Lessons Learned in Technology Assessment…Lesson 6…

This is the last of a series of six posts to share with you important lessons we’ve learned through our experiences working with numerous commercial clients in a variety of situations. On the path to your success in developing and commercializing technologies, they will help you avoid common pitfalls, unwarranted assumptions, and other sources of technical and commercial bias that could add up to business failures.

Lesson Six.

View Your Assessment as an Integrated Set of Findings to Establish Your Basis of Competition

Technical and market elements of a technology assessment should be considered together to determine the attractiveness and viability of candidate technologies within the realities of target addressable markets.

Lesson Six Case Study:

Client:  Global Chemicals and Materials Company

Situation:

  • Develop and introduce new products based on its proprietary nonwovens materials technologies, already successful in apparel insulation applications

Technology Assessment Need:  Develop and characterize the potential “product/market” roadmap that could be addressed by the client’s non-woven materials technologies

Our approach:

  • Identified acoustic (noise reduction) applications as promising high volume opportunity
  • Researched primary and secondary performance needs across an array of acoustic applications in commercial and industrial markets
  • Considering research findings holistically, identified and rank-ordered market opportunities which client could uniquely fill with its materials and technologies

Outcome: Acoustic applications with flame retardant functionality were identified as a segment in which our client could establish a basis of competition over other market participants. We segmented the market by level of flame and smoke performance requirements.

By understanding the market size of each applications and the associated flame/smoke performance requirements, our client could make sound judgments regarding the return on investment needed to develop application-specific non-woven products. In effect, the result was an array of short-, medium-, and long-range opportunities in acoustic applications.

For more on best practices in moving from lab-to-market, see https://www.prakteka.com/category/technology-assessment/

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Are you looking for new customers for your existing technologies and products?

Do you have excess manufacturing capacity you’d like to put to use?

Or are you launching a new product and need to understand which end-use applications are the most promising?

We’re ready and able to help you make your decisions with confidence. Contact us at https://www.prakteka.com/contact-us/

or via direct email at mah@prakteka.com

Lessons Learned in Technology Assessment…Lesson 5…

This is the fifth of a series of posts to share with you six important lessons we’ve learned through our experiences working with numerous commercial clients in a variety of situations. On the path to your success in developing and commercializing technologies, they will help you avoid common pitfalls, unwarranted assumptions, and other sources of technical and commercial bias that could add up to business failures.

Lesson Five.

More Facts Mean More Focus.

The “end game” of any technology assessment is to formulate and implement a plan of action – a plan that has beneficial business outcomes. Begin every technology assessment with that plan of action in mind. Doing so will drive you to develop more facts related to your implementation plan. And developing more facts will sharpen your focus and help establish priorities.

Lesson Five Case Study:

Client:  Multi-plant commodity inorganic chemicals producer

Situation:

  • For both environmental as well as economic reasons, the client was interested in identifying ways to turn a waste stream into a marketable co-product.
  • The client had a vague idea that they could turn their waste stream into a mineral extender/filler/additive, but they were not currently selling into any markets with those types of raw material needs.

Technology Assessment Need:  Develop and characterize the potential “product/market” roadmap that could be addressable by the client’s upgraded waste stream co-product.

Our approach:

  • Analyzed the economic balance point between purifying the waste stream and its saleability as a co-product
  • Researched industry needs, by market segment, in terms of particle size and purity
  • Balanced market segment needs against the cost of refining the waste stream into saleable form

Outcome: We identified sealants as an attractive application area for the client’s co-product and projected the size of the client’s addressable market for the next several years.

On the basis of our findings, the client decided to adjust their manufacturing plant to focus on the specifications needed for the sealant market and to begin commercial development efforts directed toward that market.

For more on best practices in moving from lab-to-market, see https://www.prakteka.com/category/technology-assessment/

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Are you looking for new customers for your existing technologies and products?

Do you have excess manufacturing capacity you’d like to put to use?

Or are you launching a new product and need to understand which end-use applications are the most promising?

