Innovation Management

THIRD INTERNATIONAL FORUM ON CREATIVITY AND INVENTIONS – A BETTER FUTURE FOR HUMANITY IN THE 21^ST CENTURY

Organized by

the World Intellectual Property Organization (WIPO)

and

the Department of Trade and Industry (DTI)

of the Republic of South Africa

Cape Town, May 19 to 21, 2005

 

Theme 2

Inventors, Innovators and Creators – the Intellectual Capital of Nations.

 

INNOVATION MANAGEMENT

(From ideas to the marketplace)

By: Eduardo R. Fernández.

Director, Argentine School for Inventors.

Professional inventor and entrepreneur.

INTRODUCTION:

 

Technology and inventions are important parts of the innovation process, which transform inventions into marketable products. This process is most complex and such requires much specialized professional expertise and expert knowledge. The final phase of innovation process is the marketing and commercialization phase which is crucial for the success of any invention and product.

 

If we look closer at the innovation process we will realize that it consists basically of five overlapping and interrelated main phases: the idea generation and concept phase, the development and design phase, the legal phase (novelty patent search and patent application), the prototype and pre-production phase, and the production, marketing and commercialization phase.

 

The crucial point in the innovation process is the product, marketing and commercialization stage, when the invention or the new product or process based on it will meet the test of the market. It is only when it is accepted on the market by the consumers and users that the invention or new product will begin to generate income which will compensate inventors and manufacturers for the investment made and eventually generate also some profit.

 

 

COMMERCIALIZATION OF INVENTIONS:

 

As it was already mentioned, the returns in terms of profit upon its commercialization are the ultimate (and eventually the most important) proof of the success of any invention or new product.

 

The innovation process is not a linear process and its different components overlap and interact in a considerable degree. Thus the commercialization and marketing of an invention could be initiated at a very early stage of its development, e.g. already during the idea generation and conception phase.

 

However, for the inventor or his company it is not advisable to begin commercialization at such an early stage and at least not before having filed a patent application.

 

The price offered for such an inventive concept would be very low, if any, regardless of its ingenuity and market potential, since a lot more development work will have to be done, before the invention may be used in practice and could generate any income.

 

Inventors and those involved in marketing inventions and innovations should not forget that only a very small percentage (3% to 5%), of all inventions for which patents have been granted reach the commercialization phase of the innovation process.

 

The great percentage of failure is usually not due to the quality of the invention, but rather the result of the influence of other factors, such as, for example, the high investment cost for a relatively small effect, need of additional R&D work, the manufacturing and technological environment are not yet ripe for such invention, no real market need, etc.

 

Commercialization and marketing strategies will largely depend on the kind of invention and the field of technology, to which it is related. They will be different for a mass product and for an invention in a specialized field, applicable only in the production of few manufacturers. The market environment, the customs and traditions, the purchasing capacity and power of people (consumers) in the area will to large extent define the methods and approaches.

 

Commercialization and marketing of inventions is a most complex process and in a highly competitive market it needs a professional approach and a lot of professional expertise in order to have real chances of success.

 

Inventors are advised to seek as much as possible professional expert assistance when they are involved in that process.

 

INNOVATION MANAGEMENT:

 

In order to improve the independent inventors´ skills and performance, the Argentine Association of Inventors conduct regular training courses on Innovation Management, based on the following key assumptions:

 

• “The test on an innovation, after all, lies not in its novelty, its scientific content, or its cleverness. It lies in its success in the marketplace.”

Peter F. Drucker

 

• Innovation is a specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced.

 

• Independent inventors and entrepreneurs in general, need to search purposefully for the sources of innovation, the challenges and their symptoms that indicate opportunities for successful innovation. They need to know and to apply the principles of successful innovation.

 

• Innovation is also a specific instrument of inventors and entrepreneurs. It is the act that endows resources with a new capacity to create wealth. Innovation, indeed, creates a resource. There is not such thing as a “resource” until an inventor finds a new use for something (existing in nature or invented by himself), and thus endows it with economic value.

 

 

CHARACTERISTICS OF A SUCCESSFULL NEW PRODUCT:

 

Most of the reasons for success have nothing to do with the nature of the product, but everything to do with the vigor in which the product is marketed.

 

Six basic questions should be answered satisfactory before presenting an invention project to a potential strategic partner or investor:

 

First: Does it really work?

Second: Is it unique?

Third: Will the patent be easy to design around?

Fourth: Is there a real market for the product?

Fifth: What are the manufacturing costs?

Sixth: Is the intellectual property owner prepared to make a deal?

 

• First: Does it really work?

 

There are various ways a responsible person can be assured that a product or process does what it was intended to do. Since most technologies are not “advanced technologies”, the answer is usually obvious.

 

However some determinations are very difficult specially when the device claims a significant mechanical, chemical or electronic improvement and does not have a working prototype.

