Jay Kennedy, 2021
Product counterfeiting can create serious problems for businesses of all size, yet the challenges of brand protection can be substantial for small and medium sized enterprises (SMEs). SMEs make up over 99.9% of all businesses in the United Statesi and they have a sizeable economic impact on U.S. GDP. Yet, these firms tend to face more serious resource constraints than larger firms, and research has consistently found that they tend to be victimized more often than larger firmsii. Unfortunately, many SMEs choose not to implement security/protection measures following a crime committed against the businessiii. When it comes to brand protection activities, some SMEs do not believe that they are “large” enough to be a target for counterfeiters, while others feel there is nothing they can do about counterfeiters. Still other firms want to do something, but simply don’t know where to begin or what strategy to pursue. To be sure, implementing effective anti-counterfeiting and brand protection strategies can be a particularly vexing challenge for many SMEs. Recognizing these challenges, I wrote an article in 2016 that laid out ten testable propositions designed to help SMEs to identify some essential ‘next steps’ in their strategy development and implementation processes. It was also my intention to encourage SMEs to think broadly about how they can adopt effective brand protection activities. Five years later I look at whether those propositions still hold and whether they need to be adapted to meet the continually emerging challenges of brand protection in the 2020s.
The “Proposed Solutions”
Brand protection challenges are continually evolving. By developing these propositions, I was not seeking to identify a holistic panacea to the challenges facing SMEs. Rather, it was my intention to get SMEs, researchers, and other stakeholders to think critically and strategically about the business characteristics that are most likely to align with the effective implementation of an active anti-counterfeiting program, as well as those that are likely to be effective given the resource constraints facing many SMEs. I grouped the ten propositions into three general categories reflecting the utilization of legal resources, the importance of partnerships, and human resources considerations that must be acknowledged. Today, these groupings seem less important than they did five years ago, therefore I present my reflections on these propositions in their numerical order. It must be remembered that these are testable propositions, meaning that I am fully aware that they may be wrong. Yet, they should be studied, debated and evaluated in order to determine just how right or wrong I have gotten things.
2016 Proposition 1: SMEs that perceive the protection of intellectual property as essential to the protection of the firm’s identity are more likely to utilize intellectual property rights protection laws.
2021 Reflection: My argument in 2016 was that SMEs must come to view the protection of
intellectual property as essential to the protection of the firm’s identity. There is a purposeful connection between a firm’s intellectual property and its identity primarily because of the connection between consumer behavior and firm/product identity. The rise of e-commerce and social media, the impact of COVID-19 and the closure of physical retailers, and the undeniable role of virtual influencers on consumer behavior underscore the value of a firm’s trademarks and its identity. Socially conscious buyers, fashionistas, and the ardent fans of luxury brands comes to identify as much with a company as they do with the utility they gain from the products the consumer purchases. SMEs that come to view their intellectual property as inherent to the nature and substance of what they are as a business are much more likely to become active in brand protection activities.
2016 Proposition 2: Collaborative approaches to brand protection undertaken by partner SMEs will lead to more efficient and more effective brand protection strategies.
2021 Reflection: If I could revise this proposition I would say that “Collaborative approaches to brand protection that build partnerships among SMEs will lead to more efficient and more effective brand protection outcomes.” This is a simple change, but one that places a greater emphasis on the role of partnerships and the value of partnerships for anti-counterfeiting outcomes. The value of collaboration goes beyond simply managing resource constraints. Collaborative approaches to brand protection hold substantial promise for all collaborating parties as strengths are combined and protection gaps are closed. These benefits are as clear today as they were five years ago. However, the increasingly global and virtual nature of product counterfeiting schemes, particularly the role of social media and affiliate marketing schemes, make collaborative approaches even more necessary. More importantly, the increasing speed at which counterfeiters are adapting to emerging technological and social trends, as well as enhancements in anti-counterfeiting activities, make collaboration an attractive way for SMEs to maximize their responses to brand protection risks by efficiently addressing and mitigating those risks.
2016 Proposition 3: Brand protection partnerships between SMEs and their larger business partners will lead to higher levels of supply chain guardianship than could be realized through the individual efforts of the involved firms.
2021 Reflection: Five years ago it was my contention that exploring brand protection partnerships with larger business partners could lead to higher levels of supply chain guardianship and more effective anti-counterfeiting activities for SMEs. This was because SMEs could effectively “piggy-back” off of the activities of the larger firm, which would reduce startup costs, implementation mistakes, etc. While this proposition is still relevant and I believe that is still holds promise, recent trends in the evolution of brand protection and anti-counterfeiting services and activities on the part of e-commerce platforms, as well as pending legislation in the U.S. and other countries, may mean that supply chain guardianship is the wrong outcome to be sought through this proposition. Where integration within a larger firm’s supply chain is useful and valuable for both businesses such a strategy should be pursued, yet when it comes to seeing higher levels of supply chain guardianship the growing role of e-commerce may mean that virtual intermediaries and logistics providers (e.g., freight forwarders, brokers, distributors, etc.) will have a greater impact on the counterfeiting supply chain than other partners. As such, it is still likely the case that partnerships between SMEs and larger firms will produce effective brand protection outcomes, yet it may be the case that these outcomes will be unbalanced. Rather than focusing on supply chain guardianship, a more appropriate outcome for this proposition may be that SME/larger firm partnerships will lead to enhanced brand protection efficiencies for both firms, with a particular benefit accruing to the SME.
