you have show the usefulness and what’s innovative of your product. I think that speaks for itself.”

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