2. Oxford Innovation Ltd 2003 Technology Commercialisation Practical Lessons from other Countries Dr Alistair M. Brett Senior Consultant Oxford Innovation Ltd Oxford, UK Opinions expressed are those of the presenter

3. Oxford Innovation Ltd 2003 Numbers Trends Opportunities Information sources: The Industrial Research Institute European Industrial Research Management Association Centre for Research on Innovation and Competition Institute of Innovation Research Manchester University Nottingham University Business School Association of University Technology Managers

4. Oxford Innovation Ltd 2003 A few numbers (2001) UKUSA Total university spending on research$2.8 10 9 $31 10 9 Income from licenses$24 million$1.07 10 9 Average income per license$150,000$168,000 Spin-out companies175494 Patents2763,721 Commercialisation successes initiated by personal contacts **70%

5. Oxford Innovation Ltd 2003 Russian Academy of Sciences: R&DCCs Pilot Research & Development Commercialisation Centre (R&DCC) at Chernoglovka Science Centre, Moscow Region 2001 –2004 Work supported by the British Council and UK Foreign & Commonwealth Office Based on previous work since 1994 (USAID, Tacis, BC, Eurasia Foundation) R&DCC accepted as model for Russian Academy of Sciences research institutes Problems: Structure, Financing

6. Oxford Innovation Ltd 2003 Lessons learned  Be patient  Make and maintain personal contacts with companies – large and small  Set up open communications  Don’t fall in love with the technology  Offer solutions not technologies  Work on multiple projects simultaneously  Keep new projects in the “pipeline”

7. Oxford Innovation Ltd 2003 Lessons learned (2)  Ownership rules for IP must be clear  Government funding of research is important  Industry-directed research at universities does not damage scholarship  Plan for commercialisation early  manage risk  One success is better than years of plans  Monitor costs, including indirect costs

8. Oxford Innovation Ltd 2003 Trends Motorola “We are moving more and more of our research off shore because of unavailability of the top researchers that we needed in growing our research efforts” Survey (2003) of 104 large US/European companies, 90% said “innovation is integral to our current strategic goals” Nokia “We have 18,000 engineers at 69 sites worldwide” Infineum (Exxon-Shell) “We want access to networks of scientists”

9. Oxford Innovation Ltd 2003 Trends R&D, products, becoming more complex, more embedded knowledge Reputation and track record in managing projects are more important than cost Build long-term strategic partnerships with networks of specialists across borders Stimulate methods development Access to specialized resources rather than finished technologies

10. Oxford Innovation Ltd 2003 Role of Innovation in firms Industrial Research Institute (IRI) “Biggest Problems” Facing Technology Leaders in 2003  Growing the business through innovation (acquisition and co-development) 41 %  Accelerating innovation12 %  Balancing long-term/short-term R&D objectives and focus 12 %  Measuring and improving R&D productivity and effectiveness 5 %  New business ventures 3 %  Improving knowledge management2 %  Management of global R&D1 %

11. Oxford Innovation Ltd 2003 Opportunities for Latvia  Take advantage of the trend towards distributed R&D  Reduce bureaucracy compared to other countries  Establish clear point of contact for industry at each university  Support exchanges of scientists between universities and industry  Work with existing Latvian organizations  Advertise Latvian successes to gain new industry customers

12. Oxford Innovation Ltd 2003 Mis-match of supply and demand UK/USA Other Supply Demand

13. Oxford Innovation Ltd 2003 Positioning strategies Feasibility studiesFew long-term Prototype developmentbenefits Internal investment in bothMore long-term “R” and “D” to progress benefits beyond prototypes Industry External Investment

14. Oxford Innovation Ltd 2003 “Management of intellectual property in publicly-funded research organisations: Towards European Guidelines” Open Science model - PROs do not retain any intellectual property rights (IPR) Licensing Model - PROs retain, protect and commercialise inventions through licensing the IPR to industry and to start-up companies Innovation Model – PROs have active policy of collaborative research with industry and a pro-active involvement in the creation of spinout companies.

