Technology TransferTechnology Transfer
Prof. Crawford
EN 90
What is Technology Transfer?What is Technology Transfer?
The technology transfer process helps a manufacturing company more effectively use its human, physical, and capital resources by providing knowledge, information, or assistance, which leads to improvements in its facility, equipment, manufacturing methods, management methods, or marketing methods.
Technology TransferTechnology Transfer
Technology Transfer
Marketing(Diffusion)
Innovation
Design
Invention
Simple ExampleSimple Example
• Incredible that people a million years ago invented the wheel that would be useful for so long. They saw the need for such a device that would make certain tasks easier – invention.
• Someone needed to device a way to utilize the wheel – innovation
• Turn idea into reality and implement other ideas to use the wheel – design
• Further developments need promotion and device/idea needs to be disseminated - diffusion
InventionsInventions
Some are nothing more than scientific curiosity for years before being transformed into a working device, prototype, or product
Aluminum (H. Saite-Claire Deville, 1854)
Total Internal Reflection(William Wheeler, 1881)
Theory of Lasing(A. Einstein, 1917)
Utensils, mast for sailboats window frames – late 1950’s
Fiber Optics1971
First I Prototype Gas discharge laser 1950
100 Years
90 Years
43 Years
InventionsInventionsSome inventions have immediate appeal
X-Rays(1895 – William Rontgen)
Few Years 1900’sUsed in Medical Profession
InventionsInventionsSome Inventions are forced
The ‘need’ preceded the product
Nothing happened
35 years
1940’ssuccessful need
WWII
Radar(Patent, 1914)
unworkable
InventionsInventionsThe need proceeded the product – another example
The vacuum tube was bulky, fragile, power hungry, and had lifetime issues – it was inherently unreliable
The need for a transistor existed long before its invention
Bell laboratories poured money into it resulting in the first patent of the resistor (1940)
In 1951, the first point – contact transistor was manufactured
The complicated path of InventionThe complicated path of Invention
Total internal reflection, W. Wheeler, 1981
Long uniform quartz fibers; Boys, 1887
Bundles of glass Fibers;Baird, 1927
Cladding on fibersVan Hell, 1952Guiding output of
cathode discharge lamps; Reeves, 1950
Laser, 1960’s Theory of attenuation resulting from impurities, Kao and Hockman 1960
Minimum attenuation losses achieved Maurer, 1970
TODAY – Telecommunications, Medicine, dentistry, displays
A Fundamental Question of A Fundamental Question of Technology TransferTechnology Transfer
• Why do inventions, in some cases, take so long to reach the market place?
• What factors govern the time lag between invention and application?
In today’s marketplace, speed to market dictates success or failure
InnovationInnovation
This period of development is characterized by INNOVATION!
Invention Product
Innovation vs. InventionInnovation vs. Invention
• Invention = Original Concept• Innovation = the development, refinement,
and change of an existing idea / product
• E.g. easier to manufacture, Cheaper to Fabricate, Better Performance, More reliable
Then and NowThen and Now
• The wheel has been improved over thousands of years – improvements evolved slowly
• Consumer Electronics Industry, time to market: 1980 = 1.5 years
1990 < 1 year• Today, there is a lot more effort on conscious
design and modeling
DesignDesign
• Design is part of the innovation process, sophisticated modeling and software shaves years off the development process
• Many issues can be identified during the modeling stage, before prototyping – saves time and money
DiffusionDiffusion
• Sometimes referred to as marketing, – everything that is involved in the promotion and
sale of the product
• Also important is promotion by use of publication
• Users and customers have important input on how to improve or refine the product
• Can conflict with IP
Relationship – Invention, Relationship – Invention, Innovation, Design, and DiffusionInnovation, Design, and Diffusion
Naïve Model - Linear
InventionInnovation
Design
Diffusion
What’s Wrong with this Model?
