Tech Comm Framework Complete

8/14/2019 Tech Comm Framework Complete

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Prepared by BizLogx LLC

September 30, 2004

Copyright 2004 BizLogx LLC


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Mr. Patrick Valente

Mr. Norman ChagnonTechnology DivisionOhio Department of DevelopmentColumbus, OH 43054

Dear Mr. Valente and Mr. Chagnon,

We are pleased to deliver this Technology Commercialization Framework. In the form of the ThirdFrontier Project, the State of Ohio demonstrated great foresight in making available over $1 billion to fundactivities ranging from applied research to product development. As stated by Michael Weitzman,however, the limits to growth may lie not as much in our ability to generate new ideas, so much as in ourability to process an abundance of potentially new seed ideas into usable form. To address this challenge,the Ohio Department of Development recognized the need for a framework to help optimize technologycommercialization activities and investment decisions. The ODOD therefore requested that we developthis Framework.

We based the Framework on an extensive review of the leading literature on technology commercialization.The Framework includes a map of the commercialization process and an analytical approach to helpoptimize commercialization activities and investment decisions during each of the five primary phases ofcommercialization. The Framework is not a cookbook or a list of best practices. Rather, we designed theFramework to assist research institutions, investors, economic development entities, businesses,entrepreneurs and others in optimizing the investment of scarce resources in context of transforming ideas,research and intellectual property into successful products and services.

The Framework takes a practical approach to commercialization. While interim progress and milestonescan be meaningful, the Framework focuses on transitions - the acquisition of the resources required to

engage in the next phase of technology commercialization. In-phase activities have a single purpose thegeneration of the proof required to convince resource providers to provide the capital and other resourcesnecessary to engage in the activities characterized by the next phase of commercialization. The Frameworkmeasures success one transition at a time.

The Framework also expressly acknowledges that contextual factors frequently have a greater impact onthe potential success of a project than do the merits of the particular technology or commercial application.For example, the regional presence or absence of experienced investors, a large number of companies in thetarget industry, or providers of required expertise can prove determinative to success or failure.

We believe that the thoughtful application of the Framework can help economic developmentorganizations, businesses, entrepreneurs, institutions, investors, and others optimize investment decisionsand improve the likelihood of success. We look forward to supporting ODOD and other participants in the

Ohio economy in furthering commercialization projects and programs.

Michael J. Mozenter Stephen F. Berger


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Co pyright 2004 BizLog x LLC

EXECUTIVE SUMMARY 4

INTRODUCTION 16

Purpo se of this Rep ort 16

Sc op e of this Projec t 16

Projec t Tea m 16

How to Use this Rep ort 17

1BACKGROUND ON TECHNOLOGY COMMERCIALIZATION AND INNOVATION 18

The Imp ortanc e of Comm ercializa tion and Innova tion 18

How Tec hnology Co mm ercialization Create s Value 19

Fundam enta l Aspe c ts of Co mm ercialization 20

Proc ess

Resource Provide rs

Proof

Context

Validation

Measurement

Suc cess Drivers 22

The Com mercial Conce pt

New, Sma rt a nd Mea ningful Money

Champion

Organization and Culture

Netw orks of Resource s

Communication

2THECOMMERCIALIZATION PROCESSROADMAP 26

The Tec hnology Co mm ercializat ion Roa dm ap 26

The Co nc ep ts of Phases and Transitions

A Measurement Frame wo rk

Leve l A Met ric s

Leve l B Me trics


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Tec hnolog y Co mm ercia lization Frame wo rk Pag e 2

Leve l C Met rics

Ima gining the Comm ercial Op po rtunity 31

Phase De sc rip tion Ima g ining

How Value is Crea ted in the Imag ining Phase

Activities in the Imagining Phase

Proof of Princ iple

Busine ss Case

Resource Provide rs in the Ima gining Phase

Transitioning to the Next Pha se Inc ubating

Metrics for the Imagining Phase

Incubat ing to Define Com me rc ia lizab ility 40

Phase Description Incubating

How Value is Crea ted in the Inc uba ting Phase

Ac tivities in the Inc uba ting PhaseRed uction to Prac tice

Busine ss Plan

Resource Provide rs in the Inc ubating Phase

The Early Sta ge Fund ing G ap

Ea rly Sta ge Fund ing Source s

Transitioning to the Next Phase Demonstrating

Metrics for the Inc uba ting Phase

Dem onstrating Prod uc ts and Proc esses in Co mm erc ial Co ntext 49

Phase Desc rip tion Demo nstratingHow Value is Crea ted in the Dem onstrating Phase

Activities in the Demonstrating Phase

Resource Provide rs in the Dem onstrating Phase

Transitioning to the Next Phase Market Entry

Metrics for the Demonstrating Phase

Ma rket Entry to Prove Co mm erc ial Viab ility 54

Phase Desc rip tion Market Entry

How Value is Created in the Market Entry Phase

Ac tivities in the Ma rket Entry Phase

Resource Providers in the Market Entry Phase

Transitioning to the Next Phase Grow th a nd Susta inab ility

Me tric s for the Ma rket Entry Pha se

Grow th & Susta inab ility to Ge nerate Financ ial Retu rns 58

Phase Description Growth & Sustainability


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3THEANALYTICALFRAMEWORK 59

Introd uc tion to the Ana lytic al Fram ew ork 59

How to Use the Framew ork 59

Step 1 Identifying the Phase

Tec hnology Developm ent

Comm ercial Conce pt Developm ent

Step 2 Iden tifying Poten tial Resource Provide rs

Step 3 Dete rmine the Proo f Req uirem ents

Step 4 Ide ntify the Co ntextua l Fac tors

Product

Market

Sa les & Distribution Channe ls

Competition

Step 5 Dete rmine Suc c ess Me asures

Step 6 Deve lop a Plan to Produc e t he Proof a nd Execute Transition

REFERENCES 74

Cited Refe renc es 74

Other Refe renc es 75

APPENDIX 89

Evolution of the Proc ess of Tec hnology Co mm erc ializa tion 89

BizLog x LLC projec t team b ios 92


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INTRODUCTION

Government, privat e industry, acade mics and p rac titione rs are increasingly foc used on the

c ritica l role that tec hnolog y and informa tion p lay in creating we alth and c omp etitive

adva ntage . The stakes are high a nd the rewa rds are g row th and p rospe rity. Silic on Va lley,

Route 128 in Boston, Austin and the Resea rc h Triang le in Ra leigh a re the m ost c om mo nly cited

exam ples of tec hnology com me rc ializat ion d riving signific ant ec onomic transforma tions.

Citing t hese e xamp les, many stat es, Ohio inc luded , believe that one of the keys to long term

ec onom ic succ ess is the evolution o f a ma nufacturing-based ec onom y to a tec hnology andinformat ion-ba sed ec onomy. To this end , fede ral and state go vernments are c hanne ling millions

of dollars into c om me rc ializa tion e fforts, ventu re c ap ital fund s, ea rly-sta ge business assista nc e

organizations, research and development organizations, business attraction and retention

p rog rams and rela ted ac tivities, all in the hop es of spa rking Silico n Va lley typ e suc cesses.

Desp ite the ob vious rew ards and seve ra l high p rofile suc c ess sto ries, the p a th from idea

ge neration to c om me rc ia l suc cess rem ains a relative mystery. No e xisting road ma p , proce ss or

mo del provides the guidanc e nec essa ry for gove rnme nt or private pa rticipa nts to p red icta b ly

and efficiently use investment dollars to transform techno-market insights into commercial

suc cesses.

Fac ed with this prob lem, the Tec hnology Division o f the Ohio Dep a rtme nt of Deve lopm ent

(ODOD) reta ined BizLog x to d eve lop th is Tec hno logy Com me rc ializa tion Framew ork1 (refe rred to

as the Frame wo rk). The Frame wo rk serves as a g uide fo r the thoughtful ana lysis of techno logy

c om me rc ializat ion initiatives (and relate d investme nts) at e ac h phase o f co mm ercializat ion,

from idea gene ra tion to com me rc ial suc cess. The Frame work helps answe r the follow ing

questions:

In which phase of tec hnology com me rc ia liza tion is a p artic ular p rojec t loc at ed ? Who a re t he m ost likely providers of the resources req uired to mo ve t o the next pha se o f

tec hnolog y c omm erc ialization?

1 Although we use the term tec hnolog y com merc ialization, the com merc ialization proc ess described in this report app lies equa lly to tec hnology-

enabled commercialization, which includes the application of existing technologies to improve existing products or services or to create new ones.


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What proof will the resource providers req uire as a c ond ition to investme nt? In ad d ition to the c hallenges of p roo f gene ration, wha t ad d itiona l c hallenges will the

p rojec t fac e in a ttem pt ing t o transition to the next succ essive p hase?

How should partic ipants and investors me asure prog ress during ea ch p hase whe n p roo fof c om me rc ial succ ess ma y be yea rs aw ay?

To answe r these questions, BizLog x conduc ted an extensive lite ra ture review. The literat ure

review spa nned hund red s of the lea ding a rticles and bo oks on the top ic of tec hnology

commercialization.2 BizLog x d id not c ond uc t case stud ies or primary resea rc h, althoug h the

lite ra ture d id inc lude the results of m any em pirica l ana lyses.

Based on the literature rev iew, BizLog xs tea m o f expe rts and p rac titione rs3 developed a m ap of

the c om me rc ializat ion p roc ess as we ll as an ana lytica l frame wo rk to help go vernment a nd

private p articipants op timize their investments in tec hno logy com me rc ializa tion. The Framew ork

is not a how to ma nual or a d eta iled list of b est p rac tices. Rat her, the Frame wo rk helps to

improve the q uality of de c ision ma king a nd investing at the p rojec t leve l by integ rat ing into the

ana lysis c onte xtua lly spe c ific c hallenges and op po rtunities that d irec tly affec t the likelihood of

resource ac quisition. Although m any o f the p rinc iples we d iscuss ap ply eq ually we ll to p rod uc t,

service or proc ess innova tions that are no t b ased on new tec hnology, the Frame wo rk is foc used

on tec hnology a nd tec hnolog y-enab led c omm erc ialization.

