Patent indicators for monitoring convergence – examples from NFF and ICT

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Abstract

The blurring of boundaries between hitherto distinct scientific disciplines, technologies or markets is a common and powerful phenomenon. Concentrating on monitoring convergence through patent indicators, we discuss convergence with examples from the area of Nutraceuticals and Functional Foods (NFF)/Cosmeceuticals as well as information technologies, consumer electronics, and telecommunications (ICT). We analyze 7455 scientific and patent references on phytosterols with the aid of SciFinder Scholar and 3836 documents employing STN AnaVist. Furthermore, we test an IPC co-classification based approach on 859,469 ICT-related and 341,846 NFF-related patents. Our results show clear indications for convergence and a proof of principle for our monitoring concept. Academics may better evaluate environmental parameters, like cases of convergence, influencing companies' actions. Implications for practitioners are based on a more reliable assessment prior to the forming of strategic alliances or mergers and acquisitions. This could help avoid costly adventures such as the mergers and acquisitions seen in ICT.

Introduction

Ever since their first appearance, industries have undergone evolution, decisive or radical changes or dematerialized completely over time. These changes were caused by very different drivers like technological developments, changes in regulations or new customer preferences. But within the last few decades, a new and powerful phenomenon has been identified – the convergence of industries.

In industries such as information technologies, consumer electronics, and telecommunications (ICT),1 formerly distinct sector boundaries have already largely faded [1], [2]. While the merging of different technologies and customer demands has undoubtedly led to many cross-industry products like Apple's widely discussed iPhones or RIM's several BlackBerry models (two examples for the group of products termed ‘smartphones’2), scholars are still discussing the degree of complete industry convergence [3]. In managerial practice several strategic decisions, especially between the 1980s and the early 2000s, have been associated with actual or expected occurrences of this phenomenon [4]. Strategic actions, divestitures, and even corporate mergers like that of AOL and Time Warner in 2000 have been set off by top-managers, who felt the necessity to cope with increasingly permeable industry boundaries. More recently, this phenomenon can also be found in other industries like the chemical, the food, or the pharmaceutical industry. The world of fading industry boundaries and more and more cross-scientific research [5], [6], [7] enables the chemical sector to utilize the often tremendous technological developments in its neighboring disciplines (e.g. physics or biotechnology) and at its outposts (e.g. electronics or agriculture). And the food and the pharmaceutical sectors are competing with each other on the basis of foods enriched with quasi-medical functions in the area of Nutraceuticals and Functional Foods (NFF).

The resulting new industry segments present incumbents with a selection of opportunities and threats. On one hand a plethora of opportunities for new fields of business and economic growth emerges. On the other hand the new setup is often quite challenging as firms have to employ knowledge and technologies not within their traditional framework of expertise. Naturally, in most cases of convergence sourcing the essential knowledge and experience from beyond their own factory gate is necessary and key to successful innovation management. Furthermore, they are facing many new competitors, who may have been strong incumbents in their own segments prior to the formation of the new segment [8].

On that account, anticipating convergence would enable firms to form strategic alliances or acquire new technologies already at an early stage and to prepare for the challenges and pitfalls of new segments in advance. A timely reaction to challenges posed by these external events may be decisive to find the best possible partner [9]. Thus the question remains: how to foresee or at least detect fading industry boundaries at the earliest possible moment? And how to distinguish mere utilization of a common technology platform or a merging market from cases of real industry fusion? Being the first mover will be yielding substantial rewards in many cases. But if the anticipated fading of boundaries does not occur, or occurs under completely different parameters, waiting to be second may prove to be the more sustainable survival strategy for managers [10]. Hence, the challenge is not only to spot weak signals, but at the same time to develop a reliable and robust early warning system [11].

We introduced the idea of a comprehensive approach towards anticipating and monitoring industry convergence, based on publicly available data in earlier papers [12], [13]. To the best of our knowledge, ideas of multiple indicators based on scientific and patent literature have so far not been applied in the area of convergence anticipation. Patents are generally regarded as precursors of technological developments. Long before the general public is realizing new developments, scientists and companies are trying to secure their inventions through filing of patent applications. While a patent is mainly intended for specialists and hence describes the technological aspects of the invention in great detail, especially its relation to other patents and publications can make it valuable also for non-specialists trying to identify general trends. While most scientific publications are as well not more insightful for the layman, they are written on the basis of a different motivation. Most articles are written by scientists at a time when they are either not able to already grasp the commercial applicability of their findings, or again when the most important parts have already been protected by patents. Albeit the differences in both types of “publications”, e.g. in regard to legal parameters and the existence of highly trained and full time patent examiners and attorneys, they have much in common. Like patents, papers are structured to a certain degree and follow scientific discipline (and journal) specific regulations. And with a peer review system in place and with specialists in the same area as readers, most weaknesses and errors will not go unnoticed. Hence, assessing industry convergence on the basis of such data sources should yield robust results.

