Technology commercialization strategy for a multidisciplinary R&D institutions such as GRO and CRO under new research and business development (R&BD) paradigm

1. 1
Technology Commercialization Strategy
For R&D Institutions
Prepared by:
Dr. Chulho Park
Vice President
Strategic Business Insights
cpark@sbi-i.com
October 2015

2. 2
Business Models for Technology
Commercialization

3. 3
Classical Role of University TTO
Fundamental
Science
Basic
Research
Applied
Research
Product
Development
Production
University
R&D
Tech
transfer
office
New
companies
and licenses
 Don’t know compelling
market or customer needs
 Lack of interest and resource
for application development
 Mostly individual, small group
or distributed research
 Don’t know/understand state-
of-art emerging technologies
 Technology is not matured
for commercialization yet
 Single IP is not good enough
for business development
Gap
 Standard process
 Administrative
 Little recognition
 Risk averse
Source: SRI International

4. 4
Role of CRO and GRO ─ Value Creation Centers
Must bridge the entire R&D spectrum
 Translation science &
engineering research
 Business opportunity
idea generation
 Technology
maturation fund
 IP management and
bundling
 Start-up acceleration
fund and service
 Business incubation
fund and service
Fundamental
Science
Basic
Research
Applied
Research
Product
Development
Production
University
R&D
Value
creation
center
New
companies
and licenses
CRO,
GRO
R&D
Source: SRI, SBI

5. 5
Key Success Factors for Value Creation Centers
Fundamental
Science
Basic
Research
Applied
Research
Product
Development
Production
University
R&D
Value
creation
center
New
companies
and licenses
Aligning technologies with customer needs through product/service
 Create innovative
culture
 Recruit diversified
talent
 Provide education and
practical training
 Develop innovation
principles & process
 Incentivize start-up
and biz incubation
 Develop mentor
(champion) program
Source: SRI, SBI

6. 6
New Strategic Vision and
Alignment with Corporate Strategy and Businesses
Business Model for Accomplishing the Value Creation
Objectives
R&D Activities and IP
Management
R&D Planning
UnlockingUnlocking Existing
Intellectual Property22
InventingInventing with a
Purpose11
AcquiringAcquiring
External Know-How33
CollaboratingCollaborating with
Outside Partners44
UnlockingUnlocking Existing
Intellectual Property22
InventingInventing with a
Purpose11
AcquiringAcquiring
External Know-How33
CollaboratingCollaborating with
Outside Partners44
Commercialization
Activities
Commercialization
Planning
Royalty
Equity
Revenue
IPs
IP & $
LicensingLicensing Existing
Intellectual Property33
Creating a SpinCreating a Spin--offoff with
a Strategy22
Contract ResearchContract Research
for Commercializationfor Commercialization44
ConsultingConsulting with
Internal Know-How55
Technology/IP TransferTechnology/IP Transfer
to SBU or its R&D11
LicensingLicensing Existing
Intellectual Property33 LicensingLicensing Existing
Intellectual Property33
Creating a SpinCreating a Spin--offoff with
a Strategy22Creating a SpinCreating a Spin--offoff with
a Strategy22
Contract ResearchContract Research
for Commercializationfor Commercialization44 Contract ResearchContract Research
for Commercializationfor Commercialization44
ConsultingConsulting with
Internal Know-How55 ConsultingConsulting with
Internal Know-How55
Technology/IP TransferTechnology/IP Transfer
to SBU or its R&D11Technology/IP TransferTechnology/IP Transfer
to SBU or its R&D11
Revenue

7. 7
Licensing Model
Worth Active
Marketing?
Royalty
Licensing
Opportunity
No
Yes
Marketing
Plan &
Strategy
Passive
Licensing
From Spin-off
Technology
Venture Model
Active
Licensing

