Unit 8 Commercialization (FINAL VERSION)

8/11/2019 Unit 8 Commercialization (FINAL VERSION)

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UNIT 8:COMMERCIALIZATION OF NEW

TECHNOLOGY-BASED PRODUCT

1Entrepreneurship Dept,FBM (2009) ENT 600/UNIT 8: COMMERCIALIZATION

TECHNOLOGY ENTREPRENEURSHIP

(ENT 600)


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Commercialization of Research &

Development

The products of R&D will not generate revenueunless they are successfully commercialized.

Commercialization of Research and Development

refers to efforts taken to introduce new technology-based product to the market with the aim of gaining

commercial return.

The commercial value of a research is measured bythe contribution of the research findings to the

development of new process, new services or

product.

4EntrepreneurshipDept,FBM (2009) ENT 600/UNIT 8: COMMERCIALIZATION


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Taking R & D Output To The Market

There are two approaches through which research findingscould be brought to the market by:

1. Disseminating innovation freely through academic

publication such as journals and proceedings of

research conference. This approach does notpromise maximum benefit to the innovator

2. Allowing the researcher (innovator) to monopolize

the benefits of research and development in theform of intellectual properties (IP) and

commercialization of the IP.

5EntrepreneurshipDept,FBM (2009)

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Options To Commercialize Research &

Development

There are five (5) options to commercialize R & D:1. Outright sale of the R&D output before securing IP (intellectual

properties)

2. Get into licensing agreement with established private organization

after securing IP

3. Get into Assignation agreement with buyer

4. Spin-off by starting a new venture from within the established

research organization.

5. Spin-out by starting a new venture independent of the research

organization where the new technology-based product was

developed.




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Commercialization Pattern of R&D

Spin-off

Company

Established

Licensing Agreement

Established with Existing

Private Sector

Organization.

Production

Patent Application

R & D Outright sale ofresearch product

before securing IP

Spin-out

Company

Established

Assignation Agreement

Established with

Existing Private Sector

Organization.




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Commercialization Options:

Licensing A Patent

Licensing a patent to an established business organization isconsidered as one of the most viable means of commercializing

a new technology-based product.

A patent holder who licenses his patent is known as the

licensor, while the person to whom the patent is licensed to iscalled the licensee.

When a patent is licensed to a licensee, the licensee is given

the exploitation right .

Exploitation right means the right to create, market and sell

something based on what the patent protects.




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Licensing A Patent..continue

In return, the licensor will expect financial return in the form of

royalties from the licensee.

A patent license basically is a legal contract that spells out

terms and conditions for examples:

The area of exploitation allowed by the licensing

agreement.

Performance obligation demanded by the licensor over the

licensee in order to ascertain consistent financial return.

The amount and frequency of royalties to be paid by the

licensee.

In this context a license is revocable or cancellable if certain

terms and conditions are not met.




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Patent Assignation

Patent assignation is an irrevocable exploitation right given

by an assignor to an assignee. The assignor refers to theoriginal patent holder, the assignee is one who receives

assignment of the patent.

Assignation is not like licensing: Assignation entails the sale or outright transfer of the

patent by the assignor to the assignee.

Assignation is sought if an irrevocable exploitation right

is needed by the parties involved.

The disadvantage of patent assignment is that when

assignee failed to pay royalties this will not revoke the rights

that already assigned to the buyer.




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Valuing a Patent

Determining the monetary value of a patent is veryimportant because it helps the patent holder to

determine:

The right value to sell the patent to assignee

The right amount of royalties to be charged to patentlicensee.

How much a patent is worth depends on the following

factors:

1. The size of the potential market.

2. The value of comparable patents.




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3. Validity of the patent (the risk of the promotedpatent to be invalid if the inventor does not meet

the statutory requirement for obtaining the

patent).

Example:

They were not the inventors

Had published the information about the

invention

Had offered the invention for sale beforethe date of application



Valuing a Patent.continue


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Valuing a Patent.continue

4. Determine if the patent overlaps with otherpatents, the higher the probability that a patent

may overlap with another, the lower the value of

that particular patent.

5. Assess how much it costs for someone to use the

next best patent instead of buying or subscribing

license of your patent.

6. Determine the reasons for selling or licensing the

patent.




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Spin-Off Into A New Venture

Alternative to licensing and assignation, an innovator may

choose to commercialize his invention through the creation of

a new technology-based venture.

In this context the innovator assumes the role of a

technopreneur by creating a new venture from within anestablished organization like a university or a company

In venturing into the spin-off company the technopreneur

himself exploits the patent rights he had secured.

Prior to venturing into a new technology-based business a

technopreneur needs to develop a business plan, determines

financial requirements and seeks sources of financing.




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Spin-out Into An Independent New Venture

Besides venturing from within the established R&D institutions,

universities or established business organizations the innovatorsmay also have the option to leave the parent organization and

established an independent new venture to commercialized the

patent he owned. In this context the innovator assumes the role

of a technopreneur by creating a new venture independently

Similar to a spin-off venture, in a spin-out venture the

technopreneur himself exploits the patent rights he had

secured and needs to develop a business plan prior to venturing

into the new venture.

However, in the case of a spin-out venture the technopreneur

has to bear the risk of the new venture alone.




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The Risk of A New Venture

In spinning off or spinning out into a new venture,

the technopreneur faces the following risks:1.Technological uncertainty

2.Strategic uncertainty

3.Uncertainty in first time buyers

1. Technological uncertainty is associated with:

To determine order winning product configuration.

