2. research with commercial potential

Delivered by: Panos Fitsilis (fitsilis@teilar.gr)
Date: 9-10 October 2014
Venue: American University of Beirut
(AUB)

This project has been funded with support from the European Commission. This publication reflects the views only of the
author, and the Commission cannot be held responsible for any use which may be made of the information contained
therein.
This material has been developed in the context of IDEAL Tempus
Project by
Panos Fitsilis (fitsilis@teilar.gr)

Table of contents
i. How do we identify research that has
commercial potential
ii. What strategies can we use to first protect it
and then make use of it in the marketplace
Slide 3

Chain-linked model of innovation (Rosenberg & Kline, 1986)
Source: www.uis.unesco.org

– Originality of the innovation
– Scientific return/opportunities for
the laboratory
– Project feasibility
– Potential users
– Scientific relevance of the project
– Team aspects
– Risk management
– Profile of the key researcher
– Business opportunity
– Market opportunities/threats
A lot of criteria …..
– IP (protection issues, prior art)
– Lab support
– Realism of the announced plan
– Potential applications
– Social & economical impact
– Positive ROI/NPV calculations
– Venture value
– Regulatory constraints
– Business model
– Financial return
– Production issues
• A lot of criteria for evaluation are proposed in
the literature, such as:

• According to MacMillan et al. the main
criteria for selecting are:
– Characteristics of the market
– Characteristics of the product or service produced
by research
– Financial impact
– Experience of research team
– Personality of the principal researcher
What are the criteria ?
Source: MacMillan, I. C., Siegel, R., & Narasimha, P. N. (1986). Criteria used by venture capitalists to
evaluate new venture proposals. Journal of Business venturing, 1(1), 119-128.

• The target market enjoys a significant growth
rate?
• The research stimulates an existing market?
• There is little threat of competition during the
first three years?
• The research will create a new market?
Μarket driven criteria

Market(ing) Research: Definition
• The systematic design, collection, analysis and
reporting of data and findings relevant to a
specific marketing situation facing the
organisation
• Main research activities (Source: British Market Research
Association)
– Market Measurement
– New Product development/concept testing
– Usage and Attitude Studies
– Advertising developing and pre-testing

Types of Market Research
By Source
- Primary
- Secondary
By Objectives
- Exploratory
- Descriptive
- Causal
(or experimental)
By Methodology
- Qualitative
- Quantitative

Types of Market Research: By
Source
Primary Collection of data specifically for the problem or
project in hand
Secondary Based on data previously collected for purposes
other than the research in hand (e.g. published
articles, government stats, etc.)

Methodology
Qualitative Quantitative
Type of Question Probing Simple
Sample Size Small Large
Information per respondent High Low(ish)
Questioner’s skill High Low(ish)
Analyst’s skill High High
Type of analysis Subjective, Objective,
Interpretative Statistical
Ability to replicate Low High
Areas probed Attitudes Choices
Feelings Frequency
Motivations Demographics

Benefits of Qualitative Market
Research vs Quantitative
Benefit Comment/Example
Cheaper
Probes in-depth motivations
and feelings
Often useful precursor
to quantitative research
Smaller sample size
Allows managers to observe (through one
way mirror) ‘real’ consumer reaction to
the issue - e.g. comments and
associations (e.g. Levis) regarding a new
product fresh from the labs
Gives the research department a low
cost and timely sense of which issues
to probe in quantitative research

Objective
• Exploratory Preliminary data needed to develop an idea
further. Eg outline concepts, gather insights,
formulate hypotheses
• Descriptive Describe an element of an ideas precisely. Eg
who is the target market, how large is it, how
will it develop
• Causal Test a cause and effect relationship, e.g. price
elasticity. Done through experiment

The Market Research Process
1. Defining the
problem and
objectives
2. Developing
the research
plan
3. Collecting
the
information
4. Analysing
the
information
5. Presenting
the findings
Steps
Comments
Distinguish between
the research type
needed e.g.
- exploratory
- descriptive
- causal
Decide on
- budget
- data sources
- research
approaches
- research
instruments
- sampling plan
- contact methods
Information is
collected
according to
the plan (N.B.
it is often done
by external
firms)
Statistical
manipulation of
the data collected
(e.g. regression)
or subjective
analysis of focus
groups
Overall conclusions
to be presented
rather than
overwhelming
statistical
methodologies
If a problem is
vaguely defined,
the results can
have little
bearing on the
key issues
The plan needs
to be decided
upfront but
flexible enough
to incorporate
changes/
iterations
This phase is
the most costly
and the most
liable to error
Significant
difference in
type of analysis
according to
whether market
research is
quantitative or
qualitative
Can take various
forms:
- oral presentation
- written conclusions
supported by analysis
- data tables

Other market analysis tools - PESTEL

Question?
• Can you produce the PESTEL analysis for a
spin-off company to be created at Lebanon
from your university in relation to your
research?

