© copyright 2007-2008 robert d. conway all rights reserved 1 selecting technologies robert conway...

© Copyright 2007-2008 Robert D. Conway All Rights Reserved 1

Selecting Selecting TechnologiesTechnologies

Robert ConwayRobert Conway

Senior Manager, Business Development and Senior Manager, Business Development and LicensingLicensing

Carnegie Mellon UniversityCarnegie Mellon University

Center for Technology Transfer and Enterprise Center for Technology Transfer and Enterprise CreationCreation


ReferencesReferences Teece, David J., “Profiting from technological Teece, David J., “Profiting from technological

innovation: Implications for integration, innovation: Implications for integration, collaboration, licensing and public policy”, UC collaboration, licensing and public policy”, UC Berkeley, School of Business Administration, June Berkeley, School of Business Administration, June 19861986

Porter, Michael, Porter, Michael, Competitive Strategy: Competitive Strategy: Techniques for Analyzing Industries and Techniques for Analyzing Industries and CompetitorsCompetitors,, New York, Simon & Schuster, 1998 New York, Simon & Schuster, 1998

Porter, Michael, Harvard Business School, various Porter, Michael, Harvard Business School, various published articles on “Porter’s Five Forces”, published articles on “Porter’s Five Forces”, beginning in 1980, e.g. beginning in 1980, e.g. www.quickmba.com/strategy/generic.shtmlwww.quickmba.com/strategy/generic.shtml


Technology Transfer Process Technology Transfer Process OverviewOverview

Researchers create a technology

Inve

nto

rs

Cen

ter

for

Tec

hn

olo

gy

Tra

nsf

er

Invention Disclosure

form

Does CMU own it? Who else has rights?

Is there commercial potential?

Should we protect it, e.g. patent, copyright?

Market the technology to potential licensees

Negotiate license

Licensee creates productL

icen

see

License revenue to CMU

Product sales generate revenue

Negotiate license

Monitor licensee performance

Half of net proceeds

Commercialization, patent costs

Industry Roundtable

Half of net proceeds

Public Dedication


Market CharacteristicsMarket Characteristics What is the market – who will pay, What is the market – who will pay,

and how much? How will the and how much? How will the resulting product/service be resulting product/service be positioned?positioned?

Market sizeMarket size Market growth rateMarket growth rate Industry sector: concentrated or Industry sector: concentrated or

fragmented?fragmented? CompetitorsCompetitors Complimentary assetsComplimentary assets


What problem does it solve? What What problem does it solve? What pain does it remove or risk does it pain does it remove or risk does it reduce?reduce?

Revolutionary leap or evolutionary Revolutionary leap or evolutionary improvement?improvement?

Product differentiation - benefitsProduct differentiation - benefits Substitutions or comparablesSubstitutions or comparables Regulatory environmentRegulatory environment Network effectsNetwork effects Protected technology?Protected technology?

Technology CharacteristicsTechnology Characteristics


Industry StageIndustry Stage Preparadigmatic phase:Preparadigmatic phase:

many designs, no industry standard yetmany designs, no industry standard yet complementary assets not yet a critical complementary assets not yet a critical

factorfactor Paradigmatic phase:Paradigmatic phase:

industry standard has emergedindustry standard has emerged complementary assets critical to complementary assets critical to

success of technology success of technology


Complimentary AssetsComplimentary Assets Complementary assets may prove a hindrance to selling, Complementary assets may prove a hindrance to selling,

marketing, distributing, or supporting products based on marketing, distributing, or supporting products based on this technology.this technology. Complementary assets are generalized and easily Complementary assets are generalized and easily

accessible (no hindrance)accessible (no hindrance) Complementary assets are specialized and are Complementary assets are specialized and are

available (at some cost, which needs to be considered)available (at some cost, which needs to be considered) Complementary assets are specialized to the product Complementary assets are specialized to the product

and not available and not available One or more critical complementary assets are owned One or more critical complementary assets are owned

by one or two firms by one or two firms Complementary assets necessary for commercialization Complementary assets necessary for commercialization

are not available and may require considerable are not available and may require considerable investment to developinvestment to develop