8. 8
Spin-off Technology Venture Incubation Model
Creating spin-offs requires strong, small development teams.
Need Internal
Incubation?
Spin-off
Venture
Opportunity
Yes
No Spin-off
New
Company
Internal
Virtual
Spin-off
Exit Strategy?
Sell
Spin-off
Company
Initial
Public
Offering
M&A
Ready to
Spin-off?
Yes
Not Ready
Fail Demolish team and
send staff back to
R&D
Create a New R&D
Lab
Active
Licensing
No
Other Options
Develop Eng. &
Consulting Services

9. 9
 Technology is not matured yet for commercialization
 Need to protect potential new business from IP disputes
─ File patents to protect your right to use for commercialization
─ Find ways to avoid potential patent infringement dispute
 Unclear target market or application/product
 Need to demonstrate commercial feasibility or viability
 Have to provide continuous (on-site) support from its lab such as
materials, equipment, and technical support
 Difficult to find potential investors for a spin-off venture
Needs for Internal Incubation
Maximize value and reduce risk for technology commercialization

10. 10
Quick Check of Readiness for Spin-off Venture
Demand
Technology Competition
Who are the customers?
Why do they buy (needs)?
Market size and growth rate?
How much are they willing to pay?
Will the technology be ready?
Is the technology competitive?
What is the technical risk?
What is the cost?
What are differentiation factors?
What are competitive advantages?
Are they sustainable in long-term?
Commercial
Success
Readiness = RDemand x RTechnology x RCompetition x RStrategic-Fit
Must pass the four tests:
 Will there be markets?
 Can we make it?
 Will we be competitive?
 Does it fit to our strategy?
Strategic Fit
Sustainable
Leadership
Does this fit with our strategy?
Are we capable of executing this?
What is the long-term profitability?

11. 11
Funds Required to Execute Spin-off Strategy
Need Internal
Incubation?
Spin-off
Venture
Opportunity
Yes
No Spin-off
New
Company
Internal
Virtual
Spin-off
Exit Strategy?
Sell
Spin-off
Company
Initial
Public
Offering
M&A
Ready to
Spin-off?
Yes
Not Ready
Fail Demolish team and
send staff back to
R&D
Create a New
R&D Lab
Active
Licensing
No
Other Options
Develop Eng. &
Consulting Services
Venture &
Licensing
Fund
CV Fund if
available, and
VC Funds
VC
Funds
VC
Funds
R&D Fund
Creating spin-offs requires strong development teams.

12. 12
Systematic Approach of Budgets and Funds to Realize
Value Potential
Patents & Know-How
Business Thrusts
Royalties,
Ventures, or
Large Contracts
R&D Projects
Major
Program
Potential
InvestmentsandValue
Illustrative Only
Angel
Fund
Venture &
Licensing
Budget
Strategic
Investment
Fund
Idea
Generation
Budget
Idea
Generation
Budget
Venture
Capital
Fund
Internal
Fund
External
Fund
Source: SRI, SBI

13. 13
 Concentrate resources (capital, R&D,
commercialization) on a few selected areas
 Identify innovation connected to market needs
 Criteria should include — commercializable, capable,
and competitive
 Develop technical and business “Champions”
 Pursue an aggressive IP strategy
• Strategic patents
• Patent ownership
Success Factors Related to Business Model

14. 14
Case Example:
SRI’s Five Discipline for Technology Innovation
 Important Needs
 Value Creation
 Innovation Champions
 Innovation Teams
 Organizational Alignment
Important
Client Needs
Champions Value
Improvement
Organizational
Alignment
SuccessInnovation
Teams
Source: SRI