2016 Proposition 4: SME brand protection partnerships that are based upon an alignment of each company’s brand protection needs will be more effective than partnerships based upon other criteria.
2021 Reflection: All partnerships are not the same, and the most effective collaborations for SMEs will be those that are based upon an alignment of each company’s risks and needs. This proposition has increased in importance given the technology driven changes to product counterfeiting schemes that have developed over the past five years. Accordingly, it is more important than ever that SMEs seek out partnerships that are based upon the firm’s unique needs and risks. Therefore, it may be appropriate to revise this proposition to better clarify what a company’s “brand protection needs” are, taking time to outline and separate, for example, general recordation and enforcement needs from online risks and overlapping intellectual property infringements that see trademark violations co-occur with patent or copyright infringements. A revised version of this proposition could be: “SME brand protection partnerships will be more effective when the partnership addresses the partner firms’ common needs and risks.”
2016 Proposition 5: SMEs with greater human resource flexibility (i.e., more employees, the ability to hire employees dedicated to brand protection) will find less value in partnerships with other SMEs than firms without this flexibility.
2021 Reflection: In developing this proposition I was asserting that greater human resource flexibility would lead to more prolific internal options that would reduce the value of seeking out external partnerships. In essence, if you have the people in-house to do the job is it much more efficient and effective to keep things “in-house” rather than to seek out partnerships, which can come with some risk. Today, I think that if I were to test this proposition, I would find my initial assertions to be incorrect. The original proposition failed to account for the value of experience and networks within the brand protection community. Partnerships are an ideal way to quickly understand the brand protection landscape and learn from the experiences of one’s peers. I now believe that SMEs with greater human resource flexibility may find more value from partnerships because they are able to both dedicate employees to brand protection activities and gain valuable insight, knowledge and skills from partnership activities.
2016 Proposition 6: SMEs that align brand protection duties with existing employee roles and responsibilities will be more successful in their brand protection efforts than firms that are not able to create such alignment.
2021 Reflection: Five years ago it was impossible to foresee the personnel impacts of COVID-19, especially when it comes down to efforts to recruit and retain qualified employees. Since the publication of this proposition the human resource constraints faced by SMEs have grown, meaning that it has become increasingly more difficult to reallocate employee efforts away from core functions in favor of brand protection activities. The potential to cannibalize important business functions is very real and solving brand protection challenges is not so simple as hiring more people. The costs related to hiring additional employees can make such a strategy prohibitive in the short term or unsustainable in the long term. As such, it is more likely the case now than in the prior five years, that firms that are able to align brand protection roles with traditional business functions will have more success than their peers. These firms are also more likely to have consistent employee efforts dedicated to anti-counterfeiting and brand protection activities, which should translate into more effective brand protection engagements. I continue to agree with the assertion that firms that can align brand protection and existing roles will have more effective brand protection strategies than other firms, yet I am very eager (and would welcome the opportunity) to test this assertion.
2016 Proposition 7: Employees with longer organizational tenure are more likely to perceive the integration of brand protection roles and responsibilities as a positive job role change.
2021 Reflection: Following on from Proposition #6, this proposition was advanced to highlight the ways in which research on organizational investment, commitment and engagement can be leveraged to support the internal development of brand protection activities. In general, employees are more likely to willingly expand the scope of their workplace roles the longer they are with an organization and the more invested they are in the business. Additionally, employees tend to be more willing to accept increased duties when they perceive that the organization has invested in them and when they are given the autonomy to help shape, or “craft” their job role. Importantly, business owners and managers must understand how employee motivation affects the integration of brand protection activities with existing workplace roles, and how timing, incentives, and transparency/communication can increase the likelihood of successful adoption. I believe that it is still the case that longer tenured employees will, in general, be more likely to see brand protection-related changes to their roles in a positive light. However, I would now temper this assertion with the caveat that an employee’s role and their level of satisfaction with the business at the time of role expansion will have a substantial impact on their happiness with additional brand protection related duties. It is important for managers and owners to understand that an “unhappy” employee may be a good candidate for role expansion as the individual may be looking for a way to create meaning in their role or otherwise find a connection with the firm.
2016 Proposition 8: Employees that exhibit higher levels of Organizational Citizenship Behaviors (OCBs) are more likely to perceive the integration of brand protection roles and responsibilities as a positive job role change.
