Intellectual asset management for succeeding in e-commerce

Being an e-commerce company, Amazon has emerged as the most valued company in the US stock market -- known to many of us. But upon receiving 1672 patents in 2017 alone (as reported by the US Today), Amazon's 15th position among the top 50 patent recipients in the US patent office is not known to most of us.   

As an e-commerce company, why has Amazon placed so much emphasis on generating intellectual assets is a question worth pondering indeed?  As artificial intelligence (AI) expert Kai-Fu Lee has noted, China's Didi Chuxing had to acquire and integrate a significant amount of intellectual assets fuelling innovation to bring down food delivery cost to $0.7 for creating the e-commerce success story. E-commerce like any innovation has a natural tendency of loss-making. Although subsidy is needed, subsidy alone cannot turn this loss-making revenue into profit. The generation of intellectual assets and integrating them into innovation at virtually every step of e-commerce -- starting from sourcing, packaging, route selecting and designing delivery logistics -- is crucial for continuously improving the quality and reducing the cost of delivery for reaching profitability.

Due to very low entry barrier and plentiful availability of mobile internet access across the globe, numerous e-commerce start-ups have been showing up virtually in every country. For example, in Bangladesh, Commerce Ministry (as reported in the media) is planning to promote additional 5,000 e-commerce start-ups to jack up online business, which has already reached BDT 20 billion with a recent growth rate of 100 per cent per annum.

Basically, all of them invariably start the journey with loss-making. Although there has been a call from start-ups for increasing the supply of risk capital finance to sustain loss-making operations, there has been virtually no urgency for accruing intellectual assets to turn loss into profit.

For an e-commerce business, the interface with customers starts with the website, comprising a number of intellectual assets. Some of them are graphic symbols, written material, images, graphics, data, and any music, broadcast screen displays, and graphic user interfaces (GUIs). They play an important role in drawing the attention of customers, communicating information about the merchandise in an effective and efficient manner. Business names, product names, logos, domain names, and other signs posted on the website also carry intellectual assets and are likely to be protected by registered trademarks. There are some hidden aspects in website design containing intellectual assets. Some of them are confidential graphics, source and object code, algorithms, programmes or other technical descriptions, data flow charts, logic flow charts, user manuals, data structures and database contents. They also contribute to the functioning of the website, affecting the sales.

There has been a significant role of intellectual assets in sourcing, storing, shelving, retrieving and packing merchandise-for increasing the quality and reducing the cost. Particularly e-commerce companies operating in delivering food suffers most from food wastage as well as missed business opportunity, primarily due to weak forecasting capability. It's being reported that data science, sensors, and machine learning can be used to help e-commerce start-ups in improving their decisions in doing jobs that involve planning, ordering, price setting, customer targeting, and all the situations where decisions need to be made for optimum sourcing, pricing and selling minimising the wastage.

Companies like Amazon and others have been making significant investments in generating intellectual assets and leveraging them to innovate in these areas for improving the quality and reducing the cost simultaneously. All of these are for the purpose of making e-commerce innovations succeed through intellectual asset generation and integration driving innovations-contributing to the quality improvement and cost reduction.

The role of intellectual assets in e-commerce is perhaps the most neglected, yet the highest value-bearing component of e-commerce. That is either because it is less understood, or the important connections to e-commerce are not apparent. By accruing the intellectual assets faster than competitors resulting in improving quality and diminishing cost, often the dominant provider emerges from the cohort of start-ups turning loss-making revenue into profit. Despite its invisible role, intellectual assets appear to have vital bearing on the success of e-commerce start-ups to attain profitability. To succeed in e-commerce, the focus should be given not only on generating intellectual assets and fuelling innovation around them across the whole value chain for continuously improving the quality and reducing the cost, but also on protecting them as patents, copyrights and trade secrets.

M Rokonuzzaman Ph.D is academic and researcher on technology,  innovation and policy. [email protected]