List companies that maintain critical complementary List companies that maintain critical complementary assetsassets


Appropriability RegimeAppropriability Regime Tight or weak appropriabilityTight or weak appropriability

Tight - technology can be protected through Tight - technology can be protected through patents, copyrights or trade secrets (tacit patents, copyrights or trade secrets (tacit knowledge)knowledge)

Weak – cannot protect, easily learned or Weak – cannot protect, easily learned or discovered process or knowledgediscovered process or knowledge

Technology is easy to protect: includes Technology is easy to protect: includes both easy to defend patent and tacit both easy to defend patent and tacit knowledgeknowledge

Technology is fairly easy to protect with Technology is fairly easy to protect with some tacit knowledgesome tacit knowledge

Technology is not easy to protect and Technology is not easy to protect and knowledge is easily transferable or copiedknowledge is easily transferable or copied

Technology is difficult to protect.Technology is difficult to protect.


Time to Market InvestmentTime to Market Investment

Long PeriodLong Period Short PeriodShort Period

Minor Minor InvestInvestmentment

OK if timing is OK if timing is not criticalnot critical

Full Steam Full Steam AheadAhead

Major Major InvestInvestmentment

Forget ItForget It OK if cost OK if cost position position tolerabletolerable

Source: Teece, David J., “Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy”, UC Berkeley, School of Business Administration, June 1986


The Acid TestThe Acid Test1. What is the value of the invention over existing methods? 2X, 1. What is the value of the invention over existing methods? 2X,

10X, or 100X better than existing products? [<10X do not 10X, or 100X better than existing products? [<10X do not pursue]pursue]

2. What is the economic or other benefit benefits over present 2. What is the economic or other benefit benefits over present products? (cost, quality, benefits = competitive advantage)products? (cost, quality, benefits = competitive advantage)

3. Can other solutions achieve the same result?3. Can other solutions achieve the same result?4. Is there sufficient potential demand to provide an ample ROI?4. Is there sufficient potential demand to provide an ample ROI?5. How much product development is required? (Invention 5. How much product development is required? (Invention

maturity - time required for product development, marketing maturity - time required for product development, marketing and sales)and sales)

6. Can it generate significant revenue in the first five years?6. Can it generate significant revenue in the first five years?7. Are there other applications for this invention? (Identify 7. Are there other applications for this invention? (Identify

specific companies in each industry that might want a license)specific companies in each industry that might want a license)8. Do you have personal contacts at companies that may be 8. Do you have personal contacts at companies that may be

interested? Who will you call first, next, etc.?interested? Who will you call first, next, etc.?


Could this be a startup Could this be a startup company?company?


Startup Assessment Tool Startup Assessment Tool (StAT)(StAT)

Inventor Focus – startup interest, Inventor Focus – startup interest, startup experience, protected startup experience, protected knowledge, industry relationshipsknowledge, industry relationships

Market Focus – emerging market, Market Focus – emerging market, platform technology, network effectsplatform technology, network effects

Competitive Focus – market size, Competitive Focus – market size, complimentary assets, regulatory complimentary assets, regulatory barriers, substitutionbarriers, substitution

Other – subjective factors Other – subjective factors (appropriability regime, industry (appropriability regime, industry stage, etc.)stage, etc.)