We’re ready and able to help you make your decisions with confidence. Contact us at https://www.prakteka.com/contact-us/

or via direct email at mah@prakteka.com

Lessons Learned in Technology Assessment…Lesson 4…

This is the fourth of a series of posts to share with you six important lessons we’ve learned through our experiences working with numerous commercial clients in a variety of situations. On the path to your success in developing and commercializing technologies, they will help you avoid common pitfalls, unwarranted assumptions, and other sources of technical and commercial bias that could add up to business failures.

Lesson Four.

Find Out if “New” and “Improved” REALLY MATTER!

In this era of “voice of the customer” and data analytics, coupled with feedback from an eager salesforce, the sheer volume and rate of change of market input to new product development and improved product development activities can be overwhelming. Keep in mind that not everything “new” or “improved” is valuable or useful to your customer.

Lesson Four Case Study:

Client:  Global producer and marketer in the graphic arts industry

Situation:

  • Client goal: 30% of annual sales from new product introductions
  • Global salesforce suggested over 80 “must have” or “want to have” features for the next-generation graphic arts equipment, whittled down to 25 features after internal review
  • Resources required to develop and introduce these 25 features: $40 million

Technology Assessment Need:  Determine which of these 25 features really mattered to its global customer base

Our approach:

  • Identify 160 lead users of graphic arts equipment in 7 countries on 4 continents
  • Developed statistically based array of interview questions to elicit which new product features really mattered to them and why?

Outcome: Our work led to 2 important findings

  • First: our client’s current generation of graphic arts equipment very closely matched the equipment that was top-rated by our group of lead users. In fact, there were only 2 feature areas where our client’s equipment lagged the ratings of the top-rated competitor.
  • Second: we learned that the 25+ new “bells and whistles” initially proposed would not position our client well for the future. Customers of our client were positioning themselves to respond to the rapid technology changes associated with digital graphic arts equipment and were changing their ways of managing their capital expenditures in this area.

Based on our findings, our client company decided to allocate a portion of its $40 million product development budget to tackling the two features that customers rated lower than those of its competition. The rest of the development budget was redeployed to related product management activities and exploration of emerging digital technologies, both of which held promise for a sustainable impact on the bottom line.

For more on best practices in moving from lab-to-market, see https://prakteka.com/category/technology-assessment/

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Are you looking for new customers for your existing technologies and products?

Do you have excess manufacturing capacity you’d like to put to use?

Or are you launching a new product and need to understand which end-use applications are the most promising?

We’re ready and able to help you make your decisions with confidence. Contact us at https://www.prakteka.com/contact-us/

or via direct email at mah@prakteka.com

Lessons Learned in Technology Assessment…Lesson 3…

This is the third of a series of posts to share with you six important lessons we’ve learned through our experiences working with numerous commercial clients in a variety of situations. On the path to your success in developing and commercializing technologies, they will help you avoid common pitfalls, unwarranted assumptions, and other sources of technical and commercial bias that could add up to business failures.

This lesson: Think of your technology as a “functionality”

Technology needs to be useful – it needs to “function” in ways that are useful to prospective customers. Chances are your technology has multiple potential end use applications that you haven’t even thought of yet.

Lesson Three Case Study:

Client: Custom manufacturer and converter of polymers and fabrics with patented silicone-coated fabric technology. This proprietary technology enabled a useful finished product: surgical drapes that could withstand multiple sterilization cycles.

Situation:
• Manufacturing line for the novel surgical drape products was running at much less than capacity.
• Client wanted to fill the idle capacity without investing new capital.
• The obvious line extension would be other types of “reusables” sold to the medical products industry, but that industry was already saturated with a host of reusables as well as disposables, available at very low cost.

Technology Assessment Need: Do any other high-value end-use applications exist for products our client could make using its proprietary technology and its existing manufacturing capabilities?

