Introduction
As
nanotechnology evolves from the laboratory into an industry,
one of the greatest challenges still to be overcome is the
penetration of nanotech products into mainstream user markets.
While the promise of new materials, devices and systems has
been promoted for years; the widespread presence of nanotech
products has not lived up to some people’s expectations. So
why isn’t this happening?
To
answer this question one must look beyond the lab and view
the situation from the perspective of a potential customer.
Unlike
researchers who might perceive a significant product accomplishment
as a functional prototype, prospective customers typically
require results more resembling regulatory approved products
shippable in thousands of units or tons per month, and having
form, fit and function compatibility with an industry standard
at a fraction of the price. And even if all this is attained,
there is still a question of why a person with buying authority
at a large corporation would press for the purchase of a new
high-risk technology from a financially strapped nanotech
start-up and potentially risk his or her career on the outcome?
Fortunately
state-of-the-art technologies have been making their way into
the mainstream since the invention of the wheel. And while
it may vary from company to company, there is usually a process
in place for firms to evaluate new products in order for them
to decide on adopting next-generation technologies to replace
the status quo. This applies whether the technology is bulk
or nano.
It
takes time and effort for nanotech companies to find potential
customers, convince them to evaluate a new product, and ultimately
have them purchase the product in commercial amounts. The
timeline is particularly long when the target customer is
a multinational or a government agency having as many as a
dozen people who participate in the selection of a new product
or supplier.
Nanotech
companies face further challenges. In addition to the demanding
tasks of completing product development, getting specialized
equipment on-line, replacing key personnel who leave the team
or not join when planned, scaling up the production of “real”
products, conducting marketing activities and resolving the
concerns of potential customers; nanotech companies have to
deal with a monthly burn rate of salaries, overhead and related
costs eating away at finite financial reserves. This also
applies to nanotech groups in large organizations. As a result,
the clock is counting down the time until firms ultimately
run out of funding, and the game is over!
Clearly,
time is key.
Fortunately,
there are many things within management control that can reduce
the time for transforming sophisticated nanotech research
into revenue-generating products. These include decisions
related to what you are developing, how you are developing
it, how you are applying your resources, and how you are convincing
potential customers to buy sooner rather than later.
1 – Focus on
harvesting the low hanging fruit
Nanotech
research often produces good news and bad news. The good news
is that research results can significantly exceed expectations
with better property performance and a greater robustness
of potential applications. This opens the door to numerous
commercial opportunities.
The
bad news is the temptation to pursue every potential product,
application and solution. When this is done, resources get
diluted and the real tangible milestones needed to close a
sale will ultimately slide. Not only will the resulting delays
harm your credibility in the eyes of a potential customer,
it also opens the door to competitors.
The
reality is that most nanotech ventures lack the resources
to make everything it wants to and pursue every opportunity.
When critical resources (human and other) are spread too thin,
they get diluted beyond the critical mass necessary to impact
change.
Look
at the math. Suppose you have the funding for 20 person-years
of labor and require 10 to 15 person-years per product to
conduct product development, marketing, business development,
and sales initiatives. If you are pursuing 20 products simultaneously,
there is an average of 1 person-year per product. On the other
hand, if you are pursuing only 2 products, there are now 10
person-years per product – and a higher chance of attaining
the desired results. While the actual numbers can vary from
situation to situation, the message is that if you want to
send a rocket to the moon you are better off launching one
rocket with all your fuel rather than a number of rockets
each with a thimble of fuel.
Consider
a nanomaterial company who claims to have over 50 product
concepts and prototypes. With virtually no product sales,
they are struggling to stay in business.
As
nanotechnology is still emerging as an industry, one measure
of the commercial potential of a nanotech venture is real
revenue. Revenue demonstrates credibility in the eyes of investors
and can greatly increase the chance of your firm raising additional
funding to develop more products.
Therefore,
it is key for a nanotech venture to maximize its efforts on
harvesting the “low hanging fruit” where significant revenue
can be generated in the shortest time. Although nanotech entrepreneurs
might be tempted to hit a homerun on the first at-bat, it
may be more credible to be less ambitious and just get on
base.
As
a result, one of your most strategic decisions is deciding
what you will make and promote first – and then do everything
needed from A to Z. This will need to be done at the expense
of other products by focusing the bulk of your effort on ONLY
the best 1 or 2 applications.
A
screening process can be used to find the low hanging fruit.
Each potential product can be evaluated along a number of
criteria and then scored with a meaningful rating system.
The highest score will indicate the best opportunity.
Products
can also be eliminated from consideration by evaluating potential
showstoppers. For example if there is no market for the product
in the next ten years, then drop it.