Building on the outline of our anticipation approach [12], [14], [15], we have thus far discussed different indicators and their results regarding the example of one class of NFF ingredients (phytosterols) [13], [16], [17]. Whilst different stages of the convergence process can be assessed employing a selection of indicators from various sources, patent documents have been identified to be the most important source for a reliable anticipation of industry convergence. Consequently, this paper will focus on the application of different patent indicators and compare potential sources. The present study will also introduce a way of monitoring convergence in patents independent of search-terms in the broader NFF sector. As the intersection of the pharmaceutical and the food industry is not yet a fully established example of convergence (despite several studies in this area, see especially Bröring's works [6], [18], [19], [20]), this approach will be tested against the results from the ICT sector.

Thus, the remainder of this paper is structured as follows. In the next section we will define industry convergence and delineate it from industry fusion. Additionally, patents will be briefly introduced as a means of anticipating convergence. Following Section 3 with our research setting in ICT-related industries and the chemical and pharmaceutical industry, Section 4 presents the results from three different databases, comparing our indications for convergence in NFF and those on the ICT-example of smartphones. Finally, a discussion of the developed model and future research strands will conclude our paper in Section 5.

Section snippets

Defining convergence

Although ‘convergence’ has been attested “broad implications for economic welfare” [21], it has at the same time been coined “an often used but rarely defined” [22] buzzword [23], [24]. The use of the term ‘convergence’ in the English language dates back to the 17th century. It is of Latin origin “convergere” (inclining together) and its dictionary definition encompasses basic definitions like “(of lines) tend to meet at a point” or “(of a number of things) gradually change so as to become

Convergence in ICT-related industries

As discussed earlier, most scholars have thus far concentrated on media-, information technology-, or electronics-related industries for studying effects of industry convergence. Partly, this may be due to the strong technological focus, the search for signs of industry reactions, and the necessity of comprehensible and illustrative examples, marking a considerable portion of the literature. But also the extent of influences on peoples' everyday life is probably unrivalled by other occurrences

Patent analysis as a means to monitor convergence

If managers as well as policy-makers and other stakeholders are to ground their strategic decisions on an assessment of a possible convergence status in their field, this assessment will have to be timely and reliable. Naturally, alterations in market or industry structure would be a stronger proof for the presence of fading boundaries than developments in scientific or technological publications (i.e. mainly patents). But waiting for them would hardly qualify for taking ‘proactive’ actions. In

Discussion and conclusion

In this paper we aimed at deepening our concept for monitoring convergence, by testing different patent indicators and different databases. Furthermore, we wanted to broaden the underlying search possibilities through comparing our NFF and Cosmeceuticals example of phytosterols to the ICT case of smartphones, thus shedding more light on the applicability of our concept. Employing the three software products SciFinder Scholar, STN Express, and STN AnaVist we analyzed four samples with 7455

Acknowledgments

The authors are indebted to Dr. Walter Buckel and his colleagues at FIZ Karlsruhe/STN International for their support with and access to STN AnaVist and the respective databases. We would also like to thank Gudrun Maria John, for her help in collecting patent data. Finally, our research approach was substantially improved due to the constructive discussions and recommendations during our presentation of earlier versions of this paper at the PICMET '09 and the IAMOT 2010 conference.

Clive-Steven Curran is a Post Doc at the University of Münster. He obtained his PhD in Business Management in the Natural Sciences from the University of Münster working on the anticipation of converging industries in the area of Nutraceuticals and Functional Foods. His research interests particularly include industry convergence, forecasting, patent analysis and the life sciences industry.

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    Clive-Steven Curran is a Post Doc at the University of Münster. He obtained his PhD in Business Management in the Natural Sciences from the University of Münster working on the anticipation of converging industries in the area of Nutraceuticals and Functional Foods. His research interests particularly include industry convergence, forecasting, patent analysis and the life sciences industry.

    Jens Leker is a Professor of Business Administration at the Department of Chemistry and Pharmacy at the University of Münster. He obtained his PhD in Business Management from the University of Kiel. His institute’s interdisciplinary approach combines business management research with natural sciences in order to get a deeper understanding of R&D processes.

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