Technology Transfer
Prof. Crawford
EN 90
What is Technology Transfer?
The technology transfer process helps a
manufacturing company more effectively use its
human, physical, and capital resources by
providing knowledge, information, or assistance,
which leads to improvements in its facility,
equipment, manufacturing methods,
management methods, or marketing methods.
Technology Transfer
Invention
Marketing
(Diffusion)
Technology
Transfer
Design
Innovation
Simple Example
• Incredible that people a million years ago invented
the wheel that would be useful for so long. They saw
the need for such a device that would make certain
tasks easier – invention.
• Someone needed to device a way to utilize the wheel
– innovation
• Turn idea into reality and implement other ideas to
use the wheel – design
• Further developments need promotion and
device/idea needs to be disseminated - diffusion
Inventions
Some are nothing more than scientific curiosity for
years before being transformed into a working device,
prototype, or product
Aluminum
100 Years
(H. Saite-Claire
Deville, 1854)
90 Years
Total Internal
Reflection
(William Wheeler, 1881)
Theory of Lasing
(A. Einstein, 1917)
Utensils, mast for
sailboats window
frames – late 1950’s
Fiber Optics
1971
43 Years
First I Prototype Gas
discharge laser 1950
Inventions
Some inventions have immediate appeal
X-Rays
(1895 – William Rontgen)
Few Years
1900’s
Used in Medical
Profession
Inventions
Some Inventions are forced
35 years
Radar
(Patent, 1914)
unworkable
Nothing happened
1940’s
successful need
WWII
The ‘need’ preceded the product
Inventions
The need proceeded the product – another example
The vacuum tube was bulky, fragile, power hungry, and
had lifetime issues – it was inherently unreliable
The need for a transistor existed long before its invention
Bell laboratories poured money into it resulting in the first
patent of the resistor (1940)
In 1951, the first point – contact transistor was
manufactured
The complicated path of Invention
Total internal
reflection, W.
Wheeler, 1981
Long uniform quartz
fibers; Boys, 1887
Guiding output of
cathode discharge
lamps; Reeves, 1950
Laser, 1960’s
Theory of attenuation
resulting from impurities,
Kao and Hockman 1960
Bundles of
glass Fibers;
Baird, 1927
Cladding on fibers
Van Hell, 1952
Minimum
attenuation
losses
achieved
Maurer, 1970
TODAY – Telecommunications, Medicine, dentistry, displays
A Fundamental Question of
Technology Transfer
• Why do inventions, in some cases, take so
long to reach the market place?
• What factors govern the time lag between
invention and application?
In today’s marketplace, speed to market
dictates success or failure
Innovation
Invention
Product
This period of development is characterized by INNOVATION!
Innovation vs. Invention
• Invention = Original Concept
• Innovation = the development, refinement,
and change of an existing idea / product
• E.g. easier to manufacture, Cheaper to
Fabricate, Better Performance, More reliable
Then and Now
• The wheel has been improved over
thousands of years – improvements evolved
slowly
• Consumer Electronics Industry, time to
market: 1980 = 1.5 years
1990 < 1 year
• Today, there is a lot more effort on conscious
design and modeling
Design
• Design is part of the innovation process,
sophisticated modeling and software shaves
years off the development process
• Many issues can be identified during the
modeling stage, before prototyping – saves
time and money
Diffusion
• Sometimes referred to as marketing,
– everything that is involved in the promotion and
sale of the product
• Also important is promotion by use of
publication
• Users and customers have important input on
how to improve or refine the product
• Can conflict with IP
Relationship – Invention,
Innovation, Design, and Diffusion
Naïve Model - Linear
Diffusion
Innovation
Invention
Design
What’s Wrong with this Model?
• Feedback from each stage
• No real beginning and end, invention is often continuous
Realistic Model
Innovation – Embrace the entire Process
Technology Transfer – Means to achieve
innovation
Innovation
Invention
Technology
transfer
Design
Embraces the entire process
Diffusion
Some Working Definitions
• Technology Transfer The transactions
between changing technology and invention,
innovation, production, and diffusion
• Innovation – The exploitation of new ideas
Reasons to Innovate
• Competition – Keep ahead of Competitors
• Science & Technology – Technological change can
be the result of science push and changes in the
science and technology base lead to product
innovation
• Market – Customer feedback influences innovation
leading to product improvements
• Legislation – Government can force innovation (e.g.
safety, environment, economic Policy)
• Human Nature – Curiosity “what happens if I do
this…?”; Laziness “There must be an easier way to
do this”
Innovation as a Policy
• Innovation does not guarantee success, but a lack of
it will ultimately lead to failure
• Innovation and invention are integral and key to many
companies (e.g., Philips, 3M)
• Each year Nissan holds a competition for its
employees to come up with a novel form of transport
• Innovation is policy, change is inevitable and in part is
driven from within the company. The company is not
simply waiting to respond to one another of the
external proximal cases, but is itself a vehicle for
change.
