technology commercialization strategy

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Technology Commercialization StrategyFor R&D Institutions

Prepared by:Dr. Chulho ParkVice President

Strategic Business [email protected]

October 2015

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Business Models for Technology Commercialization

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Classical Role of University TTO

Fundamental Science

Basic Research

Applied Research

Product Development Production

University R&D

Tech transfer

office

New companies

and licenses

Don’t know compelling market or customer needs

Lack of interest and resource for application development

Mostly individual, small group or distributed research

Don’t know/understand state-of-art emerging technologies

Technology is not matured for commercialization yet

Single IP is not good enough for business development

Gap

Standard process Administrative Little recognition Risk averse

Source: SRI International

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Role of CRO and GRO ─ Value Creation Centers

Must bridge the entire R&D spectrum

Translation science & engineering research

Business opportunity idea generation

Technology maturation fund

IP management and bundling

Start-up acceleration fund and service

Business incubation fund and service

Fundamental Science

Basic Research

Applied Research


University R&D

Value creation center

New companies

and licensesCRO, GRO R&D

Source: SRI, SBI

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Key Success Factors for Value Creation Centers

Fundamental Science

Basic Research

Applied Research


University R&D

Value creation center

New companies

and licenses

Aligning technologies with customer needs through product/service

Create innovative culture

Recruit diversified talent

Provide education and practical training

Develop innovation principles & process

Incentivize start-up and biz incubation

Develop mentor (champion) program

Source: SRI, SBI

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New Strategic Vision and Alignment with Corporate Strategy and Businesses

Business Model for Accomplishing the Value Creation Objectives

R&D Activities and IP Management

R&D Planning

UnlockingUnlocking ExistingIntellectual Property22

InventingInventing with a Purpose11

AcquiringAcquiringExternal Know-How33CollaboratingCollaborating with Outside Partners44

UnlockingUnlocking ExistingIntellectual Property22

InventingInventing with a Purpose11

AcquiringAcquiringExternal Know-How33CollaboratingCollaborating with Outside Partners44

Commercialization Activities

Commercialization Planning

Royalty

Equity

Revenue

IPs

IP & $

LicensingLicensing ExistingIntellectual Property33

Creating a SpinCreating a Spin--offoff with a Strategy22

Contract Research Contract Research for Commercializationfor Commercialization44

ConsultingConsulting with Internal Know-How55

Technology/IP Transfer Technology/IP Transfer to SBU or its R&D11

LicensingLicensing ExistingIntellectual Property33 LicensingLicensing ExistingIntellectual Property33

Creating a SpinCreating a Spin--offoff with a Strategy22Creating a SpinCreating a Spin--offoff with a Strategy22

Contract Research Contract Research for Commercializationfor Commercialization44 Contract Research Contract Research for Commercializationfor Commercialization44

ConsultingConsulting with Internal Know-How55 ConsultingConsulting with Internal Know-How55

Technology/IP Transfer Technology/IP Transfer to SBU or its R&D11Technology/IP Transfer Technology/IP Transfer to SBU or its R&D11

Revenue

7

Licensing Model

Worth Active Marketing?

Royalty Licensing

Opportunity

No

YesMarketing

Plan & Strategy

PassiveLicensing

From Spin-off Technology

Venture Model

ActiveLicensing

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Spin-off Technology Venture Incubation Model

Creating spin-offs requires strong, small development teams.

Need Internal Incubation?

Spin-off Venture

Opportunity

Yes

No Spin-offNew

Company

InternalVirtual

Spin-off

Exit Strategy?

SellSpin-off

Company

InitialPublic

Offering

M&A

Ready toSpin-off?

Yes

Not Ready

Fail Demolish team and send staff back to

R&D

Create a New R&D Lab

ActiveLicensing

No

Other Options

Develop Eng. & Consulting Services

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Technology is not matured yet for commercialization

Need to protect potential new business from IP disputes─ File patents to protect your right to use for commercialization

─ Find ways to avoid potential patent infringement dispute

Unclear target market or application/product

Need to demonstrate commercial feasibility or viability

Have to provide continuous (on-site) support from its lab such as materials, equipment, and technical support

Difficult to find potential investors for a spin-off venture

Needs for Internal Incubation

Maximize value and reduce risk for technology commercialization

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Quick Check of Readiness for Spin-off Venture

Demand

Technology Competition

Who are the customers?Why do they buy (needs)?

Market size and growth rate?How much are they willing to pay?

Will the technology be ready?Is the technology competitive?

What is the technical risk?What is the cost?

What are differentiation factors?What are competitive advantages?Are they sustainable in long-term?

