Wharton Chapter 11 - Appropriating the gains from innovation

In chapter 11, the author states that there are four major appropriation mechanisms to protect innovative gains.

• patents and related legal protection - patents are over-empasized as a way to protect innovations and their effectiveness is sometimes ambiguous. Science and technology can catch up with patents quicker than the patent life. Time and energy may best be invested by evaluating the other mechanisms
• secrecy - one of the hardest mechanisms to protect gains because products can be immitated or information leaked to the public. Simply put, don't share the secrets with the public to protect your innovation. Typically, it's easier to protects secrets surrounding processes than products as processes can be incredibly complex and difficult to reproduce without the knowledge.
• control of complementary assets - by controlling the facilities and capabilities of the manufacturer, innovations can be protected. Without the complementary assets, it's difficult to capitalize on products or know how that require the complementary assets to produce an innovative product. Sometimes, products in an entire industry can be protected because complementary assets are not available to the competitors in the market (IBM example).
• lead time - knowlege and know-how can create lead-time advantages with innovations. product characteristics such as durability can impact lead time. By creating a reputation or having high switching costs for alternate products, advantages can be made in the lead time.

Finding the right mechanism or a combination is very important for companies to protect their innovations. Understanding the uncertainties and applying the appropriate mechanism(s) to protect the innovative gains is important to companies. As the book outlined, "protect the golden goose". It's difficult to determine which idea or innovation will yield the biggest gain but it's important to protect all innovations and think not only about how to protect the innovation today but how to protect the innovation in the future by being responsive.

This framework of protecting innovative ideas can be applied to Mcdonalds food products. McDonalds holds a variety of patents on their processes for french fries (http://www.google.com/patents?id=fbYgAAAAEBAJ&dq=Mcdonalds+product&as_drrb_ap=q&as_minm_ap=1&as_miny_ap=2008&as_maxm_ap=1&as_maxy_ap=2008&as_drrb_is=q&as_minm_is=1&as_miny_is=2008&as_maxm_is=1&as_maxy_is=2008)
Not only is McDonalds products trademarked but the sauce used in the big mac is one of the greatest trade secrets in the fast food industry. Though a patent would help protect the "secret sauce", McDonalds may forgo the patent to protect it as a trade secret. (http://query.nytimes.com/gst/fullpage.html?res=9D00E6D9103EF936A35751C0A9679C8B63). The manufacturing and distribution channels are complementary assets that have allowed Mcdonalds to move into new markets around the world and still deliver a quality product that consumers love (I'm not the biggest fan). McDonalds holds considerable power in their lead time to get new products to market delivering existing products to locations all over the globe.