 

When the question “Does it really work?” is not clear from the ideas drawn on paper or even computer drawings, making sense of the project and obtaining necessary independent technical evaluation becomes a real challenge.

 

• Second: Is it unique?

 

A general principle of product success is that it must solve a problem or fill a need better than its direct and indirect competition.

 

Strategic alliance partners, aware of the effects competition can have on a project, always look for some kind of property position. The project uniqueness usually is determined by a patent or a patent pending, but could also be in the manufacturing technique, or even in the distribution channels.

 

Exclusivity and the potential market volume is the most important consideration in determining royalty rates for inventors.

 

The examination of patents, trademarks, copyrights and trade secrets enters into a project at some point. Generally this analysis resolves around the patent search, the preliminary response from the patent examiner (if still pending), and/or the breath coverage protected by the granted patent. This too depends on where the project is in its development stage.

 

Patent attorneys and agents are necessary and very useful partners. One of the first questions asked by a potential licensee or joint venture partners is: “Who did the patent filing work?”. Unless a professional has done the work, credibility of the project is usually lost.

 

• Third: Will the patent be easy to design around?

 

From this point only a positive answer from a professional patent attorney or agent will move the project forward.

 

Also a preliminary competitive analysis should be undertaken. Intellectual property rights (IPR) do not guarantee success any more than firing a bullet guarantees hitting the target. If the product or process does not possess a clear advantage over the features, benefits or pricing of the competition, the question asked is “Why to produce it?”.

 

• Fourth: Is there a real market for the product?

 

Usually to gain the interest of potential alliance partners there has to be preliminary and independent product analysis, even in a rudimentary form.

 

This is done through the use of new product surveys and testimonials letters from users or industrial experts. In most cases, on-line database searches (on the Internet), quickly identify and retrieve relevant information describing the industry and market.

 

The bottom line is that private sector firms do not want to hear an independent inventors´ dreams or glorified estimates of market size. They want facts and quality information upon which decisions can be made.

 

 

• Fifth: What are the manufacturing costs?

 

Will a product be successful if the retail price is only twice the cost of raw material and labor? It usually requires three or four times this amount to cover the overhead and an array of sales and marketing expenses, while still leaving room for profits. If the product can be made of plastic, is injection molding o vacuum molding the best choice? How much will the mold cost? What are all the possible distribution channels? Would it be best to use distributors or sell directly to consumer? Many new product innovators overlook such critical questions.  Accurate answers require experienced input from both manufacturing and marketing experts.

 

• Sixth: Is the intellectual property owner prepared to make a deal?

 

Has the inventor enough information, training, skills and will to face all the difficulties of the innovation process? This is the most important of the six questions.

 

 

Twelve characteristic of low technology successful inventions:

 

1. The new product must be an original solution to a relevant problem, not a simply solution, but an original solution. It must clearly solve some problem better than any other solution.
2. The new product must be easily understood. Do not try to educate the consumer.
3. The new product must be obvious. Its attributes must be self-evident. It cannot require marketing to distinguish it from its competition.
4. The new product must be very simple. It must sell without a warranty.
5. The new product must utilize simple materials and processes. There must be low tooling investment, and it cannot work.
6. The product must be at the right price point. It must qualify as an impulsive purchase or gift and retail for U$D 39.95 or less.
7. The new product must convey consumer satisfaction. It must not be too faddish or temporary.
8. The new product must be positive. It cannot be destructive, unsafe, or harmful neither for the users nor for the environment.
9. The new product must be free-standing. It must be independent. It cannot be part of a system. It cannot be tied to the success of another product.
10.  The new product must have a known retail or catalog source for   availability.
11.  The new product must be desirable. It must be irresistible. It can be a “need”, but must be a “want” as well.
12.  The new product should not appeal to everyone. If is does, there is danger that it will appeal to no one.

 

 

CASE STUDY:

 

Three successful SMEs based on low tech inventions:

(See the Power Point presentation)

 

1. Descorjet ®:

 

• A new champagne opener.
• 50,000 units sold per year.
• The company provides work for some 40 people.
• For more information: www.descorjet.com

Determination, commitment, ingenuity, team work and a holistic IP strategy are all required to explain the success of Descorjet. The experience of this company based on a device for quickly and safely uncorking sparkling drinks provides a vivid example about how a start-up enterprise has succeeded in a competitive international marketplace.

Converting an invention made in a single workshop into a product exportable throughout the world and patenting it in more than 25 countries makes Descorjet into a particularly significant case study for inventors and entrepreneurs in smaller businesses.

This company transformed the original prototype into a standardized, defect-free industrial product, worked out a detailed business plan and devised a marketing strategy. A meticulous anticipation search was conducted in the main data banks (www.uspto.gov, www.delphion.com and www.espacenet.com), and specific searches were made on the Internet.