CommercialSuccess

Readiness = RDemand x RTechnology x RCompetition x RStrategic-Fit

Must pass the four tests: Will there be markets? Can we make it? Will we be competitive? Does it fit to our strategy?

Strategic Fit

SustainableLeadership

Does this fit with our strategy?Are we capable of executing this?What is the long-term profitability?

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Funds Required to Execute Spin-off Strategy

Need Internal Incubation?

Spin-off Venture

Opportunity

Yes

No Spin-offNew

Company

InternalVirtual

Spin-off

Exit Strategy?

SellSpin-off

Company

InitialPublic

Offering

M&A

Ready toSpin-off?

Yes

Not Ready

Fail Demolish team and send staff back to

R&D

Create a New R&D Lab

ActiveLicensing

No

Other Options

Develop Eng. & Consulting Services

Venture & Licensing

Fund

CV Fund if available, and

VC Funds

VC Funds

VC Funds

R&D FundCreating spin-offs requires strong development teams.

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Systematic Approach of Budgets and Funds to Realize Value Potential

Patents & Know-How Business Thrusts

Royalties,Ventures, or

Large Contracts

R&D Projects

Major ProgramPotential

Investments and Value

Illustrative Only

Angel Fund

Venture & Licensing

Budget

Strategic Investment

Fund

Idea Generation

Budget

Idea Generation

Budget

Venture Capital Fund

Internal Fund

External Fund

Source: SRI, SBI

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Concentrate resources (capital, R&D, commercialization) on a few selected areas

Identify innovation connected to market needs Criteria should include — commercializable, capable,

and competitive Develop technical and business “Champions” Pursue an aggressive IP strategy

• Strategic patents• Patent ownership

Success Factors Related to Business Model

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Case Example:SRI’s Five Discipline for Technology Innovation

Important Needs Value Creation Innovation Champions Innovation Teams Organizational Alignment

Important Client Needs

Champions Value Improvement

Organizational Alignment

SuccessInnovationTeams

Source: SRI

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Some Examples of SRI’s Spin-off Ventures

Customer Service Tools* DTV TechnologiesVideo Enhancement

Systems

LCD technology*Iris Biometric Identification*

Panoramic Image Editing Software*

DTV Equipment*

VOD Services**

Secure Content DistributionWireless mesh networks

Virtual Personal Assistant*iPad App,

Smart Travel Guide*

Speech Recognitionfor Customer Service

Publicly Traded

Web App; Real-time VideoStreaming & Sharing

Content Curation Platform Mobile Productivity App

MPEG-4 CompliantEncoding & Authoring Tool

Gaming PlatformFor Children

Enterprise Social Media*

Electronic SignatureSolutions

Live VideoInsertion System*

Mobile Virtual Personal Assistant Technology for K-12 Education

*Acquired or merged** Dissolved

Personal ContentsSummary*

Information Technology

Robotics: Electroadhesion

Robotics

Surgical Robotics

Publicly Traded

Next-Gen Robot Arms*

Anti-counterfeiting Systems

Ceramics for Electronics *

Portable PowerSystems**

Optical NetworkComponents

ElectroactivePolymers*Next-generation

Fuel Cells**

Publicly Traded

Flexible CircuitMaterials & Components

HQ Phosphor SolutionsFor LED Lighting*

Advanced Materials

Nano-porous Material BasedNatural Gas Storage Systems

Liquid Membrane SeparationFor Chiral Molecules**

Digital Color PrintingApplications**

Biotechnology/Medical

Surgical Robotics

Publicly Traded

Genetic Profiling Drug Dispensing System*

Medical Systems

Drug Discovery

Disposable Hearing Aid*

Drug Development

Simplified Diabetes Management

Bed Bug Detection Products

Business Consulting

Business Intelligence& Consulting Services

Publications & Consulting Services*

IT Consulting Services*

Source: SRI

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Case Example:IMEC Research Programs for the Industry Eco System

Source: IMEC

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Biz Models and Spin-off Ventures of IMECIMEC’s Business Model

Source: IMEC

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Organization for Technology Commercialization

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SBI’s Integrated Framework for Technology Management and Commercialization (R&BD)