• Feedback from each stage
• No real beginning and end, invention is often continuous
Realistic ModelRealistic Model
Innovation – Embrace the entire Process
Technology Transfer – Means to achieve innovation
InventionTechnology transfer
Design Diffusion
Innovation
Embraces the entire process
Some Working DefinitionsSome Working Definitions
• Technology TransferTechnology Transfer The transactions between changing technology and invention, innovation, production, and diffusion
• InnovationInnovation – The exploitation of new ideas
Reasons to InnovateReasons to Innovate• Competition – Keep ahead of Competitors• Science & Technology – Technological change can
be the result of science push and changes in the science and technology base lead to product innovation
• Market – Customer feedback influences innovation leading to product improvements
• Legislation – Government can force innovation (e.g. safety, environment, economic Policy)
• Human Nature – Curiosity “what happens if I do this…?”; Laziness “There must be an easier way to do this”
Innovation as a PolicyInnovation as a Policy
• Innovation does not guarantee success, but a lack of it will ultimately lead to failure
• Innovation and invention are integral and key to many companies (e.g., Philips, 3M)
• Each year Nissan holds a competition for its employees to come up with a novel form of transport
• Innovation is policy, change is inevitable and in part is driven from within the company. The company is not simply waiting to respond to one another of the external proximal cases, but is itself a vehicle for change.
Benefits to InnovationBenefits to Innovation
Apart from innovate to survive;
• Competitive Advantage• Increased Market Share• Higher Growth Rates
1 RCA Hughes TI TI TI Motorola
2 Sylvania Transitron Fairchild Fairchild Motorola TI
3 GE Philco Motorola National National NEC
4 Ratheon Sylvania GI Intel Intel Hitachi
5 Westinghouse TI GE Motorola NEC National
6 Amperex GE RCA Rockwell Fairchild Toshiba
7 Nat Video RCA Sprague GI Hitachi Intel
8 Rawland Westinghouse Philco/Ford RCA Signetics Philips
9 Eimac Motorola Transitron Philips Mostek Fujitsu
10 Lansdale Clevite Raytheon Amer’Micro Toshiba Fairchild
Manufacturing Companies 1945 - 1982 1965
1950 1955 (Semi- 1975 1980 1982Rank (Vacuum Tube) (Transistor) conductor)
InformationInformation
• Inventors and Innovators need information available to them
• Knowledge – Base information – often academic and abstract, contained in journals, scientific magazine, patents, and at conferences.– Ex. Transmission of light through a glass fiber is
limited by impurities in the glass rather than inherent properties of glass. This was published in an archival journal, but did lead glass manufacturers to improve the quality of glass by reducing impurities – this paved the way for fiber optics
InformationInformation
Skills based information – information acquired by doing something. It’s hands-on experience. Skills learned by training and participation. Go to another institution where the skills are practiced, or skilled personnel can be brought in.
InformationInformation
Equipment based knowledge – Knowledge conveyed via products/devices. Knowing what machine tools are available and what they do, what merchandise is available in the marketplace and what features it has.
Also conveyed in trade journals, magazines, and conventions.
Another information channel is through sales reps, advertising, other companies, etc.
TechnologyTechnology
• Technology is key to economic growth and international competition
• Research must be exploited to produce new products / devices
• Technology transfer becomes vital, especially today when time-to-market is key to success
• Scientific push is usually not an engine for technology transfer
• Science often predates its application by decades• Without scientific curiosity, there would be no
technology transfer• With continual invention and innovation, technology will
become outdated
Technology Transfer ProcessTechnology Transfer Process
IBM grants a license to the government of Taiwan – the computer corporation undertakes a transfer of knowledge.
French cheese maker passes on recipes to Japanese firms – transfer of knowledge
Brown University organizes a short-course – transfer of educational and technology information
The flow of information and knowledge are various and wide ranging.
