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The Operating Model Just Might be Best for You

Your IP Gives You Two Business Model Choices, we touched upon the differences between a traditional operating business model and a licensing business model. In that post, we said that in the traditional model, the owner of the intellectual property commercializes a product that is created out of their Intellectual Property.

The Operating Business ModelIn our last post,

Alternatively, a licensing model is used when the owner of the IP licenses the innovation to another party in return for royalties. The other party then owns the rights to commercialize the IP by manufacturing and distributing a product based on the IP in accordance with the licensing agreement.

At the end of that article we promised to address the question “which model is best for you?”

As you may have guessed, the answer to that question depends more on the owner of the IP than on what the IP is and how it is used.

In this post we will argue that a traditional business model is the best as a way to highlight its particular advantages. We will also point out some important responsibilities to keep in mind if you decide to go this route.

In the interest of balance, the third and final post will advocate for the licensing model. You will then be able to compare and contrast both models in order to determine which model is best for you.

Advantages of the Traditional Business Model

Many inventors choose to commercialize their innovations because the traditional operating model offers the following advantages:

Responsibilities that Come with a Traditional Business Model

It is important to remember that certain responsibilities will accompany the entrepreneur who chooses the traditional model, including:

So, if you consider yourself to be an experienced business person with a high tolerance for risk, and the ability to finance your emerging business and build a great team and then execute on your business plan, then the traditional operating model is for you.

On the other hand, if you do not think that you possess all of those traits, stay tuned for the next post when we will discuss why it might be better to employ a licensing strategy.

Jimmy Lewin

Jimmy's background includes over 40 years in international, commercial, and investment banking, and nearly a decade as the principal shareholder and CEO of a rapidly growing manufacturing and distribution business in California. Today, Jimmy spends his time advising and consulting with entrepreneurs on matters related to business planning, as well as capital markets and funding strategies. Jimmy works with clients throughout the world in industries that include financial services, real estate, manufacturing and hospitality. View details.

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This Post Has 2 Comments
  1. Thanks for the information shared
    with us. I read this article and this is very beneficial for those guys
    who are ready to starting a new business. I’m also a new businessman and from this article I came to know many of things about business strategy. But I want to tell you that when I started my business I got many helps from TS Business Plan consultant company. It’s a very good company for any kind of business planning.

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