Knowledge of External Drivers and Dynamics

Infrastructure: Organization, Resources, Processes

Technology Planning

R&D Project Management

Business Vision and Strategy

• Benchmarking

• Scenarios

• Market Research

• Competitive Analysis

Technology Portfolio Planning

Project Portfolio Selection

Budgeting and Resource Allocation

Project Initiation

Project Execution

Project Management

• Management Diagnostic

• Structure and Teaming

• HR Management

• IT & Knowledge Management

• Cycle-Time Management

• External Network Management

Idea

tion

Technology AcquisitionStrategy

Project Closeout

• SWOT Analysis

• Technology Intelligence

Knowledge of External Drivers and Dynamics

Infrastructure: Organization, Resources, Processes

• Benchmarking

• Scenarios

• Market Research

• Competitive Analysis

• Management Diagnostic

• Structure and Teaming

• Profit Sharing Model

• Business Plan and Model

• Venture Financing

• External Expert Management

• SWOT Analysis

• Technology Intelligence

Intellectual Property Management

Value Creation and Management

TechnologyValuation

IP Portfolio Planning

Budgeting & Resource Allocation

TechnologyLicensing

VentureCreation

Sell, M&A,JV, Alliance

Idea

tion

Technology CommercialznStrategy

InternalUse

Return onInvestment

Technology and Intellectual Property

Creating IP Assets Turning IP Assets into Value

Technology Management Commercialization ManagementIP Management

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Basic Functions of Technology Management and Commercialization

Technology (R&D)Strategy & Planning

R&D ProjectManagement

Intellectual PropertyManagement

CommercializationStrategy & Planning

CommercializationManagement

Technology (R&D) Management

(Creating IP Assets)

Technology Commercialization

(Turning IP Assets into Value)

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Technology Commercialization Activities

IP Portfolio Planning& Management

Patent Process Management

Technology Commercialization

Strategy

Licensing Venture Start-up & Incubation

Patent Research,Market Research, & Opportunity Search

There are many strategic considerations on organizing IP planning and management as well as technology commercialization including licensing and venturing

Organizations should be evolutionarily restructured in accordance with changes in strategy, goals, and external environments

In general, there are many organizational alternatives to be considered including outsourcing and collaboration.

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Commercialization Process and Responsibility

Technology/IPfor Commercialization

IPManagement

TechnologyTransfer (Licensing)

VentureStart-up

IncubationSupport

CommercializationCommittee

LicensingCommittee

ActiveLicensing

PassiveLicensing

Licensing

Venturing

VentureStart-ups

CommercializationStrategy

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Alternative Organizational Structures

IPManagement


Commercial Development Center


VentureStart-up

IncubationSupport

Option-3

IPManagement




VentureStart-up

IncubationSupport

IPManagement




VentureStart-up

IncubationSupport

Option-3

IP Management

IPManagement

Commercial Development


TechnologyLicensing

VentureStart-up

IncubationSupport

Option-2

IP Management

IPManagement



TechnologyLicensing

VentureStart-up

IncubationSupport

IP Management

IPManagement



TechnologyLicensing

VentureStart-up

IncubationSupport

IP Management

IPManagement



TechnologyLicensing

VentureStart-up

IncubationSupport

Option-2

Option-1

Commercial Management

IPManagement



TechnologyLicensing

TechnologyLicensing

VentureStart-up

IncubationSupport

Commercial Management

IPManagement



TechnologyLicensing

TechnologyLicensing

VentureStart-up

IncubationSupport

Option-1

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Centralize oversight of commercialization processes and add Venture Start-up for its own technology commercialization – Leverage resource and database in IP management, IT support, and knowledge

management for commercialization activities Assign new business development responsibility to each R&D

unit to spearhead commercial efforts– Will scan and identify innovative and marketable technologies within each R&D

unit– Will involve each R&D unit commercialization strategy decision making

Create a Commercialization Supervisory Board of senior executives as a forum for decision making and oversight– Will act as senior advisors and decision makers; Will assume Board seats on

start-ups or joint ventures Review (and modify, as needed) patent/IP policy, profit sharing

model, R&D project management systems to expedite technology commercialization activities

Recommended Approach at Establishing Stage

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Venture Start-up Team should be led by the office head and at least 2 to 4 staff members (in early/beginning stage):

Manage small portfolio of opportunities into start-ups– Commercial business development plan and strategy– Coordination of R&D, venture planning, market research, and

commercial development– Valuation of emerging technologies and business potential

For each selected opportunity:– Development of business plan– Launching new venture– Venture incubation: hiring new staff, venture financing– Management of venture business– Establishment of networks of technical, legal, accounting, consulting,

and venture finance experts

Formation of Venture Start-up Team

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Organization for Commercialization Supervision

Commercialization Supervisory Board (CSB):– Form the Board with 3 to 5 senior

officers– Approve portfolio strategy– Preview and approve all venture

activities and major licensing deals– Allocate seed funds– Hire CEOs for new ventures– Resolve conflicts among

stakeholders

R&D Org.