Flow of information
Innovation Process ChecklistInnovation Process Checklist
Technology Transfer is a subject of Innovation
Identify TechnologyEvaluate
Technology
SecureTechnology
ProtectTechnology
Prototype
Technology Awareness
TrainingProductSpecific Training
Barriers to InnovationBarriers to Innovation
• Management Attitude: Upper level management does not embrace change easily
• R&D effectiveness: Needs to be continuous, not discretely when a new product is needed
• Short Term Pressures: Companies take a short term perspective by not investing in higher risk, long term payoffs
• Resistance to Change: Same-old, same-old; comfortable with current position
• Poor Information Flow: Need to maximize flow of information around the company… poor information flow hinders technology transfer
• Weak Links: Good idea’s products can be destroyed by poor marketing or not listening to customers
Information CollectionInformation Collection
Where do I get Market Where do I get Market Information?Information?
Customers 89%Business contacts 82%Competitors 82%Suppliers 74%Employees 70%Trade representatives 67%Business affiliates 63% Industry experts 60% Manufacturer’s salesforce 59% Social networks 48%Friends 48%Subcontractors 41%Consultants 33%Family members 30%
Impersonal Sources of InformationImpersonal Sources of Information
Trade magazines 96%Sales brochure 70%Advertising 63%National newspapers 60%General magazines 56%Journals 56%Local newspapers 52% Manufacturer materials 52% Catalogs 51% Annual reports 41%Government publications 22%
Innovation: Value to CompanyInnovation: Value to Company
• Increased Competitive Advantage• Improvement in Quality• Cost Savings• More Flexibility• Better Service to Customers• Reduction in lead timesCompanies with strong investments in innovation tend
to achieve better cash flows and earnings performances
R&D correlates with long term growth
Information CollectionInformation Collection
• Well organized approach for monitoring technological and scientific intelligence
• Good R&D organization to encourage information flow (both internal and external)
• Accurate Knowledge of the company’s own technological position and capabilities (technology reviews and audits)
• Efficiently organized information on markets and competitors
Research and DevelopmentResearch and DevelopmentHitachi Model (Japan)Hitachi Model (Japan)
Independent Research• Basic Research plus elementary
technological research• At advanced research lab, central research
lab, and the nine corporate labs• Funded by head office – long range research
strategy
Hitachi Model (cont.)Hitachi Model (cont.)
Commissioned Research• New Product Development• At Central and Corporate Labs• Sponsored by business unit, factory,
subsidiary companiesProduct Improvement• In the development departments at the
factory• Funded by factory
How much to spend on R&DHow much to spend on R&D
Company % Sales on R&D
Country
Cannon 11% Japan
3M 7% US
Philips 3% Netherlands
The norm of US companies is about 3%
A small company (like yours) needs to define a research policy
Assessing TechnologyAssessing Technology
Assessing future technological innovations is usually done in a technology review or audit
3 Parts
1. What is the competitors Technology (what do they got?)
2. Review companies own Technology (“what do we got?”)
3. Review what state-of-the-art Technology (“what could we have”)
Technology PortfolioTechnology Portfolio
Technology Importance
Business Attractiveness
Low Position
High Importance
A
High Position
High ImportanceB
C
Low Position
Low Importance
D
High Position
Low ImportanceA: Attractive Business, not much competitive position, use R& D Resources to gain competitive advantage
B: Attractive Business, good competitive advantage. Company should sustain funding and resources, be prepared for counter attack
C: Poor Position, company should not use resources here
D: Mixed, not important technology for company, move to cell B or eliminate
Market PotentialMarket Potential
• Identifying Potential Customers• Recording Data• Classifying External Influences• Analyzing Results
This can help dictate R&D resources
BenchmarkingBenchmarkingBenchmarking results help understand the amount of changes required to set strategic targets and guide planning efforts. There are four types of benchmarking.
