INNOVATION AND COMMERCIALIZATION

Learning Outcomes

LO1. Investigate how innovation is sourced and supported within different types of
organizations.
LO2. Explore the processing of different types of innovation within organizations
LO3. Apply the process required to commercialize innovation within an
organization
LO4. Evaluate the range of methods for protecting innovation within organizations.
 COMMERCIALIZATION OF INNOVATION
• Nurturing innovation is a process

• In the university context, the process is to transform intellectual resources (thoughts,

ideas and insights) into intellectual assets

• Intellectual assets become intellectual property (“IP”) through legal protection.

• IP defines the value on which a company depends for successful commercialization.

• REFINEMENT of our Value Proposition:

INNOVATION = IP + COMMERCIALIZATION
Commercialization: Thinking in Commercial Terms
TO LICENSE, ONE MUST:

• Satisfy a customer need

• Solve a “pain”
• Have a product, a process, a service
• Know industry/company entry points

FOR A “SUCCESSFUL” SPIN-OFF, MUST HAVE:

• A market
• A viable business model and plan
• A management team
• Critical resource mass ($, people, know how)
• Defensible technology
 New Product Development (NPD)
A firm can obtain new products
through:
• Acquisition refers to the buying of
a whole company, a patent, or a
license to produce someone else’s
product.
• New product development refers
to original products, product
improvements, product
modifications, and new brands
developed from the firm’s own
research and development.
Key Activities, New Product Development (NPD)
 Stages and Key Activities of NPD
Stages Key activities
Stage 1: Idea Continuous and systematic quest for new product opportunities,
Generation including updating or changing an existing product

Stage 2: Idea This is the first evaluation of a new product idea

Screening Takes the less attractive, infeasible and unwanted product ideas
out of the running
Only product ideas that will turn into profitable products are
adopted

Stage 3: The internal, objective analysis of step two is replaced by

Concept customer opinion in this stage
Development The idea, or product concept at this point, must be tested on a
and Testing true customer base
 Stages and Key Activities of NPD Cont…
Stages Key activities
Stage 4: Marketing Comprised of four P's:
Strategy and Product: The service or good that's been designed to satisfy the demand of a target audience
Development Price : Pricing decisions affect everything; profit margins, supply and demand, and market
strategy
Promotion : The goals of promotion are to present the product to the target audience,
increasing demand by doing so, and to illustrate the value of the product
Placement : The optimal channels for placement must be determined if the targeted
potential customers are to become actual customers
Stage 5: Business Yields information that is critical to the product's success
Analysis / Entails organizing private groups that will test a beta version, or prototype, of the product,
Feasibility Study then evaluate the experience in a test panel
This feedback communicates the target market's level of interest and desired product
features
Determines whether the product in development has the potential to be profitable
 Stages and Key Activities of NPD Cont…
Stages Key activities

Stage 6: Product Integrates the results of the feasibility study and feedback from beta tests from
Development / Product Stage 5 into the product
Technical Design Consists of turning that prototype or concept into a workable market offering

Stage 7: Test Marketing / The goal of this stage is to validate the entire concept – from marketing angle
Market Testing and message to packaging to advertising to distribution
By testing the entire package before launch, the company can vet the reception
of the product before a full go-to-market investment is made

Stage 8: Market entry / The stage in which the product is introduced to the target market
Commercialization All the data obtained throughout the previous seven stages of this approach are
used to produce, market and distribute the final product to and through the
appropriate channels
 Conclusions of NPD
• Product development is an always-
evolving and fluid process
• Video: Product development in the food
• In some organizations, there is a industry:
dedicated team that researches and https://www.youtube.com/watch?v=zgOh_q
tests new products gOQ_M

• Smaller organizations may • Video: The LEGO® Story:

outsource their new product https://www.youtube.com/watch?v=NdDU_
BBJW9Y
development to a design team

• In midsize organizations, the

product manager is often the
person in charge of product
development, and he or she may be
part of the marketing team
 New-Product Development Strategy
Reasons for new product failure
• Overestimation of market size

