In-depth analysis: Out of the Lab and into the Market - Making the leap from R&D to Commercial Products

Article 3: Technology Transfer Series - Out of the lab and into the market
Article written by Cynthia Gilmer, Founder and President of Opus Plus, Inc.

Research and Development is funded from a variety of sources including the Government, through SBIRs and grants to educational institutions, and by companies themselves. This funding is a critical link for developing new and innovative technologies. However, it is important to understand the difference between the invention of a new technology and the application of a new technology as a product in the marketplace.

Inventors use their creativity and specialized experience to develop new technologies. For example, they develop a completely new algorithm for statistically analyzing trends in data received from sensor systems. The result is a new technology that proves itself useful to solving a problem in a laboratory environment. However, in order to take this technology to the next step, a commercial product, two things must occur. First, the technology must be applied to solve a real-world problem in the marketplace. Second, a business and operational model must be developed and executed so that the product can be developed and delivered to this market, resulting in a profitable business.

Applying the technology to a real-world problem involves innovation and research. Innovation is required to identify potential problems in commercial markets where the solution could be applied. To do this, the team must be both analytical of how the product is applied today and open-minded to how this can be applied in other areas. Once opportunities are identified, research is required to validate the need and understand the marketplace.

R&D technologies are often being applied in practice through the funding entity. For example, SBIR developed technologies that analyze potential changes in a battlefield environment might be used in the decision making process for resource planning. Usually this analysis is supported by experts in the technology who use information from the R&D application to make the decision. However, it may not be possible to take the R&D application directly into a commercial environment where those experts are not present.

This means that once a target market is identified and market needs are analyzed, additional effort and investment is often needed to adapt the solution to meet specific needs. This could change technical architectures, interfaces, terminology, supporting products and environments, data interfaces, and many other aspects of the technology.

Before taking the leap into commercialization of your R&D technology it is critical that you understand how you will build and operate a profitable business around it. Sometimes commercialization will require additional investment. During your business planning process you must develop a detailed understanding of the following:

1. How will I monetize my product? This is more than simple licensing fees. This is a detailed pricing model that includes all revenue streams that you expect to be generated by your product. For example, you might architect your product such that you can sell a core component and industry specific add-ons. You might generate revenue from training and customization services. You will have ongoing maintenance fees. You may offer both enterprise and Software-as-a-Service (SaaS) options.
2. How will I manufacture and deliver my product? The types of decisions that must be made here vary widely depending on the type of product. Hardware products require manufacturing and distribution channels. SaaS products require a data center with ongoing monitoring and support. Each of these will have a cost associated with it that must be considered in your profit and loss (P&L) analysis.
3. How will I sell my product? You need to decide if you want to build a direct sales force or apply a sales channel strategy. Each one of these approaches has costs associated with them. A direct sales force might be more expensive, but don’t neglect the expenses necessary to build, manage and support sales channels to ensure they are effective.
4. How will I support my product? Once the product is in the field, you will need to apply human resources to support it. This can be done in-house or partially outsourced. Beware of sharing too much of this responsibility with development staff, because it will affect the timing and quality of future product releases.
5. How will I maintain and grow the product to gain marketshare and stay ahead of the competition? Once the product is out of the lab, a team should be in place to develop the product going forward. This is a very different culture and organization than the original R&D team. It should be driven by market savvy product managers and staffed with results-oriented product engineers who are dedicated to meeting release deadlines and maintaining quality.

Finally, choosing this route doesn’t mean you have to completely change your company. In fact, keeping a strong R&D presence will help you grow a sustainable business with multiple product lines. If you ensure that some amount of your R&D remains focused on potential opportunities that will add value to your market facing product business.

 

---

Cynthia Gilmer is the Founder and President of Opus Plus, Incorporated, a management consultancy that helps companies plan and execute transformations to develop new business areas and improve operational efficiencies. She is an accomplished visionary and results-oriented leader with over 20 years experience growing technology product and service companies. Ms. Gilmer holds BS and MS degrees in Computer Science from the University of Maryland and Virginia Polytechnic Institute & State University respectively. She can be reached by email at cgilmer@opus-plus.com.

Back to the Main Page