The driving philosophy of corporate America used to be based on the principle of in-house development. If it wasn’t made in-house, companies simply weren’t interested. Companies wanted things over which they had full control, and from which they could enjoy 100% of the profits. Total independence. Total control. If a good idea came along that wasn’t developed in-house, the temptation was to find some way to tweak it and claim that it was developed in-house.
All of this led to some pretty nasty lawsuits. One of the best known cases, popularized in the movie Flash Of Genius, was that of Robert Kearns. Kearns was a Detroit engineer who developed the electronic intermittent windshield wiper for automobiles, getting his first patent for it in 1967. When he failed to get the major automakers to buy his idea and then saw them come out with their own shortly thereafter, he sued. After more than 10 years of legal battling, and millions in associated fees, Kearns finally received a total of $40 million from Ford and Chrysler.
Today, of course, companies still spend vast amounts of money on in-house research and development, and employ teams of attorneys to defend their claims. But now there is a huge difference in the way companies view the outside world and outside ideas. And the difference can be expressed in one word: partnerships. Never before has the idea of partnership carried such weight. Never before have companies been more willing to work together to generate profits. In doing so, they are discovering that there is a real synergy; that companies together can be far more than the sum of their parts. We’re not talking about mergers, although the same principle can sometimes apply, but rather about very specific working agreements. It may or may not involve creating a formal separate operating entity, and could be as simple as a one-time project.
In the case of marketing, it’s often just the sharing of customers through limited joint ventures or strategic alliances. For example, companies have found that one of the fastest ways to grow is to tap into someone else’s customer database, splitting the resulting profits. The company with the database gets to make money on a product or service that they themselves don’t have, while the company with the product makes money selling to customers that they don’t have. The idea has exploded for Internet based companies, but is now seen in almost every industry.
Technological partnerships are also increasingly common, not only between companies, but between institutions and companies. On the high end, giants like General Electric (NYSE:GE) are actively seeking technological partnerships, both in and out of the U.S. It’s easy to forget that it was only in 2007 that GE took its first serious steps at developing technological partnerships with companies in Japan. Compare that with the joint venture between Fuji (Nasdaq: FUJI) and Xerox (NYSE: XRX), a partnership that has been around since 1962. On the opposite end of the scale, Kraig Biocraft Laboratories (OTCBB: KBLB), a small biotechnology company specializing in creative new ways to produce technical fibers, has managed to significantly leverage its own efforts through cooperative partnerships with select university laboratories.
Today there are thousands of partnership arrangements, involving every conceivable form of sharing. One of the purest examples of a technological/marketing partnership is Newport Digital Technologies (OTCBB: NPDT). Based in Newport Beach, California, NDT has worked out an exclusive partnership with Taiwan’s premier technology incubators, the Institute for Information Industry (III) and the Industrial Technology Research Institute (ITRI). By taking on the role of a link between these two R&D powerhouses and a worldwide network of technology hungry customers, NDT has given itself an immediate and major technological edge, without having to go through the impossible task of developing everything in-house. As a result, NDT now has a rich portfolio of RFID, WiMAX, eLearning, LED Signage, and Security & Surveillance technologies it can offer its customers. NDT co-owns all the intellectual property rights and has exclusive worldwide distribution rights. At the same time, the two incubator institutions gain access to customers around the world.
In short, companies have discovered that there is more (and easier) money to be made by bringing together and sharing existing resources and ideas, rather than by locking them up just to maintain total independence and total control. It represents a permanent shift in the way companies do business, a new age of partnerships.
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