MIT Sloan Management Review

Corporate Strategy, Management of Technology and Innovation

 

Sharing the Corporate Crown Jewels

By David Kline

April 15, 2003

The attitude toward proprietary intellectual property used to be “protect and don’t share.” But more and more companies are discovering that “strategic licensing” —sharing core technologies with others, even competitors — can have significant financial and strategic benefits.

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A decade ago, Procter & Gamble’s paper-towel production line in Albany, Georgia, used to jerk to an unexpected stop more than a hundred times daily, costing the company thousands of dollars each time in wasted product and lost production time. To solve the problem, P&G developed a suite of sophisticated technical and statistical tools that not only helped managers predict such assembly line snafus but also prevent them. This “reliability engineering” technology has given the company an important competitive advantage over rivals, as it has helped P&G boost manufacturing efficiency by more than a third and save billions of dollars in the years since it was introduced.

It came as quite a surprise, therefore, when Procter & Gamble announced in the summer of 2000 that it would henceforth license this same technology to any and all bidders — including its own competitors. The company is known, after all, for being fiercely protective of its proprietary innovations (witness the forced bankruptcy of rival diaper-maker Paragon Trade Brands in 1998 after P&G won a patent suit against it). Yet suddenly P&G was offering (for a price) to share with other companies not only its reliability-engineering tools but its entire stock of 28,000 technology patents as well.

Although Procter & Gamble’s decision stumped industry analysts at the time, the company’s move is actually part of a larger trend (see... To read the complete article, login or sign-up using the form below.

 
 

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