Commercialization always involves two components – the technology or product AND the business model. The road to commercialization, however, differs for each business due to many factors:
- Type or nature of the product/technology/service (the “product”)
- Experience of founders and leadership team
- Market demographics
- Business skills, experience, and abilities
- Proof of concept – business and product
- Product development – time, capital, etc.
For a business to achieve commercial success (profits, cash, revenues, market share), both the process of making money and the technology have to work. Furthermore, the ways in which commercial success is achieved can vary:
- Sale of products or services
- Licensing of technology
- Sale of technology
- Joint ventures
- Strategic alliances
The nature of each of these relationships and “how” they are executed aren’t mutually exclusive. A company may license technology for a market segment based upon industry, geography, or some other characteristic to another company and still produce and sell a product to other market segments. A company may choose to enter a joint venture in which they provide the technology know-how and the venture partner provides capital and manufacturing facilities.
Another aspect of commercialization to consider is whether the business will be in business to do research and development only or will also engage in producing the product or technology (manufacturing) for the market. Will the business own manufacturing or other production facilities or will the company contract those activities to another company?
What is the “right way”?
There is no single “right way” to go to market. The decision comes down to what the business considers its core expertise and many other factors as well as a range of other decision criteria
- Nature of competition
- Market barriers
- Type of business (growth or lifestyle)
“Go to Market” Process
While commercialization may take many forms, getting the product into the market for consumer, business, governmental, or institutional use is the ultimate outcome. Someone must be willing and able to purchase the product for use at a price that includes profit. Identifying the potential customer and the problem or need the prospect has is the first step that occurs on the path to market.
This step is often undertaken after technology or a product has been developed. The business develops its offering and looks around to see who might be interested in buying. Market research is undertaken to
- Define the opportunity
- Target the market with the most potential
- Identify the characteristics of that market
- Position the product as “the answer”
- Pitch and promote
When this step is moved “in step with” the development phase, becoming a concurrent process which synchronizes the business with the technology, then the enterprise is able to coordinate the development of the business side of the technology with the feature development of the technology itself. To picture this in your mind, think of the classic western movies where horses and buggies were the standard means of transportation. A single horse pulling the buggy had little to no chance against one that had two horses in the harness pulling together. You get more horsepower with two horses pulling the business down the commercialization road than a single horse pulling and another tied to the back of the buggy.
Riding Two Horses – Business and Technology
The only way for an individual to “ride” two horses is to get them in the leads together, equally yoked and pulling the load as one. Sure, you could ride one horse leading the other behind and then change horses and lead the other. Changing horses back and forth is one strategy, but the horsepower is limited at any one time.
In order to be prepared to “go to market” when the technology is ready, the ability to do business also has to be in place and ready to produce and deliver. Oh, one other thing, the market has to have the need, a recognized need, which it is willing to solve by purchasing at price that includes profit.
A need, a market-ready product, an ability to produce and deliver the product, a price that includes profit, a way to reach a prospective customer, a message which persuades the customer to do something other than maintain the status quo…that is doing business. To develop the technology and funding takes money – capital – yours and other people
Capital Required – Getting Investors
You may have the best technology ever invented. You may not. What does it take to get investors? Knowing how to put your technology into a business model and having a plan that will sell – the solution, the product, the service, the technology, the capability, the credibility, the know-how – of your business. Investors put their money into projects they believe will generate a financial return. The return they expect depends upon the what, when, where, how, who, and how much of your particular business.
If your technology is viewed as unique, that may be an outstanding selling point. If it is unique and no one knows what to do with it or recognizes a need for it, then that can present an opportunity to pursue. If it is unique and the market has been waiting for a solution, then you may just have a horse to ride…but again it needs to be teamed with business horsepower and the know-how to get the customer to buy and do business with you.
Investors need to understand that you know your technology and how to do business. It isn’t enough that there is “vast market potential” – you need to demonstrate you will be able to tap into that market and get them to buy. Investors make money when the business increases in value:
- Generates profits
- Builds its market share
- Creates interest for investment by other private investors
- Pays dividends
- Goes public
Investors and potential investors need to have confidence that the business can make money on the technology. That confidence is built through communication and “homework”. The business plan including the marketing strategy, competitive analysis, and financial forecasts is one tool for getting the story across.
Potential Investors – Business Plan Audience
Most entrepreneurs get caught up in the actual task of writing the plan when they should get caught up in conveying their understanding of the key business issues and questions which must be answered for success to be achieved.
The business plan communicates the story of the business and why the investor should be willing to choose this investment over any other. In order for the story to be compelling and convince the reader to get involved the characters (team and customers), the plot (how you make money), and the future (the exit and return on investment) need to be clearly developed and easily understood.
A business plan must be well-thought out and well documented. Your belief needs to shine through, your passion needs to be there, but belief and passion need to be supported with market data and analysis which is backed up with the specifics of what and how your business will capture the potential. Oh, and you also need to be able to tell them how much money you are going to make based upon realistic timelines, investment, pricing, and business development.
Commercialization Challenge and Results
The business must know and understand the tasks of being in business. When the focus of the business is exclusively on technology development, the organization will not be ready to “go to market” when the technology is ready. The organization must balance its resources (time, money, and people) between the technology and the business processes. Too many organizations arrive at technological success with no market, no customer, and no funding to get the business in place. These tasks are not sequential. They are concurrent. The successful business is one which gets its products ready for market and gets the market ready for its products simultaneously. Success comes when the timing of technology and market interest coincide. Convince the market that it wants your product before they are ready and you will lose credibility and momentum. Wait too long to get the customer interested and you may run out of funds. The commercialization challenge is understanding the milestones, timeline, and tasks necessary to integrate new technology with a new business with the added dimension of convincing potential stakeholders (investors, vendors, employees, and customers) to put their trust in you. If you can do that, then you will find success.
Copyright ©2006 Lea A. Strickland, F.O.C.U.S. Resource, Inc.