Improving the Likelihood of Commercial
Success
Building a process to enhance the likelihood that
a new technology venture
will succeed
Andrew Maxwell P.Eng. MBA
A Canadian Innovation Centre Whitepaper
Copyright ? 2004 April
Guiding innovation to be market-ready
Executive Summary
Over the past 50 years, consistent research has showed that the most new technological innovations are not successful. In fact if success is defined as providing a reasonable return on initial investment, less than 1 in every 100 projects achieved this milestone.
There are many avenues for commercialization of these technological innovations, which in itself is becoming a bigger issue, for companies and governments funding research and development.
This paper examines the evidence that introducing solid processes into the commercialization roadmap, with a particular focus on market validation, not only increases the likelihood of success, but assists in identifying the options available in maximizing the return on investment.
This paper contends that accepting this high failure rate is akin to the comments of the 1980’s when manufacturers (for example semiconductor fabricators) believed that increasing the yield, whilst possible, was not cost effective. However, Japanese industry showed the real benefits of a 6 sigma approach, which then translated into more reliable products, higher quality and ultimately lower costs.
This paper, based on over 30 years of experience at the Canadian Innovation Centre, shows how gathering the correct external information at the appropriate time, and having a formal approach to validating it against internal activities, will significantly improve the chances of success.
Other parties, familiar with this issue, have developed complimentary tools, to the CIC approach, which we hope will work together to enhance the overall success rates of the commercialization of new opportunities.
Guiding innovation to be market ready
Introduction
Over the past 30 years, the Canadian Innovation Centre, has pioneered a market validation approach to new venture development, which has consistently proven to increase the chance of success of new ventures.
It achieves this in a unique five step process, which makes recommendations at certain points, about the long term strategy and viability of the development. In some cases these recommendations may conclude that the proposed
development is unlikely to be successful, in others it will recommend a change in technology or market approach to enhance the likelihood of success and maximize the return. Of course a portion of the validation process recommendations include continuing in the current mode and following the plan.
Background
Many of the organizations we have surveyed in our studies, carried out very little market research in the development of their technology. This was either because the development itself came from a technology research organization (in-house lab or university) or because the inventor felt that they were so familiar with the market they did little to gather external third party validation.
The value of independent market research and validation, in assessing both the market potential, trends, competition and characteristics, can not be overstated in moving a project forward. Even large organizations, such as IBM and HP use third party organizations to both validate their strategies and to enhance the value proposition of new product or service launches.
“The research provided by Survey.com is key in all our internal planning processes, as it helps to define the market and its boundaries, keeping us at the forefront of our industry.” Dan Graham, Strategy and Solutions Director
Global Business Intelligence Solutions IBM. Any company, contemplating the launch of a revolutionary technology, to attack
a market opportunity, must undertake this research, both to ensure that
assumptions about the market place are correct, and to validate the market opportunity to stakeholders, such as employees, partners and investors (and potential investors). Historical perspective Recognizing these issues over the past 30 years, many experts have proposed process improvements, which enhance the chance of increasing the
commercialization of technology. From Bob Coopers Stage Gate approach to new solutions contained in the Christiansen and Raynor book “The Innovators Solution”, the value of a process to asses new opportunities has been recognized.
Guiding innovation to be market ready
In the case of all these approaches, the value of tracking new developments from a marketplace perspective, has been validated. A recent study by the Conference Board of Canada (2003) showed that the largest source of ideas for new business development came from customers.
Whilst at the early stage of development, a new technology needs market place validation, as the product moves closer to being delivered to the customer, ongoing feedback is needed to ensure that the features and value proposition being developed match the needs of customers. As the product or technology gets closer to the market, options such as licensing and developing international approaches become important as do channel partners. Each of these factors require input from the marketplace to determine the optimum approach to the market place.
There is increasing value in the inventor or inventing organization working with an independent third party to develop such a market validation approach. Independence brings a questioning of initial assumptions, which may not be as achievable from within the organization. Further such independence gives investors and other stakeholders confidence in the recommendations of such a process.
Another false assumption is the idea that business development, especially with regard to new technological innovation, is a linear approach, starting in the research environment, and ending in marketplace success. The same Conference Board Study showed that a successful innovation was as likely to start in sales, marketing or engineering as research, and that it was likely to morph several times between the original concept and the final commercial success. In each case based on market feedback. A 2002 international study found that 70% of technological innovations were successfully commercialized in applications other than those for which they were originally intended.
