Why Proprietary Does Not Provide a Long Term Business Advantage

In my former companies, we were fanatical about protecting our intellectual proprietary property. We had this idea that the best way to protect our turf was to earn patents for our inventions to prevent anyone else from duplicating our efforts. We falsely believed that these patents would a) provide clear differentiation for our offerings; and b) keep us clearly ahead of anyone who wanted to compete for our clients. Though our businesses were successful, in retrospect, our value had very little to do with the proprietary nature of our solutions.

I enjoy watching the ABC show, Shark Tank. The premise is a show where entrepreneurs pitch their business idea to a group of successful investors. One of the investors, referred to as sharks, is Kevin O’Leary. Kevin is predictable in that regardless of how creative the entrepreneur might be, Kevin often complains that “What you have is not proprietary.” Don’t get me wrong, Kevin is a savvy investor with an impressive history. However, his narrow focus on proprietary investments may be misguided.

Why Proprietary Is Dangerous

In my former businesses, I recall members of our board celebrating that “nobody else could do what we do.” But, we still ended up with competition. Creative businesses would figure out a better way to solve a similar issue, without infringing on our patents. The problem is that by resting on the false-security of a patent, it is easy to get blind-sided by innovation, service, or creative alternatives.

Innovation Does Not Equal Proprietary

Innovation is not the same thing as proprietary. Zappos innovated by providing exceptional service and free shipping. They have built an empire based on nothing (or almost nothing) that can be protected by proprietary claims. Still, they outperform their competition quarter after quarter. In a recent article by Seth Godin, Seth explains that the best companies seek out competition. In fact, they are so confident, that they’ll setup shop adjacent to their direct competitors. The message these companies scream is “We are better than the rest.” Godin points to burger chains like Shake Shack and Five Guys who routinely open right next to existing burger joints.

Are You Up To The Task?

Is your business hiding behind something that is allegedly proprietary, or are you providing innovation, exceptional service, and value? If your customer had a choice between something that only you could provide, or something that delivered exceptional value and experience, which one would they pick? Put another way, if you could deliver exceptional value and experience, would your customer value it more if it was proprietary? In most cases, your customer would like you better if your exceptional solution was not proprietary… they’d simply prefer remarkable.

It’s your turn

When has proprietary been a turn-off for you… other than the iPhone charging cable.