To
get the best results, this evaluation should be conducted
as early as possible in the development process. While every
situation is unique, here are some general questions that
should be addressed along with parameters that could provide
the answer:
a)
The probability of getting the product out the door the quickest:
Challenges and timing of remaining milestones
The critical elements which can determine development success
or failure
Risk factors and obstacles such as regulation, environmental
standards, raw materials, machines and equipment, etc
Estimation of additional time and budget to begin commercialization
Implications for quantities, cost and quality
b) The probability that a market exists for the product:
A significant demand based on many users and/or major companies
with large requirements
The presence of early adopters and strategic buyers
Overall size of the potential market, projected growth rate
and trends that might change them
Target industry and segments
Fit with the direction of the industry’s technology road map
Timing and size of potential sales
c)
The probability of unseating the industry standard or status
quo (taking the perspective that everything is new relative
to current practices):
Concern about the stability of existing vendors on delivery,
business longevity, financial strength, etc.
Forces that are driving companies to switch (e.g. new government
regulations, dwindling supplies, increasing costs, special
circumstances or crisis, etc)
Opportunity for significant performance improvement and/or
real cost savings
Specifications of the products to be substituted along with
the buying criteria
Reasons for being accepted or rejected by a customer
Cost to switch
Existing constraints which could prevent or delay the adoption
of a new product
The technology’s innovative aspects and positioning compared
to existing technologies and those under development
The technology’s stage of development compared to competition
Need to integrate to a bigger system or production process
The standard’s inability to adapt to change
d)
The probability of creating a sustainable competitive positioning:
Degree and sustainability of competitive advantage in cost,
performance, and other key buying criteria
Relative strengths and weaknesses of key resources including
people, processes, equipment, raw materials, funding, and
political connections
Principal competitors and likely response to a new threat
Barriers to entry for new entrants and emerging technologies
Key intellectual property is owned or controlled, and can
be protected and defended
Feasibility of attaining strategic partnerships
e)
The probability of ramping up production from lab scale to
commercial requirements:
Simplicity of individual production processes
Dependency on custom-made specialty equipment for large-scale
production
Evidence of similar production operations
Availability of raw materials in significant volumes
Financial viability of large-scale production
2 – Develop
“sellable” products
Nanotech
“products” can mean different things to different people.
The problem comes when nanotech researchers and operational
users have different perspectives on what a product needs
to be.
Scientists
devote hard work and creativity to attain specific research
objectives. These can be measured in many ways including the
achievement of a particular performance output (such as the
bandwidth and signal-to-noise ratio of an optical switch)
with a series of controlled and variable inputs, processes
and constraints.
And
while operational users might be impressed with the research
results, there are practical considerations that must also
be addressed before they can consider the output from the
research as a “sellable” product. Among the many things, the
nanotech product may need one or more of the following:
it may need to fit somewhere
it may need to connect to something
it may need to perform certain functions
it may need to be lightweight and mobile
it may need to work in some harsh environment
it may need to work without failure for a minimum time
it may need to have a minimum life
it may need to be manufactured or produced in a certain way
it may need regulatory approval
it may need to come with certain documentation
it may need to be delivered in a certain quantity
it may need to be available by a certain date
Not
only do customers assess products on multiple dimensions,
each dimension is evaluated on its own based on the customer’s
expectation. For example, a customer may expect a quality
acceptance of 99.9%. If your product is rated below expectation
then the customer is disappointed. If the rating dips below
the minimum acceptable threshold, then your product will be
eliminated from consideration.
When
a nanotech prototype or early stage product is evaluated by
a customer and is unacceptable on a mandatory requirement,
there is a natural reaction by the research team that their
interpretation of the “product” should be accepted as the
customer’s “product”. No surprise here.
And
while it may not be possible to eliminate this gap, it can
be reduced if the mandatory requirements are addressed early
in the development process. And even if the first deliverable
doesn’t meet all of the mandatory requirements, at the very
least, a serious plan can be provided to the customer explaining
how and when these requirements will be met.