Industry Roundtable EvaluationIndustry Roundtable Evaluation Four to seven industry experts plus the Four to seven industry experts plus the

inventorsinventors Related industries Related industries Serial entrepreneurs Serial entrepreneurs Experienced business people – government Experienced business people – government

regulations, union rules, tax implications, sales, regulations, union rules, tax implications, sales, marketing, insurance, etc. (IT, HR, accounting)marketing, insurance, etc. (IT, HR, accounting)

One hourOne hour 5 min – introductions5 min – introductions 10 min – inventor presentation10 min – inventor presentation 45 min – moderated discussion 45 min – moderated discussion

No NDAs – no enabling or proprietary No NDAs – no enabling or proprietary informationinformation


Porter’s Forces and Generic Porter’s Forces and Generic StrategiesStrategies


Porter’s Five ForcesPorter’s Five Forces Industries have different profitability – some Industries have different profitability – some

of this difference is determined by industry of this difference is determined by industry structure structure

Professor Michael Porter - Harvard Business Professor Michael Porter - Harvard Business School – described five forces that drive School – described five forces that drive competition within an industry (1980)competition within an industry (1980)

The intensity of rivalry among existing The intensity of rivalry among existing competitors competitors

The threat of entry by new competitorsThe threat of entry by new competitors Pressure from substitute productsPressure from substitute products The bargaining power of buyersThe bargaining power of buyers The bargaining power of suppliersThe bargaining power of suppliers

SUPPLIER POWER - Supplier concentration - Importance of volume to supplier - Differentiation of inputs - Impact of inputs on cost or differentiation - Switching costs of firms in the industry - Presence of substitute inputs - Threat of forward integration - Cost relative to total purchases in industry

BARRIERS TO ENTRY - Absolute cost advantages - Proprietary learning curve - Access to inputs - Government policy - Economies of scale - Capital requirements - Brand identity - Switching costs - Access to distribution - Expected retaliation - Proprietary products

THREAT OFSUBSTITUTES

-Switching costs -Buyer inclination to substitute -Price-performance trade-off of substitutes

BUYER POWER - Bargaining leverage - Buyer volume - Buyer information - Brand identity - Price sensitivity - Threat of backward integration - Product differentiation - Buyer concentration vs. industry - Substitutes available - Buyers' incentives

DEGREE OF RIVALRY - Exit barriers - Industry concentration - Fixed costs/Value added - Industry growth - Intermittent overcapacity - Product differences - Switching costs - Brand identity - Diversity of rivals - Corporate stakes

Diagram of Porter’s Five Forces


Porter’s Generic StrategiesPorter’s Generic Strategies Three generic business strategies Three generic business strategies

regardless of industryregardless of industry Strategies depend on market size Strategies depend on market size

(broad/narrow)(broad/narrow) Industry leaders pursue a single strategyIndustry leaders pursue a single strategy

Often the strategies are incompatible Often the strategies are incompatible Combining strategies can lead to stagnationCombining strategies can lead to stagnation Corporations create separate businesses to Corporations create separate businesses to

follow different strategiesfollow different strategies Strategic focus does not guarantee Strategic focus does not guarantee

success – companies are still vulnerable to success – companies are still vulnerable to those that can undermine their positionthose that can undermine their position


Generic StrategiesGeneric Strategies

Advantage Target Scope

Low Cost Product Uniqueness

Broad

(Industry Wide) Cost Leadership

Strategy Differentiation

Strategy

Narrow

(Market Segment)

Focus Strategy (low cost)

Focus Strategy

(differentiation)


Broad Industry StrategiesBroad Industry Strategies


Cost Leadership

Strategy

Differentiation Strategy

Cost LeadershipCost Leadership

Low cost providerLow cost provider

Larger market Larger market share, lower share, lower profitsprofits

DifferentiationDifferentiation

Superior featuresSuperior features

Smaller market Smaller market share, higher share, higher profitsprofits


Focus StrategyFocus Strategy


Narrow

(Market Segment)

Focus Strategy (low cost)

Focus Strategy

(differentiation)

Cost or differentiation advantage in narrow segment Cost or differentiation advantage in narrow segment High customer loyalty deters rivals and new entrantsHigh customer loyalty deters rivals and new entrants Lower volumes result in less supplier bargaining powerLower volumes result in less supplier bargaining power May pass higher costs to customers since substitute May pass higher costs to customers since substitute

products don’t existproducts don’t exist Vulnerable to imitators and changes in customer Vulnerable to imitators and changes in customer

preferences preferences Other focusers may be able to control sub-segmentsOther focusers may be able to control sub-segments


Forces and StrategiesForces and Strategies

Generic Strategies Industry Force Cost Leadership Differentiation Focus

Entry Barriers

Ability to cut price in retaliation deters potential entrants.