2021 Reflection: Your most dedicated employees – those who regularly perform beyond their roles to assist the business and other employees – are the ones most likely to see value in added brand protection responsibilities. This proposition is just as valid today as it was when originally written five years ago. Research has consistently found that highly engaged employees come to see the business as an extension of themselves and tend to view their coworkers as members of their own family. In fact, the owners of SMEs regularly state that their businesses are “like a family”. When highly invested and engaged employees understand how impactful product counterfeiting can be to a business, they are the ones who are more likely to take on additional roles to protect the business from harm. Yet, this does not mean that employees who do not exhibit high levels of OCBs will shy away from brand protection roles – in fact, it could be quite the opposite. This proposition is simply asserting that your greatest internal champions will be the employees that have demonstrated, over time, their commitment to the firm and their co-workers. However, SMEs must be cognizant of how these employees are being utilized and should seek out ways to reward them for their extra efforts, especially when it comes to the mental and emotional energy that comes along with going the extra mile.
2016 Proposition 9: SMEs that use outside experts will have greater knowledge of brand protection laws, general counterfeiting activity, and anticounterfeiting solutions than firms that do not use outside experts.
2021 Reflection: Where appropriate, SMEs should rely upon outside experts to help them better understand their risks and exposure, as well as utilize resources that can help to protect the brand. SMEs should use outside experts to gain knowledge of brand protection laws, product counterfeiting trends activity, and novel anti-counterfeiting solutions. However, the proliferation of freely available information on the Internet and through partners such as e-commerce platforms, industry associations, and groups like the World Trademark Review and the National Intellectual Property Rights Protection Center have come to be incredible sources of support for small businesses. As such, it may not be the case that those firms who work with outside experts will have greater brand protection knowledge. Rather, it may be the case that the firms who work with these experts are in a better position to benefit from the expert’s knowledge of brand protection solutions and strategies. I can therefore revise this proposition to state that “SMEs that use outside experts will have access to a greater range of brand protection information than firms that do not use outside experts.” Ultimately, it remains to be seen how valuable such access is, and whether the quality of interactions between and SME and their expert partners affects the firm’s risk for product counterfeiting.
2016 Proposition 10: SMEs that partner with law enforcement and customs organizations will be more effective in identifying and prosecuting counterfeiters than firms that do not partner with law enforcement.
2021 Reflection: This proposition is as true today as when it was first laid out. SMEs should always seek out partnerships with law enforcement and customs organizations as a way to enhance their effectiveness against violations. While the substance of this proposition has not changed, the practice of implementing its tenant has and likely will continue to change in the coming years. In particular, the growing recognition of the overlap of counterfeiting schemes and transnational criminal activity gives added impetus to the need for law enforcement/customs engagements. Not only will SMEs find an easier path to address trademark infringements, but they can become valuable partners in stopping the spread of illicit activity across the globe.
Concluding Thoughts
The organizational challenges SMEs face when seeking to implement brand protection solutions are intertwined, as constraints such as a lack of access to financing can influence hiring and cash flow, which can affect the organization’s ability to appropriately respond to counterfeiting threats. Research has also found that while SMEs see counterfeiting as a major concern and want to do something about the problem, the resource constraints they face prevent them from fully developing and implementing a comprehensive brand protection strategy. Yet, it is not necessarily true that resource constraints will mean that smaller firms are doomed to be unsuccessful in their anti-counterfeiting efforts. For some SMEs financial constraints do not represent hindrances – rather, they have opened the door to opportunities for ingenuity and organizational creativityiv v. The success of anti-counterfeiting activities within resource constrained businesses will be heavily influenced by the firm’s ability to efficiently allocate organizational resources to brand protection efforts. Luckily, SMEs tend to be more willing to engage in trial and error, are more likely to undertake creative risks, and may have a greater appreciation for the educative effects of failurevi. SMEs should focus on the fact that in many cases resource constraints can actually drive employee and organizational creativity and innovation, guiding the way to more effective and efficient brand protection strategies.
[i] https://advocacy.sba.gov/2020/05/20/2020-small-business-profiles-for-the-states-and-territories/
[ii] https://www.acfe.com/report-to-the-nations/2020/
[iii] https://www.proquest.com/openview/c7d75305ac208bda16beba92848f620d/1?pq-origsite=gscholar&cbl=18750
[iv] Heimonen, T. (2012). What are the factors that affect innovation in growing SMEs? European Journal of Innovation Management, 15(1), 122-144.
[v] Omri, W. (2015). Innovative behavior and venture performance of SMEs: the moderating effect of environmental dynamism. European Journal of Innovation Management, 18(2), 195-217.
[vi] Centeno, E., Hart, S., & Dinnie, K. (2013). The five phases of SME brand-building. Journal of Brand Management, 20(6), 445-457.