Benefits to Innovation
Apart from innovate to survive;
• Competitive Advantage
• Increased Market Share
• Higher Growth Rates
Manufacturing Companies 1945 - 1982
1950
Rank (Vacuum Tube)
1955
(Transistor)
1965
(Semiconductor)
1975
1980
1982
1
RCA
Hughes
TI
TI
TI
Motorola
2
Sylvania
Transitron
Fairchild
Fairchild
Motorola
TI
3
GE
Philco
Motorola
National
National
NEC
4
Ratheon
Sylvania
GI
Intel
Intel
Hitachi
5
Westinghouse TI
GE
Motorola
NEC
National
6
Amperex
GE
RCA
Rockwell
Fairchild
Toshiba
7
Nat Video
RCA
Sprague
Hitachi
Intel
8
Rawland
Westinghouse Philco/Ford RCA
Signetics
Philips
9
Eimac
Motorola
Transitron
Philips
Mostek
Fujitsu
Clevite
Raytheon
Amer’Micro
Toshiba
Fairchild
10 Lansdale
GI
Information
• Inventors and Innovators need information
available to them
• Knowledge – Base information – often
academic and abstract, contained in journals,
scientific magazine, patents, and at
conferences.
– Ex. Transmission of light through a glass fiber is
limited by impurities in the glass rather than inherent
properties of glass. This was published in an archival
journal, but did lead glass manufacturers to improve
the quality of glass by reducing impurities – this
paved the way for fiber optics
Information
Skills based information – information acquired by doing
something. It’s hands-on experience. Skills learned by
training and participation. Go to another institution where the
skills are practiced, or skilled personnel can be brought in.
Information
Equipment based knowledge – Knowledge conveyed via
products/devices. Knowing what machine tools are available
and what they do, what merchandise is available in the
marketplace and what features it has.
Also conveyed in trade journals, magazines, and
conventions.
Another information channel is through sales reps,
advertising, other companies, etc.
Technology
• Technology is key to economic growth and
international competition
• Research must be exploited to produce new products /
devices
• Technology transfer becomes vital, especially today
when time-to-market is key to success
• Scientific push is usually not an engine for technology
transfer
• Science often predates its application by decades
• Without scientific curiosity, there would be no
technology transfer
• With continual invention and innovation, technology will
become outdated
Technology Transfer Process
IBM grants a license to the government of Taiwan – the
computer corporation undertakes a transfer of knowledge.
French cheese maker passes on recipes to Japanese
firms – transfer of knowledge
Brown University organizes a short-course – transfer of
educational and technology information
Flow of
information
The flow of information and
knowledge are various and
wide ranging.
Innovation Process Checklist
Technology Transfer is a subject of Innovation
Identify Technology
Prototype
Technology
Awareness
Training
Secure
Technology
Evaluate
Technology
Protect
Technology
Product
Specific
Training
Barriers to Innovation
• Management Attitude: Upper level management does
not embrace change easily
• R&D effectiveness: Needs to be continuous, not
discretely when a new product is needed
• Short Term Pressures: Companies take a short term
perspective by not investing in higher risk, long term
payoffs
• Resistance to Change: Same-old, same-old;
comfortable with current position
• Poor Information Flow: Need to maximize flow of
information around the company… poor information
flow hinders technology transfer
• Weak Links: Good idea’s products can be destroyed
by poor marketing or not listening to customers
Information Collection
Where do I get Market
Information?