THETECHNOLOGY COMMERCIALIZATION PROCESS

We de velop ed the follow ing roadm ap from our extensive resea rc h into the literature on

tec hnology c om me rc ializat ion p roc esses. We ado pt ed c ertain terminology, conc ep ts and

graphics from the work of Vijay Jolly in his 1997 boo k Comm erc ializing New Tec hno logies:

Getting from Mind to Ma rket. We a ugm ented Jolly s wo rk with the thinking a nd resea rch of

lea ding a ca de mics and prac titioners. As ap plic ab le, we referenc e these a c ad emics and

prac titione rs throughout this rep ort.

2 A list of all sourc es is includ ed in the Referenc e sect ion.

3 Team memb ers and biographies are in the Ap pendix


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The Pha ses

The follow d iag ram illustrates the p rima ry pha ses and transitions in the BizLog x roa dma p of

tec hnolog y c om mercialization4:

Figure 1. The Proc ess of Tec hno logy Co mm ercia liza tion

In seq uenc e, the five pha ses of tec hnology com me rc ializat ion a re Ima gining, Inc uba ting,

Demonstrating, Market Entryand Grow th & Susta inab ility. We did no t inven t these te rms or the

five p hase m od el. Numerous expe rts use a five p hase mod el to de sc ribe the te c hnology

c om me rc ializat ion proce ss. We simply integ ra ted certain terminology a nd d efinitions to c rea te

the m od el we use in this Frame work.

The Imagining Phasebe gins with the tec hno-ma rket insight - the linking, if only in c onc ep t, of a

tec hnolog y and a m arket op po rtunity (often referred to a s a job to b e d one ). Ac tivities focus

on the g ene ra tion of a proof of p rinc ip le the de mo nstrat ion in a lab oratory setting of c ritica l

c om po nents of the tec hnology and the d evelop me nt of a related b usiness c ase. The p rovide rs

of resources for the Imagining Phaseac tivities include, but a re no t limited toow ners/ entrepreneurs, co rporate R&D b udg ets, university d ep artment al b udg ets, and , direc tly

or indirec tly, gove rnme nt fund ing. Given the extrem e c om me rc ial risk at this ea rly stag e o f

deve lopm ent, third pa rty priva te financ ing is rare. The p rima ry ob jective for Ima gining Phase

4 Ada pte d from the c omm ercialization p rocess mod el of Vijay Jolly (1997)


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ac tivities is the g ene ration o f the p roo f req uired to attrac t the resources nec essa ry to mo ve to

the ne xt pha se Incubating.

The Incubating Phaseis c harac terized by the follow ing a c tivities: de finition of te c hnic al a nd

prod uc t pe rforma nc e spe c ific at ions, va lidat ion of tec hnic al ca pa bilities in the c ontext of the

pe rforma nce spe c ifica tions, and further valida tion o f the m arket a nd related c omm erc ial

c onc ep t/ business plan. Often referred to in the literature as the Valley of Dea th or the

Darwinian Sea , the Incubating Phaseis, mo re o ften than no t, the end o f the roa d fo r

c om me rc ia liza tion initiatives. Insurmo untable tec hnica l and m arket roadb locks freq uently

surfac e. Perhap s eve n more cha lleng ing, howe ver, is resource ac quisition . Bec ause of the

technical and market uncertainties, Incubatingc ontinues to e mb od y enormous c om me rc ial risk.

Unfortuna tely, this risk is coup led w ith the ne ed for an increa sed level of resources. As a result,

p rivate mo ney is sca rc e. Typ ica l supp liers of resources for Incubatingac tivities inc lude the

fed eral gove rnme nt, stat e g overnments, owne rs/ entrepreneurs, co rpo rat e R&D b udge ts,

university R&D budgets, and , to a limited e xtent, angel investors. Given the lac k of tang ible

ma rket va lida tion, and op en tec hnology que stions relating to issues suc h a s ma nufac turab ility,

p rivate investo rs gene ra lly do not fund p rojec ts in the Incubating Phase. The scarcity of

resources only inc rea ses the c halleng e o f ge nerating the p roo f nec essary to a ttrac t the

resources req uired to m ove to the next pha se Demonstrating.

During the Demonstrating Phase, projec t team s attem pt to g enerate tec hnic al and m arket

proof within a m ore d efined co mm erc ial co ntext. Ac tivities focus on p rod uct d evelopm ent and

ma rket ac ce pta nce . Working p rototype s, performa nce to c om mercial spe c ific ations, and

ma nufac turab ility within de fined cost and qua lity standa rds c harac terize the g oa ls on the

tec hnica l side. On the ma rket side, Demonstrating Phaseac tivities foc us on ge nerating

evidenc e tha t c ustom ers will buy the p rod uc t. The m ix of resource providers now beg ins to

include private sources. Co rpo rat ions and ange l investors a re tw o of the prima ry c ontributo rs to

Demonstrating Phaseac tivities. Early sta ge venture c ap ita lists som et imes invest in

Demonstrating Phaseprojec ts, but more c om mo nly save the ir resources for the next pha se

(Ma rket Entry). As with the p rior pha ses, the Demonstrating Phaserep resents an insurmountab le

ob stac le to a large pe rc enta ge of c om me rc ializat ion initiatives. Those resource providers who

fund m arket e ntry projects req uire m ore refined a nd tangible p roo f of prod uc t fea sibility suc h as

tec hnica l, performa nce, manufac turing, and ma rket feasibility.


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In the Market Entry Phase, pa rtic ipa nts enter the m arket to valida te the co mm erc ial op po rtunity.

Ac tivities a re tho se typ ica lly assoc iated w ith an ongoing b usiness p rod uc tion, service ,

d istribution, sa les and m arketing. As noted , ven ture ca p italists and c orpo ra tions a re the p rima ry

providers of the resources requ ired to fund Market Entry Phaseac tivities. To move to the final

phase, Grow th & Susta inab ility, or to g ene rate a financ ially a ttrac tive exit for ea rlier resource

providers, the op portunity must g ene ra te positive business results (e.g. sa les, grow th a nd

evidenc e of profitab ility). If the evidenc e indica tes that the produc t/te c hnology c an fuel a

wide va riety of new p rod uc ts and o pp ortunities, Grow th & Susta inab ility Pha seresource

p roviders, suc h as venture cap italists, ba nks and the pub lic eq uity ma rket itself, will p rovide t he

resources nec essa ry to ad vanc e. If, how eve r, the opportunity ge nerat es positive b usiness

metric s, but is unlikely to serve a s a p latfo rm for a va riety of new produc ts or sp in-off

op portunities, then an exit is the mo re likely result. Ce rta in priva te eq uity firms as we ll as strateg ic

buyers/ ac quirers p rovide the resources for the exit.

The Grow th & Susta inab ility Pha se involves the e xecution o f a c om prehensive business p lan to

increa se m arket sha re a nd / or tota l reve nue a nd profit in context of a self-susta ining business.

The g oa ls, va lue c rea tion mec hanisms and resource p roviders a re tho se g ene ra lly assoc iated

with a thriving b usiness see king to ide ntify opp ortunities for growt h and p rofitab ility. While the

c ha lleng es a re sub sta ntial and wo rthy o f extensive d isc ussion the Grow th & Susta inab ility Pha se

is outside the sc op e o f the Framew ork.

Transitions to Mo bilize Resources

A Transition is best d esc ribed as a sa les p rocess whose p rima ry ob jec tive is to c onv ince resource

providers to invest in the ac tivities of the next phase o f co mm erc ializa tion. All transitions have

two c om po nents the a c quisition of resources (the eve nt) and the a c tivities that c ulminate d in

that event . The e vent o c curs whe n resource p rovide rs p rovide the investme nt nec essa ry to

perform the ac tivities defined by the next phase of the c om merc ializa tion proc ess. Transition

ac tivities be gin during the p hase a s proof is ge nerated . The e xac t p oint in time (early or lat e in

the p hase) is de pe nde nt on nuanc es of the industry, projec t a nd resource p rovide rs.

In this sa les p roc ess, pa rticipants use the p roo f ge nerated within a p hase to c onv ince resource

p roviders to ma ke an investment . Espec ially in the ea rlier pha ses, the risks a re high and the

proof is mo re a n indic ato r of p rog ress than a de terminant of c om me rc ial op po rtunity. As a

result, transitions a re e xtrem ely cha lleng ing p roc esses. To a c c om plish a n effec tive transition,

pa rticipa nts must c learly unde rstand the ne ed s/ de sires of the targe ted resource providers and,


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mo re imp ortantly, the proof t he resource p rovide rs req uire as a c ond ition to investme nt.

Suc cessful co mm erc ializa tion is about suc cessful transitions.

Unfortuna tely, howeve r, not a ll transitions a re c rea ted e qua l. For our purposes, the b est

evidenc e (albeit imp erfec t) that a project is mo ving through the c om me rc ia lizat ion p roc ess is

the c onsumma tion of resource acquisition. The a cquisition o f resources va lida tes the p roo f and

the o pp ortunity at the p oint of the transition. In ana lyzing the q uality of the transition, however,

we foc us on three c riteria. Those c riteria a re new , sma rt a nd me aningful.

To d etermine if the resources a re new , we ask the question Are the resource from athird party that has not p reviously invested in the p rojec t?

To d etermine if the resources a re sma rt , we ask the q uestion Is the resource p roviderexpe rience d in the target industry and c ap ab le of bringing othe r nec essary ca pab ilities

to the project if nece ssary?

To d etermine if the resources a re mea ningful , we a sk the q uestion Is the investmentsignific ant when m ea sured relative to the resource p rov iders tot a l assets or co nside red

in co ntext of the resource p rovide r s c ore strate gy?