• Poor design

• Incorrect positioning

• Wrong timing

• Priced too high

• Ineffective promotion

• Management influence

• High development costs

• Competition
Case Study:
An Analysis of 3M, the innovation company – Click
Page 612
Commercialization Funnel
• Primary purpose is to kill weaker projects,
which could account for the low success rate
of product launches
• Resources can be focused on projects with
the greater probability of success
• Pros of the funnel approach:
Alignment with business strategy
Project governance
Portfolio management
Reduced time-to-market
Effective allocation of resources
• Cons of the funnel approach:
• Risk of killing good ideas prematurely
• May not guarantee the creation of concepts
that appeal to consumers and retailers
 Building an Innovation Business Case
Q: What is the best way to put the case to start the innovation journey?

A business case for innovation will help you to:

• Illustrate the issues and justify the risk of investing in innovation

- Convince management and other stakeholders to endorse the idea
- Logically think through your proposal, especially about its wider impacts
- An initial business case should be short, clear and easy to understand
- Its purpose is to get you through initial acceptance that there is an issue, and that it is
worth investigating a better approach
 Building Innovation – A Business Case
STAGES KEY ACTIVITIES
Stage1: Define the core issue the What is the presenting problem?
innovation is addressing: There may be a combination of factors

Stage2: Estimate the costs of the Identify areas where change may prove worthwhile
issue: Direct, risk and opportunity costs all contribute to the case for
innovation

Stage 3: Define metrics that will Based on the answers above, what aspects of the issue must the
indicate improvement: innovation address?
How will you know when a proposed innovation is working?

Stage 4: Identify the scope of Would the solution combine a technology with a change in processes?
innovation Or does the organization simply need to equip practitioners with better
tools?
Are changes in work practices required?

Stage 5: Determine how to You might start with a single point

implement the innovation This will help clarify your entry costs and implementation costs over
appropriately: time

Stage 6: Calculate the return on What will be the return to the organization?
investment How would this translate financially?
How will customer outcomes be impacted?
How long should it take for a return to materialize?
• Video: Gamechangers:
Netflix Case Study:
https://www.youtube.com/
watch?v=7Vxv4aVb6k4
Big Data and Cognitive systems to predict behaviors and Future Trends
Accessing Funding and Resources
• Not only public companies, but also private
companies need funding for various reasons

• A business typically needs the greatest amount of

financing during the startup and growth phases, but
it may also require a cash infusion for research and
development, new equipment or inventory

• While funding options for private companies are

numerous, each choice comes with various pros and
cons

• Money from personal savings; friends and family;

bank loans; private equity through angel investors;
and venture capitalists are all options for funding
throughout the life cycle of a private company
Resource requirements for a small business
to commercialize their offering

Financial Resources: Funding

• The most important element in starting a business is funding. Even the

most basic home business incurs a multitude of startup costs, including
registering a business name, obtaining a business telephone line and
printing business cards.

• Financial resources can be obtained from a variety of sources, the easiest

being from the personal accounts of the company’s founder. Alternatively,
loans and lines of credit may be granted from financial institutions, friends
and relatives, private investors and even the United States government. In
addition, many grants are offered from private and public sources to
entrepreneurs of all demographics and personal situations.
Resource requirements for a small business
to commercialize their offering

Human Resources: Employees

• The success of an organization is heavily reliant on the talent and strength

of its employees. The hiring of experienced professionals with track records
of excellence within their area of expertise ensures that the mission and
goals of the company will be carried out efficiently and with competence.
Strong team members can be recruited using a variety of methods. Staffing
agencies and executive search firms specialize in placing talent of all levels
within every industry. An alternative is to find employees through referrals
from individuals whose judgment is trusted.
Resource requirements for a small business
to commercialize their offering

Educational Resources: Industry Know How

• Perhaps the greatest thing an entrepreneur can do when establishing a new

business is to gain as much education possible. By understanding her
competition and gaining an in-depth knowledge of her industry, she will be
better prepared to make smarter decisions regarding the direction of her
firm. Educational resources can be found through professional trade
associations that are geared toward her industry, her local chamber of
commerce as well as the Small Business Administration.
Resource requirements for a small business
to commercialize their offering

