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Intellectualizing Risk

As the business implications of big data continue to grow, so too does the need for academic research that helps lead to improved industry practices. Thomas Brush, a professor in the strategic management area at the Krannert School, is doing just that by merging his interdisciplinary work on product lifecycle management (PLM) to help the Licensing Executives Society (LES) create a better standard for managing intellectual property (IP) suppliers. 

Brush’s research on the topic includes a presentation titled “Supplier Segmentation, IP Risk Assessment, and Modes of Access to IP as PLM Facilitates Earlier and Broader Supplier Integration,” which he coauthored with Krannert PhD graduate Wonsang Ryu, now an assistant professor at City University of Hong Kong, and current Krannert doctoral candidate Joonhyung Bae.

The study was developed with the support from the Purdue University Product Lifecycle Management Center, which fuses the talents and resources of experts from the Purdue Polytechnic Institute, the colleges of Engineering and Science and Krannert School of Management into a single focused entity that serves as an industry resource.

“A new and important problem in supplier relations has to do with how to manage intellectual property,” Brush says. “As more and more data becomes available on new technology backbones, there is a greater risk of that information being misappropriated by suppliers.

“The idea behind many of these new data architectures is that the information generated and collected throughout the product lifecycle — from the way it is sold to maintenance issues encountered in the field — is beneficial to suppliers in the next stage of product development.”

Ideally, PLM facilitates earlier supplier integration in new product development and benefits from broad access to product information. Because their willingness to share proprietary data may differ, however, not all suppliers and prospective customers can be treated equally.

“The differences in benefits between prospects are generally determined in advance by business level managers, but IP access and risk of access is determined separately by IP licensing professionals,” Brush says. “They seek to make the necessary information available after selecting among prospects to reduce the risk of a high impact violation of compliance or the probability of a violation of compliance.”

From a supplier’s perspective, the risk for noncompliance is higher when it has a greater capacity to absorb knowledge and innovation or is in a competitive relationship with the buyer or one of its rivals. The probability of a violation is higher when the supplier has been insensitive to IP concerns in general or with a particular buyer, has a history of previous interactions with the buyer that reveal opportunism, or when the buyer has specialized asset investments that need protection.

From a buyer’s perspective, the benefits are higher when a supplier provides a new channel to a market, makes a component that is critically important or costly, has distinct and difficult to substitute technical capabilities, and is willing to share data to seek cost reductions and quality improvements.

“There has been an ongoing effort by the LES to develop standards and certification schemes for evaluating suppliers in terms of IP risks,” Brush says. “In fact, we’ve become members and are now working with its IP in Supply Chain Standards Committee to create a standard for how suppliers should manage intellectual property. 

“Once suppliers are ranked in terms of the risks they bring, then access to information in the PLM data system can be narrowed or broadened depending on the supplier’s score in the maturity of management of intellectual property. This partnership will allow us to further refine our research schema and develop an actionable model.”