Market analysis for industry sectors

The Five Forces Model of
Competition / Porter
Source: Crafting and Executing
strategy, A. Thomson, A.J. Strickland III,
J. Gamble

Factors Affecting Threat of Entry
Source: Crafting and Executing strategy, A. Thomson, A.J. Strickland III, J. Gamble

Question?
• Can you identify the ENTRY threads for your
spin-off company?

Factors Affecting Competition From Substitute Products

Factors Affecting Bargaining Power of Suppliers

Factors Affecting Bargaining Power of Buyers

• The product may be described as “high tech.”
• The product is innovative
• The research product is proprietary or can
otherwise be protected.
• The product enjoys demonstrated market
acceptance.
• The product has been developed to the point
of a functioning prototype.
Characteristics of the product or
service produced by research

Types of innovations
• Product innovation: introduction of a good or service that is new or
significantly improved with respect to its characteristics or intended
uses. This includes significant improvements in technical
specifications, components and materials, incorporated software,
user friendliness or other functional characteristics.
• Process innovation: implementation of a new or significantly
improved production or delivery method. This includes significant
changes in techniques, equipment and/or software.
• Marketing innovation: implementation of a new marketing method
involving significant changes in product design or packaging,
product placement, product promotion or pricing.
• Organisational innovation: implementation of a new organisational
method in the firm’s business practices, workplace organisation or
external relations.
www.uis.unesco.org

Degree of novelty
• New to the firm:
– A product, process, marketing method, or
organisational method can already have
been implemented by other firms, but if it
is new to the firm (or in case of products
and processes: significantly improved),
then it is an innovation for that firm.
• New to the market:
– the firm is the first to introduce the
innovation onto its market.
– The market is defined as the firm and its
competitors.
– The geographical scope is subject to the
firm’s own view of its operating market and
thus can include both domestic and
international firms.
www.uis.unesco.org

Degree of novelty (continued)
• New to the world:
– the firm is the first to introduce the
innovation for all markets and industries,
domestic and international.
– implies a qualitatively greater degree of
novelty than new to the market.
• Disruptive innovations:
– an innovation that has a significant
impact on a market and on the economic
activity of firms in that market.
– focuses on the impact of innovations as
opposed to their novelty.
– These impacts can, for example, change
the structure of the market, create new
markets, or render existing products
obsolete. However, it might not be
apparent whether an innovation is
disruptive until long after the innovation
has been introduced.
www.uis.unesco.org

Product Differentiation
• Incorporate differentiating features that cause buyers
to prefer firm’s product or service over brands of rivals
• Find ways to differentiate that create value for buyers
and are not easily matched or cheaply copied by rivals
• Not spending more to achieve differentiation
than the price premium that can be charged
Objective
Keys to Success

Types of Differentiation Themes
• Unique taste – ????
• Multiple features – ????
• Wide selection – ?????
• Superior service – ?????
• Spare parts availability – ????
• Engineering design and performance – ????
• Prestige – ????
• Product reliability – ?????
• Quality manufacture – ????
• Top-of-line image – ????

Types of Differentiation Themes
• Unique taste – Dr. Pepper
• Multiple features – Microsoft Windows and
Office
• Wide selection – Amazon.com
• Superior service – Ritz-Carlton
• Spare parts availability – Caterpillar
• Engineering design and performance – BMW
• Prestige – Rolex
• Product reliability – Johnson & Johnson
• Quality manufacture – Toyota
• Top-of-line image – Ralph Lauren, Starbucks,
Chanel

32
Two other factors also influence an industry attitude to innovation and
technology
•The Technology adoption Cycle - which describes the enterprise attitude
to technology (and possibly change in general)
•The Product life-cycle (if we can possibly imagine such a thing!)

• Return of Investment equal to at least IO
times the initial investment within 5-10 years.
• Requires an investment that can easily be
liquefied (e.g., new company goes public or
acquired).
• It is not be expected to make subsequent
investments
Financial impact

Financial evaluation methods
Liljeblom, E., & Vaihekoski, M. (2004). Investment evaluation methods and
required rate of return in Finnish publicly listed companies.