Customer loyalty can discourage potential entrants.

Focusing develops core competencies that can act as an entry barrier.

Buyer Power

Ability to offer lower price to powerful buyers.

Large buyers have less power to negotiate because of few close alternatives.

Large buyers have less power to negotiate because of few alternatives.

Supplier Power

Better insulated from powerful suppliers.

Better able to pass on supplier price increases to customers.

Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases.

Threat of Substitutes

Can use low price to defend against substitutes.

Customer's become attached to differentiating attributes, reducing threat of substitutes.

Specialized products & core competency protect against substitutes.

Rivalry Better able to compete on price.

Brand loyalty to keep customers from rivals.

Rivals cannot meet differentiation-focused customer needs.


Selecting Selecting TechnologiesTechnologies

Robert ConwayRobert Conway

Senior Manager, Business Development and Senior Manager, Business Development and LicensingLicensing

Carnegie Mellon UniversityCarnegie Mellon University

Center for Technology Transfer and Enterprise Center for Technology Transfer and Enterprise CreationCreation

Research$42.3 billion

Invention17,382 disclosures1 per $2.43 million

IP Protection9,536 new patent applications

1 per $4.4 million

Commercialization4,932 licenses and options

628 company starts

2005 AUTM Survey


New Product New Product IntroductionsIntroductions

527 new products first available in 2005

3641 new products introduced from 1998 to 2005

Source: Association of University Technology Managers survey FY2005


628 new company startups in FY2005

5171 startup companies

formed since 1980

New Company StartupsNew Company Startups

Source: Association of University Technology Managers survey FY2005


4,300 disclosures received4,300 disclosures received Approximately 30% were licensedApproximately 30% were licensed 50% of the licenses produced less than 50% of the licenses produced less than

$10,000$10,000 Only 30 deals generated $1,000,000 or Only 30 deals generated $1,000,000 or

more cumulativelymore cumulatively Of the 378 licenses generating any Of the 378 licenses generating any

royalties, only 39 generated $100,000 or royalties, only 39 generated $100,000 or moremore

Only one out of 4,300 was a blockbusterOnly one out of 4,300 was a blockbuster

Source: Katherine Ku, Director Stanford OTL

Stanford Experience over 30 Stanford Experience over 30 years:years:


Carnegie Mellon 1993-2005Carnegie Mellon 1993-2005

Start-ups related to Carnegie Mellon: 171Start-ups related to Carnegie Mellon: 171 74% within the Pittsburgh region74% within the Pittsburgh region

Average per year: 12 (peak of 29 in 2000; 8 in FY06 to Average per year: 12 (peak of 29 in 2000; 8 in FY06 to date)date)

Licenses to small, local companies: 68Licenses to small, local companies: 68

Technologies licensed to local companies of all sizes: Technologies licensed to local companies of all sizes: 114 114


CMU Inventions by School (%)CMU Inventions by School (%)

CIT, 40

SCS, 33

MCS, 11

Other, 8

Provost, 5

CFA, 2Heinz, 1 H&SS, 1

Source: CTT 2005 Annual Report


CMU Technology Transfer CMU Technology Transfer StatisticsStatistics

FY05 FY04 FY03 FY02 FY01 FY00 Average

Innovators Served 321 302 312 297 - - 308

Invention Disclosures 132 95 97 102 114 106 108

Patents Filed 75 61 85 69 41 39 62

Patents Issued 33 35 81 33 27 27 39

License Agreements 23 21 26 18 16 16 20

All Agreements 102 64 48 35 37 27 52

Startup Companies 7 4 1 4 5 4 4

© copyright 2007-2008 robert d. conway all rights reserved 1 selecting technologies robert conway...

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