Proof-of-Marketactivities in the
innovation cycle
$Five year window for CIC involvement (I’m making money.)
! (I’ve got a great idea.)
CommercialInventionMaximizePrepare ValidateAlignIntellectual for first MarketTechnologyPropertycustomers
Guiding innovation to be market ready
Over the last 30 years, the Canadian Innovation Centre, in conjunction with its economic development partners , has developed a unique 5 step approach to preparing this information to assist in the commercialization process. This service is now available more widely through many of the Centres Innovation partners.
The CIC’s five step approach to market success
Over the past 30 years the Canadian Innovation Centre has developed a five step process to enhancing successful commercialization of technologies. With over 12,000 undertaken, for projects ranging from individual inventors to organizations which have become large multi-nationals, the CIC has built up both an approach to best practices and a track record which bear further investigation.
As the Canadian Innovation Centre works with clients through a unique partnership program, the first step in assessing the commercial viability of an opportunity is undertaken by the partner, who meets with or discusses the approach with the SME.
If the partner determines that the SME will benefit from the CIC involvement, they will recommend them to proceed, and usually offer to cover some of the costs.
The next step of the process carried out by the CIC is a Market Validation process, which looks at the external market and evaluates its size, dynamics , characteristics and patterns to identify potential for the technological innovation. At this point the recommendation can be to stop the commercialization of the product, or to find alternate technologies or markets for its development. Alternatively the study can simply validate the original assumptions. In practice, CIC finds that 30% of projects are recommended to stop, and 30%
recommended to proceed with monitor modifications. The remaining 40% are then divided between those who need to reevaluate the technology and those who are recommended to find an alternative market.
Once the new plan has been developed, and as the product moves closer to being ready for market, the SME can utilize the CIC’s second step, that of Market Alignment. During this phase of the research, a more detailed analysis of the competitive position is given, along with some ideas of the features customers would like to see in the solution. To ensure realistic expectations are raised, there is some development of a resource plan (technical, human and financial) required to implement the path to market.
The path to market is then more fully developed, as issues such as licensing and channel strategies are developed. The CIC provides a Market Maximization strategy to develop the full potential of the innovation.
Guiding innovation to be market ready
Qualify? Validate?Align?Maximize?Prepare
Canadian Innovation Centre’s Process As the company moves forward to launch the product, more detailed analysis of
market demands (pricing, support, channels, collateral) are required, as well as the full resources the organization requires to launch the product. This is the final stage in which the CIC can be involved and will often include a close up analysis of early customer requirements, to facilitate the introduction of the first sales.
Verifying the importance and effectiveness of the Market Validation Process
The Canadian Innovation Centre, is uniquely placed to measure the effectiveness of this process as with over 12,000 studies completed and documented, it has a unique database of recommendations, and 30 years of history to draw on.
The key summary from an independently commissioned research study on the
effectiveness of the CIC process concluded that:
Clients who Clients who Clients who
successfully struggle to did not Themes of CIC’s process commercialized commercialize commercialize Validated the market 70% 18% 0% Aligned the innovation to the market 100% 39% 0% Pursued the customer’s voice 60% 14% 0% Understood their competitive position 70% 21% 0% Formalized their marketing strategy 73% 39% 0%
Guiding innovation to be market ready
Conclusion
It is becoming increasingly evident that getting market place input into the plans and decision making process of new business development has a significant impact on the chance for commercial success of a technological innovation. The nature and type of this market input varying over the lifecycle of the product development process.
Solid market validation, by multi technology teams, with a variety of experiences and backgrounds significantly increase the quality of the decision making in the path to successful commercialization.
The process is still difficult to introduce and use to influence strategy in technologically focused organizations, or those that feel that they already have or the complete understanding of the marketplace. However the value to stakeholders is enormous. Correct and timely input can reduce ineffective investment, and influence product and market development to significantly increase the likelihood of significant returns.
There is no optimum process, and there is much research being done on factors and market/technology influences affecting outcomes. Trying to build formal processes, establish best practices and building a culture of continuous improvement will no doubt have as significant an influence on the yield of technological innovations as it did on semiconductor manufacturing in the 1980’s
Guiding innovation to be market ready