 Namaskar. I am Professor Devdhi Purkayastha from IIT Bombay and I welcome you to my course, Business Fundamental for Entrepreneurs Part 2, External Operations. I also welcome you to this wonderful module by Professor Raj Hirwani on how to unlock the value in your innovation. As background, Professor Hirwani has 40 plus years of experience in research, technology and IP management. He was head of IP Directorate in CSIR and Director of CSI's Unit for R&D of Information Products. He was a member of World Bank Consultancy Team for strengthening of R&D institutions in China and Indonesia as well as on the panel of UNC TAD. He has won many national awards and honors. He was President of Licensing Executive Society India and is a member of several CSIR and government committees. He has a PhD in Technology Management from IIT Bombay. He was a full bright scholar and was a recipient of Hubert Humphrey Fellowship in Technology Policy and Management. So with that, over to Professor Hirwani. I am going to speak today about managing and commercializing innovation. My emphasis is going to be on the innovation which happens in the institutes of higher learning and the research institutions under publicly funded system. Before we begin, let us look at what innovation means. Innovation means transforming our application of a knowledge to a novel and useful. It is the utility element which is attached to the newly generated knowledge or the application of existing knowledge to a new use. Since we are talking about application, it has to be sold in the marketplace and it has to generate revenue. So any idea which does not generate money is an invention. It is not an innovation. And when we talk about innovation management, we are referring to a business process that converts any bright idea or a knowledge into an innovation. So let us look at what are the skill sets which are required for the management innovation. We already talked about innovation has to generate money. So it has to do with business. So we must understand the business which we are in. We also must understand the technology under the product. And third important is intellectual property. So let us look at what are the consideration for the business and the technology. We have new invention. That invention must satisfy a certain need. It must fill some unmet need. What is that need? And has that need been recognized by the customer or will we have to generate market for it? Very often there are certain latter needs which consumers have not articulated. The example which I would like to give of the Polaroid Instant Camera. Mr. Land who developed that camera had a small daughter. He took her picture and the child wanted to see the picture immediately. Mr. Land explained to her that this whole role will have to be exposed, developed and it will take few days for her to see that picture. But she being a child kept on insisting, Papa I want to see the photograph now. And she did not accept no from her father. That night Mr. Land went to the bed with the thought, can this be done? He did a bootlegging and finally came up with the Instant Camera, Instant Photography. Once the product was introduced in the market, it was instant success. Till that child cried on that day, nobody had articulated that need. The question is, is the need recognized? Is it a latent? Or sometime you have new science based product and you may have to develop application for that, market for that. Next question is, how big is the market? Is it a miniscule market? You have developed something which only few scientists will use in research laboratories. As a very large FMCG market which we sold in tons of quantities, millions of pieces. And how is that market being filled now? Every human need is somehow met. The solution may be expensive, solution may be not really user friendly, but people will find out some way of meeting that need. However, inefficiently or expensively. So, we must find out what is being done now. And then compare our solution with what is presently being done and see what competitive advantage has our invention offering. May be less expensive, may be more efficient. There has to be certain competitive advantage for innovation to be accepted. How sure are we that our invention will work? It is one thing to do an experiment in a test tube, in a flask, petri dish or build a crude prototype in a workshop. But can it be scaled up? Can we demonstrate on a larger scale? Can it be manufactured? Because initially when we are building a prototype, we may be building with a hand. But when thousands of pieces are to be built, there may be a manufacturing system required. There may not be existing machinery available. We may have to develop a special purpose machine. Is the product such that it will require regulatory clearance? It may be pharmaceutical, pesticide, cosmetics, food products, medical devices. All these require a considerable amount of regulatory approval. So we must address them upfront. Because once the invention is ready, it may take few years of time and considerable more amount of money to get it to the market. We have developed certain product. But what do the customer want from the technology? It is our perceived need. But does the customer wants that? So we must find out what really customer want from that kind of technology? What kind of product are you expecting? And how much he is willing to pay? Because customer always wants additional benefits at much lower cost. If not lower cost, in the same price, he wants additional features. So any application of new technology must make economic sense. It should be affordable to the customer. He should be willing to pay. And what he is willing to pay should also be profitable to