Internal: Comparison of Internal Operations
Competitive: Competitor-to-Competitor comparisons for products/services of interest
Functional: Comparisons to similar functions – with the same broad industry or to industrial leaders
Generic: Comparisons of business processes on functions that are very similar regardless of industry
Searching for TechnologySearching for Technology
• Very few small to medium size companies will have the necessary expertise or R&D resources and infrastructure to provide new technology.
• Companies that want to develop something must be able to find other organizations that can help them
• Information is key to finding new technologies• Companies must know where they can go to find
information on products, research activities, finance, IP, etc.
• How can a small company leverage off of a university?
Using Higher Education Research and Using Higher Education Research and DevelopmentDevelopment
Universities can often help small and big companies with R&D. The University often offers much cheaper rates than a private research company.
• Access to new technology (A lot of pie in the sky stuff)
• Keep abreast of new developments• Access consultancy skills• Professors are possible technical board members• Develop joint new technology, benefits both.
Linking Organizations to Educational Linking Organizations to Educational EstablishmentsEstablishments
Forming Links1. Graduate Employment – companies hire graduates and create
a natural link back to their alma mater2. Sabbaticals – Companies hire university professors to work
on-site for a year or semester to bolster in-house expertise (pretty cheap)
3. Industry/University Research Units – Organized research units where focused groups at the university partner with companies (e.g. in the US, NSF, MRSEC). Companies gain access to professors, students, and earn results
4. University/Industry Liaison Units – Universities are creating internal organizations that are in charge of protecting and developing valuable new technologies to be transferred to industry. At Brown, the campus based technology transfer unit is BURF, Brown University Research Foundation.
University Industry
University – Industry PartnershipUniversity – Industry Partnership
Product ideas, real world perspective, focused problems, prototyping facilities, market experience
New results, interesting devices, research with seemingly no applications, professors, and students
Information
Paths of Technology TransferPaths of Technology Transfer
GovernmentFunding
Universityresearch Invention
Campus-basedtechnology transfer group
FundingUniversityresearch Invention
Campus-basedtechnology transfer group
option
Option to exclusive right
Company w
Company x
Company z
No exclusive right
Exclusive right to use it
Company x
Exclusive right to use
Company w
Company x
Company z
Company y
no
Company to Company TransferCompany to Company Transfer
• Private companies with R&D facilities ‘produce’ a lot of innovative ideas that they may or may not patent or develop. These ideas may not be in their business plan, not within their core competencies, or returns are too small. These ideas may be suitable for another company.
• A small company company acquired by a big company or selling off its technology to a big company
• Inter-Company transfers. Your idea is now being transferred to products group or manufacturing.
Company to Company TransferCompany to Company Transfer
Company xresearch
Innovationidea
Company SBSmall Business
Company xproducts
group
Innovationidea
Spin-off of Company X
Company Y buys
technology
Company Z buys company SB on
right to invention
Collaborations between Collaborations between CompaniesCompanies
Agreements for organizations to work together
• Alliances
• Networks
• Cooperatives
• Collaboration
These arrangements could be with suppliers, customers, and even competitors
Many times manufacturers form alliances to work together but retain their individual brand names.
Technical PartnershipsTechnical Partnerships
Another form of technology transfer is through technology / engineering collaborations to increase their expertise by sharing knowledge, skill, and personnel.
What is the goal of a technology collaboration?
- To improve the Innovation Process
Why Collaborate?Why Collaborate?
If you are faced with a problem that you cannot solve yourself – technical, financial, or commercial problem:
• To share risks
• To share costs
• To gain technological know how
• To speed up product development
• To develop industry standards
•To gain additional markets
• Reduce time-to-market
Barriers to TransferBarriers to Transfer
What hinders technology transfer and what cause joint projects to fail?
• Lack of awareness – what technologies are available to them • Lack of knowledge – If staff of company is lacking technical
knowledge, it may not be able to capitalize on the technology being offered in the transfer
• Lack of funds – company may not be able to afford the development costs of the technology being transferred
• Lack of common interests – Individuals putting the interests of their own company ahead of the alliance
• Conflict of interest – Even in collaborations on the technical level or strong, it has been found that collaborations between competing companies doesn’t work.