15. Oxford Innovation Ltd 2003 Importance of technology transfer factors N= 150 1 2 3 4 5 6 Person to person contact User “pull” for technology Product champion at user Cooperative activities between user/developer Sense of common purpose Developer understanding of user environment

16. Oxford Innovation Ltd 2003 What drives market opportunities? Survey of 1000 European firms % effect

17. Oxford Innovation Ltd 2003 Why Latvia? Why should a company look to Latvia to access research expertise or outsource R&D? Is Latvian research of any value, is it innovative? How can we overcome barriers of language, culture, distance? Will the cooperative R&D be carried out efficiently? Will our company’s IPR be protected? How can investors make a return on investment?

18. Oxford Innovation Ltd 2003 What do Investors want from universities and research institutes? “Show me” -- don’t tell me Promote successful ventures  Recent cases of successful contracts or alliances  Is there a market for the technology?  What is the size of the market?  How should the market be entered?  What are your industrial contacts?  Finished technology or expertise?  How will the investor make money?  Risks?  How much money is needed?

19. Oxford Innovation Ltd 2003 Issues 1.Feasibility of conducting technology audits at Latvian universities and institutes, or – 2.Accessing and promoting expertise at Latvian universities and institutes, previously identified and evaluated by the institute 3.Promoting technologies, expertise, and resources from Latvian universities and institutes to foreign companies. Industrial Liaison Office model Web Portal

20. Oxford Innovation Ltd 2003 Issues 4.Promoting success stories 5.Analyse existing contracts with Western companies for attractiveness to investors 6.Selecting a small number of companies who can act as "bridges" between universities/institutes and foreign companies 7.Strategies for Latvian Government investment in technology commercialisation 8.Incentives for innovation, and retention of young scientists 9.The "Why Latvia?" question. What is Latvia's competitive advantage?

21. Oxford Innovation Ltd 2003 Strategic drivers of R&D outsourcing  New markets  New technologies  Access to IP  Access to new specialist expertise  Filling capability gaps  Resources flexibility  Management of risk  Time to market  Focus on core activities  Build on core strategic assets

22. Oxford Innovation Ltd 2003 Fuzzy front endNew product development Traditional Stage Gate™ Process Technology Stage Gate™ Process Overall New Product Development process

23. Oxford Innovation Ltd 2003 GateStage New Product Development Stage Gate™ Process Market/ customer input Preliminary assessment Full product launch Testing & validation Development Business case Initial screen Next screens Decision on business case Post- development review Post- commercial analysis Post- implementation review

24. Oxford Innovation Ltd 2003 Project Charter Six Elements of the Stage Gate™ Process TR 1 TR 2 TR 3 …… Technology Development Team Technology Review Committee Planning Process Owner Technology Review Process New Member joins Current member leaves

25. Oxford Innovation Ltd 2003 Gate 2 Stage 2 Gate 1Stage 1 Tech Stage Gate™ Process Technology Review 1 Technology Review 2 Stage 1 Activities Technical literature search Patent and IP search Competitive alternatives Resource gaps Plan for feasibility assessment Experimental work Analysis and interpretation Develop action plan for Stage 2 Deliverables Understanding of IP situation Demonstrate feasibility Results of experiments Stage 2 Activities Perform technical work Analyse and report results Competitive assessment Environmental assessment Commercial product possibilities Preliminary market assessment Preliminary manufacturing assessment Develop action plan for Stage 2 Deliverables Results of feasibility experimental work Results of commercial application assessment Forward planning Technology Review N

26. Oxford Innovation Ltd 2003 2345 Preliminary investigation 1 Technology audits Other ideas Seed projects Detailed investigation DevelopmentValidation Commercial launch Exploratory Research BA Development Research C RESEARCH TRACK COMMERCIAL TRACK Outside ideas Bio-fuels Stage Gate™ Process Reduced risk Increased costs

27. Oxford Innovation Ltd 2003 Development $ D Commercialise $ C $ ECV P ts Technical failure $ ECV = [($ PV * P cs - $ C) * P ts - $ D] P cs $ PV Commercial failure $ ECV = Expected Commercial Value of the project P ts = Probability of technical success P cs = Probability of commercial success $ D = Development costs remaining in the project $ C = Commercialisation costs $ PV = Present value of project’s future earnings (discounted to today) Expected Commercial Value (ECV)

28. Oxford Innovation Ltd 2003 High Low $10M 8 6 4 2 0 NPV P ts Risk-Reward Bubble Diagram