Customers
Business contacts
Competitors
Suppliers
Employees
Trade representatives
Business affiliates
Industry experts
Manufacturer’s salesforce
Social networks
Friends
Subcontractors
Consultants
Family members
89%
82%
82%
74%
70%
67%
63%
60%
59%
48%
48%
41%
33%
30%
Impersonal Sources of Information
Trade magazines
Sales brochure
Advertising
National newspapers
General magazines
Journals
Local newspapers
Manufacturer materials
Catalogs
Annual reports
Government publications
96%
70%
63%
60%
56%
56%
52%
52%
51%
41%
22%
Innovation: Value to Company
• Increased Competitive Advantage
• Improvement in Quality
• Cost Savings
• More Flexibility
• Better Service to Customers
• Reduction in lead times
Companies with strong investments in innovation tend
to achieve better cash flows and earnings
performances
R&D correlates with long term growth
Information Collection
• Well organized approach for monitoring
technological and scientific intelligence
• Good R&D organization to encourage
information flow (both internal and external)
• Accurate Knowledge of the company’s own
technological position and capabilities
(technology reviews and audits)
• Efficiently organized information on markets
and competitors
Research and Development
Hitachi Model (Japan)
Independent Research
• Basic Research plus elementary
technological research
• At advanced research lab, central research
lab, and the nine corporate labs
• Funded by head office – long range research
strategy
Hitachi Model (cont.)
Commissioned Research
• New Product Development
• At Central and Corporate Labs
• Sponsored by business unit, factory,
subsidiary companies
Product Improvement
• In the development departments at the
factory
• Funded by factory
How much to spend on R&D
Company
% Sales on
R&D
Country
Cannon
11%
Japan
3M
7%
US
Philips
3%
Netherlands
The norm of US companies is about 3%
A small company (like yours) needs to define a research
policy
Assessing Technology
Assessing future technological innovations is usually
done in a technology review or audit
3 Parts
1. What is the competitors Technology (what do they
got?)
2. Review companies own Technology (“what do we
got?”)
3. Review what state-of-the-art Technology (“what
could we have”)
Technology Portfolio
Technology Importance
Business Attractiveness
Low Position
High Position
High Importance High Importance
A B
C D
Low Position
High Position
Low Importance Low Importance
A: Attractive Business, not much competitive position, use R& D
Resources to gain competitive advantage
B: Attractive Business, good competitive advantage. Company should
sustain funding and resources, be prepared for counter attack
C: Poor Position, company should not use resources here
D: Mixed, not important technology for company, move to cell B or
eliminate
Market Potential
•
•
•
•
Identifying Potential Customers
Recording Data
Classifying External Influences
Analyzing Results
This can help dictate R&D resources
Benchmarking
Benchmarking results help understand the amount of
changes required to set strategic targets and guide
planning efforts. There are four types of benchmarking.
Internal: Comparison of Internal Operations
Competitive: Competitor-to-Competitor comparisons for
products/services of interest
Functional: Comparisons to similar functions – with the
same broad industry or to industrial leaders
Generic: Comparisons of business processes on functions
that are very similar regardless of industry
Searching for Technology
• Very few small to medium size companies will have
the necessary expertise or R&D resources and
infrastructure to provide new technology.
• Companies that want to develop something must be
able to find other organizations that can help them
• Information is key to finding new technologies
• Companies must know where they can go to find
information on products, research activities, finance,
IP, etc.
• How can a small company leverage off of a
university?
Using Higher Education Research and
Development
Universities can often help small and big companies
with R&D. The University often offers much cheaper
rates than a private research company.
• Access to new technology (A lot of pie in the sky
stuff)
• Keep abreast of new developments
• Access consultancy skills
• Professors are possible technical board members
• Develop joint new technology, benefits both.
Linking Organizations to Educational
Establishments
University
Industry
Forming Links
1. Graduate Employment – companies hire graduates and create
a natural link back to their alma mater
2. Sabbaticals – Companies hire university professors to work
on-site for a year or semester to bolster in-house expertise
(pretty cheap)
3. Industry/University Research Units – Organized research units
where focused groups at the university partner with companies
(e.g. in the US, NSF, MRSEC). Companies gain access to
professors, students, and earn results
4. University/Industry Liaison Units – Universities are creating
internal organizations that are in charge of protecting and
developing valuable new technologies to be transferred to
industry. At Brown, the campus based technology transfer unit
is BURF, Brown University Research Foundation.
University – Industry Partnership
Product ideas, real world
perspective, focused
problems, prototyping
facilities, market experience
New results, interesting
devices, research with
seemingly no applications,
professors, and students
Paths of Technology Transfer
Government
Funding
University
research
Campus-based
No
technology
exclusive
Invention transfer group
right
Company w
Company x
Company z
Company x
Funding
University
research
Invention
Exclusive
right to
use it
Campusbased
technology
Option to
transfer group
exclusive right
option
no
Company y
Company w
Company x
Exclusive right to use
Company z
Company to Company Transfer
• Private companies with R&D facilities ‘produce’ a lot
of innovative ideas that they may or may not patent
or develop. These ideas may not be in their business
plan, not within their core competencies, or returns
are too small. These ideas may be suitable for
another company.