Our approach:
• Identify the functions of the client’s product as viewed by its customers
• For each of the product’s useful functions, assess quantitatively its “value-in-use” to the customer
• Identify other addressable market segments/customers with similar functional requirements and value-in-use needs and for which our client’s product could be immediately useful and cost-competitive.

Outcome: Tapping relevant industry experts, we discovered that:
• It’s common practice in the nuclear power industry to contract out for services related to maintenance worker uniforms.
• In the textile rental segment of the nuclear services market, disposable fabrics are not used
• Maintenance worker uniforms with increased service life and/or greater feeling of comfort and durability have a competitive edge.

By viewing our client’s technology in terms of its functionality, we identified a potential new market segment and gave sharp focus to our client’s subsequent end-use applications development plans.

It’s not necessarily easy to find such out-of-the-box solutions. In this case, we brought together a range of end-use industry experts to bring fresh input to generating potential new applications for our client’s technology and product.

…Are you looking for new customers for your existing technologies and products?
…Do you have excess manufacturing capacity you’d like to put to use?
…Or are you launching a new product and need to understand which end-use applications are the most promising?

We’re ready and able to help you make your decisions with confidence. Contact us at http://www.prakteka.com/contact-us/
or via direct email at mah@prakteka.com

 

 

 

 

 

 

 

 

Lessons Learned in Technology Assessment…Lesson 2…

This is the second of a series of posts to share with you six important lessons we’ve learned through our experiences working with numerous commercial clients in a variety of situations. On the path to your success in developing and commercializing technologies, they will help you avoid common pitfalls, unwarranted assumptions, and other sources of technical and commercial bias that could add up to business failures.

Lesson Two.

Avoid Single-Point Projections.

Whether you’re talking about sales, profit, or manufacturing cost projections, single point projections can be misleading.

Lesson Two Case Study:

Client:  Producer of bulk fine chemicals with new, developmental production technologies

Situation:

  • This producer believed that its family of 10-12 developmental production technologies provided a cost advantage over its established competition.
  • This “belief” was based on single-point manufacturing cost projections for each of its developmental production technologies.
  • The client had already invested almost half of the required time and financial resources needed to take the technologies to a commercial stage.

Technology Assessment Need:  The client was uncertain about possible problems in production scale-up, which could affect manufacturing cost, and wanted an outside third party to assess the technologies before further investments were made.

Our approach:

  • Utilizing an analysis tool called “technical cost modeling”, we developed manufacturing cost probability curves for each of the production technologies.
  • We also developed cost probability curves for the production technologies already in use by our clients’ competition.

Here is what our cost modeling analysis revealed:

  • Even though there were differences between the average cost of our client’s production technologies and the technologies of its competition, there was significant overlap in the cost probability curves, i.e., the likely production costs for both our client and its competition were much closer than our client’s single-point cost projection led them to believe.
  • Among our client’s 10-12 developmental production technologies, only 3 or 4 possessed manufacturing cost differences distinct enough to be a basis for competition in the marketplace, although the client had invested in scale-up for all.

Outcome: Our client chose to commercialize only those few technologies that showed significant and sustainable cost advantage.

For more on best practices in moving from lab-to-market, see http://www.prakteka.com/category/technology-assessment/

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Are you about to make decisions regarding investments in R&D scale-up? In manufacturing?

Are you basing those investment decisions on cost projections? Sales projections? Profit margin projections?

We’re ready and able to help you make your decisions with confidence. Contact us at http://www.prakteka.com/contact-us/

or via direct email at mah@prakteka.com

Lessons Learned in Technology Assessment…Lesson 1…

Treat Your Technology Assessment Conclusion as a Hypothesis – and Proof-Test It!!!

This is the first of a series of posts to share with you six important lessons we’ve learned through our experiences working with numerous commercial clients in a variety of situations. On the path to your success in developing and commercializing technologies, they will help you avoid common pitfalls, unwarranted assumptions, and other sources of technical and commercial bias that could add up to business failures.