producers. So when I say make economic sense, economic sense for the customer as well as for the manufacturer. We talked about scaling up. So we must estimate what are going to be the production methods? Are they going to be any special production methods, special machinery? What are going to be the cost of producing? And what is the investment required to build those kind of facilities? Please remember it is a business operation. So it has to make profits. Companies license profits. They do not license ideas. As a scientist, as an academicians, we get carried away by the elegance of technical solutions. We get excited by new science, but businesses do not get carried away by these aspects. The end user must see value in the final product. When I say a value, it is not the price what he pays, but what he gets and what the product does for him. Once the product succeeds in the market, there are people who are going to copy us. How are we going to stop those copycats? Because if we do not stop them, then all that investment which we are done into development will go away. Other people are going to take a free ride on our investment of time, money, energy into development of product. That brings us to the aspect of intellectual property. What is intellectual property? It is basically a concept of property which is applied to the creation of human intellect. What is the concept of property? You own it. You are free to use it the way you want it. And most importantly, exclude others from using that item of the property. I have a house. I am not living into it. I am keeping it locked. I also do not want to give it to you on rent. That is how I am excluding you from using it. So, exclusion is an important aspect of ownership of property. The same concept of property applied to creation of human mind intellect is the intellectual property. Now, what does the intellectual property does? Intellectual property protects. So, there are different rights under the intellectual property. Patents protect inventions. If they are novel and non-obvious, patents enable you to exclude others from making, selling and using those products. Copyright protects expression. It excludes others from copying, performing, printing, distributing. Then your design rights. Design rights cover the non-functional aspects, basically aesthetics. How the product looks? How does it appeal to the eye? You may have two cars with the same capacity of 1000 cc, but the styling is different. Color is different because of which you like one model versus another model. Then you have trademarks. Trademarks prevent confusion of the consumer. Trademarks distinguish products of one manufacturer from another manufacturer because that it creates demand for the product and maintains the quality. Then we have trade secrets which protect information which is not in the public domain. It may be the process. It may be information, technical information, commercial information, financial information. All kind of information which give you a competitive advantage. And therefore, they preserve the economic value for the enterprise. Why do these IP rights matter? Because IP is a primary way which benefits innovation and the competitive advantage which can be made exclusive and sustainable for enterprise. Not only it gives you exclusivity, it gives you a larger market share and higher profitability. It protects you from the competition. It is an important competitive differentiator. Gone are the days when your competitive advantage was from resources like land, capital, certain materials like minerals, energy or supply chain relationships. Today if you select any successful product with a long market history or a desirable features, chances are much high you will find IP associated with it. It may be iPhone of Apple or it may be a simple beverage like Coca-Cola which survives on a trademark. You can also monetize IP by licensing it. If you have an IP, you can attract investors because investors when they look at the new technology, they are uncertain about its future. They do not know what shape it will take and will it succeed and make money. So they put their resources to the risk. If you have an IP, they feel little confident that there is something new which is worthwhile to invest and if your business venture does not succeed, at least they can monetize by selling that IP. So when we are talking about new ventures, new inventions, we have to evaluate that aspects. First and foremost is the invention patentable. You have invented something, but is it patentable? There are requirements of patentability, you must meet them. If it is patentable, do you have patents on it? Are you taking it? Very often we do not take the patents. We either publish it or just put the product in the market. Even if you have the patents, what is the nature of your claims? Because it is basically claims written on the patent document which protect your invention. How strong are those claims? How broad are those claims? Are there any dominating patents? Nominating patents are those patents taken before your patent in the same area of technology or the product. And those patents may prohibit you from practicing your invention. Is the invention too early? Very often we are ahead of the time. Contemporary technologies or products are not available to take your invention to the market. What is the rate of obsolescence? In certain areas of technology, rate of obsolescence is very high. Look at electronics, computing. You will look at our smartphones. How many phones have we changed in the last 5 years? Rate of obsolescence is very high. Patent may give you a life of 20 years. The product does not have a life of 2 years. So the patent is not going to protect you