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Tool:Innovative Technology IP Development Pipeline
Innovative Technologies IP Development Process
In 2001, Primary Technologies (now Nova Institute of Technology, LLC of Salt Lake City, Utah) invested $185,000 hiring three MBA accounting firms, who spent a year to come up with an IP development pipeline, which is a gateway process for taking disruptive technologies from concept stage to market. Nova presents this process to the inventors whose technologies they consider, so that there is a clear understanding up front of what will be entailed in the process from beginning to end, rather than having surprises come up part way through the process which can often derail a process.
The following preface comment was composed on December 21, 2006 by David G. Yurth for consideration by the New Energy Congress.
[Below is] a recently updated copy of the IP Development Pipeline process, complete with flow chart and templates. This product was originally developed under contract with Primary Technologies while I was CEO there. Since that time, I have redesigned and improved on the original product and have been using it to guide our IP assessment, acquisition, analysis, development, commercialization and licensing projects over the past few years. This is the IP Development bible at Nova. It is a simple, effective, easy tool set that irons almost all the wrinkles out of the IP selection and evaluation process.
At Nova, we have been working hard to solve two of the most challenging aspects of the IP development syndrome. When inventors/integrators do not have access to some kind of privileged source of conventional funding, they are faced with the daunting challenge of finding more creative ways to finance their undertakings. While most of the people who are engaged in serious work are honest and forthright, the need for capital often provides the pretext for exaggeration, dissimulation, misrepresentation and outright falsification during the capital formation process. Guys who have maxed out their credit cards, mortgaged their homes, borrowed money from their families and friends, only to discover that they have not nearly enough money to finish what they started, sometimes resort to stretching the truth about what their IP will do in order to solicit investment from others to support their ongoing work. This practice is becoming increasingly common and can exert disastrous effects on commercialization efforts downstream.
Associated with this trend is the set of challenges associated with verifying original ownership of IP. We both know people who have liberally 'borrowed' other people's ideas by claiming ownership, particularly when the IP appears to have genuine economic value. Failure to discover and root this out at the onset can spell disaster for any kind of undertaking which subsequently finds traction in the open marketplace.
Another difficult set of issues arises when really far-out technologies are brought to the table for consideration. Magnetic 'over unity' motors, antigravitational devices, and a whole raft of similarly challenging IP are surfacing with increasing frequency. This happens every time gas prices go up and the market begins to clamor for newer, more cost effective energy solutions. The feeding frenzy occasioned by the recent spike in fuel prices is now in full swing - we are seeing more and more outrageous claims all the time, brought to the table by a whole community of inventors, developers and integrators with little or no formal training or background.
We have developed a strategy for conducting independent verification of inventor claims about such devices. First, we insist that the inventor allow his invention to be evaluated by others who are certifiably competent to pass judgment about such things. Second, we submit the IP to others who have the facilities and equipment, expertise and experience to determine whether the devices actually perform as they are represented. Third, we conduct a thorough background check of the invention, the inventor, the technology and the group of prior investors to determine the extent to which liberties may have been taken along the way, before the invention is brought to us for consideration. Once we have satisfied our need to know these things, then and only then do we proceed with the first set of evaluation exercises.
Our experience has been that out of every 100 new IP's brough to us, perhaps one or two demonstrate real promise by actually performing at or near claimed levels. More than 90% of the offerings are withdrawn when we demand that we be given the opportunity to independently verify performance claims on our own, without the inventor being present to interfere or skew the results. The excuse given for this refusal is almost always based on the expressed fear that we will steal their IP. It's a stupid excuse but people still resort to it as a way of gracefully avoiding careful scrutiny.
This set of templates serves another useful purpose. When people come to us for funding or development support, we give them a copy of this thing up front, at no charge. We do this because we want them to understand a couple of important things. First, we are going to be thorough in our assessments and specific in our inquiries. If they aren't willing to submit to the rigors intrinsic to the process, we would rather know immediately than find ourselves halfway through the deal having to deal with resistance, sabotage and all kinds of nutty behaviors. Second, we want people who have not been through the process before to understand what the IP development process looks like. It is a daunting exercise requiring time, energy, commitment of substantial resources and a high level of competency. And for every one that succeeds, after all is said and done, regardless of how well we do this job, there will be 25-30 that will fail. No matter what we do. So the risks have to be clearly identified early in the process, in all their hoary aspects. Otherwise, when the going gets rough, as it always does, people will want to bail out and take their IP someplace else where the silver bullet illusion can be maintained.
Finally, inventors need to understand what it really takes to move their IP from early proof-of-concept status to full commercial development and licensing. Perfecting the IP represents about 15%-20% of the total cost and value of most projects. The 80%-85% is represented by the time, cost and expenditure of essential non-technical resources needed to get the product packaged, legally protected, described, tested, documented, marketed, channeled, presented, etc. So when we make our offers for funding support and equity/profit sharing, the inventor needs to be informed. He needs to understand that his invention is not going to change the world and he is not going to become an instant millionaire. With hard work, dedicated performance and appropriate resource support, there is a good chance a great IP can be successfully commercialized. And when the gold stars get handed out, the inventor needs to know in advance what his upside is. If the upside is not worth the time and effort it will take to make his IP commercially viable, then no deal should be done, no matter how good the IP may be. No early stage IP-based project can succeed if the inventor is unhappy or dissatisfied. This is the essential failure of the conventional VC capital formation model - it minimizes risk, fails to disclose risk, and steals anticipation and satisfaction from the inventor by eliminating his upside incentive from the very beginning. And that is why the Dot-com model imploded as it did - everyone had to tell a bigger lie, more effectively and convincingly, so that the anticipated upside justified increasingly higher investment thresholds. We can't do business like that, so we enroll the inventor in the process from the outset.