To determine the most efficient production technology To determine the level of difficulty to develop this

technology.

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The Risk of A New Venture (continue)

2. Strategic uncertainty

New products are often characterized by the absence of

a proven marketing strategy. Hence firm needs to utilize

more resources in order to ensure success.

3. Uncertainty in first-time buyers

Customers of a new venture normally are first time

buyers. The marketing task is to substitute what buyers

used to purchase and to encourage these buyers tomake initial purchase of the new products.




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Barriers To Entry A new venture may face difficulty to establish entry into a

particular industry.

Entry barriers refer to the accessibility of a new venture

into a particular industry. Factors that contribute to entry

barriers are: The cost of adopting technology in the industry

Access to distribution channel

Access to raw material

Cost inefficiency due to lack of experience The cost of capital required to launch the new venture

Some of these barriers disappear as the industry

develops.




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Technology Life Cycle

The performance of technology and product hasa recognized pattern over time

This pattern can be very helpful in the strategic

planning process of the technology-based

venture

Thus, managing a technology venture requiresdeep understanding of the life cycle of the

technology, product, process and system.




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Technology Life Cycle (continue)

A technological rate of performanceimprovement is dependent on the effort such as

research and development devoted to the

technology improvement.

A newer technology may have higher limit of

performance for the same parameter and may

replace the older technology at certain period oftime.




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Technology Life Cycle (continue)

Technology performance is expressed in term ofany attribute such as density in electronicindustry (for example number of transistor perchip), speed in mile per hour, energyconsumption in K Watt per hour or fuelconsumption in mile per Km.

The technology performance become vulnerableto substitution or obsolete when a new or bettertechnology emerges.

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Technology Life Cycle

Physical Limit

Time

Technology

Performance

Parameters

NEW

INVENTION

PERIOD

Embryonic

Technology

Improvement

period

Growth

Maturity

Mature

Technology

Period

Aging

The S-curve of technological progress

Source: Tarek Khalil (2000), Management of Technology; the Key Competitiveness

And Wealth Creation, McGraw-Hill International Ed., Singapore, (pg 81).



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Stages in the TLC

Technology progresses through a three-stage

technological life cycle (TLC):

1. The new invention period known as the

embryonic stage.

2. The technology improvement period, also

known as the growth stage.3. The mature technology period or maturity

stage.



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TLC Stages:

New Invention Period or Embroynic Stage

The new invention period is characterized

by a period of slow initial growth. This is

because experimentation and initial

problems are worked out of the system.

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TLC Stages:

Technology Improvement Period

or Growth Stage

The technology improvement period is

characterized by rapid and sustained

growth.

Also known as the growth stage


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TLC Stages:

Technology Mature Period

or Maturity Stage

The mature technology period starts when

the upper limit of the technology is

approached and progress in performance

slows down. This occurs when the

technology reaches its natural limit.




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TLC Stages:

Technology Mature Period or Maturity Stage (cont)

The technology become vulnerable when

technological substitution takes place or when

the technology becomes obsolete. That is when

better new technology emerges.

Investment in the on going technology at this

stage may be riskier even though some may

thrive in the declining technology.




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TLC and the Market

In commercializing new technology or product

one must identify the stage of the technology in

its life cycle.

Technology under development stage has no realincome-producing value and the technology that

is not being marketed (technology on the shelf)

provides no return.

When technology reaches the market itgenerates income.




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The Technology Market Life-cycle

As technology develops along with the

recognized technology life-cycle, the

technology begins to penetrate its market

and subsequently experiences marketgrowth.

The corresponding market growth phases

of the technology is called the TechnologyMarket Life-cycle and is expressed as

market volume




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The Technology Market Life-cycle Phases

Over time the technology will experiencesix phases of market life-cycle:

A. Technology development phase

B. Application launch phase

C. Application growth phase

D. Technology mature phase

E. Technology substitution phase

F. Technology obsolescence phase



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Technology Market Life-cycle

Technology Development Phase

At the Technology Development Phase the marketdoes not recognize the technology at all.

During this time the researchers are putting in much

effort and utilizing significant amounts of resources tocreate the technology, develop proto type and testing

the new technology.

During this period revenue is not generated andwhere ever possible, time spent in this phase has to be

reduced.



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Application Launch Phase

This is the phase where the technology islaunched on the market as a new application

(e.g. a new product or process)

Once the new technologyapplicationis

launched the market volume will pickup with

the path of the technological progress.

It is characterized by slow beginning and

followed by rapid growth.

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Application Growth Phase

In the Application Growth Phase the

technology application will begin to penetrate

or go deep into the market

Extend of penetration of the technology into

the market will depend on the rate of

innovation and the market needs of the new

technology.




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Technology Mature Phase

In the Technology Mature Phase, the market

growth rate slows down as the technology

approaches its maturity. The market volumemay reach a peak and then start to decline.




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Technology Substitution Phase

The Technology Substitution phase ischaracterized by declining market volume as

the technology is faced with being substituted

by new technologies

Companies that continue to utilize the old

technology will begin to experience decline in

market share and revenue.




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Technology Obsolescence Phase

In the Technology Obsolescence Phase the

technology application has become obsolete

and has little or no value at all.

Investment in the technology during this phase

is not attractive

38EntrepreneurshipENT 600/UNIT 8: COMMERCIALIZATION

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Unit 8 Commercialization (FINAL VERSION)