because technology is becoming obsolete very fast. Now it comes to commercialization. You do think in terms of systems, we start with an idea and with a successful innovation. Very often we are focused on an isolated product or a service. The product is a part of bigger ecosystem, market system where there are other products, there are other manufacturers and there is a competition between those products and the companies. So we must understand how each major step occurs between the idea and a successful business. The idea needs to be explored, needs to be experimented to see whether it works. If it works, it needs to be scaled up. After scaling up, it has to be manufactured, brought to the marketplace. So there are many steps in this whole process. So we must understand how each of those steps occur. And finally we must understand what are the opportunities for income generation. You have invention. Do you want to make it as a product and sell it? Or you want to get it manufactured and then sell it, manufactured under a contract. Do you want to build a service around that invention? Do you want to integrate hardware and a service? Or you do not want to get into any of those commercial operations of manufacturing, selling, products or a services. You just want to monetize your those IP rights. You can license to somebody. You still retain the ownership, but you allow somebody else to use your technology. Or you can outright sell the technology. Or you can create a franchise, which means the way of doing business along with your IP. Converting invention and innovation requires a lot of skills. No single person can have all the skills. So you need to increase the capacity of your resource team. You have to complement the inventors team with engineers and other technology facilitators, which includes finance people, marketing people, design people. And as the project moves from one stage to another, it requires different kind of leadership. Initially at R&D stage, there may be the inventors, the scientists, who can be the lead position. But when it gets into the next phase of manufacturing, maybe the engineers are to be in lead position. When it gets into the market, maybe it is the marketing people. So leadership must change depending upon what stage the product is. There is also very often need for downstream product application and market development for a science push based product. You need to develop a product which meets certain application. And then you may have to develop a market for it. Again all these skills and facilities are not available in the research institution, education institution. So you will require industrial partners at each of the early stage. Now what should you look for the partners? First and foremost, you must address the question. Who is your customer? Identify the targets, likely people who are in the business, who may be interested. All those people may not be interested in working with you for variety of reasons. Maybe you are working with competitors. Maybe they have bad experience of working with you. So you have to qualify targets. You have to look whether those people have appreciation of technology. There are many people who are trading mentality. They do not have appreciation of technology. And do they have willingness to invest in R&D, take risk and patience to wait for returns? Very often it may take 3 years or 5 years to bring the product to the market. So they need to have that kind of patience and ability and willingness to put those resources and ultimately they may fail. So they should take that risk. Do they have technical, financial marketing strength to take the idea to the marketplace? As a scientist, as engineers, we always look for the people who have technical strength, who can make the products. But we fail to see their financial abilities or their marketing strength, whether can take the ideas. The end market may be an agriculture market. It is different ball game to sell to farmers than to sell to a typical urban customer. So our partner must understand agriculture market. What is their past record? Have they investment into their own in-house R&D? Have they done innovation within the company? Have they taken innovation from somewhere out and taken to the marketplace? There has to be synergy of our efforts and their business. And what is their time frame and budget? Because both must match, otherwise they will get impatient and lose interest. When you are marketing to those partners, you need to emphasize the benefits of the invention rather than the features. As a scientist, we get excited by technical things. So we talk about features rather than the benefits of the invention. We need to describe what the invention does rather than how does it work. We need to compare the invention to one or more current alternatives. Describing the competitive advantage which we get. We must highlight the advantages. And very often those advantages come at the cost of something else. So there will be disadvantages. So we must also talk about them. You must describe the market potential because industrial partners are interested in the size of the market. And finally, we need to tailor our technology to their needs because they have a customer. Those customers have different needs. So our invention must fit between the technology which we have developed and the needs of the market. So invention need to be fitted into the clients technical and marketing plans. And while we are talking to them, we need to use a marketing language rather than giving them a title of the patent. When we are communicating with the management of particularly industrial partners, we need to speak about profits they will make because they are not in the business