April 13, 2009

IAM/IPM system in Agribusiness visualized

In my previous blog post, I conclude with “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”. This will require companies to form, and transform into, elaborate IPM/IAM systems where internal assets are consciously controlled to create maximal value. Teece D.J. states in his 1992 (Competition, Cooperation and Innovation) article “the boundaries of the firm are getting fuzzy”; and it is therefore, in my opinion, even more important to manage all types of assets in the development network of a firm, since value creation will be more and more dependent on collective participation in open technology platforms. However, this is to think in practice but rather complex to implement in practice. I therefore thought it would be interesting to visualize a small case study of a real life example where an intellectual asset strategy has been successfully implemented. The problem, as always, is that there is never enough public information available (for obvious reasons) to do an in-depth study, so bear with me as I briefly try to deconstruct one of the more successful commercialization strategies in Agbio; Monsanto’s commercialization of its INGARD technology in Australia.

Case Background
Cotton containing the Bt gene – known as ‘Bt cotton’ - was among the first genetically modified crops in widespread commercial production. Bt cotton has been commercialised in Australia, by Monsanto, under the trade mark INGARD® and in many other countries under the trade mark BOLLGARD®. INGARD cotton has been modified by the insertion of the Bt gene derived from Bacillus thuringiensis together with a promoter region into the cotton DNA. The genetically modified cotton plant expresses the Bt toxin targeting pests such as the cotton bollworm and the native budworm.
The key players involved in the commercial development of INGARD cotton technology in Australia are;
• Monsanto: the owners of the Bt patent and the INGARD® trade mark
• CSIRO: the public sector research institution which owns variety rights on cotton germplasm
• Cotton Seed Distributors and Delta Pine: two commercial seed firms.
Read more about the case here.


The INGARD Value Chain
A simple overview of the value chain that shows a high-level of a selection of the transactions that enable the commercialization strategy is shown below.

Knowledge Management: At the top of the value chain is the knowledge management level. Here all the basic discoveries and enabling technologies can be found that provide a foundation of information and knowledge that may ultimately lead to societal utilities through bundling, innovation refinement or other usage. In this case we find scientific discoveries that ultimately lead to the identification and characterization of the Bt-gene and promoter. The arrows between Monsanto and these discoveries are dashed as I have not been able to find any information regarding the transactions between these two levels.
Genetic Management: At this level we find Monsanto and its Bt-gene capabilities and assets, in this specific value chain.
Genomic Management: Despite Monsanto’s many years’ of R&D in the Bt-gene and its expression in plant systems it did not (at the time) have access to suitable germplasm necessary for developing new varieties of cotton bearing the gene for production in Australia. CSIRO did both have the germplasm and a commercial partner (Cotton Seed Distributors) with the capabilities to distribute the finished product.
End-user Level: The finished product (commercial Bt-cotton) is delivered to growers at this end-user level. Much of the success of Monsanto’s commercialization strategy was owing to the technology user agreement that enabled additional value extraction and direct royalties from end-user to technology provider.

IA/IP Management Level
It is quite simple to stop the analysis at the “value chain level“ and conclude that licensing is important in a knowledge-based economy. This is too simple, in my opinion, and fails to unveil where the real value is created and captured. To understand this on a more detailed level we need to zoom in to see ”Monsanto as a value generating IAM/IPM system“. Since I was able to find Monsanto’s technology user agreement for INGARD cotton (1999/2000) I was able to map out at least some of the value creating processes on a more detailed level, although there is still a lot left to understand for a full picture;

Since most of the assets shown in the picture are of intangible character, it is simple to conclude that clever governance will allow for value extraction of one assets in simultaneous markets (e.g. Bt-gene in cotton, corn, soybean, etc.). Moreover, some assets will increase in value by feedback-loop mechanisms where the technology and market database is an interesting example. According to the user agreement, growers are obligated to disclose scaled map of their farm units as well as information about what they are growing and how. This valuable information becomes proprietary to Monsanto which is allowed to use it as value propositions towards CSD ”to anticipate INGARD Cotton Seed demand“, according to §6.1 (c) of the technology user agreement, meaning that the value of this database further increases as more customers uses the technology. Then considering that growers are obligated to grant-back improvements and developments in relation to the technology to Monsanto ”to use, license or assign, without charge or restriction” (§4.3) it is quite simple to conclude that this is a valuable strategy for the company.

More about IAM/IPM capabilities in upcoming posts.

Tobias Thornblad
(Follow me on Twitter)

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

For some interesting examples of the norms that create these types of transactions see: http://intangitopia.blogspot.com/2009/05/transactional-norms-in-agricultural.html

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