No matter who does your technology assessment, whether you perform it internally or externally, whatever conclusion you come to, treat that conclusion as a hypothesis. Here is a case example:

Client:  Industrial, Automotive, and Aerospace Manufacturer and Marketer

Situation: Client was about to make a significant investment in a potential target acquisition. The target company owned a unique thermal barrier coating technology for aircraft turbine blades which the client judged to be a significant and attractive market differentiator for them.

Technology Assessment Need: Client was concerned about their internal ability to assess the new, cutting-edge coatings technology, and wanted additional “vetting” of this technology.

Our approach: We took our client’s conclusion, that this coatings technology was worth their investment, and treated it as a hypothesis by asking the following questions:

What could go wrong? Could we find aspects of the technology that would invalidate this hypothesis?

Here is what our research uncovered:

  • One of the coatings facilities our client would acquire was actually a joint venture: someone other than the target company owned the intellectual property!

 

  • A competitor of our client had recently bought access to a non-U.S. 300-man facility with a technology that threatened to upstage the target technology

These two findings alone were sufficient “red flags” that our client put a “caution” light on the acquisition plans and directed additional due diligence on these two investment hypothesis-busters.

In this case, treating the conclusion of the client’s technology assessment hypothesis led to the discovery of new, highly relevant aspects of the potential technology acquisition. These new findings prevented a premature investment – an investment that likely would not have produced the financial and commercial results that motivated it in the first place.

Are you facing a technology investment decision?

We’re ready and able to help you with your due diligence. Contact us at http://www.prakteka.com/contact-us/

or via direct email at mah@prakteka.com

 

Maximum Affordable Royalty Rate – A Useful and Underutilized IP Valuation Method

Challenge: You have software and hardware patents that are licensable to as many as a dozen different prospective licensees already established in the industry. You have reason to believe that your patent portfolio could become a standard in the industry. How do you determine a royalty rate to maximize your royalty income ?

Approach:

  1. Think of the adoption of your patented technology as a new commercialization project within each of the prospective licensee companies.
  2. Evaluate each prospective licensee’s projected discounted cash flow resulting from commercial use of the technology.
  3. Include in the financial model a line item for royalty payment.
  4. The maximum affordable royalty rate (MARR) is the value of the royalty payment, expressed as a percent of net sales, that yields a net present value (NPV) of zero for the project.

Lessons Learned from Case Studies:

  • The maximum affordable royalty rate can vary widely across different companies in the same industry. In one case involving storage area network technologies, the roualty rates ranged from 3% to 20% of the annual revenues of the prospective licensees.
  • Inputs to the financial model can be based on public information as well as industry expert judgement regarding revenue growth rate, internal discount rates, and the percentage of total company revenues attributed to products embodying the technology
  • For prospective companies with negative free cash flow, affordable royalty rates can be assumed equal to those of peer companies with positive cash flow

A Strategy to Maximize Income

This usefulness of this technique of financial modeling to arrive at maximum affordable royalty rates company by company is that you now have a starting point for developing and quantitatively assessing various licensing (and sub-licensing) strategies for impact on licensing income. Some discrete scenarios to consider:

  • Establish your technology as an industry standard via licensing to as many prospective licensees as possible
  • “Outsource” licensing by allowing sub-licensing to one primary licensee, perhaps the one company that can afford to pay the highest royalty, based on its financial model
  • Limit the licensees to those companies with the fastest time to market

Use of MARR has been particularly helpful to companies with valuable technology-based IP but little to no experience in licensing. Interested in finding out how MARR can help you, too?  Contact us at https://www.prakteka.com/contact-us/

See also: DCF Analyses in Determining Royalty, Daniel Burns, les Nouvelles, Journal of the Licensing Executives Society, September, 1995, accessed November 7, 2018, http://www.danielburnsassociates.com/wp-content/uploads/2011/08/DCFAnalysisInDeterminingRoyalty.pdf

And for more on what matters when you’re working at the technology/business interface, see our content on technology assessment, technology commercialization, technology valuation, and “seeing the future” on our website: https://www.prakteka.com/

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