unit 8 ent600 commercialization
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8/10/2019 Unit 8 ENT600 Commercialization
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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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Introduction
• The word technology-based product in this unit
encompasses physical products, services andprocesses.
• New technology-based product is the outputdeveloped from innovative activities that take place in
a successful R & D (research and development).
• Research and development activities may take placein public universities or research institutes owned by
government or private research institutions.
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Technology-based Industry In Malaysia
• The future of Malaysian technology-based
industry is very much dependent on locally
developed technology-based ventures.
• The success of home-grown technology-
based venture is determined by the strength
and efficiency of commercialization of R&D
(research and development) output andenforcement of intellectual property (IP) law
in Malaysia.
3EntrepreneurshipDept,FBM (2009)
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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 products 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 service or product.
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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.
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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:
Outright Sale of The R&D Output
The researcher may decide to sell the R&D output before applyingfor patent rights due to any of the following reasons:
• Cost to secure a patent right is higher than the product potential
value
• The new technology-based product is competing with a
promising substitute product (the developed technology is
already mature and facing substitution stage)
• High market development cost required because market is notyet ready for the product.
• To avoid the hassles associated with patent application
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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 is called thelicensee.
• 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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Commercialization Options:
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 thelicensee.
• In this context a license is revocable or cancellable if certain
terms and conditions are not met.
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Commercialization Options:
Patent Assignation
Patent assignation is an irrevocable exploitation right given by
an assignor to an assignee. The assignor refers to the originalpatent holder, whereas the assignee is one who receives an
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 an
assignee failed to pay royalties, this will not revoke the rights
that are already assigned to the buyer.
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Valuing a Patent
Determining the monetary value of a patent is very importantbecause it helps the patent holder to determine:
• The right value to sell the patent to an 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 promoted patent tobe invalid if the inventor does not meet the statutory
requirement for obtaining the patent).
Example:• He was not the inventor
• Had published the information about the invention
• Had offered the invention for sale before the date of
application
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Valuing a Patent….continue
4. Determine if the patent overlaps with other patents - thehigher 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 nextbest patent instead of buying or subscribing license of
your patent.
6. Determine the reasons for selling or licensing the patent.
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Commercialization Options:
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 an established organizationlike 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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Commercialization Options:
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 commercialize 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 to makeinitial 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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Considering Business Incubators To Increase The
Chance For New Venture Survival
• Business Incubator means a facility with adaptable space that
a new venture can lease on flexible terms and at reduced
rental rate.
• The purpose of an incubator in the early stage of the new
venture is to increase the chance of survival for new start upbusiness.
• Business incubators offer financial, managerial, technical,
and administrative support services which are available on
sharing basis.• Most incubators limit the time for new venture occupying
space in the facility ranging from two to five years
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Technology Life Cycle
• The performance of technology and product has arecognized pattern over time
• This pattern can be very helpful in the strategic
planning process of the technology-based venture
• Thus, managing a technology venture requires
deep understanding of the life cycle of thetechnology, product, process and system.
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Technology Life Cycle (continue)
• A technological rate of performance improvementis 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 terms ofany attribute such as density in electronic industry(for example, number of transistor per chip), speedin mile per hour, energy consumption in K Wattper hour or fuel consumption in mile per Km.
• The technology performance becomes vulnerable
to substitution or obsolescence when a new orbetter technology 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 Embryonic 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 performanceslows 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 becomes vulnerable when
technological substitution takes place or when
the technology becomes obsolete. That is when
a 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 a 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 a technology reaches the market it generatesincome.
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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 market doesnot 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 prototype and testing the
new technology.
• During this period, revenue is not generated and whereever possible, time spent in this phase has to be reduced.
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Technology Market Life-cycle
Application Launch Phase
• This is the phase where the technology islaunched in the market as a new application
(e.g. a new product or process)
• Once the new technology application is
launched, the market volume will pickup with the
path of the technological progress.
• It is characterized by a slow beginning and
followed by rapid growth.
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Technology Market Life-cycle
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 Market Life-cycle
Technology Mature Phase
• In the Technology Mature Phase, the
market growth rate slows down as the
technology approaches its maturity. Themarket volume may reach a peak and
then start to decline.
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Technology Market Life-cycle
Technology Substitution Phase
• The Technology Substitution phase is
characterized 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 adecline in market share and revenue.
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Technology Market Life-cycle
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
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