Center

Commercialization Supervisory

Board

R&DDivisions

R&D Planning& Management

Spin-off Ventures Holding Company

(Subsidiary)

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Case Examples: Venture Board Composition SRI: Commercialization Supervisory Board (CSB)

– CEO, CFO, VP of Business Development, One of its R&D Division Head (VP), President of SRI Holdings

P&G: P&G Innovation Leadership Team (ILT)– CEO, CTO, and One of its global business unit presidents

Lucent: Venture board of the New Venture Group (NVG)– President of the NVG division, and 3 VPs, act as the partnership for the

internal venture capital firm

Nortel Networks: Business Venture Group (BVG)– BVG members, some executives of its SBUs, and outside experts

3M: No corporate-wide venture board– The Corporate Enterprises Development (CED) organization had the

leadership

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Profit Sharing Model

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Basic Requirements for Profit Sharing Model

Encourage researchers to conduct innovative, disruptive, high-impact research

Create new culture of technology commercialization and commercial business development through innovation

Sustain the top management’s commitment to successful technology commercialization

Encourage the technology commercialization team to build a profitable, financially sustainable, and self-motivated organization

Provide significant rewards to inventors Retain rewarded inventors and keep them focused on innovative

R&D Comply with government regulations Minimize potential conflicts among stakeholders

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The profit sharing policy must have clearly defined rules The profit sharing process must be perceived as fair The policy must be subject to government The company should recover out-of-pocket expenses incurred in

producing the royalty/equity income before sharing profits For each allocation, the company must conduct a detailed review

of all facts and provide supporting documentation such as written R&D proposals and Lab notes

The company must implement a process for an independent review of distributions by a compensation committee of the board:– Approve compensation and supervise execution– Decide compensation of top management (e.g., CEO, CTO, CFO, and VPs)– Resolve conflicts among stakeholders regarding compensation.

Implementation of a Profit Sharing Model

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Recommended Distribution and Approval Process for Profit Sharing

VP of R&D Div appoints knowledgeable Lead (PI) to recommend allocations

Lead develops list of participants, their contributions, and relative % contribution (except the Lead’s %)

VP recommends distribution %s, Lead’s %, expenses, and reserve, if any

HR distributes the list and top management team reviews recommendations for completeness

CEO reviews with top management team the final distributions, expenses, and reserve, if any

Compensation Committee reviews and approves distributions, expenses, and reserve, if any

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Summary of Recommendations

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InstitutionalFinancialSupport

RegionalEconomic

Growth

WorldImpact

IndividualRewards

Objectives of Technology Commercialization

World-ClassThink-tank &

Innovator

Retain top scientists and engineers Attract new talented technical staff

Diversify income sources Increase incomes Prepare rainy days Develop self-sustainable institution

Contribute to develop local economy

Create a local venture valley Improve national competitiveness

Invent innovative, high-impact technologies Demonstrate big success in commercialization Establish centers of excellence Develop world-class reputation

Nurture culture of commercialization Increase income sources Achieve financial independence Attract more R&D funds Become a world-class R&D institute

Source: SRI, SBI

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Companies Represent a Range of the Commercialization Continuum

Returns / Cost / Complexity / Compelling Innovations and Market Needs

Passive Licensing

Fee for Services

Active Licensing

Start-up Promotion

Venture Incubation

Source: SRI

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Technology Commercialization Management Diagnostic Identifies the Needs and Leverage Points for Improvement

Company• Issues in TechnologyCommercialization• Leverage points — Strategy — Organization and resources

— Management systems

• Metrics and benchmark

• Next steps

• Solution options

Vision & Strategy

Commercialization

Strategy

MgmtSystems

Org. &Resources

External

Environment

Technology,and IP

Vision & StrategyVision & Strategy

Commercialization

Strategy

MgmtSystems

Org. &Resources

External

Environment

External

Environment

Technology,and IP

Technology,and IP

Value Creation• Licensing• Start-ups• Incubating• IPOs

Value Creation• Licensing• Start-ups• Incubating• IPOs

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Recommended Strategic Principles in Technology Commercialization

Recommendationsu Build consensus internally and

externally for proactive, strategic technology commercialization

u Go slow initiallyu Build skills, processes firstu Spin-off technology ventures are

preferred over licensing to maximize value creation

u Create some early success stories

u New performance measurement and profit sharing models are needed

Typical Situation Require cultural change Need new skills and

experience Align with R&D planning

needed Have limited capital availability Comply with the government

and company regulation and supervision

Require legal/policy changes to support various technology commercialization activities and profit sharing