• A small company company acquired by a big
company or selling off its technology to a big
company
• Inter-Company transfers. Your idea is now being
transferred to products group or manufacturing.
Company to Company Transfer
Company x
research
Company x
products
group
Innovation
idea
Spin-off of
Company X
Company Y
buys
technology
Company SB
Small Business
Innovation
idea
Company Z buys
company SB on
right to invention
Collaborations between
Companies
Agreements for organizations to work together
• Alliances
• Networks
• Cooperatives
• Collaboration
These arrangements could be with suppliers,
customers, and even competitors
Many times manufacturers form alliances to work
together but retain their individual brand names.
Technical Partnerships
Another form of technology transfer is through technology
/ engineering collaborations to increase their expertise by
sharing knowledge, skill, and personnel.
What is the goal of a technology collaboration?
- To improve the Innovation Process
Why Collaborate?
If you are faced with a problem that you cannot solve
yourself – technical, financial, or commercial problem:
• To share risks
• To share costs
• To gain technological know how
• To speed up product development
• To develop industry standards
•To gain additional markets
• Reduce time-to-market
Barriers to Transfer
What hinders technology transfer and what cause joint
projects to fail?
• Lack of awareness – what technologies are available to
them
• Lack of knowledge – If staff of company is lacking technical
knowledge, it may not be able to capitalize on the
technology being offered in the transfer
• Lack of funds – company may not be able to afford the
development costs of the technology being transferred
• Lack of common interests – Individuals putting the interests
of their own company ahead of the alliance
• Conflict of interest – Even in collaborations on the technical
level or strong, it has been found that collaborations
between competing companies doesn’t work.
Barriers to Transfer (cont.)
• Lack of Trust – If little trust exists between
companies, it is doomed to fail
• Poor communications – Fail to keep each abreast on
everything relevant to the collaboration, activities,
thoughts, processes, goals, direction of venture
• Lack of infrastructure – company may lack equipment
and facility in infrastructure to take on the transfer
• Over-committed – The company may be overcommitted on current projects and simply lacks the
time needed for success.
Barriers – With Regard to
Collaboration
• Technical Problems – which are generally overcome,
but which add time and money and frustration
• Resource Limitation – Poor budget control
• Change in Project’s Structure – Loss of key members
or loss of partner
• Organizational Problems – due to a partner losing or
changing interest in the technological side.
Evaluating the Technology
Large companies solicit proposal on new and innovative
ideas. There will be well defined criteria for the
assessment of new proposals
• Is proposal consistent with company strategy
• Any synergy with existing efforts on projects
• Have the risks, advantages, potential payoffs, and
implications been considered in detail
Proposals may be evaluated by internal or external
reviewers
For small companies, startups, they are contained in
business plans.
Financing Innovation
• Has major influence through innovation
process and technology transfer
• Before funding is obtained, costs and benefits
need to be thoroughly analyzed
• What is the payback period?
Protecting Technology
IP plays a vital role in technology transfer. Those
interested I the technology will want to hear that there
is a strong IP position. If others have IP that is close
to yours, this may muddy the waters!
• Patents
• Trade-Secrets
• Trademarks
• Copyrights
• Confidential Information
The Importance of IP cannot be over-emphasized
To Prototype or Not To Prototype,
That is the Question
Prototype
No
Prototype
Advantages
Disadvantages
Identify issues
and
potential problems
Expensive and
time consuming
Save money
&
Time to market
Could miss
design flaw, for
example
By prototyping you can minimize risk and uncertainty at the
expense of cost and time
Prototyping
Assists in the following areas
• Planning of implementation
• Feasibility
• Clarification of necessary requirements
• Explore Options
• Improve product
• Improve understanding
• Verify Design
• Explore maintenance issues
Prototyping Risks
• Increased time-to-market (increased
development)
• Prototyping too early
• Insufficient testing of materials (components)
• Lack of knowledge in new technical
environment
Example of Response Time of New Product
Development of Mechanical Transmission
Develop design concept
2
3
Complete layout and design
1
3
Design review
1.5
1
Detail design
1
4
Manufacture prototypes
2.5
6
Pilot test and power test
1
2
Field test
4
8
Manufacture first product
4
7
Total Time
17
34
Prototypes
A well designed prototype can help you market
your idea to potential partners.