Stage Of
Business
Expected Annual Return
on Investment
Expected Increase
on Initial Investment
Start-up business
(idea stage)
60% + 10–15 × investment
First-stage financing
(new business)
40%–60% 6–12 × investment
Second-stage financing
(development stage)
Third-stage financing
(expansion stage)
Turnaround situation 50% + 8–15 × investment
Source: W. Keith Schilit, “How to Obtain Venture Capital,” Business
Horizons (May/June 1987): 78.
Indicative ROI (example)

• The research team has substantial expertise
• The research team has a well established
reputation and track record
• Research team has good collaboration and
• Research team has links with industry
Experience of research team

• Capable of sustained intense effort.
• Able to evaluate and react to risk well.
• Articulate in discussing venture.
• Attends to detail.
• Demonstrated leadership in past
• Thoroughly familiar with market
Personality of the principal
researcher

Roles and Tasks of principal
researcher
40
• He is responsible for organizing, staffing,
budgeting, directing, planning, and controlling
the project.
– shape goals
– obtain resources
– build roles & structures
– establish good communication
– see the whole picture
– move things forward Buchanan & Boddy, (1992)

Types of competence
20 Technical competencies
15 Behavioural competencies
11 Contextual competencies
=> 46 competencies

Common activities and skills
42
• Leadership
• Management
• Customer Relations
• Technical problem solving
• Conflict Management
• Team Management
• Risk and Change Management

• Introducing our research to the market is a
new project
• We need to put all data, information and
research together as check
is the project
FEASIBLE
Project feasibility

05 44
CONCEPTION
FEASIBILITY
IMPLEMENTATION
OPERATION
TERMINATION
Define the Project
Design the Project Process
Deliver the Project
EVALUATION
Develop the Process
Reminder

45
Feasibility Analysis
1. Technical Feasibility;
2. Financial Feasibility;
3. Risk & Uncertainty Feasibility.
4. Environmental feasibility
The most frequently used evaluates these
three key areas, BUT others might well be
used!

46
Process
Project Brief Generate Scenarios
Undertake Feasibility Studies for Each Scenario
Technical Feasibility Study
Financial Feasibility Study
Risk & Uncertainty Feasibility Study
Collate Results
and Select Best
Scenario by
Weighted
Analysis
Comprising of:

47
Project Brief
Generate Scenarios
Feasibility Study
Technical Feasibility
Financial Feasibility
Risk & Uncertainty
Feasibility
Feasibility Study Feasibility Study
Technical Feasibility Technical Feasibility
Financial FeasibilityFinancial Feasibility
Risk & Uncertainty
Feasibility
Risk & Uncertainty
Feasibility
Select Best Option by Weighted Analysis
Project Brief
Generate Scenarios
Feasibility Study
Financial Feasibility
Risk & Uncertainty
Feasibility
Feasibility Study Feasibility Study
Technical Feasibility Technical Feasibility
Financial FeasibilityFinancial Feasibility
Risk & Uncertainty
Feasibility
Risk & Uncertainty
Feasibility
Select Best Option by Weighted Analysis

48
• A Technical feasibility study can only be based upon current
information concerning the product, material, or services
life. Information availability stages are:
– Fully mature – considerable data is available for evaluation of new
proposal.
– Semi-mature – limited data available to be used in feasibility study.
– New Technology – at prototype stage, limited information
available.

The PMBOK
• “Project Management Body of Knowledge”
– sum of knowledge within the profession of project
management
– used to document and standardize generally accepted
project management information and practices
• produced by the Project Management Institute
(www.pmi.org)
• revised and reprinted every 4 years – fifth edition is
the current one

The 10 subject areas of PM
• an area of project management defined by its
knowledge requirements and described in terms of
its associated process, practices, inputs, outputs,
tools and techniques
• identified subject areas
1. Project Integration Management
2. Project Scope Management
3. Project Time Management
4. Project Cost Management
5. Project Quality Management
6. Project Human Resource Management
7. Project Communications Management
8. Project Risk Management
9. Project Procurement Management
10. Stakeholder Management

CRITERIA FOR EVALUATING
VENTURE OPPORTUNITIES

Attractiveness
Criterion Higher Potential Lower Potential
Market Issues
Need Identified Unfocused
Customers Reachable; receptive Unreachable or loyal to
others
Payback to user Less than one year Three years plus
Value added or created High Low
Product life Durable; beyond time to
recover investment plus
profit
Perishable; less than time
to recover investment
Market structure Imperfect competition or
emerging industry
Perfect competition or
highly concentrated or
mature industry or declining
industry
Criteria for evaluating venture opportunities
Source: Entrepreneurship, Miroslaw Malek

Attractiveness
Market Issues (continued)
Market size $100 million sales Unknown or less than $10
million sales or multibillion
Market growth rate Growing at 30% to 50% or
more
Contracting or less than
10%
Gross margins 40% to 50% or more;
durable
Less than 20%; fragile
Market share attainable
(year 5)
20% or more; leader Less than 5%
Cost structure Low cost provider Declining cost