15. 15
Some Examples of SRI’s Spin-off Ventures
Customer Service
Tools* DTV TechnologiesVideo Enhancement
Systems
LCD technology*Iris Biometric Identification*
Panoramic Image
Editing Software*
DTV Equipment*
VOD Services**
Secure Content Distribution
Wireless mesh networks
Virtual Personal Assistant*
iPad App,
Smart Travel Guide*
Speech Recognition
for Customer Service
Publicly Traded
Web App; Real-time Video
Streaming & Sharing
Content Curation Platform Mobile Productivity App
MPEG-4 Compliant
Encoding & Authoring Tool
Gaming Platform
For Children
Enterprise Social Media*
Electronic Signature
Solutions
Live Video
Insertion System*
Mobile Virtual Personal Assistant Technology for K-12 Education
*Acquired or merged
** Dissolved
Personal Contents
Summary*
Information Technology
Robotics: Electroadhesion
Robotics
Surgical Robotics
Publicly Traded
Next-Gen Robot Arms*
Anti-counterfeiting
Systems
Ceramics
for Electronics *
Portable Power
Systems**
Optical Network
Components
Electroactive
Polymers*
Next-generation
Fuel Cells**
Publicly Traded
Flexible Circuit
Materials & Components
HQ Phosphor Solutions
For LED Lighting*
Advanced Materials
Nano-porous Material Based
Natural Gas Storage Systems
Liquid Membrane Separation
For Chiral Molecules**
Digital Color Printing
Applications**
Biotechnology/Medical
Surgical Robotics
Publicly Traded
Genetic Profiling Drug Dispensing System*
Medical Systems
Drug Discovery
Disposable Hearing Aid*
Drug Development
Simplified Diabetes
Management
Bed Bug Detection Products
Business Consulting
Business Intelligence
& Consulting Services
Publications &
Consulting Services*
IT Consulting Services*
Source: SRI

16. 16
Case Example:
IMEC Research Programs for the Industry Eco System
Source: IMEC

17. 17
Biz Models and Spin-off Ventures of IMEC
IMEC’s Business Model
Source: IMEC

18. 18
Organization for Technology
Commercialization

19. 19
SBI’s Integrated Framework for Technology
Management and Commercialization (R&BD)
Knowledge of External Drivers and Dynamics
Infrastructure: Organization, Resources, Processes
Technology Planning
R&D Project Management
Business
Vision and
Strategy
• Benchmarking
• Scenarios
• Market Research
• Competitive
Analysis
Technology
Portfolio
Planning
Project
Portfolio
Selection
Budgeting
and Resource
Allocation
Project
Initiation
Project
Execution
Project
Management
• Management Diagnostic
• Structure and Teaming
• HR Management
• IT & Knowledge Management
• Cycle-Time Management
• External Network Management
Ideation
Technology
Acquisition
Strategy
Project
Closeout
• SWOT Analysis
• Technology Intelligence
Knowledge of External Drivers and Dynamics
Infrastructure: Organization, Resources, Processes
• Benchmarking
• Scenarios
• Market Research
• Competitive
Analysis
• Management Diagnostic
• Structure and Teaming
• Profit Sharing Model
• Business Plan and Model
• Venture Financing
• External Expert Management
• SWOT Analysis
• Technology Intelligence
Intellectual Property Management
Value Creation and Management
Technology
Valuation
IP
Portfolio
Planning
Budgeting
& Resource
Allocation
Technology
Licensing
Venture
Creation
Sell, M&A,
JV, Alliance
Ideation
Technology
Commercialzn
Strategy
Internal
Use
Return on
Investment
Technology
and Intellectual
Property
Creating IP Assets Turning IP Assets into Value
Technology Management Commercialization ManagementIP Management

20. 20
Basic Functions of Technology Management and
Commercialization
Technology (R&D)
Strategy & Planning
R&D Project
Management
Intellectual Property
Management
Commercialization
Strategy & Planning
Commercialization
Management
Technology (R&D)
Management
(Creating IP
Assets)
Technology
Commercialization
(Turning IP Assets
into Value)

21. 21
Technology Commercialization Activities
IP Portfolio Planning
& Management
Patent Process
Management
Technology
Commercialization
Strategy
Licensing
Venture Start-up
& Incubation
Patent Research,
Market Research, &
Opportunity Search
 There are many strategic
considerations on organizing IP
planning and management as
well as technology
commercialization including
licensing and venturing
 Organizations should be
evolutionarily restructured in
accordance with changes in
strategy, goals, and external
environments
 In general, there are many
organizational alternatives to be
considered including
outsourcing and collaboration.

