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Roadmap 04/11 (click here to expand/collapse)

Below is the Roadmap for select April 2011 website articles.    Please note  the website contains many more articles covering these same topics. For example, pre-game is integral to our program for attracting better R&D investment opportunities.

Provide Predictable Funding for Unpredictable R&D+
(Introduction to Franchise Capital Mgmt.)

Make funding more predictable (From Unpredictable R&D to Predictable Investor Returns)

  Attract and Retain Long-Term Investors

– Make a Market (You Have to See It to Believe It)

  Reinvest Interim Windfalls+

Make R&D success more frequent * (Execution is the Key to Success)

  Get Smarter at Tracking R&D Advancements+ and Transitions+ (Exits)
  Attract Better R&D-centric Investments
  Increase R&D Productivity (Execution is the Key to Success)

* Although it's still unpredictable

As funding agent+ we match investors and investments (owners of intellectual property+). Our role as funding agent (as middleman) is to keep investors happy, thereby ensuring steady funding for investments. We do this by packaging unpredictable R&D investments into an offering that is more attractive for investors (the perpetual fund). We do this by direct mediation into our unpredictable R&D investments (via franchise operations+), to ensure above-market productivity. Above-market R&D productivity is the only reliable means to ensure predictable funding.

Why Push As Far As Commercialization?

Summary: 

Venture capital sells out at the first sign of success. We insist on staying through to successful completion of the research. Here’s why.

It’s Our Brand

It’s who we are. We do commercialization+ because it’s what we do. Commercialization is integral to success both from the standpoint of the investor and of the investments. We need the money from commercialization to fund research. We need the focus of commercialization to do better research. We don’t settle.1

It’s our brand. It’s how we distinguish ourselves from other funding approaches. Our fund with only a few billion dollars in capital becomes broadly recognized as a jobs-creation engine, attracting even more investment dollars, and favorable government attention.

Our brand delivers quality products. You can’t know the quality of a product or service until it reaches the commercial market. Hidden flaws and warts can remain hidden for years only to be revealed during commercialization. Consumers buy perceptions, and you can’t see perceptions in a scanning electron microscope. If the pre-commercialization product or service hasn’t left enough flexibility for marketing to be able to adjust to consumer perceptions then you pay the consequences in the marketplace.

You buy our product or service and we throw in our heart and soul as a bonus. Our success comes from your success, both financially and in our reputation. We use ratcheting royalties+ in sales contracts to keep our teams engaged financially even after product has been launched into the marketplace. We continue to support you during scale-up, manufacturing and roll out of the products and services. You’re not just buying from one of our research units. Your outrageous success redounds on the future reputation of the entire franchise (e.g., funding agent+). The franchise stands behind the sales of its members.

We’re better at commercialization

We’re better at commercialization than anyone else. Sales of half-completed research projects leave good money on the table. We’re better at commercialization than the firms who buy our products and services for manufacture and sale. Being the best at commercialization means we reap monopoly profits from this activity.

We’re better because commercial considerations are integral to our pre-commercialization research. We take 50% of the cost out of a finished product because we address many cost issues during design, in research. We don’t throw a product or service across the transom and let someone else figure out how to manufacture or to sell it. Commercial considerations are built into the product by researchers early in the game. Remember the story of giving away the printers and selling the ink cartridges (or chargers for hand held devices)?2

Table 1. Commercialization Design Considerations. Commercialization makes or breaks promising research projects. We look both ways during research, during the design of the research product, to ensure commercial success. It’s how we define effectiveness in research.
Commercialization Design Considerations
Design for manufacturability ...more
Design for low-cost …more
Design for consumer experience …more
Design for extensibility (e.g., add-ons, follow-ons, maintenance revenues, supplies, branded merchandise)

Firms with pre-commercial research want to join our franchise because of our reputation for commercialization: we take good research and commercially exploit it. It's our definition for a Scientific Competitive Edge+ (here).