Negative a nswe rs to o ne o r mo re o f these q uestions do no t mea n tha t a transition has not

oc c urred . Rathe r, they spea k to the q uality of valida tion of the op po rtunity. If the projec t is

unab le to attrac t a new , sma rt and mea ningful investment, the pa rticipa nts must c onside r

the implic ations. Why didn t the p rojec t attrac t new, sma rt and me aningful resources? Are the

pa rticipa nts so wrap pe d up in their enthusiasm and op timism that they fa il to see wa rning signs

reg a rding the viab ility of the co ncep t? Resource a c quisition is the best evidenc e tha t a p rojec t

is ad vanc ing tow a rds c om me rc ial suc c ess. Bec ause resource ac quisition is the be st evide nc e

(bu t no t p roba tive) of p rog ress, participants must sc rutinize the qua lity of the transition.

Comp lexity, Iteration a nd Co ntext

As noted , Figure 1 is fa irly rep resentat ive o f the numerous mo dels and desc riptions used by

theorists and p rac titione rs to c oncep tua lize the c om me rc ializa tion proc ess. The g raphic is,

how eve r, dec ep tive on a numb er of critica l points. First a nd fo rem ost, the proc ess ap pe ars

linea r, but in almo st every instanc e, is c om plex and iterative. Espec ially in the ea rlier pha ses,

false sta rts and d ea d -ends a re the no rm, no t the exception. Even in the pursuit of resources

during a t ransition, suc cess freq uent ly dep end s on a serend ipitous turn of eve nts rather tha n the

exec ution of a seq uenc e o f planne d step s. As Clayton Christensen (2003) po inted o ut,


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Tec hnolog y Co mm ercia lization Frame wo rk Page 10

approxima tely 90% of suc cessful c om panies d id not suc cee d o n the b asis of the business or

op portunity de sc ribed in their orig inal business p lans an extrem ely com pelling sta tistic.

Sec ond , the b asic p roc ess ma p d oes not show the c ritic al role of c ontext. Each op portunity

germina tes and d eve lops in a unique environm ent . Co ntextual fac tors suc h as the skills, trac k

rec ords and relationships of the peop le involved ; the loc al or reg ional availab ility of requ ired

resources; the a va ilab ility of spec ialized eq uipm ent ; the p resenc e o f businesses w ith experienc e

in the ta rgete d m arket; and a host of o ther simila r fac to rs a re a s dete rminative o f suc c ess as the

unique a spec ts of the tec hnology or c om mercial conc ep t. For exam ple, an Incubating Phase

op portunity see king resources to perform Demonstrating Phaseac tivities is less likely to suc cee d ,

even a fter generating the req uisite p roo f, if the region lac ks a relatively large numb er of ange l

investo rs or see d sta ge venture cap ital firms w ith experienc e in the ta rge t industry. As mo st

ent rep rene urs und erstand , p roo f is ra rely ob jec tive in the w orld o f resource p rovid ers. Proo f

de emed c om pe lling by o ne resource provider is often d ismissed as inadeq uate by o thers.

Perspec tive, expe rience , foc us and com pe tition a ll influence a resource providers view o f

p roof. As a result, the a bsenc e o f a large num ber of resource p roviders ofte n translates into a

low p rob ab ility of transition. Afte r a ll, how d ifficult is it to find reasons not to invest in an early

stage te c hnology comm ercialization initiative?

As an aside , it is important to note tha t resource a c quisition is not just about financ ial investme nt.

Required resources can take the form of personnel, expertise, capital equipment or facilities, to

nam e a few. As ano ther imp ortant side note, the c onc ep t of proof cha nges from pha se to

phase. While resource providers in ea c h phase require som e level of proof a s to te c hnic al and

ma rket viability, the na ture o f the proof c hange s at e ac h subseq uent p hase.

Measurement

Me asureme nt serves two c ritica l roles in the c om me rc ializa tion frame wo rk. First, ap p lying

me asurem ent to a p rojec t helps define the desired outc om es. Sec ond , me asurem ent p rovides

a m ec hanism for ac c ounta bility. Ra ther than spe c ific m etric s (which a re unique to ea ch

projec t), we prop ose a me asurem ent fram ew ork tha t ena bles p rojec t tea ms or resource

providers to deve lop a com prehensive set o f me trics for short-term a nd long-term p rojec t

evaluation.

The m ea surem ent frame work consists of three c a tego ries of m ea sureme nts Level A Me tric s,

Leve l B Metric s and Leve l C Me tric s. Leve l A Metricsare direc t evidenc e o f projec t or prog ram


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suc cess. In c ontext of the Tec hno logy Comm erc ializa tion Frame wo rk, transitions (resource

ac quisitions) a re the d efinitive Level A Metric. For the most pa rt, Leve l A Metric sare o bjec tively

de terminable a nd ea sy to m ea sure. Level B Me tric sare mo re cha lleng ing. Leve l B Me tric s a re

tang ible evide nce that a p roject in on the pa th to ac hieving Leve l A Metric s. So, for example, a

Level A Metric for a projec t in the Demonstrating Phase is an investme nt by a venture ca p ital

fund (funding Market Entry Phaseactivities).

A Level B Metric for this projec t might include the d elivery of a te rm shee t deta iling a po tential

investme nt and c om mitting the resource p rovide r to a de fined set of d ilige nce-related ta sks

within a relatively short time p eriod . While less ob jec tive eve nts might qua lify as Level B Metric s

for examp le, numerous me etings with venture fund pa rtners follow ed by extensive d ilige nce

these less ob jec tive events have t he p otent ial to result in d elusions of p rog ress d riven by

unbrid led op timism.

Finally, Leve l C Me tric sa re simp ly evidenc e tha t the p rojec t is eng age d in the type s of ac tivities

typ ica lly assoc iate d with simila r projec ts. These a c tivities (e.g. hiring q ua lified personnel,

prep aring pa tent ap plica tions, prep aring a business plan, etc .) are vital ac tivities, but d o no t

rep resent e videnc e of p rog ress towa rd the goa l of Transition o r c om me rc ial suc c ess. Rather,

they simply ind ic at e tha t the p artic ipant s are exec uting their plan.

THEANALYTICALFRAMEWORK

The Ana lytica l Fram ew ork builds on the Comm ercializat ion Proc ess Roa dm ap and provides a 6-

step p roc ess to m ove p rojec ts to the next pha se o f co mm ercialization. The true wo rk now

be gins ap plying the Fram ew ork to a pa rticular prog ram or projec t. To d o this, we p rop ose the

follow ing analytic al step s:

Ide ntify the app rop riate phase of com me rc ializat ion. Ide ntify the resource providers req uired to fund the ne xt p hase o f c om me rc ia lization

activities.

Determine the p roo f req uired by the ta rge ted resource p rovide rs. Ide ntify the co ntextual facto rs that a re likely to have a ma terial imp ac t on the c hanc es

of resource acquisition.

Determine the appropriate measures of progress. Develop a plan to produc e the proof a nd pursue the transition.


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Identifying the Phase

Ide ntifica tion of the pha se is not a lways ea sy. In gene ral, the dete rmination foc uses on tw o

c ateg ories of proof - proof relating to the tec hnolog y/p rod uct and proof relating to the

c om me rc ial c onc ep t/ business plan. During the Imaginingand Incubating Phases,

tec hnolog y/p rod uct p roof tend s to oc cur in the lab oratory rather than in a c om mercial

environm ent. In the later phases, tec hnolog y/p rod uc t valida tion oc curs in a c om me rc ial

environm ent, but also includes proof relating to p ackag ing, ma nufac turing a nd c osts. On the

c om me rc ial c onc ep t/ business p lan, p roo f during the Imaginingand Incuba ting Phasesis more

abstract.

If the p rojec t relate s to a disrupt ive innova tion (new be nefits offered to new or less dem and ing

c ustom ers) targe ting new c ustom ers, proof g ene rally com es in the form o f sec ond a ry ma rket

resea rc h a nd business logic . Even w ith susta ining innova tions (imp roving p rod uc ts or services

that are c urrently in the ma rket), business logic and sec ond ary resea rc h form the c om me rc ial

c onc ep t p roo f during the ea rlier pha ses.

During the Demonstrating Phaseand be yond, the market be c ome s the sourc e of c omm erc ial

c onc ep t/ business plan proof. Are custom ers buying the p rod uc t? Is the op po rtunity ge nerating

targeted growth a nd ma rgins? Are the va lue c hain pa rticipa nts pe rforming a s anticipated ?

During Ma rket Entryand Grow th & Susta inab ility Pha ses, the p roo f evo lves to sta nd ard b usiness

me tric s. While none o f the listed fac tors is dete rminative, they p rovide a useful guide .

Identifying the Resource Providers

The fo llow ing c hart p rovides som e g ene ral guidanc e rega rd ing the resource providers that

ge nerally invest a t a pa rticular pha se:

Com me rcia lization Phase Resource Providers5

Imagining Owners/Founders Corporate R&D Resea rc h program s funded b y fede ral ag enc ies,

foundations and universitiesIncubating Owners/Founders

Corporate R&D Angel Investors (limited) Fed eral Prog rams

5 We have id entified the primary resource p roviders. Other resource p roviders ma y pa rticip ate b ut they are the exce ption, not the rule.


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Com me rcia lization Phase Resource Providers5

Venture capital, universities and state governments providesom e funding for Incubation to a muc h sma ller deg ree

Demonstrating Co rporat ions Investment and R&D Ang el Investo rs Venture C ap ital (limited )

Market Entry Co rporat ions Investment and R&D Venture Ca pital Ang el Investo rs

Growth Corporations Venture Ca pital Commercial Lenders

Determining the Required Proof

The ultimate de c ision on p roo f req uirem ents to supp ort a p rojec t is ma de b y the resource

prov ider (the investor). Mo st resource p roviders c an articulate in deta il the c riteria the y

ge nerally ap ply to d ete rmine whethe r a pa rticular investme nt fits within the sc op e o f their

investment p aramete rs. These c riteria usua lly inc lude fa c to rs suc h as com pany size and sta ge of

financ ial de velopme nt (such a s pre-revenue , po st-revenue , pre-profitab ility a nd po st-

profitab ility). Othe r typic al fac tors spe ak to ta rge ted industries, degree of tec hnology risk,

c om pleteness of ma nag em ent team and ge og rap hic preferenc es. To the p roject tea m, these

fac to rs a re useful, but a re m erely a sta rting p oint. These fac tors rep resent the first leve l filter the

resource p rovider ap p lies to p ote ntial investments. They do no t, how eve r, spea k to the spec ific

proof the resource provider will de em pe rsuasive in m aking a n investme nt d ec ision.