22. 22
Commercialization Process and Responsibility
Technology/IP
for Commercialization
IP
Management
Technology
Transfer (Licensing)
Venture
Start-up
Incubation
Support
Commercialization
Committee
Licensing
Committee
Active
Licensing
Passive
Licensing
Licensing
Venturing
Venture
Start-ups
Commercialization
Strategy

23. 23
Alternative Organizational Structures
IP
Management
Technology
Transfer (Licensing)
Commercial Development Center
Commercialization
Strategy
Venture
Start-up
Incubation
Support
Option-3
IP
Management
Technology
Transfer (Licensing)
Commercial Development Center
Commercialization
Strategy
Venture
Start-up
Incubation
Support
IP
Management
Technology
Transfer (Licensing)
Commercial Development Center
Commercialization
Strategy
Venture
Start-up
Incubation
Support
Option-3
IP Management
IP
Management
Commercial Development
Commercialization
Strategy
Technology
Licensing
Venture
Start-up
Incubation
Support
Option-2
IP Management
IP
Management
Commercial Development
Commercialization
Strategy
Technology
Licensing
Venture
Start-up
Incubation
Support
IP Management
IP
Management
Commercial Development
Commercialization
Strategy
Technology
Licensing
Venture
Start-up
Incubation
Support
IP Management
IP
Management
Commercial Development
Commercialization
Strategy
Technology
Licensing
Venture
Start-up
Incubation
Support
Option-2
Option-1
Commercial Management
IP
Management
Commercialization
Strategy
Commercial Development
Technology
Licensing
Technology
Licensing
Venture
Start-up
Incubation
Support
Commercial Management
IP
Management
Commercialization
Strategy
Commercial Development
Technology
Licensing
Technology
Licensing
Venture
Start-up
Incubation
Support
Option-1
  

24. 24
 Centralize oversight of commercialization processes and add
Venture Start-up for its own technology commercialization
– Leverage resource and database in IP management, IT support, and
knowledge management for commercialization activities
 Assign new business development responsibility to each R&D
unit to spearhead commercial efforts
– Will scan and identify innovative and marketable technologies within each
R&D unit
– Will involve each R&D unit commercialization strategy decision making
 Create a Commercialization Supervisory Board of senior
executives as a forum for decision making and oversight
– Will act as senior advisors and decision makers; Will assume Board seats on
start-ups or joint ventures
 Review (and modify, as needed) patent/IP policy, profit sharing
model, R&D project management systems to expedite technology
commercialization activities
Recommended Approach at Establishing Stage

25. 25
Venture Start-up Team should be led by the office head and at least 2
to 4 staff members (in early/beginning stage):
 Manage small portfolio of opportunities into start-ups
– Commercial business development plan and strategy
– Coordination of R&D, venture planning, market research, and
commercial development
– Valuation of emerging technologies and business potential
 For each selected opportunity:
– Development of business plan
– Launching new venture
– Venture incubation: hiring new staff, venture financing
– Management of venture business
– Establishment of networks of technical, legal, accounting, consulting,
and venture finance experts
Formation of Venture Start-up Team

26. 26
Organization for Commercialization Supervision
 Commercialization Supervisory
Board (CSB):
– Form the Board with 3 to 5 senior
officers
– Approve portfolio strategy
– Preview and approve all venture
activities and major licensing deals
– Allocate seed funds
– Hire CEOs for new ventures
– Resolve conflicts among
stakeholders
R&D Org.
Commercial
Development
Center
Commercialization
Supervisory
Board
R&D
Divisions
R&D Planning
& Management
Spin-off Ventures
Holding Company
(Subsidiary)