Here
are some questions to answer to get the team to think about
developing sellable products earlier in the process:
a)
What are all of the possible characteristics of the complete
offering that a potential customer “needs to have”, “wants
to have” and “would like to have”? These can include:
Price – Net price, discounts, perceived fairness in price,
price of add-ons, switching cost, deployment cost, life-cycle
cost, credit, timing of payments, etc
Performance – throughput, efficiency, efficacy, speed, lifespan,
reliability, versatility, quality, purity, etc
Features, Functionality & Properties – electrical, mechanical,
power, optical, chemical, biochemical, thermal, structural,
etc
Physical – Size, weight, density, packaging, footprint, etc
Aesthetic – look, feel, color, taste, odor, etc
Operating Environment – Temperature, pressure, volume, chemical,
biological, etc
Services - order processing, delivery, set up, maintenance,
training, alteration, upgrade, operational, etc
Time – Completion, availability, quantity, etc
Capabilities – personnel, equipment, special resources, corporate
reputation, documentation, etc
Safety – safety, health, security, certifications, side effects,
etc
Personal – specific attributes for specific individuals
Political – job creation, exports, approvals, eligibility
for government programs, visibility, etc
Risk Reduction – Guarantees, bonds, insurance, partners, use
of development tools, financial strength, etc
b)
How can you reduce the customer’s expectations on certain
parameters and eliminate particular “want to have” and “would
like to have” parameters to get your product scored more favorably?
c)
Does this “sellable” product still look like a low hanging
fruit? If not consider developing another product.
3
– Regularly validate the commercial opportunity
It
is common for some nanotech scientists to conduct their research
in isolation from the commercial world. Doing so keeps researchers
focused on their work and away from time-consuming distractions.
Working in secrecy also avoids tipping off potential competitors
of what is being made.
While
it is desirable to develop a completed product before approaching
a customer, nanotech companies who wait too long can completely
miss the commercial opportunity.
The
big assumption in any R&D endeavor is that customers will
want to buy the end-results of the development. As it may
take years until a nanotech product is ready for sale, changes
in customer specifications, competitive offerings, available
technologies, industry standards, and government regulations
can make a nanotech product obsolete before it is even completed.
While
the markets for nanotech products are moving targets, each
potential customer also has its own window of opportunity
when it is prepared to adopt a new technology. If your nanotech
product is not known by the customer or is discovered too
late in its evaluation process, the customer could select
a lesser product which was at the right place at the right
time.
As
market and customer opportunities are not readily publicized,
it is in your best interest to regularly validate the commercial
opportunities for your product. This means directly or indirectly
finding out how potential customers will measure value from
your products and when to advise specific companies of the
status of your offering. Not only will regular injections
of field data reinforce and/or fine-tune the direction of
your product plan, especially earlier-on when changes are
easier to implement, you may also tap into valuable leads
for the sale of your products and related services.
Ideally
the validation process will make use of a variety of sources.
The first level of information can be obtained from an in-depth
analysis of published sources including SEC disclosures, websites,
published reports, and product literature.
The
next level of information can be obtained from discreet discussions
with industry pundits, prospective customers, potential partners,
and competitors. This type of investigation goes beyond published
information and can reveal commercial opportunities on the
level of what products are being developed, what markets are
being pursued, what resources are being used, etc. Third parties
specialized in conducting industry surveys are often in a
unique position to collect objective information at arms length
to the nanotech company.
When
the time is right a pipeline of potential customers can be
created from the above research, as well as from meetings
at focused industry conferences where customers are actively
seeking solutions, and from highly targeted publicity conveying
a carefully crafted message.
4 – Outsource non-core operations
and special projects
When
computers first emerged on the market it was common for companies
to develop their own software using internal resources.
Partially due to the limitations of the commercial offerings
available at the time, computer programming was often felt
to be a necessary core competency required to attain operational
improvements and cost reductions.
With
the rapid evolution of the computer industry, teams of people
were needed to continuously upgrade code for compatibility,
standards, interfaces, features and functionality. While internal
costs to develop and maintain in-house products escalated,
the economies of scale gained from mass-market vendors, having
thousands or millions of customers, made outsourcing and the
use of commercial-off-the-self products the only viable option
for most mainstream applications.
Outsourcing
permits products and services to be supplied at a fixed price
with a high degree of certainty in what you are getting. As
well, an off-the-shelf product and/or a specialty firm with
considerable experience at the task at hand can significantly
improve the completion time and outcome compared with in-house
personnel who might be doing a particular activity for the
first time in their careers. Therefore an opportunity exists
to evaluate if certain operations and activities really need
to be core competencies and then determine the benefits of
having them outsourced.
As
an example, consider a nanotechnology company developing applications
from nanotubes. While the “use” of nanotubes would be critical
for the application, it may not be necessary to have the “production”
of nanotubes as a core competency.
If
nanotubes are produced internally, then capital, expertise
and equipment will have to be allocated to nanotube production
and away from the principal application. Diluting key resources
could lead to bottlenecks and delays in completing the development
of a sellable product.
Alternatively,
nanotubes could be sourced externally and purchased at market
prices from one or more vendors. As the price of nanotubes
is dropping and the quality, consistency and other parameters
are improving, it may be a great strategic decision to buy
nanotubes on the open market and negotiate price, support
and delivery time. In addition to avoiding a capital outlay
to build an in-house plant, any risk for quality assurance,
production ramp-up, and product support can be passed on to
the nanotube supplier.
