The Value of "Herbal"

The value of any business idea is significantly affected by the possibility of competitors imitating it and replicating the same business plan in the market. "Herbal" is a very lucrative pharmaceutical innovation that reduces the number of cancerous cells in organs and thus manages most Organ Cancers. The product is projected to generate sales worth $2 billion with a profit margin of 100%, which will attract a lot of competition when the product is launched. Teece’s Win-Lose Innovation Model is used to ensure that the value of a business idea is protected from the possibility of replication. The framework uses three steps to achieve the business success of an innovation amidst competition – Protecting the Idea, Responding to the Market, and Reaching Scale As Soon As Possible.

Protecting the Idea

“Herbal” is a unique innovation that despite being discovered accidentally while testing painkiller, follow-up research, testing, and commercialization makes it an innovation that requires protection as an investment. This is because it can be replicated by competitors in the same or other markets with the goal of sharing the expected 100% profit margin from the projected sales of $2 billion from it. Abu Dhabi is one of the seven Emirates under the legal jurisdiction of the United Arab Emirates. In addition to the country’s legal protection on Intellectual Properties, it is a member of the World Trade Organization (WTO). Therefore, any patent issue that relates to chemical inventions of pharmaceutical compounds and medical drugs within Abu Dhabi, is subject to Article 65.4 of The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. Under the new amendments to UAE’s patent laws, such chemical inventions of medical nature are protected as from January 2005. The new laws provide a duration of five years protection for patents by the Department of Industrial Property terminated by either approval or decline of legal protection as an Intellectual Property.

Majid should seek the best legal representation to foresee the process of protecting his investments in the new product – “Herbal.” He should consider the legal cost associated with protecting “Herbal” from imitations as capital investment related to the development of the product. The formula used to develop the product is the trade secret that guarantees the assumptions made in herbal’s business plan to an Angel investor and even creditors. Although the company cannot completely block out the competition, protecting the procedure for its development ensures that the competition takes longer to imitate the product. In addition, Majid and his company should constantly research how to improve the product and make it more unique and different from any other in the market. The measures will protect “Herbal” from stiff competition during the introduction and market entry phase, and thus ensure that they maintain their market share.   

Responding to the Market

“Herbal” has very viable projections in the market with an estimated $2 billion in sales and 100% profit margin. However, the lucrativeness means that there is expected to be massive interest from the competition in other pharmaceutical firms and even new entrants. Majid and the company should expect products that imitate “Herbal” in the market despite any legal protection as there are legal by-passes to IP laws. The competition may also develop several close substitutes of the product and concentrate their resources on the most viable to share in “Herbal’s” demand in the market.

Majid should constantly monitor the market for products that mimic Herbal and form close substitutes and research on what makes it acceptable to its consumers. Then, the company should invest in further research and development and differentiation, to distinguish “Herbal” as a unique product to its competitors’. Research may involve collecting feedback from consumers and other stakeholders in the industry on why they prefer “Herbal” over the other organ cancer medication. Then, the company should proceed and do the same for its competition’s products to identify why they are acceptable and their weaknesses and inefficiencies. Information from the two research will inform the direction that the development of the product will take to ensure that they capitalize on their strengths. The process of further customizing the product should also make a clear distinction and expose the inefficiencies of those of the competition.

Reaching Scale As Soon As Possible

Herbal is expected to be a highly demanded pharmaceutical solution for managing organ cancer in the market. The perceived demand has been translated to projected sales for the product being estimated to amount to $2 billion. This means that the previously small herbal business that Majid operates, should scale up its operations and production to match up the demand in the market. Scaling up will ensure that the demand for the product is not transferred to its competitors’ products because of shortages of supplies of “Herbal.” Supply may be increased in-house by growing the scale of production. Supply may also be grown externally by seeking a third party for that purpose, which means that control of the production process will be lost. The second option exposes the company's trade secret of producing "Herbal" to another party that may imitate it later or sells the information to competition.

            Majid should consider financial from angel investors and other sources to develop its infrastructure in readiness to meeting the demand for “Herbal” in the market. The small herbal company should use the investments to grow both its fixed and variable assets to their most optimal Marginal Utilities. When the demand is still higher than the supply at this point, then Majid should consider external supply for the excess demand. This will ensure that the demand for “Herbal” is not enjoyed by competitors that may capitalize on the shortage of supply to meet it. In addition, Majid should ensure that any external supplier of the product has very controlled access to the original formula for making “Herbal.”

Recommendation

The application of the Teece’s Win-Lose Innovation Model on Herbal Business Plan reveals how the value of the business idea will be protected from imitation. In addition to Majid and the company seeking legal protection in form of a patent on the business idea, they should market research to ensure that the product is diversified to maintain an edge in the market. Majid and the company should also increase the production of “Herbal” internally before seeking external suppliers.