Commercialization means better research

Commercialization makes for better research. It may seem counter-intuitive. Many in today’s R&D organizations consider commercialization as a distraction from pure research. However effectiveness in industrial research means meeting commercial needs. If all researchers, continuously, think about how consumers will use their products and services,3 how this use will change over time, then all research gains a common focus. It makes it easier for researchers at the bench to decide go, no-go for the next research study. You look at the data through a different lens. It becomes easier to understand why there is no one correct answer staring at you through the mass of dots on a graph. There is no one consumer.

Commercialization focuses research on the subjective experience of the consumer. A good quality physical product is demanded, but how the consumer perceives this product, its brand, is more important. There are many consumers for any one purchase (e.g., buyers, influencers, providers). We must come up with a way to jointly satisfy all their perceptions.

Exhibit 1. Dimensions for Commercial Success. Chart shows various dimensions to be considered in converting a physical product or service into commercial revenues. We build flexibility into our choices for these 'downstream' considerations very early in R&D – flexibility gets built into the physical product itself.
Commercialization keeps management engaged for the duration. It takes the emphasis off quick wins. Pre-commercial sales make it too tempting to take shortcuts. If I don’t have to commercialize this product then I may be less careful in ensuring this product can be commercialized. There’ll be plenty of other obstacles uncovered down the road that can be used as an excuse for its failure in the marketplace. My inattention won’t be blamed, since many others will adopt my same attitude. Commercialization means managers can never safely take their eyes off the ball: any failure will be in their court.

Pre-commercial Sales

There may be isolated instances when it makes sense for a franchisee to sell an intermediate product, a prototype+, rather than to carry it forward into commercialization. For example, the purchaser of the product may hold complementary patent rights that are just too expensive to acquire. This is a decision not taken lightly. Emptying out the research coffers by selling intermediate research is not the fastest route to a second major commercial success, the ultimate goal of researchers in the franchisee. Managing partners in the funding agency are also in it for the duration and will be curious as to why a franchisee sees fit to delay reaching a second major commercial success, and to delay their payout.

Pre-commercial products are sold on an as-is basis, but even in these cases the reputation of the funding agent (as middleman) is at stake. The funding agent will stop sale of intermediate research containing known flaws. The sale may satisfy funding needs for the moment (the seller gets to buy a new trinket for his trophy bride) but the reputation of the franchise gets tarnished and short term gains become long term hurdles. The brand, the reputation of our commercial products and services, is integral to building sustainable operations.

Closing

The looming collapse of corporate R&D sectors gives us no choice. We must focus on commercialization. Venture capital firms are already seeing demands for higher escrow accounts in the sale of pre-commercial research. It’s not only going to get worse, industrial purchases of half-completed research projects will soon cease.4 We can’t build a sustainable operation aimed at pre-commercial sales.

Great ideas are a dime-a-dozen. The real work of R&D, 90% of the glory and the cost, is in commercialization. Combined with our focus on blockbusters, commercialization sets the bar high enough to attract only the best players. This could be the single most important factor for our focus on commercialization: it helps us to attract winning investments.


Editor's Picks for April, 2011

  • 1. Commercialization means development to the end of R&D, but not into Sales & Marketing. We sell finished products to firms who specialize in manufacturing and sales. Franchise Capital Management+ is (for the moment) aimed at R&D-centric operations, but we reach much further into commercial activities than is often the case in today’s research organizations. We do commercialization, which includes Industrial Design+ and Market Preparation. Baby steps.
  • 2. How do franchisees do well at commercialization if they don’t have commercial departments? They do, as a service from franchise operations+, and perhaps innately from sale of sub-blockbuster+ products. Franchisees also have the option of contracting with potential buyers to play the commercialization role, similar to the approach discussed here.
  • 3. We know we’ve succeeded when we see researchers taking research ideas home and trying them out on friends and family.
  • 4. Big Pharma M&A activity during the last decade lost close to one trillion dollars in value, based on the current combined market capitalization of 17 of the industry's most active acquirers. - Burrill & Co. Annual Report
Further Reading
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Reba Tull
Offline
Joined: 03/30/2011
You'll not find any takers.

It's very tough, almost Herculean, to sell an intermediate research product or to complete an M&A transaction. And now you're saying that's not enough. You've set the hurdles are too high and you'll not find any takers. But don't worry, you'll lower you sights when you see how difficult it really is to achieve even these intermediate successes.