March 31, 2009

Information capture and repackaging as core business

Some time ago, I blogged about the company 23andMe that specializes in personal genetics by offering DNA testing kits and web-based interactive tools that allows individuals to understand their personal genetic information. The company was founded by Linda Avey and Anne Wojcicki, in 2006, and its investors include Genentech Inc., Google Inc., and New Enterprise Associates. The company recently announced that they have launched a Parkinson’s Disease (PD) initiative in collaboration with the Parkinson’s Institute and Clinical Center and the Michael J. Fox Foundation.

Community-based research
The PD initiative is planning to use an open platform approach where the two clinical institutions above will reach out to their networks and encourage PD patients to enroll. The press release states that “the first-of-its-kind program will focus on enrolling 10,000 individuals with Parkinson's disease” meaning that a valuable database is likely to be built from the genetic information. One of the major advantages for participating PD patients, at the same time, is that they will have access to an online community where they may meet others in the same situation as themselves. Commercial tests are usually $399 each, but Google co-founder Sergey Brin has made a personal contribution to lower the price to $25 each for participants for the benefit of PD research. The value of the contribution is not explicitly disclosed but simple mathematics of a cost decrease of $374 per test for a total of 10,000 participants adds up to an indicating value. Current customers of 23andMe, who are not PD patients, that already have their genotypes uploaded into the 23andMe databases, can also contribute to the initiative by participating as “healthy controls”.

Intangibles as value-drivers in knowledge-based business
Knowledge-based industries, such as biotechnology, enable interesting novel structures due to the nature of intangibles. The PD initiative provides an optimal example of a structure where information is the most important underlying object of transfer. Although it is repackaged into many forms: First the genetic information is inaccessible (physically present in the nucleus of cells) and hence without direct value to the PD patient. By enrolling in the initiative, that very same patient transfers (by physical means: DNA kit + post office as distribution channel) his genetic information (physically present as saliva) to a cost of $25 to the company’s database where the information is presented back (by virtual means: analyzed data and predictions in a web-browser) to the PD patient. The patient may now choose whether he would like to share or compare his data or parts of it to peers (by virtual means: presented as personal data) within a community of others in the same situation. At the same time, data supplied by the PD patient contributes to a database that will increase in value for the company (by virtual means: analyzed data becomes building blocks for bioinformatic/computational tools to make discoveries) and participating institutions* (by virtual means: genomic associations that may lead to clinical studies - which may in turn provide further data that can build the database even more).

Maybe even more interesting, at least from an IAM/IPM perspective, is that due to the scalability of the current model: 23andMe is planning to launch several new communities for other diseases - extracting tremendous value from their current assets and capabilities by segmenting parts of their existing business model (TBMDB).
* I have assumed that the institutions have access to the data for the sake of argument.

Intangible assets and property
The scalability of the model makes it very attractive, but what are the underlying assets, capabilities and activities that are needed to create it? The list of assets can be made long, but on a high-level some key assets include a proprietary database of both understood and non-understood data, tools to sequence and analyze genetic information, (probably) cost-efficient out-sourced distribution channels for sending out and collecting information, an external relational capital of information-suppliers / high-end investors / renowned advisors, internal human capital, customer user base, trademarks claimed through (™), and software to manage, analyze and ”present data back“ to the customer. Not to mention policies, agreements, strategies, competitor intelligence, technical know-how etc that would require a more in-depth investigating to be identified and described.

IAM/IPM capabilities to control and extract
Some quick searches in Google Patents and Patentlens for 23andMe as assignee did not yield any results. So how does the company maintain in control over their value creation and extraction? A number of capabilities, and IA/IP strategies probably exist for each of the assets. But if we look at the proprietary database as an example, some strategies possibly include;
• property-based copyright protection associated with the totality of organized data
• technical control by providing proprietary softwares which (only?) displays data from 23andMe
• market power through a large user-base where the network effects of online communities create higher barriers to entry for other players
• contractual control to ensure that rights to use the information within are maintained (see example below)

Example of contractual control between the customer and the company: (17.) 23andMe’s Proprietary Rights: ”[...] Your saliva, once submitted to and analyzed by us, becomes our property. Any genetic information derived from your saliva remains your information. We retain the rights set forth in the consent form and any additional terms of service.“.
”You retain copyright and any other rights you already hold in information and content you create and which you submit, post, or display on or through, the Services. By submitting, posting, or displaying the information and/or content, you give 23andMe a perpetual, irrevocable, worldwide, royalty-free, and non-exclusive license to reproduce, adapt, modify, translate, publish, publicly perform, publicly display, and distribute any content which you submit, post, or display on or through the Services.“
”You agree that this license includes a right for 23andMe to make such content available to other companies, organizations, or individuals with whom 23andMe has relationships, and to use such content in connection with the provision of those services. [...]“

At the same time, it is interesting to think that a number of IA/IP strategies probably exist to extract even more value from the database, including;
• value capturing strategies to repackage data in the database into new value propositions (e.g. genetic associations to be used in studies, new genetic tools, new communities, database access for external parties, publication opportunities, intellectual objects for transactions or to form new ventures/entities, and so on)
• strategic alliance strategies to both evaluate existing data, and to collect new data for other diseases

Final thoughts
In my previous blog post, I discuss the changing role of patents in a knowledge economy and how companies must incorporate IP strategy to their cores. I think that 23andMe provides an interesting example for how both control and value can be maintained efficiently, while managing several simultaneous value recipient, by detailed IA/IP strategies (although, I have in this case interpreted the strategies as a case study based on their public information). I think that many organizations can learn from this model. IAM/IPM capabilities will need to become key to business strategy for every organization that wishes to be a player in a knowledge-based economy.

Tobias Thornblad
(Follow me on Twitter)

IAM/IPM capability and open innovation will be discussed further by prominent IP thought-leaders during CIP FORUM 2009, 6-9 Sep, Gothenburg, Sweden.

(Link to 23andMe’s blog: the Spitoon)


  1. Thanks for a great post Tobias! Very interesting and well written!

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