Standards – what can the IP sector learn from the automotive industry?



Introduction

Intellectual Property services typically rely on quality of client service to maintain their commercial edge. Nevertheless, the IP sector as a whole could stand to learn much from the best practice approaches adopted by many of the large industrial sectors it services.

The International Organisation for Standardisation has begun to apply quality management practices to the areas of innovation and intellectual property through the work of Technical Committee 279 (ISO/TC 279). At the time of writing, the proposals in relation to intellectual property remain at the preparatory stage and a draft is yet to be put forward for formal consultation. While finalised proposals are likely many months away, the potential benefit of applying quality management principles to IP can be considered in light of the benefits experienced by other industries where these practices are commonplace. Arguably, no industry sector has embraced the importance of quality standards to the same degree as the automotive sector.

 

Quality management in the automotive industry

The automotive industry exists primarily to manufacture and sell vehicles. The sector is large; in 2016 alone, approximately 88 million vehicles were sold across the world[1] and the OICA estimates that the automotive sector employs around 5% of the world’s manufacturing workforce. The US market has been historically dominant.

In the 1980s, US automotive manufacturers struggled to maintain their position in global markets in the wake of the Asian (and to a lesser extent, European) adoption of quality management practices. For example, the US automotive market share from Japanese companies rose from 19.6 to 28.1 percent in the decade following 1980[2]. In the 1990s, the US automotive industry woke up to the commercial benefits of quality control and the global automotive sector began to collaboratively develop quality management standards which form the basis of the International Automotive Task Force (IATF) 16949:2016 standard that the industry applies today. The enforcement of an industry wide quality standard ensures that all components manufactured in any territory are held to a comparable minimum level of quality.

IATF 16949:2016 is based upon the earlier ISO/TS 16949 standard and has been developed by the International Automotive Task Force. The IATF consists of many of the most prominent vehicle manufacturers including Ford, GM, Chrysler, BMW, VW, Daimler, Renault, PSA Peugeot Citroën and Fiat alongside national trade organisations from the USA and European states. The British Standards Institution explains that “ISO/TS 16949 … promotes continual business improvement by emphasising defect prevention and reducing variation and waste in the supply chain”. The efficiencies brought about by such continuous improvement are viewed as so commercially critical that it is now an accepted reality that certification to IATF 16949:2016 (or ISO/TS 16949) is an essential requirement for suppliers to do business with the large automotive manufacturers. When asked about the importance of quality management, a manager at an automotive manufacturing facility commented:

I would always prefer to work with businesses that share our foundation in quality management. Knowing that the fundamentals are in place lets me rest assured that the product quality will always meet expectations.”

 

What can IP practitioners learn from automotive quality standards?

So, what can the IP sector learn from the automotive industry’s drive for quality? Fundamentally the key objectives of IATF 16949:2016 are to (a) reduce waste and (b) prevent defects via the principles of:

  • a customer focus;
  • leadership;
  • the engagement of people;
  • a process approach;
  • continuous improvement;
  • evidence-based decision making; and,
  • relationship management.

In the context of an IP services firm, consistency of approach and reduction in waste provides financial benefits for both a firm and its clients. Defect prevention is particularly desirably as ‘defects’ in an IP context may have severe consequences such as loss of rights.

 

Recent progress

Encouragingly, some patent offices and IP firms are embracing many of the fundamental quality management principles within their core organisational philosophies. The European Patent Office recently published its first Annual Quality Report, which highlights the EPO’s investment in its quality management systems (including operational quality control and conformity assurance) and their aim to extend ISO 9001 certification to additional processes. To track its own progress, the EPO has formed a new Quality Working Group within the EPO’s Standing Advisory Committee (SACEPO), which the EPO President Benoît Battistelli invited A.A. Thornton & Co’s Mike Jennings to join for his “recognised expertise”. Mike commented:

We have been impressed by the openness of EPO management to our and our clients’ recommendations for quality and efficiency improvements, and by the very significant investment in EPO quality management systems”.

Despite such progress, it remains challenging to find reliable case studies that quantify the commercial benefits of integrated quality management to a legal services firm, and formal quality certification is rarely requested by the clients of UK intellectual property law firms, because of their international reputation for high quality advice and services. However, a reputation for past quality is not a guarantee of future quality and certainly does not imply efficiency. Manufacturing organisations have been shown to experience efficiency savings equivalent to around 0.5 to 5% of their annual sales revenue[3] when adopting quality management, and we believe much greater savings as well as quality assurance can be achieved by legal services firms who integrate quality management throughout their processes.

While IP practitioners and innovators await the draft proposals from the International Organisation for Standardisation and the EPO seeks ISO 9001 recertification, we should consider whether the historical lessons of the automotive industry are more applicable to the IP sector than they may have first appeared.


References
[1] Parkin, R, et al “2017 Auto Industry Trends – Automakers and suppliers can no longer sit out the industry’s transformation”, PWC Strategy&, 2017.
[2] Automotive Fuel Economy: How Far Can We Go? (1992) Chapter: 5 IMPACTS ON THE AUTOMOTIVE INDUSTRY.
[3] International Organisation for Standardisation “Economic Benefits of Standards”, 2014. (Available here).


Category: Publications | Author: David Blair | Published: | Read more

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