The spec ific proof em erges from the interac tion be twe en the resource p rovide r and the p rojec t

tea m. If the projec t team/ cham pion ma nage s to ma ke it throug h the first leve l filters and

c aptures the interest of the resource p rovid er, a d ialog b eg ins. The resource p rov ider will

c ond uc t an analysis of the project , typica lly evaluating the tec hnology, the p rod uc t, the

ma rket, the p eop le, the c omp etition, the financ ing and the financ ial p rojections to d etermine

whether or not to m ake an investment . In ma ny ca ses, the resource p rovider identifies ga ps in

the p lan that req uire a dd itional proof. These g ap s are the o rigin of the proof requirem ents that

stand betw een the p roject tea m a nd a n investment.

Ce rtainly, a w ritten business c onc ep t o r business plan will alwa ys be a c om po nent of the

req uired p roo f. The w ritten d oc ume nt serves as a roa dm ap for the oppo rtunity and sets

expec tat ions reg arding the hurdles to ove rc om e and the nature of the op portunity. The written

doc ume nt also b olsters the p artic ipant s c red ibility by d em onstrat ing a thoug htful and

c om prehensive app roa ch to ca pturing the opp ortunity. As note d, howe ver, proof is a relative


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c onc ep t. While the resource p rovide rs at each stage req uire p roo f of technica l viability and

proof of the co mm erc ial co nce pt, the spe cificity and na ture of the p roof c hange s with eac h

phase. During the late r phases, the required proof of tec hnic al viab ility and c om me rc ia l

c onc ep t flows from the ma rket rather than the lab .

Finally, few elem ents of p roo f are uniformly co mpelling to a ll resource p rov iders. To m itiga te the

risk that a n individua l resource p rovider will dec ide no t to invest (for any number of rea sons,

ma ny of whic h are indep ende nt of the merits of the tec hnolog y or c omm erc ial co nce pt), the

projec t team has no c hoice but to initiate as ma ny me aningful disc ussions with resource

providers as possible. While this c onc lusion ap pea rs ob vious, ma ny projec t tea ms do no t take

into ac count the relat ive lac k of qua lified resource p roviders in assessing the likelihood of

suc cess.

Identifying Contextual Fac tors

As noted ab ove und er C omp lexity, Iteration and Context, co ntextual fac tors ma y be as

c om pe lling indica tors of po tential suc cess as the quality of the tec hnica l and c om me rc ial

c onc ep t. Loc al ma rket conditions, the loc al or reg ional presenc e of a large num be r of po tential

resource providers, the a bility of the pa rticipa nts to c red ibly approa c h the resource p rovide rs,

c om pe tition and the ava ilab ility of no n-financ ial resources (qua lified pe rsonnel, expert

assistanc e, testing fac ilities etc .) a re examp les of c ritica l advanta ge s or obsta c les.

To a ssess contextua l fac to rs, the pa rticipant should shift foc us from the m arket fo r the p otent ial

prod uc t or services to the ma rket for their p rojec ts op portunity at the c urrent p hase o f

commercialization. In this ana lysis, the fo c us is on the likelihoo d of a suc c essful transition

(resourc e ac quisition). In this ma rket, the p rod uc t is the p rojec t s op portunity. The c ustome r is

the resource p rov ider. Sa les and d istribution a re a c ritica l c om pone nt of the transition a c tivities,

which d ep end in large p art on whether the projec t team c an effec tively ma rket the op po rtunity

to the resource p roviders. With this shift in foc us, the p rojec t tea m shou ld be a b le to mo re c learly

de termine the mag nitude of the resource a cquisition cha lleng e.

As also no ted , in the a bsenc e o f a large m arket (a large numb er of po tential resource

p roviders), the likelihood of suc c ess, even fo r a rela tively compelling op portunity, d iminishes

signific antly. Espec ially in the e a rlier pha ses, resource p roviders tend to a c t on a loca l or

reg iona l ba sis. In add ition , many resourc e p rov iders foc us on p articu lar industries. As a result,

the m arket of p otent ial resource p rov iders may be sma ller than it first appea rs.


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Determining Measures of Progress

Finally, the m ea surem ent frame wo rk must b e a pp lied to ide ntify Leve l A, B and C metric s. Only

by the ca reful identifica tion and mo nitoring o f pe rformanc e to the se m etric s c an p rog ress be

de termined. In the ab senc e of we ll-defined m etric s, the inherent unc ertainty of the

c om mercia liza tion p roc ess ma kes it next to imp ossible to ident ify p rog ress, make time ly c ourse

c orrec tions or ab and on unp rod uc tive c ourses of ac tions.

Develop ing a Plan to Transition

For the reasons ou tlined above , transition a c tivities must be c losely aligned w ith the p roo f

req uired by p ote ntial resource providers and the c onte xt of the op po rtunity. Transition ac tivities

include resource provider identific at ion, p roo f definition, proo f ma rketing and resource

ac quisition. The spe c ific ac tivities are highly dep end ent o n the industry, phase a nd c onte xt.

SUCCESSDRIVERS

In acc orda nc e w ith the literature, histo ry and c om mo n sense, no fo rmula exists to ensure suc c ess

in techno logy c om me rc ializat ion. The literature d oes, however, c onta in a numb er of rec urring

theme s reg arding fac tors tha t ap pea r to d rive suc cess. The list ge nerally includ es the fo llow ing:

A c omp elling c omm ercial concep t; Continuing va lida tion throug h the a c quisition of new , sma rt and m ea ningful investme nt; A c ham pion we ll matc hed to the nee ds of the p roject, espe cially during the m ore

uncertain early phases;

Environm ents c ond uc ive to tec hnology c om me rc ializat ion a t the pa rticular phase ofp rojec t developm ent (e.g. supp ortive orga nization and c ulture, com patible incentives,

ena bling legislation);

Effic ient a cc ess to external ne tworks of resource p rov iders; and An e ffic ient m ec hanism t o share informa tion bo th within the organizat ion a nd externally,

w ith po ten tial resource p roviders, includ ing p roviders of non-fina nc ial assista nc e.

Although no o ne of these fa c tors gua rante es succ ess, the p ositive c ontribut ion of e ac h of these

fac tors c om mo nly is c ited in the literature.


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This rep ort, Tec hnology Com me rc ializat ion Frame wo rk, is de signed to he lp t he Ohio Depa rtme nt

of Developm ent a nd private pa rtic ipa nts in the c omm erc ialization o f tec hnolog y in the State of

Ohio. The m otiva tion for this rep ort co me s d irec tly from three sources: the Third Front ier

investme nt of $1.1 Billion t o stimulate the e conomy in Ohio to ge nerate mo re high p aying job s

and new ec ono mic ac tivity in techno logy b usinesses; the desire o f ODOD to ma ximize the

prod uc tivity of the Stat e s investme nt in tec hnology c om me rc ialization; and the d esire o f ODOD

to he lp pub lic and priva te e ntities to m ore effic iently and effec tively use the resources provided

by ODOD to successfully commercialization innovations.

THEPURPOSE OF THISREPORT

The purpose of the rep ort is to address spec ific ODOD nee ds as follows:

A c om prehensive a nalytica l fram ewo rk to supp ort the prepa ration of e c onom icdeve lop me nt p rog rams, the p rep aration o f RFPs, the eva lua tion of p rop osa ls and the

dec ision to invest funds in a p rojec t;

A m ea ns to esta b lish a minimum stand ard of a na lysis for prop osa ls; A system of metric s tha t conveys ODODs ob jec tives, p rov ides interim a nd ultimate

performanc e e valuation me asures, and a llow s for diag nostic e va luat ion of existing

p rojec ts; and

A stand a rd set of g uidelines that provide po tential funding rec ipients with the t oo ls torespond to RFPs and imp leme nt p rojec t p lans w ith a highe r p rob ab ility of suc cess.

THESCOPE OF THISPROJECT

To d eve lop the Fram ew ork, BizLog x comb ined the expertise o f the p rojec t tea m with a review of

business, ac ade mic and gove rnme nt literature. The project tea m did not eng age in prima ry or

c ase stud y resea rch.

PROJECTTEAM

ODOD, rep resented by Pat Valente and Norm C hag non, eng age d BizLog x LLC, rep resented by

Steve Berge r and Mike Mozenter, to c ond uc t the resea rc h and p rep are this rep ort. BizLog x


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used its internal resources as we ll as those o f selec ted consultants. See the Ap pend ix for

biographies on the team mem be rs.

HOW TO USETHISREPORT

This rep ort is orga nized to p rov ide the reader with informa tion in a seq uent ial manner. The

information builds with each section resulting ultimately in the Analytical Framework.

Unde rstand ing the A nalytic al Fram ewo rk and how it c an b e a pp lied to m ake b etter

c om me rc ializat ion dec isions is large ly de pend ent on rea d ing a nd und erstanding the prior

sections.

We strong ly rec om me nd tha t the rea der sta rt with the Executive Summa ry. This w ill p rov ide

ge neral awa reness of the subjec t and the rep ort c ontent. The Bac kground sec tion then

de sc ribe s the fa c tors that are funda me ntal to c om me rc ialization a nd sets the stage for the ne xtsec tion. The Co mm erc ializa tion Proc ess Roa dma p p rov ides an in-de p th desc rip tion of the

mo vem ent of a te chnology co mm ercializat ion projec t from the initial tec hno-ma rket insight

through the va rious phases, and p rovides the unde rsta nd ing of p ha ses, transitions and m etric s

tha t is essentia l to und ersta nd ing the a na lytic a l frame wo rk. The Ana lytic a l Framew ork builds on

the C om merc ializat ion Proc ess Roa dm ap and provides a 6-step proc ess to m ove p rojec ts to the

next pha se of c om me rc ia lization.