While
it may seem counter-intuitive for companies developing intellectual
property to give up any control of their product plan or processes,
the benefits of getting a product to market faster greatly
outweigh the complete control over secondary operations and
projects which are not leading-edge, secretive or strategic
if done internally. It is in your best interest to evaluate
all required competencies with the objective of outsourcing
non-core operations and projects – entirely or in parts.
While
every company has its own way of best leveraging scarce resources,
here are some areas to investigate the merits of a “make”
versus “buy” decision.
Raw materials – commodity components, chemicals, etc.
Equipment – lab equipment, microscopes, test equipment, etc
(on a pay per use basis)
Manufacturing – production, packaging, testing, order fulfillment,
etc
Financial– accounting/bookkeeping, financing, applications
for government programs, etc
Sales and Marketing – publicity, market research, business
development, lead generation, etc
While
you may look for partnerships with various nanotechnology
firms, professionals, universities and government labs, it
is essential to have legal agreements in place where appropriate,
to clearly spell out ownership of intellectual property. If
this is not done properly, you might be giving away ownership
or rights. In this regard, you must also have a trusting relationship
with any partner as it may be viewed as a marriage with messy
implications in the event of a divorce.
5 - Manage your customers’ purchasing
process
Getting
potential customers interested in nanotechnology is easy.
Getting them to actually buy nanotech products is another
story.
Initial
customers for nanotech products are most likely to be large
companies and government agencies. Selling state-of-the-art
products and services to these entities is a lengthy process
as there are typically many people involved in the selection.
To further complicate the process, each person has different
needs and influence. And even if a company’s nanotech product
is technically superior to the status quo or another offering,
some of the customer’s people can be working behind the scenes
to block your product from being purchased.
Consider the following:
A purchasing manager might have a great relationship with
the current supplier and won’t want to risk changing vendors
An executive might have pressure from a government agency
to do business with a certain company
A financial evaluator might think that a start-up company
is too weak financially to support a major program, as it
might not be in business next year
Often,
many of the people involved in the selection process are not
made known or are not accessible to the selling company. As
it may take weeks or months just to get an appointment with
the head of R&D at a major corporation, you may end up
with only 30 minutes to persuade him or her to give your company
a chance. As a result, firms who want to increase their chances
need to be intimately involved in understanding the customer’s
decision making process and proactively managing events that
encourage the purchase of its products.
While
there is no definitive way of assessing every customer or
sales situation, here are some of the things that you should
be aware of:
The Need – Nanotech companies have to focus on the primary
“need” driving a customer to change from the status quo and
select a new technology or supplier. Any change has risks
and switching costs that must be overcompensated by the additional
value from your product.
The Champion – Nanotech firms need to identify a champion
in the selection team who wants its product and is prepared
to stick his or her neck out to do the internal promotion
on its behalf.
The Friend – Nanotech firms should make a friend in the customer’s
organization who can inform them of the situation behind the
scenes. This will allow nanotech firms to prepare tactics
for overcoming obstacles.
Senior Management Support – Nanotech companies need to ensure
that the customer’s senior management will support the consequences
of the selection team going with its solution.
Developing Capabilities – In cases where certain capabilities
are lacking, nanotech companies may need to find solutions
that help the customer develop the necessary capabilities
to use its products which could include the supply of training,
access to equipment, special financing, etc.
Overcoming Resistance – As there will be resistance to any
change, nanotech companies need to find ways to identify and
overcome the sources of resistance. This can often be done
by making its offering more appealing by adding value, cutting
price, soliciting strong partners to the team, making use
of political connections, etc.
While
the sales process can be complex and time consuming to manage,
it is a fundamental step for generating revenue. Getting to
know the customer’s processes and people, professionally responding
to their inquiries, building relationships, and making use
of partners with existing relationships are all steps for
building trust and credibility.
It
is in your best interest to get accurate and timely information,
and stage “strategic events” to move the customer closer to
selecting your product. For example, it may be possible to
have a potential customer find out from a third party that
its main competitor is seriously evaluating your product.
Conclusion
Bringing
nanotech products to market ultimately comes down to focusing
your resources and making a product easier for a customer
to buy. Nanotech executives need to be conscious of every
lever at their disposal to speed up the processes, since time
is a precious commodity. While these tips can reduce the time
for bringing a nanotech product to market it is essential
that any nanotech product be based on a solid foundation of
good science, a strong technical and management team, and
the perseverance to stick it out.
|
.png)