Barriers to Transfer (cont.)Barriers to Transfer (cont.)
• Lack of Trust – If little trust exists between companies, it is doomed to fail
• Poor communications – Fail to keep each abreast on everything relevant to the collaboration, activities, thoughts, processes, goals, direction of venture
• Lack of infrastructure – company may lack equipment and facility in infrastructure to take on the transfer
• Over-committed – The company may be over-committed on current projects and simply lacks the time needed for success.
Barriers – With Regard to Barriers – With Regard to CollaborationCollaboration
• Technical Problems – which are generally overcome, but which add time and money and frustration
• Resource Limitation – Poor budget control• Change in Project’s Structure – Loss of key members
or loss of partner• Organizational Problems – due to a partner losing or
changing interest in the technological side.
Evaluating the TechnologyEvaluating the Technology
Large companies solicit proposal on new and innovative ideas. There will be well defined criteria for the assessment of new proposals
• Is proposal consistent with company strategy• Any synergy with existing efforts on projects• Have the risks, advantages, potential payoffs, and
implications been considered in detail
Proposals may be evaluated by internal or external reviewers
For small companies, startups, they are contained in business plans.
Financing InnovationFinancing Innovation
• Has major influence through innovation process and technology transfer
• Before funding is obtained, costs and benefits need to be thoroughly analyzed
• What is the payback period?
Protecting TechnologyProtecting Technology
IP plays a vital role in technology transfer. Those interested I the technology will want to hear that there is a strong IP position. If others have IP that is close to yours, this may muddy the waters!
• Patents• Trade-Secrets• Trademarks• Copyrights• Confidential InformationThe Importance of IP cannot be over-emphasized
To Prototype or Not To Prototype, To Prototype or Not To Prototype, That is the QuestionThat is the Question
By prototyping you can minimize risk and uncertainty at the expense of cost and time
Identify issues and
potential problems
Expensive andtime consuming
Save money&
Time to market
Could miss design flaw, for
example
Prototype
NoPrototype
Advantages Disadvantages
PrototypingPrototyping
Assists in the following areas• Planning of implementation• Feasibility• Clarification of necessary requirements• Explore Options• Improve product• Improve understanding• Verify Design• Explore maintenance issues
Prototyping RisksPrototyping Risks
• Increased time-to-market (increased development)
• Prototyping too early• Insufficient testing of materials (components)• Lack of knowledge in new technical
environment
Example of Response Time of New Product Example of Response Time of New Product Development of Mechanical TransmissionDevelopment of Mechanical Transmission
Develop design concept 2 3
Complete layout and design 1 3
Design review 1.5 1
Detail design 1 4
Manufacture prototypes 2.5 6
Pilot test and power test 1 2
Field test 4 8
Manufacture first product 4 7
Total Time 17 34
PrototypesPrototypes
A well designed prototype can help you market your idea to potential partners.
Determining the Value of your Determining the Value of your Invention:Invention:
License AgreementLicense Agreement• Value – How much the licensor is entitled to as
compensation from the licensee in exchange for licensing rights
• Compensation (Royalty) – Income for the licensor at the expense of the licensee
• How to arrive at a fair royalty: Many Models• Simple model to calculate impact on royalty rates and
compensation by fixed dollar payments have differing effects on pricing behavior.
