 |
| |
| |
This is the Introductory Paper for the TOP Course
Skills Development Course for the Technology Transfer and Innovation Support Professions
Technology transfer (TT) professionals tend to communicate mainly the technical aspects of a technological opportunity (TOP). The business or market aspects are too often neglected or unknown. In order to succeed in the market place TOPs must, however, be made interesting to people who speak and understand mainly the “language of the market”. This course attempts to give TT professionals a tool box to better communicate TOPs thus enhancing the chances of success of the TOP, the TT agent and his or her organisation. The tool box consists of a framework of understanding (models), practical standards and a number of case studies. The course is intended as a one-day workshop possibly followed up individual tutoring in relation to real cases.
Definitions
A TOP in the context of this course is defined as any opportunity to introduce new technology in a market-based business in order to innovate and enhance the profitability and sustainability of that business (and possibly other businesses as well). The TOP may be generated by either a Technology Request (TR) from the business side or a Technology Offer (TO) from the research side. Technology is defined in a wide sense as not only “hardware”, machines and other tangible items, but also as the know-how associated with the practical use of the hardware and “orgware” or the managerial and organisational aspects of applying a given technique in a sustainable manner. Thus technology could comprise innovation of products, processes and markets and be incremental as
well as radical in nature.
Dr.Pavitt’s research, which can be supported by other studies, shows that businesses can be segmented according to their probable sources of technology and innovative behaviour. The same research documents that not more than 10% of all businesses innovate with the assistance of R&D institutions and/or TT professionals. In this course, we shall mainly investigate the innovative behaviour and TOP communication of businesses as it occurs with the intermediary services of a TT professional.
A simple Model of TOP Communication
A simple Model of TOP Communication involves at least the following elements: an Offerer, a Requester, who are assumed not to know of each other’s existence, for which reason communication must be established between these two parties. This communication is established through a description of the Offer and/or the Request done by a TT Broker or professional.
 Most often the TOP Communication takes place in a sequence of phases or steps such as contemplated in the following illustration of how the IRC network sees its own operations.
 When considering TOP Communication, we must differentiate between the communication needs and forms in different phases: Auditing, Partner search, Negotiating and Implementation. The nature of TOP communication is contradictory in that the parties wish as much openness as possible in the early stages and typically the opposite once the process approaches the final stages. In this course, we shall try to set standards for how to communicate according to this critical contradiction.
SPIN Selling
Is TOP Communication different than other business communication involved in innovation processes?. Often you will hear arguments that innovation is driven by “technology push” or “technology need”; or lately that innovation is an interactive process with a of balance between “push and pull”. It is argued that there is “market failure” because most SMEs or most researchers are not able to find each other without high transaction costs , for which reason there is a need for professional intermediary between the parties. Taxpayers’ money is given out in most developed countries in order to counterbalance this assumed imperfection of the market mechanism. Accordingly, it is assumed that the resulting TT profession makes use of
special tools of communication different from those of the commercially driven innovation projects. In this course, you will be asked to discuss:
Is there a difference between communication in technology transfer and in commercial innovation practise? And if so, specify how and why!
Certainly TOP Communication has many similarities with models of successful business communication in relation to complex sales/business operations. Neil Rackham has studied more than 35,000 cases of what constitutes communication in successful business transactions and reached the conclusion that the answer is SPIN. SPIN stands for a method of asking questions between parties so as to understand the following aspects:
S Situational aspects, understanding the general situation of the Requester (potential client)
P Problem related aspects, i.e. Questions related to what the problem in question is, technical specifications etc
I Impact related aspects, i.e. questions related to how the existence of the problem Impacts the Requester, understanding the scope of the problem (how much, how often,...) and how a solution might impact the success of the business.
N Net Value questions, namely increasing the understanding of how much a solution to the problem would be worth.