Physical Resources: Premises and Equipment

• Whether a small home business or a retail operation with multiple

locations, every organization must have the appropriate physical resources
to survive. This includes a proper work space, working telephone line,
adequate information systems and effective marketing materials. This
aspect of business planning can be one of the costliest. As such, it is
important for an entrepreneur to realistically assess his needs before
making any purchases.
Resource requirements for a small business
to commercialize their offering

Emotional Resources: Support Systems

• Starting a business can be an extremely stressful endeavor for an

entrepreneur to undertake. To maintain her sanity as well as stay
motivated, it is important she have a support team that can give her
inspirations and guidance as needed. This team may be composed of friends
and family as well as a mentor or professional group.
Types of Funding Sources – Friends and Family
• In the early stages of a private company, personal resources
are often used to finance business operations

• Pulling from savings, taking a distribution from a retirement

account or taking out a second mortgage on a residence are
common among new business owners

• Once financing from personal resources dries up, owners may

find funding opportunities among friends and family Video: Friends & Family |
members Equity Funding:
https://www.youtube.com/wat
ch?v=xuzZD3FgKTc
• In most cases, private financing from close relatives or friends
comes in small increments between $5,000 and $10,000, and
repayment is often flexible

• Friends and family who invest in the business do not often

take an active role in operations
 Types of Funding Sources – Venture Capital
• A venture capitalist is similar to an angel investor

• This is a group of high or ultra high net worth individuals

or a company that manages the assets of those individuals

• Because of the volume of money that flows into venture

capital firms, businesses able to secure capital through this
medium are awarded deals of $11 million on average Video: VC and Private Equity:
https://www.youtube.com/watch
• Similar to angel investors, venture capitalists invest in ?v=NAtOa6wM3z4
companies with a strong track record of revenue and
potential for extreme growth over time but also require an
active role in business operations

• Venture capitalists require an exit strategy, which makes

this financing option best for companies that plan to go
public or sell to another company in the future
 Types of Funding Sources – Franchising
• Franchising is a method of expanding business on less capital than
would otherwise be needed For suitable businesses, it is an alternative
to raising extra capital for growth, Franchisors include KFC,
McDonald‘s, etc.

• Under a franchising arrangement, a franchisee pays a franchisor for the

Video: How to Open a
right to operate a local business, under the franchisor's trade name. McDonald's Franchise (short
manual):
• The franchisor must bear certain costs (possibly for architect's work, https://www.youtube.com/w
establishment costs, legal costs, marketing costs and the cost of other atch?v=bdVCV6EULo0
support services) and will charge the franchisee an initial franchise fee
to cover set-up costs, relying on the subsequent regular payments by
the franchisee for an operating profit.

• These regular payments will usually be a percentage of the franchisee's

turnover

• Although the franchisor will probably pay a large part of the initial
investment cost of a franchisee's outlet, the franchisee will be expected
to contribute a share of the investment himself
Social media and constructing digital platforms for
promotion and distribution.

• What is Social Media Content Distribution Strategy?

• A content distribution strategy is a plan for properly promoting content online,

whether it’s linking to the latest blog post or sharing a new ebook. A content
distribution strategy ensures that your content is seen by the world.

• Without distribution, your content won’t reach your target audience. They won’t
know about your product, what it does and how it can help them reach their goals.
They’ll have no clue why they should park their well-earned dollars with your brand
rather than your competitor. You won’t have enough leads to sell your product to.
Social media and constructing digital platforms for
promotion and distribution.

• What is Social Media Content Distribution Strategy?

• But content distribution has always been more of an after-thought. There are
creators who hit send on a tweet, status or story and call it a day. Content
distribution is backburner-ed. And unfortunately, the creators who are trying to
distribute their content may not be doing it right. To help, here are 5 tactics that
can transform your social media distribution strategy and make sure your content
reaches the right people.