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BACKGROUND ON TECHNOLOGY COMMERCIALIZATION AND

INNOVATION

This sec tion provides impo rtant bac kground information on tec hnology com me rc ia lizat ion a nd

the p roc ess of innovation. Beg inning w ith an overview of the impo rtance of innovation and

tec hnology comm ercialization, we then summ arize the funda me nta l aspe c ts of

c om me rc ializat ion. The summ ary ad dresses and defines funda me ntal c onc ep ts inc lud ing

process, resource p rov iders, p roo f, con text, va lida tion and m ea sureme nt. The summa ry also

add resses a num be r of suc c ess d rivers including the c om me rc ia l concep t, the ide a of new ,

sma rt a nd mea ningful money, the role o f the c ham pion, the impo rtanc e o f orga nizational

supp ort and c ulture, the supp ort of networks of resources, and the need for com munica tion.

THEIMPORTANCE OF COMMERCIALIZATION AND INNOVATION

The Know ledg e Ec ono my , Creative Destruc tion , Glob alizat ion , Off-shoring - These

buzzwo rds c harac terize the e c onomic and soc ia l cha nge s that t he Sta te o f Ohio, the United

Sta tes and the rest of the deve loped w orld ha ve be en expe rienc ing for the past dec ad e. These

wo rds a lso signa l a period of transforma tion, which, am ong other things, has resulted in a

fundam ental cha nge in the b asis of c omp etition. Com pe tition used to foc us on c omp anies.

Now com pe tition o c c urs amo ng loca lities, stat es, reg ions and c ountries. Ma nufac turing assets

and d istribution c ap ab ilities are no longer c om petitive d ifferentiato rs. Tod ay, information a nd

knowled ge a re eq ual pa rtners with assets in de fining c om petitive a dva ntag e6.

Ac c ording to David Teece, it has long b een rec og nized that e c onomic p rospe rity rests upo n

knowled ge and its useful ap plica tion [T]he increases in the stoc k of useful know led ge and the

extension of its ap plica tion are the essenc e of mo de rn ec onomic g row th. In the pa st,

prod uc tive assets and natural resources we re the found at ion of ec onomic d eve lopm ent and

c om pe titive strate gy. Tod ay, how eve r, theorists and prac titione rs alike p oint to tec hnology and

informa tion as the rea l drivers of wea lth c rea tion and c om pe titive ad vantag e. In the absenc eof succ essful prod uc tive com me rc ializat ion proc esses, the p otential value of tec hnology,

knowled ge and informa tion rema ins out o f rea c h.

6 Many thinkers have c ontributed to the und erstand ing of information and knowledg e in co mp etition. David J. Teec e has bee n very articulate on

the subject, p articularly in Cap turing Value from Knowled ge Assets: The Ne w Econo my, Ma rkets for Know -How, a nd Intangible A ssets.


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Ec ono mist Ma rtin Weitzma n sta ted , The ultima te limits to g row th may lie not a s muc h in our

ab ility to gene rate new idea s, so m uch as in our ab ility to p roc ess an ab unda nc e of p otentially

new seed idea s into usab le fo rm (Weitzma n 1998). For any c om pa ny, reg ion, stat e o r country

wishing t o d rive value c rea tion from tec hnology a nd informa tion, ma stering t he p roc ess of

c om me rc ializing te c hnology-ba sed innovations it is an a bsolute nec essity.

HOW TECHNOLOGY COMMERCIALIZATION CREATES VALUE

We are all fam iliar with the a poc rypha l story of a b rea kthroug h tec hnology that c rea tes a new

ma rket, sets a ne w stand a rd , ob soletes all that c ame before, and g ene rat es inconc eivab le

we a lth for its c rea to rs. Unfortuna tely, c ont ra ry to p op ular lore, these b rea kthroug hs a re

extrem ely ra re. Yet , less d rama tic brea kthroug hs and innova tions rout inely c reate enormous

va lue for those w ho c an t ranslate these b rea kthroug hs into ne w o r improved prod uc ts or

services. Ge offrey Moo re, autho r of Crossing the Chasm, has ou tlined the fo llow ing wa ys tha tinnovation c oupled with effective c omm erc ialization c rea tes value a nd builds wealth:

Introd uc ing a new tec hnologythat , bec ause o f its fea tures and bene fits, create s a newma rket (ce ll pho nes);

Finding new applicationsfor existing techno log ies (GPS used for OnSta r); Improving productperformanc e (Pent ium p roc essors by Inte l) or prod uc t usab ility (Pa lm

handhelds);

Making processesmo re e ffec tive or efficient (Dells streamlining o f the PC supp ly c ha in); Imp roving the c ustom ers experienc e(Disneylands amusement park management

system);

Imp roving the customer-touchingproc esses (eBay s online auc tion a nd Amazons e-co mmerce mec hanisms7);

Introd ucing a new business modeltha t c hanges a va lue p rop osition (IBM s shift to on-dem and c omp uting); and

Taking a dva ntag e of struc tural c hang esc aused by disrupt ions like regulato ry c hange s(Fide lity offers online financ ial services to c om pete with banks and b rokerage s).

Although som e o f these innova tions are less new swo rthy, they d rive com petitive a dva ntage s

and va lue c rea tion for ind ustries in a ll phases of ma turity. Imp rov ing the a b ility of Oh io entities

(companies, inventors, entrepreneurs, universities, research institutes, and support entities) to

7 Who crea ted online boo kselling? Charles Stac k, an Ohio-ba sed bo okseller, was the pionee r in this ca tego ry, starting bo oks.com in 1991, four

years before Am azon entered the market.


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c om me rc ialize innovat ions c an have a p rofound imp ac t on the c om pe titiveness of the a ssets of

the sta te, resulting in mo re high p aying jobs and g ross sta te p rod uc t.

FUNDAMENTAL ASPECTS OF COMMERCIALIZATION

Although extrem ely va ried , the literature on tec hnology co mm ercializat ion c onta ins a num be r

of consisten t them es, ob serva tions and p rincip les. Bec ause of the high frequenc y of their

oc c urrenc e and the relat ively consistent me aning throug hout the literature, we ha ve c onc lude d

tha t ma ny are funda me ntal to c om me rc ializat ion. The follow ing are brief desc riptions of som e

of those p rincip les.

Process

Although c om me rc ializat ion com mo nly follow s a c om plex and iterative pa th, with many false

sta rts and de ad -ends, suc cessful com me rc ializat ion ultimate ly proc eeds throug h d efined pha sesand transitions. Know ing w ith relative c ertainty the pha se o f a p artic ular c om me rc ializat ion

projec t, the ob jectives of tha t phase, the resources nec essa ry to p roc eed to the next pha se,

and the sourc e of those resources, is c ritica l to suc c ess. Without this you-a re-here ma p ,

projec ts flound er with misplac ed go a ls, ac tivities and expec tat ions.

Resource Providers

Although the ultima te g oa l of succ essful c om me rc ializat ion is the c rea tion of new or more

c om petitive b usinesses ge nerating high m argins and c rea ting high paying jobs, the c rea tion

and ma nag em ent of succ essful c om me rc ializat ion p rojec ts de pend s on a m ore focused

perspe c tive. At the p roc ess level, suc cessful com me rc ializa tion is la rge ly d ep end ent on

suc cessful transitions. A transition o c curs a t the p oint in time tha t a p rojec t at trac ts the resources

req uired to p erform the ac tivities in the next phase of c om me rcializa tion. These resource

providers tend to vary from phase to pha se. They p rovide a wide va riety o f resources including

c ap ital, fac ilities, eq uipme nt, and a c cess to netw orks and informa tion in tec hnology,

ma nufac turing , market, sa les, d istribution a nd rela ted support servic es. It is only by p rop erly

identifying tho se resource p rovide rs who typically invest in the next phase of

c om me rc ializat ion ca n the projec t team de termine the informa tion or p roo f req uired as a

c ond ition to investment.

Proof

As noted , the ac tivities within ea ch phase foc us on p roo f generation the p roo f which the

identified resource p rov iders req uire as a c ond ition to making a n investment d ec ision. Proo f


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gene ra lly falls into two b uc kets technica l fea sibility and ma rket fea sibility. Tec hnica l fea sibility

sta rts with p roo f of p rinc iple, evolves to red uc tion to prac tices, and ultima tely prod uc t fea sibility

tha t include s issues suc h a s pe rforma nce to de fined spe c ific at ions, produc tion w ithin de fined

c ost pa rame ters and q ua lity standards, and m anufac turab ility. Ma rket feasibility sta rts w ith a

c red ible c omm ercial co nce pt, and proce ed s to the p rep aration of a business plan a nd

valida tion of c ritic al co mp onents of the plan throug h direc t ma rket testing a nd va lidat ion,

ultima tely in the fo rm of sales. While the resource providers at ea ch p hase foc us on te c hnica l

fea sibility and ma rket feasib ility, the type o f proof they req uire a t ea c h pha se c hang es

d ram at ica lly. Furthermore, p roo f is ra rely objec tive. Proo f deem ed prob ative b y one resource

prov ider is ofte n d ismissed as inad eq ua te b y othe r resource p rovid ers.

Context

Unfortuna tely, there is no m agic formula , instruct ion boo k, or step -by-step guide to suc c essful

tec hnology com me rc ializat ion. Eac h technology and ma rket need p resents a unique situa tion

that req uires a thorough und erstand ing of interna l and externa l fac tors in orde r to d ete rmine the

plan for moving forwa rd and the resources req uired . The follow ing c ontextual fac tors, amo ng

othe rs, ca n b e a s impo rtant in co mm ercialization succ ess as the unique aspec ts of the

tec hno logy or business case:

The skills, trac k rec ords and rela tionships of the p eo p le involved ; The loc a l or reg iona l ava ilab ility of req uired resources; The availab ility o f spe c ialized eq uipme nt; The p resenc e o f businesses with experienc e in the ta rgete d m arket and industry.