Successful business communicators, according to Rackham, use these question types in complex negotiation cases, never at the same time but always in a sequence of meetings (communications) and always in this order. A solution is never offered immediately, but only after a thorough mutual understanding of the SPIN aspects has been reached. In many ways, the IRC model above corresponds quite well with Rackham’s SPIN model, which leads me to claim that TOP Communication is not generically different from complex sales negotiations. My own experience suggests that successful TT corresponds well to Rackham’s observations. Another interesting observation from Rackham’s research is that a complex sale is never terminated in one meeting but rather over a series of meetings.
Furthermore, the first contact person is seldom the final decision maker, which means that your first contact person also has to convince others in the internal organisation, before a deal can be made.
My conclusion from this is that there is no reason to believe that the TT profession is very much dissimilar to ordinary SPIN Selling.
One important distinction may be made in the case of application of early stage or prototype research results to commercial practise. In most of Rackham’s cases, the “interviewer” has a limited arsenal of solutions, namely his company’s products and services, most of which are well described both in terms of technical/operational aspects and price. In TT cases, where the TT Offer is not a fully developed technology, there will always be questions concerned with whether the suggested Offer will work in real life. If there is only theoretical evidence or a simple prototype, how can I convince a businessman that my Offer will work, since I often have no clear evidence that the prototype can be made into an operational production item without excessive cost? In
such cases there will often be a need to actually carry out pilot projects to test the Offer. It is clear that communication between the parties will suffer from the fact that the pilot project must be funded – who should pay? The risk is, in other words, higher for TT. Furthermore, the risk profile for TT also includes the potential business of the Offer once it is introduced into the market.
In summary, I find it useful to apply Neil Rackham’s insights as guidelines for Best Practise Standards in TOPs Communication. Later in this course, we shall see how this can be done in practise.
Porter’s 5 Forces
Michael Porter from Harvard Business School has studied competitive forces which can be used to diagnose an industry’s structure and average profitability, which in turn may be used to predict or at least indicate expected innovation behaviour. I find that Porter’s model is useful in understanding the structural framework which we meet as TT professionals, since new technology is always associated with certain industries. Which entry barriers exist? What determines Supplier or Buyer power? What determines strategies of Rivals? And how will a new technology substitute existing ones? Answers to these questions are helpful tools when we wish to understand how a certain new TOP could or should enter the market.
“Porter's 5 Forces
A framework for diagnosing industry structure, built around five competitive forces that erode long-term industry average profitability. The industry structure framework can be applied at the level of the industry, the strategic group (or group of firms with similar strategies) or even the individual firm. Its ultimate function is to explain the sustainability of profits against bargaining and against direct and indirect competition.
Porter's five forces, or factors that shape business strategy are:
- Threat of entry to the market from other organisations
- Supplier power
- Buyer power
- Availability of substitute products
- Existing competitors
 The elements involved with each force are shown in the lists below
Entry Barriers
- Economies of scale
- Proprietary product differences
- Brand identity
- Switching costs
- capital requirements
- Access to distribution
- Absolute cost advantages
- Proprietary learning curve
- Access to necessary inputs
- Proprietary low-cost product design
- Government policy
- Expected retaliation
Determinants of Supplier Power
- Differentiation of inputs
- Switching costs of suppliers and firms in the industry
- Presence of substitute inputs
- Supplier concentration
- Importance of volume to supplier
- Cost relative to total purchases in the industry
- Impact of inputs on cost or differentiation
- Threat of forward integration relative to threat of backward integration by firms in the industry
Determinants of Buyer Power
- Bargaining Leverage
- Buyer concentration versus firm concentration
- Buyer volume
- Buyer switching costs relative to firm switching costs
- Buyer information
- Ability to backward integrate
- Substitute products
- Pull-through
- Price Sensitivity
- Price / total purchases
- Product differences
- Brand identity
- Impact on quality / performance
- Buyers profits
- Decision makers' incentives
Rivalry Determinants
- Industry growth
- Fixed (or storage) costs/value added
- Intermittent over capacity
- Product differences
- Brand identity
- Switching costs
- Concentration and balance
- Informational over complexity
- Diversity of competitors
- Corporate stakes
- Exit barriers
Determinants of Substitution Threats
- Relative price performance of substitutes
- Switching costs
- Buyer propensity to substitute “
As with the other models presented so far, we shall see later how Porter’s Forces may be used in practise.