Innovative Technology IP Development Pipeline
The following is an adaptation of Nova's document. It is reproduced here with permission of David Yurth, who is authorized to grant permission. This permission was given to Sterling D. Allan on Dec. 26, 2006.
This document details a strategic approach to managing the evolution, development and commercialization of innovative technology. This IP development process provides template forms to be completed with every Stage and Gateway throughout the process. This documentation serves multiple purposes:
- Informing our technology evaluation and selection criteria
- Tracking our IP development for patent claims
- Synthesizing our analysis to identify the most critical issues
- Ensuring a focused and consistent approach to all technology and market analyses
- Enabling effective communication across a broad range of technologies and markets
- Enabling key decision making based on comprehensive set of facts
- Capturing the relevant decisions and fact-base for easy review
Since technologies and their related markets cover a broad spectrum, we have not attempted to create a detailed and comprehensive set of forms. Instead, we have created a comprehensive framework within which all technologies and markets can be assessed. These templates are designed to used as tools to facilitate accurate and effective decision making. It is the responsibility of those using these forms to exercise good judgment in the level of detail they supply to support an effective, efficient decision-making process.
"Lead" is the individual responsible for completion of the analysis and documentation for the Stage or Gateway. This includes all components of the analysis and preparation for any decision making, regardless of whether or not the work falls within their area of expertise.
"Support" is identified as any area that will play a significant role in a given Stage or Gate. It is their responsibility to perform the appropriate analysis within there area of expertise and support the Lead in whatever way possible.
During the analysis process, differences of opinion will likely arise. As always, we expect these differences to be expressed and discussed in an open and positive manner. If the difference cannot be resolved, it is the responsibility of the Stage or Gate leader to make the final call on how to proceed, as well as inclusion of the key points of disagreement in the Stage or Gate summary forms, to the satisfaction of the dissenting party.
"Approval" is the party responsible for making the final decisions on all process Gates. If inadequate information is provided to make an informed decision, it is the responsibility of the Approver to remit the findings to the Stage Leader with specific instructions regarding additional required work, analysis, or information to enable adequate decision-making.
Gates and Stages
[The original document presents two pages for each of these sections, providing room for the information to be filled in, along with pertinent identifying notation and comments.]
Gate 1: Initial Screen
- Discuss technology with inventor
- Identify background issues
- Determine reasonableness of claims
- Identify initial requirements for appropriate due diligence
- How did inventor come to develop or possess the technology?
- Is this technology based on real science?
- What is the status of patent protection or rights?
- Why has the inventor not taken this to market already?
- What will it take to do appropriate due diligence?
Stage 1: Conduct Due Diligence
- Review patents
- Assess competition
- Confirm performance claims
- Define initial funding and development requirements
- Estimate value potential
- Are rights to the intellectual property free and clear? If not, what would it take?
- Does this technology represent a true breakthrough? Why have existing players not pursued?
- How real is this technology? (e.g., If prototyped, how does this compare to existing technologies?)
- What time and resources are required to create a development plan and assess business potential?
- By orders of magnitude, what is the value potential of this technology?
- What are the key risks associated with pursuing this technology?
- Is Primary Technology well positioned to advance this technology?
Gate 2: Interim Approval
- Review recommendations and determine final disposition
- Does this technology fit with Primary’s goals and current technology portfolio?
- Does this technology share potential synergies with other Primary technologies?
- Does it represent a good investment, balancing risk and reward?
- Does Primary have the resources and is it well positioned to advance this technology in the near term?
Stage 2: Build Dev. Plan & Initial Business Assessment
- Create detailed development plans
- Refine assessment of initial business potential
- Identify key issues and challenges
- How long, how much money, and who will it take to make this technology market ready?
- What are the specific steps and milestones associated with making this market ready?
- What is the long term business potential? (i.e., high level Net Present Value)
- What is the likelihood of success in target market?
- What are the key issues that must be addressed to make this technology successful?
Gate 3: Development Approval
- Review recommendations and determine final disposition
- Is the development plan appropriate and adequate?
- Fit with initial market entry expectations?
- Is the market potential attractive enough to support development costs and risks?
- What risks would need to be mitigated to enable pursuing this technology?
- If pursued, what legal structure would be appropriate for this technology?
Stage 3: Development & Testing
- Execute development plan
- Create and test prototype(s)
- Perform milestone reviews as defined
- Does this technology perform as expected? Provide the projected value?
- Does the technology meet specific market requirements (e.g., emissions)?
- Is the testing adequate to support taking technology to market?
Gate 4: Milestone Review
- Review milestone progress and recommendations, and determine final disposition
- Has the milestone been fully completed?
- Do the results support on-going development?
- Are there any indications that development will deviate from plan? If so, what is the impact?
- Has anything changed to jeopardize the potential of this technology?
- Is this technology market ready?
Stage 4: Recommend Market Approach
- Develop appropriate business model
- Market strategy
- Financial model
- Define high-level operating model, including identifying executives
- What are the alternative models, and why was this one chosen?
- What are the costs and lead times associated with alternative models?
- What are the key business risks associated with each business model?
- Does the legal structure support the recommended business model?
- How will competitors likely react to this?
- What is the impact of the recommended model on Primary and the Inventor?
Gate 5: Market Approach Approval
- Review recommendations and determine final disposition
- Is this market approach reasonable and consistent with our mission?
- Are the risks associated with this market approach appropriately addressed?
- Are the steps adequately detailed and documented?
- Are the steps realistic and are the right people involved to help ensure success?
Stage 5: Market Execution
- Execute market approach
- license, or
- Are the anticipated results occurring?
- What can be done to improve performance?
- Any changes required to protect this technology and revenue stream?
- Any way to expand this market and / or technology?
- How are customer and consumers responding?