One of the p rima ry c ha llenges to succ essful com me rc ializat ion is the ide ntifica tion of m at eria l

c ontextual fac tors and the d evelopme nt of p lans to leverag e o r overco me those fa c tors.

Validation

One of the more frustrating a spe c ts of ma nag ing te c hnology c om me rc ialization is the lac k of

ob jective and tangible ind ica tors of prog ress. The ultima te goa l, the c rea tion of viab le and

grow ing businesses, is ofte n yea rs awa y. How c an a p rojec t or an investo r know w ith any level of

c erta inty that it is on t he right p a th, espec ially in the e arlier pha ses? The a nswe r is

straightforward resource acquisition. The b est ev idenc e o f prog ress is the acquisition o f the

resources required to transition to the next phase of commercialization.


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From a validation p erspec tive, how eve r, not all resources are c rea ted eq ual. All othe r things

be ing e qua l, the highest form o f validat ion m ee ts three c riteria : new, sma rt and me aningful. For

validation purposes:

New me ans tha t the resource provider has not previously invested in this projec t a ndma kes an indep end ent evaluation of the p roject.

Sma rt me ans that the resource provider is experienc ed in the industry and c apa ble o fbringing other necessary capabilities to the project if necessary.

Meaningful me ans the investme nt is signific ant whe n mea sured relative to the resourcep roviders tota l assets or co nsidered in context of the resource p roviders core strategy.

Fa ilure to sa tisfy eac h of these c riteria doe s not ne cessarily unde rmine the va lida tion or ind ica te

tha t p rog ress ha s not oc curred . For exam ple, existing investors ofte n invest a sec ond or third

time, espec ially in the cases of interna l co rpo rate de velopme nt or venture capitalists. Rat her,

the lac k of third party investme nt and validat ion should raise the question in the m ind of the

projec t cha mp ion: Why do po tential investors judge this c onc ep t to lac k viab ility?

Measurement

Me asureme nt is c ritic a l to d ete rmining p rog ress and ensuring the effic ient use o f resourc es. The

frame wo rk for identifying app rop riate me trics and then me asuring p rog ress aga inst those me trics

is d isc ussed in de ta il in the sec tion titled C om me rc ializa tion Proc ess Roa dma p. The selec tion

and use o f the right me tric s provides for effect ive imp lem enta tion of stra teg y and useful

feed ba c k to ma ke resource a lloc ation d ec isions that m aximize the va lue of subseq uent

investments. The w rong me tric s inhib it prog ress and result in non-prod uc tive investment .

SUCCESSDRIVERS

The literature co ntains a num be r of recurring them es reg a rding fa c tors that ap pe ar to b e

c orrelated with succ ess. While none of these a re d ete rminative a nd ma ny are d iffic ult to verify

until afte r a p rojec t has suc c eede d o r failed , they are nevertheless wo rthy of me ntion and

c onsideration. These suc c ess d rivers include the fo llow ing: the c om me rc ial conc ep t; the

infusion o f new, sma rt and me aningful mone y; the existenc e o f a c ham p ion; the existenc e a nd

nature of the organiza tion a nd c ulture; the p resenc e o f a ne two rk of resources; and effec tive

communication.


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The Comm ercial Conce pt

The imp ortanc e of de veloping a nd refining a c omp elling c omm erc ial conc ep t is a c omm on

them e in ac ade mic resea rc h and is funda me ntal in business p rac tice. The com me rc ial co ncep t

identifies and desc ribes an outc om e tha t c an g ene rate sa les and profit that m ee ts the

expec tations of the tea m a nd the investors. The c omm ercial co nce pt m ay start as a tec hno-

market insight and e volve into a business c ase and then into a com prehensive business p lan. It

is ba sed on the c ollec tion of informa tion a nd a pp lied judg ment o f the projec t tea m a nd its

supporters.

A c omm erc ial c onc ep t p rovides the foc us for tec hnology d evelopm ent, business deve lop ment

and resource a lloc at ion d ec isions throug hout the c om me rc ia lization p roc ess. One of the

prima ry ob jectives within ea c h pha se is the g ene rat ion o f the informa tion/ proof required to

refine the b usiness conc ep t. Unfortuna tely, participants w ill find it diffic ult to know with certa inty

whe ther their c om me rc ial co ncep t is c om pe lling. The o nly true te st is whe ther resource

providers ac tually ma ke an investme nt.

New, Sma rt and Mea ningful Money

As noted, practitioners and researchers generally agree that financial resources in the form of

new , sma rt and me aningful money a re a n essential comp onent of co mm ercialization succ ess.

Champion

The lite ra ture almost unanimously rec og nizes the role of the champion in com me rc ializing

tec hnolog y. Cham pions rec og nize the po tential of a co mm erc ial opp ortunity, ad op t the

projec t as their ow n, be c om e a n ad voc ate and provide the d irec tion a nd lead ership ne ce ssary

to o bta in req uired resources. Projec ts that have c ham p ions a re m ore likely to mo ve through the

c om me rc ializat ion p roc ess suc c essfully than a re tho se tha t d o no t ha ve c ham p ions.

Organization and Culture

The o rga nizationa l struc ture a nd the c ulture of the o rga nizat ion c an ha ve a huge effec t on the

succ ess of a com me rc ialization p rojec t. Organizat ions and the ir c ulture p rovide a ma jor part of

the co ntext in whic h a c omm ercialization projec t op erates. Alignm ent betw een the need s of

the c omm ercialization projec t and the need s of the p arent orga nization c an b e a ma jor


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dete rminant o f suc c ess8. Lou Gerstner, former c ha irperson o f IBM, empha sized the imp ortanc e

of c ulture in crea ting the c ond itions for suc c ess with this quote:

Culture is not p art of the gam e. It is the g am e. Most of the really imp ortant rules a ren t

written do wn a nywhere. Culture is wha t p eop le d o w ithout be ing told.

Networks of Resources

Comm ercializa tion is ra rely ac com p lished without the ac tive and freq uent pa rticipa tion of othe r

players who p rovide informa tion, resources and ac c ess to e verything from tec hnic al c ap ability

to c ustom ers. Both fo rma l and informal netw orks and ge og raphic c lusters of p artic ipant s are

d rivers of suc c ess for co mm erc ializa tion p rojec ts. These ne tworks p rovide c ritic a l input on

tec hnology, pe op le, financ ing, produc t ma rkets, va lue c ha ins and c om pe titive strate gies9.

Without a relatively large numb er of pote ntial resource p rovide rs and a m ec hanism to ac c ess

those resource p roviders, the o dds of suc cess d iminish d rama tica lly.

Communication

Comm unica tion refers to the system s of informa tion excha nge . Comm unic ation include s the

c onc ep t o f informa tion sharing, b ut m ore spec ific ally ad d resses the fac ilita tion of sharing,

including, but no t limited to the translation of w ords and c onc ep ts ac ross tec hnica l and business

bo unda ries, the a bility and willingne ss to ha ve c ritica l and cand id dialog ue a bo ut issues, and a

c ulture tha t supp orts and enc ourag es de ba te.

Comm unica tion as a suc cess driver is ap p lic ab le w ithin the project tea m (in the form of internal

c om munic ation) and be twee n the p roject tea m a nd the networks that supp ort it (external

c om munica tion). In orde r to have effec tive resource a lloca tion planning and prioritization,

ma nag ers must enc ourage interac tion am ong functiona l spe c ialists, particularly be twe en

ma rketing and tec hnology. These e fforts allow func tional spe c ialists to lea rn from one ano thers

unique pe rspe ctives and forge a vivid, c omm only held ima ge of the tec hnolog y ap plied to

8 The resea rch on the importanc e of o rganizations and their cultures on succ ess of innovative p rojects are based large ly on ca se studies and

interviews. Karen Zien a nd Sheldon Buc kler have resea rched highly innovative c omp anies and identified seven shared principles (Zien 1997).

Although a ll the co mp anies share these principles, they ea ch ha ve a unique a nd c ontext driven implementa tion of the shared p rinciples. Zien

conc ludes, Crafting a culture o f innovation is a story of c onnections betwe en one person a nd other employees; betwe en em ployees and

external partners; between employees and the organizations purpose.

9 There is a trem end ous amount of resea rch on the role of n etwo rks and clusters as drivers of tec hnology c om merc ialization including Porter (1998)

who ha s pub lished widely on the role of regional industry clusters and Payta s et a l (2003) who h ave rece ntly com pleted a study for the Eco nomic

Develop ment A dm inistration that em pha sizes the impo rtance of regiona l industry clusters in building tec hnolog y-based ec onom ies.


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mee t potential ma rket need s10. The ma jor imp lic ation for technology c om me rc ializa tion is tha t

the numb er and qua lity of c om munic ation c hannels c an direc tly influenc e the proba bility of

suc cess.

10 Four rec ent studies summ arized b y Bond (2003) supp ort the impo rtance of the interac tion betw een m arketing and tec hnology. This interaction

improves the output of the innovation process, speeds the improvement of brand quality and allows a firm to respond more quickly to environmental

changes.


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THECOMMERCIALIZATION PROCESSROADMAP

This sec tion d esc ribes the c om me rc ializa tion p roc ess tha t serves as the found ation o f the

analytic al frame wo rk in the ne xt sec tion. The sec tion sta rts with an ove rview of the tec hnolog y

c omm ercialization roa dm ap and c ontains a de sc ription of the c onc ep ts of p hases and

transitions, as we ll as a system of m ea surem ent . The sec tion then includ es a deta iled desc ription

of those a c tivities typica lly assoc iated with tec hnology co mm ercialization w ithin ea ch pha se.

The p hase d esc riptions address va lue c rea tion, resource p roviders, proof g ene ra tion, transition

ma nag em ent a nd m etric s to m ea sure p rog ress.