or charity. We need to talk about what is going to be the cost saving. Will their market share increase? Will they be able to expand their product range? Their valuation may go up. There may be also possibility of merger and acquisition of some businesses. These are the aspects which they are interested more and decision can be our favorable if we talk this language. Finally, when we are dealing with industrial customers, what are we transferring to them? Are we giving them just a paper license? We have a patent and we just say this is license granted to you. That happens when people are able to replicate our patent. They do not need us. There are enough technical strength to convert our patent into a product. But they know that we have a patent, we may sue them. So they just come to us to take that license to protect themselves. Are we giving them a process report? Some know-how package? A book? How this invention has been done? And nothing beyond that? Or are we demonstrating to them how we have done it? Giving them a prototype? Engineering drawings? We must be clear about what we have been transferring because everyone has their own understanding of technology. We do work in the lab, in the test tube, in the flask and we think that is a technology. That is not the technology as the industry understands. Technology is something which is scaled up version which is repetitive can be mass produced. So this gap in understanding very often leads to mismatch of expectations and delivery. And there is a reason then people do not want to work with the research institutions and education institutions. So we should be very clear what are we transferring. We should not assume that we have a technology in hand. We have a new knowledge in hand which needs to be converted into technology. We also need to look at certain spin-off possibilities. Do not expect all great ideas to find a customer. Because very often people have invested capital in existing technology. Capital is expensive. It becomes very difficult to displace the existing capital. Markets may be saturated. There can be variety of reasons. You may not find a customer for great ideas. Under such circumstances we must look for underlying skills which we have developed built to capitalize on the generated knowledge base. There can be other possibilities of using that knowledge base. I like to give an illustration. At our National Chemical Laboratory we have developed a new metallocene catalyst for the polyethylene. When we looked at the patents we found number of companies had taken patents, hundreds of patents. We had done something new, innovative which was not that they had done it. But the way the patents were written we could not get the patent. We knew we had great invention on hand but it could not be applied to polyethylene commercially. So we started looking what can we do it. So we asked question what have we done it? We developed a catalyst for the oligomerization. So we started looking where else oligomerization can be used. And we found that a product is called drag reducer. It is used in the oil fields. So we went and talked to Indian Oil Corporation which used to import drag reducers. So using same capabilities, same catalysts, same technology we developed the drag reducer and then licensed it to Indian Oil Corporation which they are commercially using today. I can give number of such examples where you will look out spin off possibilities after understanding the underlying skill which you have used to develop that product. Finally in my experience of 40 years there are few lessons which we have learnt and I want to share with you. First and foremost you must know your customer. Go to the field and talk to few key stakeholders. What are they doing? How that industry operates? What are their needs? Second attention to economics is crucial at every stage. You may have great inventions. You may have patents. But if your solution is not techno commercially viable, nobody is interested in it. You must dirty your hands in the lab or at a sharp floor. Must work to get a first hand experience of how the technology works. How it is scaled up? How a product development takes place? Application development takes place. Go and talk and experiment at the customer side. And one cautious. Do not over sell. In our enthusiasm we very often over sell. We say yes, this technology can do everything. Do not do that. Do not overcome it. We are going to take 3 months, say it will take 3 months. Because customer is putting a pressure saying it has to be delivered in one month. Do not overcome it. It will be done in one month when you know it will require 3 months. Do not over promise what cannot be done. It is better to under promise and deliver more. In all your R and D partners into every decision making at early stage. So that they are part and parcel of what you are doing. You will benefit from their experience. What works and what does not work. Commit to hold hand till the product reaches the market. Very often in research institutions, education institutions, we have done the inventions. And we feel our job is done. We will transfer that knowledge to industrial partner. And it is his job now. You have nothing to do with it. No. When he scales up, when he go to market, he works with his customers, problems will come up. And it is our responsibility to solve those problems. So commit to work with your partner till the product successfully reaches the market. And finally, key R and D people must have some training in marketing. As one poet has said, grace is given of the God, but knowledge is bought in the market. So training in marketing helps to understand the market for technology and the technologies products. Thank you.