Porter’s Generic Strategies
 Segmentation of SMEs
Many innovation researchers have tried to create taxonomies or segmentation of enterprises. The purpose is, of course, to predict innovative behaviour and consequently design and implement appropriate (public) innovation support mechanisms. Similar research is used by venture capitalists and other investors when trying to target areas of investment.
Different segments of industry are located in typically different core sectors according to Pavitt et.al. The following categories are interesting for the TT profession:
–Supplier dominated (SD), e.g. agriculture, housing
–Scale Intensive (SI), e.g. bulk material production (steel, glass)
–Specialised suppliers (SS), e.g. machinery, instruments
–Science Based (SB), e.g. electronics
Each of these segments show differences with regard to what determines their “technological trajectory”, i.e. which sources of technology are most probable, “types of users” , and which “technological trajectory” they will choose; sources of process technology, the relative balance between process and product innovation, typical size of firm. Actually, Pavitt has attempted to create an unambiguous relationship between these segments and statistical codes for industry sector (often termed SIC), which means that you can “predict” which kind of business you plan to visit.
 From Pavitt
In the course we shall test some of these assumptions and see how well they may assist us in understanding the prospects of success for TT, even before we have visited and audited a given enterprise.
Business Plan Paradigm
An American colleague of mine is fond of asking: “Where’s the Beef, Max?” when we open a new case of TT. His real concern is not culinary but concerns the business side of TT; how money can be made, the scope and size of business and how easily it may be made. These questions are of prime importance for success in TT. The best Model for analysing the factors which determine the potential for adding profitability to a given business is known as creating a Business Plan.
There are many good models for Business Planning. You may just search any business school or the Internet, and you will be rewarded with millions of pages of reading. At the heart of Business Planning are questions which are also central to successful TOPs Communication. In order to attract the attention of potential partners for a TT deal, we need to give meaningful information about the probable expenses involved in acquiring a technology, how these expenses may be covered by different implementation strategies, markets, pricing etc so as to ensure profitability. Following this it should be possible to create an action plan with a cash flow prediction, financing, liquidity and such important financial information. Most businessmen will require or calculate themselves this piece of
information in order to finally evaluate whether a TT deal should be made. The successful TT professional should then of course be proactive and prepare as much business plan information as possible before even entering partner search and definitely before negotiating.
The Business Plan will, of course, consist of information, which could be derived from the other Model exercises mentioned earlier in this chapter (Pavitt’s segmentation, Porter’s Forces, Rackham’s generic questions).
NEW: I have DEVELOPED my own approach with BeefCAMPus and dedicated a web page to the purpose CLICK TO READ
News Model
All of the other mentioned Models require a lot of information gathering and a well prepared TOP file will consequently be quite voluminous. On the other hand, this information is not requested nor needed in the early phases of TOPs Communication. Therefore, a final TT Best Practise can be learned from news editors or marketing people. The Headline and the first pieces of information should be eye catchers, so potentially interested partners will “buy” our story in a world crowded with useless information.
I claim that a TOP cannot be give a good Headline unless the groundwork has been done as required by the other Models, but also that all this relevant information cannot be communicated or ”sold” unless the Headline or sales message is very clear. Managers of successful businesses are extremely busy and will not spend scarce time on anything which does not fit into a tight timetable filled with core activities. The typical modern business acts “just-in-time”, has focused on core competence and outsourced most non-core competencies, the consequence of which is that it becomes more and more difficult to determine where in a supply chain the precise user of a given technology may be found.