Determining the Value of your
Invention:
License Agreement
• Value – How much the licensor is entitled to as
compensation from the licensee in exchange for
licensing rights
• Compensation (Royalty) – Income for the licensor at
the expense of the licensee
• How to arrive at a fair royalty: Many Models
• Simple model to calculate impact on royalty rates and
compensation by fixed dollar payments have differing
effects on pricing behavior.
(that doesn’t make sense, stacy…)
Royalties
• Running Royalty is most popular. The sharing of
success, achieved through the distribution of profits –
This is considered a good indication:
– Profits: A share of 25% of profits
• Profit is not an ideal metric to base royalty payments
on because of the different accounting ways that can
be represented.
– Net Sales: A share of 5% of net sales
Royalty: % of Net Sales
(many models)
• % may be constant
• It might also decline beyond certain base
levels as sales rise (incentive to licensee to
promote sales)
• Increase at higher volumes
Royalty Rate Payment
• Often accomplished by up-front payment –
License Fee
• A minimum annual royalty payment
Up front money serves a few purposes:
• Immediate returns to licensor
• Incentive for licensee to bring technology to
market
Lump-sum Payment
Sometimes royalty payments are impractical
• A process
• The technology is a small part of a
complicated system
Other Compensation
1. Royalty fee for sub-licensees
2. Stocks
3. Equity (works for many small start-ups)
(2) and (3) allow licensor to participate in profits
and increased control of business
Ball Park Ranges
IP
RANGE
Patent
Licenses
0.2 – 35%
Trade
Secrets
0.2 – 15%
Tabulated from biological, chemical, electrical,
mechanical
Present Value of Royalty
R(1+r)-n
For the licensor, the investment is in the past
Year
Expected
$1.00
Amount
Royalty
1
$200,000
.91
$182,000
2
$200,000
.83
$165,000
3
$200,000
.75
$150,000
4
5
$200,000
$200,000
Total: $ 1 M
r =10%
.68
.62
$137,000
$124,000
$758,000
(Present value of
royalty payments)
Fixed Sum Equivalents of Running
Royalty
• If the market interest rate is 10%, this is the
opportunity cost or rate that is forgone if the
licensor elects a running royalty
• Lump sum payments can be invested in the
market
Simple Model for Negotiating
Royalty
• An array of considerations or variables
judged to impact the royalty
• Reasonable estimates on dollar valuations of
the variables impacting the royalty
• Weights impacting relative worth on the
variables impacting royalty
Variable Affecting Royalties
• Degree of Exclusivity (exclusive, nonexclusive)
• Anticipated Net Sales
• Type of License (Patent or know how)
• Term of License
• Terms of Licensee (guarantees, immunities,
etc).
Royalty Rate Matrix-Type Array
New $ Amt. P%
$ Amt.
beginning
assigned to after
negotiation royalty
variable
B j (2)
xP
Bi (1)
New royalty
after
negotiation
B j (2)
x(i (1))
Bi (1)
Variables
affecting
royalty
Bi(1)
Bj(2)
Ci(1)
Cj(2)
A1(1)
B1(1)
B1(2)
C1(1)
C1(2)
A2(1)
B2(1)
B2(2)
C2(1)
C2(2)
A3(1)
B3(1)
B3(2)
C3(1)
C3(2)
Total
Bi(1)
 Bj(2)
 Ci(1)
=P
 Cj(2)
Sample Calculation
Variables
affecting
royalty
Amt.
Proposed
Amt.
Negot’d.
Royalty
Impact
New
Royalty
Net Sales
50,000
60,000
3.55
4.26
Exclusivity
30,000
30,000
2.25
2.25
Immunity from (10,000)
lawsuits
(10,000)
(.70)
(.70)
New Product
risk (heavy
marketing)
(20,000)
(20,000)
(1.45)
(1.45)
Patent
20,000
20,000
1.45
1.45
Total
70,000
80,000
5.00
5.71
Examine 1st Row
A
Variable
Bi(1)
Amt.
Requested
Bj(2)
Amt.
Negotiated
Ci(1)
Royalty Impact
Cj(2)
New Royalty
Impact
Net Sales
50,000
60,000
3.55
Bi(1)/Bi(1) * 5% =
50,000/70000 * 5%
4.26
Bj(2)/Bi(1)*Ci(1) =
60,000/50,000 *
3.55
TOTALS
70,000
80,000
5.0
5.71
Summary – Technology Transfer
• Innovation and Technology transfer is
exciting, but it is a complex process
• Innovation and Technology transfer are a
judicious mix of management and science,
creativity with technology.