THETECHNOLOGY COMMERCIALIZATION ROADMAPResea rc hers and prac titione rs have prop osed and use a va riety of tec hnology

c om me rc ializat ion mo de ls. Ma ny of these mo de ls foc us on a d isc rete c om po nent of the

c om me rc ializat ion p roc ess suc h as tec hnolog y deve lopm ent, prod uc t developme nt, lic ensing

or venture c rea tion. Less spec ialized mod els span the e ntire p roc ess from basic resea rc h and

idea ge neration to m arket e ntry and business growth. Fortunately, desp ite the rap id

proliferation of new mod els and related no me nc lature, we found considerab le consistenc y,

pa rticularly with reg a rd to the p hases of tec hnology c om me rc ia lizat ion.

We de veloped the follow ing road ma p, the Tec hnolog y Com mercialization Roa dm ap , from our

extensive resea rc h into the literature on tec hnology com me rc ializat ion proc esses and be st

prac tices. We ad op ted c ertain terminolog y, c onc ep ts and grap hics from the w ork of Vijay Jolly

in his 1997 boo k Comm erc ializing New Tec hnologies: Ge tting from Mind to M arket. The Jolly

mo de l add resses the entire c ontinuum of tec hnology comm ercializat ion from p re-co mm ercial

ac tivities throug h p rod uc t introd uc tion a nd improvem ent. The Jolly mo de l emp hasizes the role

and impo rtanc e of transitions (Jolly refers to them as bridg es). We aug me nted Jollys mod el w ith

the thinking and resea rc h of lea ding a c ad em ic s and p rac titioners, and we referenc e these

ac ade mics and prac titione rs throug hout this rep ort.

The following grap hic illustrates our cha rac teriza tion of the Tec hno logy Co mme rc ializa tion

Roa dma p in its simp lest fo rm.


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The Roa dma p c ont a ins five phases. Eac h phase overlap s w ith the p rior and subseq uent p hases.

The pha ses are Ima gining, Inc ubating, Demonstrating, Ma rket Entry and Growth & Susta inab ility.

The overlapp ing a rea s of the c irc les g raphica lly rep resent the four critica l transitions betw ee n

phases. The c onc ep ts of p hases and transitions provide a conve nient w ay to seg me nt the

p roc ess into sets of a c tivities with c om mo n go a ls. The p roc ess a lso inc ludes a m ea surem ent

frame wo rk for identifying a nd app lying a system o f metric s. The m ea surem ent system is not

visible in the graphic. We will d isc uss ea c h pha se, transition a nd the rela ted mea sureme nt

system in detail later in this section.

The Conc ep ts of Phases and Transitions

The process orga nizes comme rc ializa tion a c tivities into p hases and transitions. The p rima ry

ob jec tive of the ac tivities within a pa rticular pha se is proof spe c ifica lly, the p rod uc tion of

informa tion tha t p rovides proof ac c ep tab le by a resourc e p rovider to de termine whe ther to

invest time, money o r other resources in the c om me rc ializa tion effort. The typ e of p roo f varies

based on the p hase of d evelop me nt, the industry, the na ture of the p rojec t and the resource

provider. Proo f is alwa ys ta ilored to the needs and wa nts of the ta rge ted resource providers.

A transition, the mo vem ent o f a p rojec t from one pha se to the next, has two c om ponents the

event itself and the a c tivities that culminate d in the event. The event o cc urs whe n resource

p rovide rs provide the investme nt nec essa ry to pe rform the ac tivities de fined by t he ne xt p hase

of the c om me rc ializat ion p roc ess. The a c tivities are p art of an ong oing p roc ess to leverag e


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proof to attrac t req uired resourc es. Transition ac tivities beg in during the p roo f gene ra tion

proc ess. The e xac t p oint in time (ea rly or late in the p hase) is de pe nde nt on nua nces of the

industry, p rojec t and resource p roviders.

Transition a c tivities a re most ana log ous to t rad itiona l sa les ac tivities and p rocesses. In sa les,

c om pa nies leve rag e the c harac teristics, functions and fea tures of their produc ts or servic es to

c onvince a p otential buyer (resource provider) to ma ke a p urchase. In transition ac tivities,

pa rticipa nts leverage proof of tec hnolog ic al c ap ab ility, ma rket po tential a nd related

informat ion to c onvince a resource provider to ma ke an investme nt (purcha se) in the form of

time, mo ney o r other req uired resources. To a c c om plish a n effec tive transition, pa rticipa nts

must c learly unde rstand the ta rge ted resource providers, and mo re imp ortantly, the p roo f they

req uire a s a c ond ition to investment . Suc cessful c om me rc ializa tion is about suc c essful

transitions. As w ith sa les, a la rger ma rket mea sured in terms of the number of po ten tial

c ustome rs (resource p roviders) drama tica lly imp rove s the od ds of suc c ess. Afte r all, in most sa les

situat ions, only a sma ll pe rc enta ge of potential custom ers c hoo se to buy. In c ontext of the

prospe c t of investing in a tec hnology c om me rc ializa tion op po rtunity, po tential resource

providers do no t ha ve to sea rch for rea sons to hold on t o t heir wa llets.

A Mea surement Frame work

Me tric s p lay two ve ry imp ortant roles. First, they help define the d esired out c om e of the

pa rticular p rojec t or prog ram. Sec ond , they provide a me c hanism for ac counta bility. Rat her

than spe c ific me tric s (which a re unique to individua l projec ts), we prop ose the a pp lic at ion of a

me asurem ent frame wo rk to d eve lop p rojec t-spe c ific m etric s for short-term a nd long-term

projec t pe rforma nce evaluation.

The frame wo rk consists of t hree ca teg ories of m etrics Level A, Level B, and Level C.

Leve l A Metric sa re d irec t evide nce o f projec t suc cess de mo nstrate d by a t ransition (resource

ac quisitions). For the mo st pa rt, Level A Metricsare ob jec tively de terminable a nd e asy to

me asure. One o f the ma jor p itfalls in dete rmining Leve l A Metric sis looking to o fa r into the future

of the overall c omme rc ia lization p roc ess be yond the b ound s of the c urrent p hase a nd the

next transition.

Co nsider me asureme nts for a Wright Center of Innova tion. Wright Centers a re collab orat ive

R&D entities that combine research organizations (universities or research institutes) with


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c orporations foc used on a spe c ific ap p lic at ion a rea suc h as fuel ce lls or reg ene rat ive m ed icine.

The p urpose o f a Wright Ce nter is to d evelop a te c hnology so tha t a com me rc ial entity will

inco rpo rate the tec hnolog y into a produc t or proc ess and introd uce it to the ma rketplac e. An

examp le of Leve l A Metric sfor a Wright Center is:

Level A Metric

Self-susta ining levels of revenue from licenses and from resea rc h fund ed by pub licand p rivate sources

Develop ment of tec hnolog ies with com mercial potential that imp ac t Ohio a smea sured by:

A lic ense o r sa le o f tec hnology or A private e quity investme nt to co mm ercialize the tec hnology

Level B Metric sare tang ible evidenc e tha t the p roject is on the p ath to ac hieving Level A

Metrics. Level B Metric sare the m ost challeng ing to identify. As with Leve l A Metric s, Level B

Metricsa lso mea sure an investment b y po tential resource p roviders. Ra ther tha n the investment

tha t trigge rs the transition (the Level A Me tric), the Level B Metricsme asure the leve l of inte rest of

potent ial resource providers. A projec t shou ld sa tisfy Level B Me tric sonly with evide nce that a

potent ial resource p rovider is seriously considering an investment . The m ost ob vious ev idence o f

a Level B Metricwo uld be a te rm sheet w hic h de ta ils the terms of a prop osed investme nt and

c om mits the resource provider to a de fined set o f diligenc e a c tivities within a spe c ified pe riod .

As a rule, investo rs only issue term shee ts a fter cond uc ting substa ntial d iligenc e. Of c ourse,potent ial investo rs c an d em onstrate serious interest p rior to the issua nc e o f a term shee t. For a

corporate resource provider, serious interest might take the form of ongoing meetings with senior

business de velopme nt execut ives or ongo ing meetings with ma nage me nt or ope rat ing

pe rsonne l who ow n the P&L tha t would b e a ffec ted by the investme nt. A serious c om mitment

to d ilige nce w ould a lso rep resent a Level B Metric. Unfortuna tely, how eve r, these softe r

me asures of c om mitment p rovide the p rojec t tea m w ith a pow erful op portunity for self-de lusion.

Go od me etings , even w ith senior exec utives or investors, are freq uently not evidenc e of

interest or com mitment. Further, de c id ing w hethe r a m eet ing is a go od me eting is extrem ely

subjec tive, espec ially in c onte xt o f the unb rid led enthusiasm and op timism of m ost p rojec t

prop onents/ c ham pions. As a result and whe neve r po ssib le, Level B Metric sshould b e tied to

tang ible a nd unamb iguous evide nce of interest a nd increasing co mm itment.


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An exam ple of Level A and Level B Me tric sfor a Wright Ce nter is:

Level A Metric Level B Metric

Self-susta ining leve ls of revenue fromlic enses and from resea rc h funde d bypub lic and private sourc es

Develop ment of tec hnolog ies withc omm ercial potential that imp ac t Ohioas me asured by: A license o r sale o f tec hnology A p riva te e quity investme nt to

c om mercialize the tec hnolog y

Resea rch funding from c om me rc ialsources in the form o f c ollab orationsas well as contrac t resea rch.

Sc ientific resea rc h fund ing fromfederal, state and private sources

Leve l C Metric smea sure the results and key ac tivities of the short-term op erat ions of the p rojec t .