Psychology at Work
Communication requires good basic information, good headlines, good sales channels. The process of communication itself is, however, also a psychological “game”. From my experience with hundreds of audits, interviews and case stories of TT, I have come to believe that understanding this and acting accordingly is essential to successful TOPs Communications and TT deals. Psychology gives us a lot of Role Models we play when we communicate; and there are numerous schools of social psychology which study communication from this perspective.
In this course I shall refrain from going into theoretical detail, but rather give you some of the Paradigms you may have met yourselves. Or you may even add your own experience.
”Underage Signatory” : A very typical situation in TT is that the TT professional will communicate or meet with a given person in an organisation. In the early stages” of TOPs Communication the TT pro will have to convince this person first; and at this stage only few ask whether the counterpart actually has “power of attorney” to represent the true opinion of the partner company/organisation. Many people don’t like to show that they lack power so he/she will tell you: “ I underwrite” and you believe that your counterpart expresses the true position of the potential partner,
but what the counterpart really means is “but I ... need my boss’ signature”. So this version of the TT game is like an underage teenager going to a shop, buying a lot with a signed cheque, but not telling the shopkeeper that he is underage and that the signature is not valid. The parents are not interested in buying....
The Fake: a variation of the “underage signatory” is the “Fake”. In quite a few enterprises there will be division managers responsible for certain functions. Innovation managers belong to this breed and are , of course, paid to make sure that innovation happens. He (yes, most often he will be a male engineer) feels or is under direct orders to create tangible results and to reduce the cost of acquiring new know-how and technology. So the Innovation Manager will firstly be extremely keen to talk with you, since he may learn something or get an important lead to a potentially interesting source of
innovation for his enterprise. Secondly, he will seldom give you access to upper management because of own mandate. It doesn’t look well if he finds an interesting TOP and goes to upper management to ask for funding for acquiring this TOP. His gut reaction will be to see if he can become a “copycat”. He will look for alternative routes to the TOP or something close to it – without using you, the TT professional. He suffers the NIH-Syndrome (“Not Invented Here”). An interesting observation in patent literature is that you will almost invariably make the judgement of any TOP that the “Good part is not New” or “the New part is not Good”: there is always a “second man”, someone who had your idea or close to it. This also goes for patents, which by International Search Reports have been deemed “novel”, in my experience. Innovation research has a name for this, Imitation Strategies. Steven
Schnaars’s book on this issue is an awesome analysis of 28 cases which show that imitators often are more successful in business terms that the “pioneers”. So the Fake is a real species to be aware of.
”Therapist”: is a special European Role which is typically offered by TT professionals. In EU there is a myth (and reality?) that especially SMEs lack the resources to become innovators, so they need the help of (publicly funded) TT professionals. As SMEs also lack the financial strength to pursue more innovation, taxpayers’ money are given out to foster a group of TT “Therapists”, as I call them. ”Let me help you, poor SME you”
”Adult Couples”: is a classical Role. The partners trust and confide in each other. Often they share many years of being together. Mutual respect rules the game. But beware, couples get tired, too. Or side steps may be costly. Divorces do occur. In TT terms this means that the enterprises with which you have enjoyed the best experiences, your key accounts, may suddenly get into “midlife crisis” and opt for other partners. I worked with Key account management in a large technology transfer organisation with more than 12,000 annual clients in the books, of which about 1,000 could be called key
accounts. Invariably, however, there would be a turnover of 25% each year in the key accounts.
”Business Partners”: is an evergreen. In this Role, the parties stay together because it makes business sense. The partners share information and prospects in order to benefit most, but either party will only disclose just enough to facilitate progress. Often legal agreements regulate the flow of information and prospects so as to share risks and profits according to signed Memos of Understanding or the like. With business partners you will also have a clear division of costs and profits arranged. For the TT pro this most often means: “pay for yourself” until we start making a profit”
especially on larger projects or projects where the payback period is long.
| |