The secret to successful commercialisation
Introducing a successful new product or service to the market requires careful consideration
of much more than the technology on which the product is based. While product
development frequently focuses on differentiating product or service features, it is important
to also develop a defensible intellectual property (IP) position, as well as truly understand the
customers and their perceptions. The former is important, not just to protect the new product
from imitators, but also to ensure freedom to operate i.e. that the product does not infringe on
others’ IP rights. Similarly, identification and testing of customer needs, price and pain points,
and ways to reach customers are an equally important part of the commercialisation
pathway.
But if there is one secret that summarises what commercialisation really entails, it is to be
able to understand precisely where the product or service will fit in the overall value chain,
and how it adds value.
The value chain, first popularised by Michael Porter in 1985, refers to a network of activities,
connected by linkages that are performed by an organization to design, produce, market,
deliver and support its products and services. As corporations have become less vertically
integrated, adopted open innovation, and embraced globalisation, most value chains today
cross organisational boundaries and consist instead of numerous firms, loosely linked but
interdependent on each other.
The real innovation challenge for many small firms seeking to meet new customer needs is
that others with complementary capabilities in the value chain may not be accessible, or in
the case of a new industry, perhaps may not even exist at all. If a firm does not understand
or cannot enter the value chain, even though it has a new product or service, successful
commercialisation might never be achieved.
Such has been the case for example in deploying renewable energy sources in remote
Australia, for example with indigenous communities or at mine sites. The outback has the
highest solar intensity in the world, so it should be relatively easy to install solar cells to
power such communities, right?
Unfortunately not. Electricity providers currently use diesel generators to power such sites,
and although solar cells (or wind generators) could offer a renewable solution, diesel
generators are still required because of intermittent cloud cover or wind that prevents such
renewables providing base load power capacity. Even though a number of small Australian
firms are developing energy storage solutions (such as batteries, thermal storage, or
flywheels) to provide power continuity when the supply drops, the challenges to integrating
these into existing networks are so numerous that most energy companies find it difficult to
use renewable solutions as much as they otherwise would.
The challenges facing these small firms with energy storage solutions are not just
technological. More difficult is their inability to negotiate (indeed, create) the value chain that
is required. The barriers they face include scale (too much or too little energy storage); cost;
the regulatory and approval process; understanding the specifications for modelling and
design; system integration; interoperability (for instance, with diesel generators who are
resistant to being displaced); and remote system control and maintenance. Solutions might
exist in isolation, but broad innovation is hindered because a multiplicity of connections
needs to be made before the innovating firm can ever satisfy its potential end customers (in
this case, the energy generators). They require what are known as “complementary assets”
outside their own organisational boundary. The value chain is not visible, connected, nor
easily accessible to small individual firms.
In fact, the entire sustainability industry could innovate much faster if only more serendipitous
connections could be engineered. We believe we know how to do that, through a structured,
facilitated process that we call TechClinics.
We have found that the end customer of the value chain is usually prepared to participate in
a TechClinic if it can help them find a solution to satisfy a business need they are facing. If
so, many downstream stakeholders along a potential value chain can be motivated to
participate in a structured process that enables a new value chain to be created or an
existing value chain to be reorganised. We have found through our experience that because
satisfying an end customer need may require participants from outside their existing area of
expertise, they often try to find traditional solutions, work with existing partners, or are
unaware of more optimal approaches. We also found that through a structured process to
assemble a new value chain, the creation of new industry sectors is accelerated, and
individual firms are better able to commercialise their products or services, often in new niche
areas. Our case study into energy storage devices is just one example (see breakout box).
We have found that a critical part of the process is to involve the right stakeholders – R&D
organisations, governments, industry associations, businesses, and end-user suppliers or
customers themselves. Each contributes a vital piece of the puzzle: R&D organisations, a
broad knowledge of the technology environment and specialist skills; governments, the vital
support mechanisms and ability to overcome regulatory roadblocks; industry associations,
their knowledge of the business networks; businesses, the ability to provide products or
solutions that the value chain will eventually integrate; and customers, the “market-pull” and
capital to motivate the stakeholders.
For example, we found that in order to establish a viable algae-based bio-fuels industry in
Australia, a large scale lipid (oil) extraction capability needed to first be established. Australia
currently has the research, development, processing, refining and end-user capability for this
industry sector, but lacks adequate scale in algae production and oil extraction. However,
algae production and extraction lie between the development and processing activities of the
value chain (illustrated in the figure below) and therefore are integral to the building of a
viable algae based bio-fuels industry. Through the TechClinic process, the relevant
businesses have come together in a new collaboration to complete the value chain, with
Boeing one end user and a number of small businesses filling the remaining production and
extraction gaps in the value network.
Research
Development
Production
Extraction
Processing
Refining
End Users
Figure: Algae Based Bio-fuels Industry Value Chain
A successfully facilitated innovation process will avoid jumping to point solutions that may
result in suboptimal outcomes. By using its extensive networks among governments,
research organisations, and industry, the AIC is able to invite a diverse array of stakeholders
from across the entire value chain to be represented in the process. Through this initial
research mapping and discovery process, the AIC is able to identify the most challenging
barriers to greater industry collaboration, and ensure that all aspects of industry growth are
considered (for example, the need for regulators, standards, and community opinion to be
involved). New project opportunities inevitably surface during this part of the process.
The subsequent TechClinic then facilitates the adoption of innovation and technology in
these new projects, helping to solve problems for firms, and building new industry value
chains and networks. The TechClinic provides a platform to match industry needs to
relevant, capable and interested organisations. By developing an agreed list of action items
as its outcome, the TechClinic defines a path showing how firms can provide solutions to
market gaps or address opportunities, and where they fit in the value chain.
Dr. Rowan Gilmore is Adjunct Professor of Business at the University of Queensland Business School, and CEO
of the Australian Institute for Commercialisation.