The suc c essful performa nc e o f these a c tivities is imp ortan t to the suc c ess of the

c om me rc ializat ion initiative, but it d oes not inde pe nde ntly provide va lidat ion o f progress

towa rds the goa l of transition o r com me rc ial suc cess. Examp les of ac tivities to b e me asured

with Leve l C Met ricsinclude hiring qua lified pe rsonne l, filing pa tent ap plica tions, prepa ring

business plans and cond uc ting c ertain types of expe rime nts. The a c hieveme nt o f in-phase

pa rtnering relationship , the rec eipt o f ad ditional cap ital to fund in-phase a c tivities or the

ac hieveme nt of certain financ ial milestones c ould qua lify as Leve l C Metric s. In the ca se of

pa tent filings or expe rime nts, filing the pate nt or co nduc ting the experime nt wo uld be

c onsidered a c tivities to b e mea sured by Leve l C Me tric s. Depend ing upo n the circ umstanc es,

how ever, the g ranting of the p ate nt or the results of the e xpe riment c ould b e c onside red Level B

Metricsif, for examp le, a po tential resource provider ma de the p ate nt g rant or the results of the

expe riment a c ond ition to investme nt. Leve l C Me tric ssimp ly mea sure whe ther the p rojec t

team is performing the types of activities typically associated achieving the results measured

with Level B or Level A m et ric s.

An exam ple of Level A, Level Band Leve l C Met ricsfor a Wright Ce nter is:

Leve l A Metric Leve l B Metric Leve l C Metric

Self-susta ining lev els of revenue fromlicenses and from research funded bypub lic and private sources

Developme nt of tec hnologies withco mmercial potential that impa ct O hio a smea sured by:

A license or sale o f tec hnolog y A p riva te eq uity investme nt to

c omm ercialize the tec hnology

Resea rch fundingfrom co mmercialsources in the form o fcollabo rations as we llas contrac t resea rc h.

Sc ientific resea rchfunding from federal,state and privatesou rce s.

Inventionrepo rts, pat entapplicationsand pa tentswithcommerciallyvaluableclaims.


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In the follow ing sec tions, we d esc ribe ea c h pha se a nd t ransition a nd inc lude examp le metric s.

IMAGINING THECOMMERCIAL OPPORTUNITY

Phase Desc ription -- Imagining

The Imagining Phasebeg ins when a technological ca pa bility and a market need bec ome

c onnec ted . This phase, and the entire c om me rc ializa tion p rocess, sta rts when sc ientific

knowled ge o r tec hnica l c ap ab ility is linked in som e way to a job to b e d one (Christensen,

2003) tha t rep resents a m arket need 11. The linkage c an sta rt as nothing m ore than the be lief

that a spe c ific tec hnology c an b e a pp lied to solve a spe c ific problem12 or that a spec ific

ma rket would va lue a solution tha t wa s be tter, c hea per, ea sier to use, or more c onvenient.

Bec ause of the high d eg ree o f tec hnic a l and m arket unc ertainty, this pha se is c harac terized by

iterat ion. False sta rts and dea d -ends are co mm on. Given the difficulty of ma tc hing tec hnic al

11 Most research and business practices support the idea that commercialization does not begin until the establishment of a connection between a

tec hnology a nd a m arket need . An alternative view is articulated by resea rchers at Sand ia National Lab s (Myers 2002), who ha ve c harac terized a

three-stage technology d evelopment mode l based on their experience in developing a nd c omme rcializing new tec hnologies that have the

potential to change markets. During the first stage, they develop a technica l proof of co ncep t independent of c omme rcial ap plica tion. During

the sec ond stage , they attemp t to estab lish the viability of the techn ology for at least one p otential co mme rcial app lica tion. This sec ond stage is

analogous to Imagining Phasein our proce ss. During the third stage , they c ross the c hasm a nd e stab lish the innova tion as the solution of c hoice

for the ma jority of b uyers.

12 A technology in search of a m arket need is not included in the definition of imag ining a s the co nnection betw een the technology a nd the need

has not been m ad e. For example, a tec hnology that ma kes a specific material more durable is not a co mmercial opp ortunity until the tec hnology

ca n be ap plied to a market opp ortunity where increased durability of that material is needed and sufficiently valued in the ma rketplac e.


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c ap ab ilities to anticipa ted or proposed pe rformanc e spe c ifica tions (developed on the basis of

loosely defined m arket nee ds), iteration is unavo idable. The g oa l is to p rod uc e tec hnic al and

business c onc ep t proof d eeme d suffic ient b y Incubating Phaseresource providers. Not

surprisingly, the in-pha se sea rch fo r ad eq ua te resources is a lso a significant c ha lleng e, espec ially

du ring the Imagining Phase.

Sony is we ll known for its ab ility to innova te. In a spee c h in 1988, Kozo Ohsone d esc ribed the

imag ining p roc ess as app lied a t Sony13:

We a lwa ys have a n ima ge o f how an idea l produc t would look and pe rform in our

minds. This is not d rea ming o n our part, but a conc rete p lan fo r which exac t prod uc t

spec ific a tions have b ee n drawn up . Unfortuna tely, it is usua lly imp ossible for us to b eg in

p rod uc ing this idea version of our produc t immed ia tely. Instea d, a step -by-step plan

must be formulate d to g uide us in rea ching our go al. There are a numb er of fac tors

which d etermine how quickly this c an be ac c omp lished, b ut the three most impo rtant

one s have alwa ys be en size, weight a nd p erforma nce. In order to red uc e the size a nd

we ight of our Walkma n without sac rific ing qua lity, we ha d to d eve lop new integ ra ted

c irc uits, ba tte ries, motors, rec ording hea ds and transport system s, and to fit everything

into a case the size o f a c assette tape .

How Value Is Crea ted in the Imagining Phase

Com bining a tec hnolog ica l ca pa bility and a ma rket need in such a wa y that it results in the

identific at ion of a c om me rc ial op po rtunity is the first step in value c rea tion. Value ac cumulates

ove r time a s the p rojec t suc c essfully ad d resses the tec hnica l and market issues assoc iate d w ith

the op portunity. Value be c om es tangible whe n the resource p rovide r for the next phase

c om mits to p rovide resources, the mo st reliable evidenc e o f the c om me rc ial value a rising from

the c onnec tion b etwe en tec hnolog y and need . Prior to that reco gnition, the p erceived value is

not ta ngible a nd ha s no verifiab le e c onom ic worth.

Estimating the upside p otential of an o ppo rtunity during the Imagining Phaseca n be very

d iffic ult, pa rticularly whe n the op po rtunity involves a new tec hnolog y that offers c urrently

unava ilab le c ap ab ilities or when the a pp roa c h to the m arket (strate gy) rep resents a d ep a rture

13 This qu ote wa s ta ken from Jo lly 1997 as referenc ed in Sony , The C ase of the Walkma n (Tokyo : Sony s Innova tion Ma na ge me nt Series 1, June 1998)

p. 7.


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from the w ay c ustom ers are c urrently served. Co llec tively, the unc ertainty of the tec hnology,

pe op le, and ma rket req uires the resource providers to m ake ma ny assump tions in order to p lac e

a va lue on the innova tion. The va lue at this sta ge is highly spec ulative. One resea rche r

estima tes tha t it takes 3000 raw idea s (tec hno -market insights) to p rod uc e o ne suc c essful

business14. It is therefo re no surprise tha t va lida tion and resources a re ha rd to c om e b y during

the Imagining Phase.

Ac tivities in the Imagining Phase

To a ttrac t the resources nec essa ry to fund the p roo f req uirem ents of the next phase

(Incub ating), the p roject te am must d evelop a business c onc ep t a nd de mo nstrate proof of

principle.

Proof of Principle15

In ge neral, a proof o f princ iple is the d em onstrat ion in a lab oratory setting o f critica l com po nents

of the tec hnolog y that ena ble the c ore functionality of the c omm ercial ap plic ation. During this

phase, the tec hnic al proof do es not g ene rally inc lude ma nufac turab ility, prod uc tion co sts or

reliab ility. The p roo f involves the suc c essful app lica tion of ba sic sc ientific a nd eng ineering

princ ip les to the solution o f ba sic c om po nents of a spe c ific p rob lem.

Proo f of p rincip le va ries signific antly dep end ing up on the business sec to r as show n in these

examples:

In the life sc ienc es, the term p roof o f principle is ac hieved when a co mp oundhas shown the desired activity in vitrothat supp orts a hypo thesis or conc ep t for use o f

c om pound s (Bransc om b 2000).

In softwa re d evelopm ent, the term proof of p rinciple has be en d esc ribe d as tea ms work simultaneo usly on a ll pha ses of the p rob lem. The a na lysis tea m

ge nerates req uirem ents. The d esign team d iscusses req uirem ents and feeds bac k

c om plexity issues to the req uirem ent te am and feed s c ritica l imp lementa tion ta sks to

the imp lementa tion team . The testing tea m p rep ares and de velops the testing

environm ent ba sed on the req uirem ents One of the go als of this stage is for the

14 Stevens (1997) estima tes that 3000 raw idea s translate into 300 Ide as Subm itted , 125 Sma ll Projects, 9 Early Stag e De velopm ents, 4 Ma jor

Develop ments, 1.7 Launche s a nd 1 Succe ss.

15 An in-dep th d iscussion of te ch nical risk reduc tion, including p roof of principle, is provide d in Bransco mb 2003.


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tea ms to c onvince the mselves that a solution c an b e ac c om plished (Bransc om b

2000).

Business Ca se

The d eve lopme nt of a business case d uring the Imagining Phaseis a lso c ritic a lly imp ortant to

mo ving the p rojec t forwa rd . In the Imagining Phase, the business case is the first c om pelling

a rticulation of the c omme rc ial c onc ep t. The b usiness c ase p rovide s the d esc ription of the

ma rket nee d (the job to b e d one ) in suffic ient d eta il to c onvince Incubating Phaseresource

p roviders to fund the p rojec t. The b usiness case a lso p rovides a g uide fo r subseq uent

tec hnology and prod uc t deve lopm ent. The com po nents of a business c ase are dete rmined in

part by the nature of the op portunity, the sec tor involved a nd the te c hnology. In general, a

business case would include the following:

A de sc ription of the ma rket need o r job to b e d one A de finition of the target ma rket seg me nts An artic ulat io

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