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Grasping the bigger picture
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15/09/2008
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Inventors and start-ups collaborating with large companies face many daunting challenges on how best to proceed, as Tom Shelley has been finding out
The world is full of frustrated inventors, with harrowing tales of how they were either ignored or taken advantage of by major companies. But the truth is not so much about big guys taking advantage of little guys, but little guys not understanding the problems of corporates and how to overcome them to mutual advantage.
Big guys need little guys to come up with ideas – and little guys not only need to protect their intellectual property before they approach the big players, so they have something to sell, but also must have a firm grasp of which company they should to go to, how that business operates and exactly who to approach within the organisation.
Once, large companies did most of their research and development in-house. But as Mike Addison, R&D section head of Procter & Gamble explained at a seminar at Venturefest in Oxford, a lot of ideas went into the R&D pipeline, but not much came out of the other end. The company saw this as a problem, because they are firm believers in the idea that, as Addison puts it: “If you are not growing, you are dying.”
This, in P&G and elsewhere, has led to the idea of ‘Open Innovation’, where large corporates seek to interact with small companies with sound ideas, in order to exploit them to mutual advantage.
But before rushing off to companies such as P&G with your latest idea, it is essential to understand their business and what they are seeking.
The company has an annual turnover of $80 billion, plus $4 billion of new business it is adding each year. So what is its particular strength?
“Outstanding consumer and regulatory understanding,” according to Addison. “We’re looking for things we can sell in a supermarket and which can be bought every four to six weeks.”
And while P&G is very interested in possible new products, he offers this caveat: “We don’t get out of bed unless your product has the potential to sell $100 billion worth.”
Some idea of what the company has in mind can be gathered by going to the company’s web page (www.pg.com), where there is a section called ‘Connect and develop’. This lists some of the things it is on the look-out for.
“We are not interested in cheaper ‘me-too’ products”, Addison states. “However, we are always interested in making our branded products better and catapulting them to even greater market superiority – as well as the means to extend brands.”
On the Procter & Gamble Web site, a number of engineering requirements can be found that include: “Ideas, solutions to pack unitised doses (30 – 40ml of liquid detergent) in a controlled fashion without having to invest large amounts of capital in quality control” and “Alternative spray technologies…to deliver a similar/improved consumer experience, while reducing waste (sustainability), packaging costs and VOCs.” (Incidentally, Eureka knows of small companies and inventors with solutions to both problems – but have any of them approached P&G?)
At the seminar, though, Addison focused on consumer products, citing the example of the ‘SpinBrush’ – an electric toothbrush that could be sold for much less than previous electric toothbrushes and which extended the Crest Procter and Gamble toothpaste brand. In this case, the product was already being manufactured and sold in small quantities by the time its developers licensed the design to Procter to Gamble, while separately licensing the motor to Hasbro for use in toys. The developers were paid $20 million – certainly more than would be paid an inventor with an untested idea – because “the more risk you have taken, the higher your share of the value will be” Addison pointed out.
When asked if large companies ever bought up ideas in order to delay or suppress technologies, Professor Bill Dawson, chairman of the South East Health Technologies Alliance (SEHTA) – which often represents small companies – retorted: “There is no way big companies will suppress technology. If they did a bad deal, nobody will deal with them again. Word gets round. If you are worried, put in a reversion clause.”
This is a clause in the licensing agreement such that, if the licensing company does nothing with the intellectual property within a certain time limit, it reverts to the original owners.
“You get frustrated waiting outside, we get frustrated inside,” was how Addison described the situation. “I have never heard anyone suggest delaying to get a better deal. It’s not in our best interest if you are holding IP [intellectual property] and go bust, so it becomes public.”
Meanwhile, SEHTA’s Dawson talked mainly about health technologies, his current focus, dismissing engineering innovations as “lower profit”. But, whatever your field, he said: “You need to understand the marketplace the company is in. Know your customer. The partnership process is customer specific.”
He also spoke about the importance of start-ups and making sure they have their acts fully together before that crucial meeting when the proposition is discussed with the team from the target company. Before this takes place, he added, the questions that need to be asked are: “Is the IP strong?” and “Are all contributors on board?” In other words, to ensure that what is being offered is not dependent on intellectual property owned by others, who may or may not wish to go along with the deal.
Real collaboration is complicated, at times frustrating, and can always go sour. The inexperienced should seek advice. The internet is useful for studying the needs and practices of potential customers. So are local Enterprise Hubs and/or Business Links. Their advice and support is free, and is usually given by professional consultants who know what they are talking about. We have heard bad things said of these organisations and their spin-offs, but all our contacts with them suggest their advice is excellent – although it may not be what you hope to hear. And they do work on the principle of advising you what to do, as opposed to doing things for you.
Venturefest is a free annual networking event for innovators and those interested in innovation, held in or near Oxford. There are now many other events with similar goals, based on differing formats, held in various parts of the country.
If any readers have experiences they would like to share of working with large companies, please let us know.
Pointers
* Many big companies are now looking for innovation from outside
* If wishing to collaborate with a large company, it is essential to find out exactly what they want and how they work before making any approach. Know your customer
* Secure your intellectual property, in order to have something solid to sell or license
* Take advice and help from experts. Government wants to assist innovation and, at the present time, such advice and assistance is mostly available free
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Author
Tom Shelley
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