(that doesn’t make sense, stacy…)
RoyaltiesRoyalties
• Running Royalty is most popular. The sharing of success, achieved through the distribution of profits – This is considered a good indication:– Profits: A share of 25% of profits
• Profit is not an ideal metric to base royalty payments on because of the different accounting ways that can be represented. – Net Sales: A share of 5% of net sales
Royalty: % of Net SalesRoyalty: % of Net Sales(many models)(many models)
• % may be constant• It might also decline beyond certain base
levels as sales rise (incentive to licensee to promote sales)
• Increase at higher volumes
Royalty Rate PaymentRoyalty Rate Payment
• Often accomplished by up-front payment – License Fee
• A minimum annual royalty payment
Up front money serves a few purposes:• Immediate returns to licensor• Incentive for licensee to bring technology to
market
Lump-sum PaymentLump-sum Payment
Sometimes royalty payments are impractical• A process• The technology is a small part of a
complicated system
Other CompensationOther Compensation
1. Royalty fee for sub-licensees
2. Stocks
3. Equity (works for many small start-ups)
(2) and (3) allow licensor to participate in profits and increased control of business
Ball Park RangesBall Park Ranges
IP RANGE
Patent Licenses
0.2 – 35%
Trade Secrets
0.2 – 15%
Tabulated from biological, chemical, electrical, mechanical
Present Value of RoyaltyPresent Value of RoyaltyR(1+r)R(1+r)-n-n
For the licensor, the investment is in the past
Year Expected Royalty
$1.00 Amount
1 $200,000 .91 $182,000
2 $200,000 .83 $165,000
3 $200,000 .75 $150,000
4 $200,000 .68 $137,000
5 $200,000 .62 $124,000
Total: $ 1 M $758,000
(Present value of royalty payments)
r =10%
Fixed Sum Equivalents of Running Fixed Sum Equivalents of Running RoyaltyRoyalty
• If the market interest rate is 10%, this is the opportunity cost or rate that is forgone if the licensor elects a running royalty
• Lump sum payments can be invested in the market
Simple Model for Negotiating Simple Model for Negotiating RoyaltyRoyalty
• An array of considerations or variables judged to impact the royalty
• Reasonable estimates on dollar valuations of the variables impacting the royalty
• Weights impacting relative worth on the variables impacting royalty
Variable Affecting RoyaltiesVariable Affecting Royalties
• Degree of Exclusivity (exclusive, non-exclusive)
• Anticipated Net Sales• Type of License (Patent or know how)• Term of License• Terms of Licensee (guarantees, immunities,
etc).
Royalty Rate Matrix-Type ArrayRoyalty Rate Matrix-Type Array
Variables affecting royalty
Bi(1) Bj(2) Ci(1) Cj(2)
A1(1) B1(1) B1(2) C1(1) C1(2)
A2(1) B2(1) B2(2) C2(1) C2(2)
A3(1) B3(1) B3(2) C3(1) C3(2)
Total Bi(1) Bj(2) Ci(1)= P
Cj(2)
$ Amt. assigned to variable
New $ Amt. after negotiation
P% beginning royalty
New royalty after negotiation
(2)
(1)j
i
BxP
B(2)
( (1))(1)j
i
Bx i
B
Sample CalculationSample Calculation
Variables affecting royalty
Amt.Proposed
Amt. Negot’d.
Royalty Impact
New Royalty
Net Sales 50,000 60,000 3.55 4.26
Exclusivity 30,000 30,000 2.25 2.25
Immunity from lawsuits
(10,000) (10,000) (.70) (.70)
New Product risk (heavy marketing)
(20,000) (20,000) (1.45) (1.45)
Patent 20,000 20,000 1.45 1.45
Total 70,000 80,000 5.00 5.71
Examine 1Examine 1stst Row Row
A
Variable
Bi(1)
Amt. Requested
Bj(2)
Amt. Negotiated
Ci(1)
Royalty Impact
Cj(2)
New Royalty Impact
Net Sales 50,000 60,000 3.55
Bi(1)/Bi(1) * 5% =
50,000/70000 * 5%
4.26
Bj(2)/Bi(1)*Ci(1) =
60,000/50,000 * 3.55
TOTALS 70,000 80,000 5.0 5.71
Summary – Technology TransferSummary – Technology Transfer
• Innovation and Technology transfer is exciting, but it is a complex process
• Innovation and Technology transfer are a judicious mix of management and science, creativity with technology.