(Source: https://foundationinc.co/lab/social-media-distribution/)
 Social Media Distribution Tactics
Tactic 1: Create Content (Really Good Content)

• In order to have something to distribute, you still must be creating good content.
Maybe a tweet of a motivational content or posting pictures of food on Instagram.

• With your target audience in mind, the content that you create will always benefit
from two things: storytelling and the 3 E’s.

• STORYTELLING - As soon as you make a personal connection with your target

audience and let them into an experience. When storytelling through content, it’s
not always about your own personal experiences. It’s also telling other people’s (like
customers’) stories, or the story of your brand, or even creating a story about how
your product could be used in the audience’s life. By doing this, you forge a way
stronger relationship and keep their attention for longer.
 Social Media Distribution Tactics
Tactic 1: Create Content (Really Good Content)

• The 3Es
• Entertaining content catches your audience’s attention. Anything that makes
your audience feel good is entertaining content.
• Educational content teaches your audience something—in the broadest sense.
You could blow their minds with some eye-opening, in-depth research, but your
content doesn’t have to be technical to be educational.
• Engaging content invites your audience to join the conversation. It turns social
media into a dialogue instead of a monologue. To engage your audience, create
content they can reply to, ask questions about, give their opinion on, and share
with others. And then you can directly interact with your target audience and learn
more about them. This kind of content is underused, but it is seriously a win-win.
 Social Media Distribution Tactics
Tactic 2: Find Your Target Audience & Where They Live
(Digitally)

Step 1: Understand what you bring to the table for your target audience.
What’s your core offering to customers? What’s your unique value proposition?
Step 2: Create detailed marketing personas. The best way to get started is to break it
down into 4 questions that need answering:

• What does your ideal customer look like?

• What would lead them to buy what you’re selling?
• What does their buying process look like?
• How can you get your brand in front of them? Remember:
Personalization is everything.
 Social Media Distribution Tactics
Tactic 2: Find Your Target Audience & Where They Live
(Digitally)

Step 3: Research. Dig up as much relevant information as you can about the
businesses and decision-makers you want to reach. This is where you can find out
where your audience spends most of their digital time. Which social media platforms
they use, when they’re on during the day, and how long they spend on each channel—
this is all crucial information for creating your content distribution plan for social media.

By understanding where your target audience is online and what they’re doing will give
you enough direction to understand where you need to be sending your content. Put
your content in front of people who value it and start seeing the results you want.
 Social Media Distribution Tactics
Tactic 3: Focus On Your Best Performing Channels

• Your best performing channel (the one with the most followers, most engagement, etc.)
is likely where you spend most of your time—it’s the platform you know inside and
out. Keep using the platform to connect with your target audience but find new ways
to do so.

For example, if your biggest channel is Twitter, then start hunting down your target
audience, and find out who they follow and what communities they revolve in. Then you
can start interacting with other users in these communities. It’s a fast and effective way
to build your audience and learn more about them.
 Social Media Distribution Tactics
Tactic 4: Join Social Media Groups, Subreddits & Other
Niche Channels

• Social media groups, subreddits, forums and other niche channels are like direct
pipelines to your target audience. The whole point of these niche channels is to bring
like-minded people together.

• You can join groups and channels specifically tailored to your niche. There is a
channel/group/subreddit/forum/etc. for every single topic. All you have to do is track
down the ones that are relevant and join them. But you must be careful in your
approach.
 Social Media Distribution Tactics
Tactic 5: Build Relationships With Influencers
• If your brand is small, if it’s new, or if you want to break into a new target audience
segment, influencer marketing is a great way to get a lot of attention on your brand.
• Start by identifying potential partners—you need to make sure their followers are in
line with your target audience.
• Once you have a list of influencers, reach out and make the connection. Influencers
can share any content you provide them, or they will create content for you that has
to do with your personal brand or company.
• Their audience, which should include your target audience, will see the content they
share, and you will easily get more viewers/followers/subscribers and see the results
you want.
• By securing relationships with influencers, you are opening the door to future
partnerships and tapping into the tremendous sway that influencers have with their
followers.