on 20th November 2018
It is now well accepted that R&D activities are a key driver of performance growth for small and medium sized enterprises (SMEs). However quite a number of SMEs don’t engage in R&D at all and for those that do, a significant proportion are not successful at it. In an economic climate of constrained resources and development timeframe pressures, replacing or adding further products and services to a company portfolio can present a challenge.
There is an alternative strategy that could be considered however. In today’s world, the probability is that the product or service you are conceptualising or seeking to conceptualise exists in some close form somewhere out there. To this end, consideration could be given to exploring some form of technology transfer arrangement with the objective of:
- Not re-inventing the wheel
- Creating a faster and cheaper route to the market with something already proven elsewhere
Leveraging the discoveries, technologies and intellectual property of others through a technology transfer agreement can give companies, particularly smaller companies a distinct competitive advantage and can shorten the time to market. Such a strategy can also eliminate the expense and the risk of protracted research and development.
The most common forms of technology transfer are licensing and technical cooperation partnership agreements. Such arrangements can also allow companies to enhance the functionality of an existing product. The benefits of technology transfer are summarised as follows: –
- A large amount of technology has been developed internationally and there is a wide choice available
- The product or service is probably already developed or at an advanced stage of development – perhaps proven in other markets
- It can provide a cost effective solution in an increasingly competitive market
- The time to market is usually reduced
- There could be technical assistance available as part of the agreement
- Opportunity for sharing costs and risks
- It might create possibilities for accessing new markets through collaboration and for entering a foreign market more quickly
The process:
In the post The pessimist complains about the wind, the optimist expects it to change, the leader gets help to adjust the sails… I talk about ensuring the need for innovation and new ideas aligns with the business objectives and the need to ask.. why are we doing this?
So with that in mind – review your company’s strategy in terms of products and markets and assess current capacity and capability, product mix and technology level to uncover a potential gap that could be filled with the right technology or product solution.
Determine what is the current technology need or product gap and what might the potential solution look like.
Assess what commercial outcome could this solution deliver.
Estimate the budget available/required to introduce and deliver the solution.
Deploy an internal resource or engage a good consultant; a scout, to research an extensive network of innovation sources to identify the best solution for your business need.
Carry out evaluations and due diligence
Consider Intellectual property implications
Evaluate opportunities from a technical and commercial perspective
There are a large number of online search facilities available for searching for products, technologies and patents. The best sources of technology are often companies trading in foreign markets who have already developed technology but have not introduced it to the EU e.g. small US companies. Patent databases can be useful sources of opportunities and there are quite a few good networks and unified databases.
At this stage, there is also the option for industry to engage with universities and research centres which are an excellent source of newly developed technologies, products, processes and expertise. In Ireland the incentives from state agencies for SMEs to work with Irish Universities and Institutes of Technology are very attractive. With the Enterprise Ireland (EI) Innovation Partnership programme for example, the typical cost to an SME is 20% of total cost with balance funded by EI. A no-brainer some might argue! It is subject to criteria of course and economic impact is key. Check it out for yourself or speak with your Development Advisor if you have one https://www.enterprise-ireland.com/en/funding-supports/company/esetablish-sme-funding/innovation-partnerships.html
Within this support mechanism, there is the potential for exclusive technology licensing for world markets in a broad field of use assuming confidence in the company’s ability and scale to fully capitalise. The up-front fees and royalties are usually lower than those of industry though the technologies will be earlier stage and not so well proven. The Universities / IoTs probably won’t be knocking on your door with opportunities. Most operate in reactive mode and work to problem solve or meet an identifiable challenge when approached by the company or through EI. Expectation management is critical as academic timelines are not the same as industry.
Within the €2.56Million VITAL project for which I was responsible, we initiated seven Innovation Partnership projects with academic institutes. The broader project created 35 tech transfer / licensing arrangements as at June 30th 2015 with 5 additional matches since that date. Some of those matches were created through a technology scouting initiative. You can read more about that project here https://www.linkedin.com/pulse/reimagining-business-start-supports-kieran-fegan A case study booklet is accessible from my LinkedIn profile.
Once a solution has been identified, there are key considerations when negotiating a License Agreement. Although the complexity and scope of these types of arrangements can vary widely, there are basic provisions which most license agreements share covering such issues as the technology itself, territories, exclusive vs. non – exclusive, compensation / royalties, modifications / Improvements, warranties, liability and term / termination.
With careful consideration of the licensing terms, companies can generate revenue, limit risk, and protect future options. It is always advisable to get legal advice before signing off on such a contract.
The final stage following transfer is successfully exploiting the new technology. This will involve familiarisation with the technology, confidence in its operation and reaching profitability as soon as possible. If royalties are involved, the licensor will have a vested interest in ensuring that the license generates sales as quickly as possible.
The usual important steps to commercialisation follow considering the market entry, where to launch geographically, the timing period, who to target, how to market and effective sales planning.
The benefit of using a consultant to assist is that they can also help with these steps and then to structure your team to develop and deliver the full technology / knowledge transfer and commercial plan. This includes expertise to guide you through the process of acquiring a new technology or product, licensing and the initial commercialisation process.
Do you need help with any of the areas covered. Perhaps you’re not sure where to start? Please get in touch – contact details kieran.fegan@vara.ie or mobile +353 (0) 87 417 4681.
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Kieran Fegan is helping a number of SMEs and entrepreneurs across Ireland, providing assistance with business development, innovation management and investment. He has recently moved to North Co. Dublin and would be delighted to help with your business development opportunities and challenges.
Contact details again kieran.fegan@vara.ie or mobile +353 (0) 87 417 4681.