27. 27
Case Examples: Venture Board Composition
 SRI: Commercialization Supervisory Board (CSB)
– CEO, CFO, VP of Business Development, One of its R&D Division Head (VP),
President of SRI Holdings
 P&G: P&G Innovation Leadership Team (ILT)
– CEO, CTO, and One of its global business unit presidents
 Lucent: Venture board of the New Venture Group (NVG)
– President of the NVG division, and 3 VPs, act as the partnership for the
internal venture capital firm
 Nortel Networks: Business Venture Group (BVG)
– BVG members, some executives of its SBUs, and outside experts
 3M: No corporate-wide venture board
– The Corporate Enterprises Development (CED) organization had the
leadership

28. 28
Profit Sharing Model

29. 29
Basic Requirements for Profit Sharing Model
 Encourage researchers to conduct innovative, disruptive, high-
impact research
 Create new culture of technology commercialization and
commercial business development through innovation
 Sustain the top management’s commitment to successful
technology commercialization
 Encourage the technology commercialization team to build a
profitable, financially sustainable, and self-motivated organization
 Provide significant rewards to inventors
 Retain rewarded inventors and keep them focused on innovative
R&D
 Comply with government regulations
 Minimize potential conflicts among stakeholders

30. 30
 The profit sharing policy must have clearly defined rules
 The profit sharing process must be perceived as fair
 The policy must be subject to government
 The company should recover out-of-pocket expenses incurred in
producing the royalty/equity income before sharing profits
 For each allocation, the company must conduct a detailed review
of all facts and provide supporting documentation such as written
R&D proposals and Lab notes
 The company must implement a process for an independent
review of distributions by a compensation committee of the board:
– Approve compensation and supervise execution
– Decide compensation of top management (e.g., CEO, CTO, CFO, and VPs)
– Resolve conflicts among stakeholders regarding compensation.
Implementation of a Profit Sharing Model

31. 31
Recommended Distribution and Approval Process for
Profit Sharing
VP of R&D Div appoints knowledgeable Lead (PI) to
recommend allocations
Lead develops list of participants, their contributions,
and relative % contribution (except the Lead’s %)
VP recommends distribution %s, Lead’s %, expenses,
and reserve, if any
HR distributes the list and top management team
reviews recommendations for completeness
CEO reviews with top management team the final
distributions, expenses, and reserve, if any
Compensation Committee reviews and approves
distributions, expenses, and reserve, if any

32. 32
Summary of Recommendations

33. 33
Institutional
Financial
Support
Regional
Economic
Growth
World
Impact
Individual
Rewards
Objectives of Technology Commercialization
World-Class
Think-tank &
Innovator
 Retain top scientists and engineers
 Attract new talented technical staff
 Diversify income sources
 Increase incomes
 Prepare rainy days
 Develop self-sustainable institution
 Contribute to develop local economy
 Create a local venture valley
 Improve national competitiveness
 Invent innovative, high-impact technologies
 Demonstrate big success in commercialization
 Establish centers of excellence
 Develop world-class reputation
 Nurture culture of commercialization
 Increase income sources
 Achieve financial independence
 Attract more R&D funds
 Become a world-class R&D institute
Source: SRI, SBI

34. 34
Companies Represent a Range of the
Commercialization Continuum
Passive Licensing
Fee for Services
Active Licensing
Start-up Promotion
Venture Incubation
Source: SRI

35. 35
Technology Commercialization Management Diagnostic
Identifies the Needs and Leverage Points for Improvement
Value Creation
• Licensing
• Start-ups
• Incubating
• IPOs
Value Creation
• Licensing
• Start-ups
• Incubating
• IPOs

36. 36
Recommended Strategic Principles in Technology
Commercialization
Recommendations
 Build consensus internally and
externally for proactive, strategic
technology commercialization
 Go slow initially
 Build skills, processes first
 Spin-off technology ventures are
preferred over licensing to
maximize value creation
 Create some early success
stories
 New performance measurement
and profit sharing models are
needed
Typical Situation
 Require cultural change
 Need new skills and
experience
 Align with R&D planning
needed
 Have limited capital availability
 Comply with the government
and company regulation and
supervision
 Require legal/policy changes to
support various technology
commercialization activities
and profit sharing