Attractiveness
Economic/harvest issues
Profits after tax 10% to 15% or more; durable Less than 20%; fragile
Time to:
Break even Under 2 years More than 3 years
Positive cash flow Under 2 years More than 3 years
ROI potential 25% or more/year; high value 15%-20% or less/ year; low
value
Value High strategic value Low strategic value
Capital requirements Low to moderate; fundable Very high; unfundable
Exit mechanism Present or envisioned harvest
options
Undefinded; illiquid investment

Attractiveness
Competitive advantages issues
Fixed and variable costs:
Production Lowest Highest
Marketing Lowest Highest
Distribution Lowest Highest
Degree of control:
Prices Moderate to strong Weak
Costs Moderate to strong Weak
Channels of
supply/resources
Moderate to strong Weak
Channels of distribution Moderate to strong Weak

Attractiveness
Competitive advantages issues (continued)
Barrier to entry:
Proprietary protection/
regulation advantage
Have or can gain None
Response/lead time
advantage in technology,
product, market innovation,
people, location, resources
or capacity
Resilient and responsive;
have or can gain
None
Legal contractual
advantage
Proprietary or exclusive None
Contacts and networks Well developed; high-
quality; accessible
Crude; limited inaccessible

Attractiveness
Management team issues
Team Existing, strong proven
performance
Weak or solo entrepreneur
Competitor`s mind set and
strategies
Competitive; few; not self-
destructive
Dumb
Fatal flaw issue
Fatal flaws None One or more

Source: Stanley Rich and David Gumpert, Business Plans That Win $$$ (New York:
Harper & Row, 1985), 169.
Level 4
Fully developed product/service
Established market
Satisfied users
4/1 4/2 4/3 4/4
Level 3
Fully developed product/service
Few users as of yet
Market assumed
3/1 3/2 3/3 3/4
Level 2
Operable pilot or prototype
Not yet developed for production
Market assumed
2/1 2/2 2/3 2/4
Level 1
Product/service idea
Not yet operable
Market assumed
1/1 1/2 1/3 1/4
Level 1
Individual founder/
entrepreneur
Level 2
Two founders
Other personnel
not yet identified
Level 3
Partial
management
team—members
identified to join
company when
funding received
Level 4
Fully staffed,
experienced
management team
Riskiest
Riskiest
Status of Management
StatusofProduct/Service

Concluding – Top 10 criteria
Criterion Percentage
Capable of sustained intense effort 64
Thoroughly familiar with market 62
At least ten times return in five to ten years 50
Demonstrated leadership in past 50
Evaluates and reacts to risk well 48
Investment can be made liquid 44
Significant market growth 43
Track record relevant to venture 37
Articulates venture well 31
Proprietary protection 29
Source: MacMillan, I. C., Siegel, R., & Narasimha, P. N. (1986). Criteria used by venture capitalists to
evaluate new venture proposals. Journal of Business venturing, 1(1), 119-128.

STRATEGIES FOR INITIAL
PROTECTION OF RESEARCH

61
What is intellectual property?
• Intellectual properties are intangible products of
the mind. These include:
– inventions (devices, compositions, plants, designs)
– publications
– Software
– works of art.
Must be tangible in order to be protected.

62
How do we protect
intellectual property?
Source:http://melfiassociates.com/which-is-which-
copyright-patents-trademarks-trade-secrets/

63
What we can do in advance?
• Create protection practices such as
– Establish correct employment agreement
– Have a well established and royalty policy
– Enforce physical and electronic security guidelines

64
Employment Agreements
• Typically are a condition at hiring & include salary,
benefit details.
• Often include trade secret & confidentiality language
for a term that exceeds termination from the
company.
• Includes IP ownership information.
• May include non-compete language to prevent you
from working for a competitor for a period of time.
http://www.egr.msu.edu/egr/research/techtransfer.php

65
Example Royalty Policy
• First $5000 goes to the inventor(s).
• Patent expenses are then recovered.
• Net Royalty Inventor(s) Academic University
Next $100,000 33.3% 33.3% 33.3%
Next $400,000 30% 30% 40%
Next $500,000 20% 20% 60%
Excess >$1M 15% 15% 70%

Physical and electronic security
guidelines
• Control physical access
– Notebooks
• Control electronic access
• Do Have ALL Entries in the Notebooks
Witnessed and Dated
• Do Implement Document Control/Destruction
Policy

Follow course on coursera
Technology Commercialization, Part 1: Setting up your Idea Filtering System
From: University on Rochester
https://www.coursera.org/course/techcommercialpart1

2. research with commercial potential

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