Patents were applied for in more than 25 countries (Argentina, Australia, Brazil, Canada, Mexico, New Zealand, the United States of America and others), and in the European Union. Patents were granted in just eight months in the United States of America and in 18 months in the European Union. As Argentina is not party to the PCT, the inventors were obliged to file for patents in a great many countries very quickly, and were at risk while they did so. The team worked not only on the product itself but also on the trademark, the logo and the packaging, all of which were duly protected with trademark and industrial design registrations in more than 25 countries. And then, when the company Descorjet S.A was established, all the patents and other forms of intellectual property were made over to it as intangible assets.

The project was privately financed with contributions by the two investor-partners. Descorjet S.A was set up in Argentina, with an offshore company for the international business management. The initial investment was US$ 260,000, which was earmarked for the industrial development of the project, castings, patenting, travel, pamphlets and other paperwork, web pages, outside consultancy, etc.

The product was manufactured in Argentina to supply the Mercosur countries and in Taiwan to supply the other main world markets. Descorjet S.A. has not granted any licenses, and the company controls manufacture and marketing on its own. A number of improvements have been made to the product, and they too are protected by patents.

The main challenges were a lack of experience in international business and in financial matters. All this was overcome when the product won some important awards, both national and international (First prize in the 2001 International Invention Exhibition of Geneva, First prize in the 2001 Buenos Aires Regala Exhibition for the best industrial design and First prize in the National Business Plan Contest – Naves – 2002, organized by the IAE Business School of Argentina’s Universidad Austral). All this made for extensive exposure in a range of communication media, which in turn attracted interest and commitment on the part of distributors, retailers and agents in both the international and the national sphere. By dint of forward planning and the press coverage, the product progressed from the design stage to the first sales in just 18 months.

The company now has annual sales of about 50,000 units, with an annual growth of 15 per cent. Of that output, 90 per cent is manufactured in Taiwan (for the European and North American markets and those of Australia and New Zealand), owing to the competitive advantages in terms of manufacturing and shipping costs, while the remaining ten per cent is manufactured in Argentina for the Mercosur countries.

As for staff strength, the company has just four full-time employees in Argentina for final assembly and packaging, while the partners themselves work on the day-to-day management. All the rest is contracted out, including cutting, welding and polishing, the manufacture of packaging, printing, customs clearance and so on. In all, if one includes the accountants, the commercial artists, those who take care of shipping, etc., the company provides work for some 40 people in Argentina and another 40 in Taiwan.

The company owes its success to its ability to convert what was just a good idea into a functional prototype with a professional business plan that afforded genuine business prospects on the market. For the inventors, joining up with investors who had access to funding and also business experience was the determining factor. Apart from that, winning national and international awards gave the inventors credibility, and allowed them to go out and look for partners in the certainty that they had a sound, recognized project to offer.

 

1. 2.     TARC ®:

 

• A new wire stretcher for urban and rural use.
• 3,000,000 units sold per year.
• The company provides work for some 30 people.
• For more information: www.tarc-fences.com

 

TARC is a group of argentine inventors and marketers, who are striving to create, develop and commercialize new low tech products for the XXI Century.

 

After many months of hard work, designs, techniques, and proven trials, TARC was proud to introduce to the marketplace a  new innovative wire stretcher. TARC is offered international to the urban and rural segments of the wire stretcher markets.

 

TARC is patented as well as the name TARC is trademarked in more than 25 countries.

 

 

 

TARC design is unique from the other wire stretchers on the market because of its simple design and functional advantages for wire stretchers users.

 

TARC means less volume, less weight, less expensive, and easy to use compared to the traditional ones on the market today.

 

Any simple tool can be used to adjust the TARC. One does not need special equipment or special tools to attach the TARC.

 

The TARC technical advantages have been certified by the INTI (National Institute of Industrial Technology)

 

TARC is an argentine invention which will change the way wire stretchers will be used worldwide. Wire stretchers have been used for 129 years. The first wire stretchers were developed and invented between 1875 and 1890 in Argentina.

 

Today TARC offers a new concept and technical design which gives clear advantages for the rural and urban usage.

 

 

1. 3.     FLAPS ®:

 

• A new magnetic book mark.
• 10,000,000 units sold per year.
• The company provides work for some 20 people.
• For more information: www.flaps.com

 

Flaps, is an innovative magnetic bookmark that marks the page and even the sentences you are on. Very easy to use, it sticks to a page without moving or falling out, and you may put and remove it as many times as you wish.
Flaps is a highly useful item to have at reading time, with books, diaries, notes, magazines, and so on.

 

Flaps, also offers a highly effective conscious and mainly suggestive assimilation of the advertising message. This is due to the visual permanence of Flaps at the critical time of the reader’s emotional engagement.

Daily habits make it a very likely possibility that the bookmark be the last advertising seen by a person before falling asleep (scientifically determined as the best time for storing the advertising message in memory).

The physical characteristics of the product (weight, size, shape) make it appropriate for distribution by the most effective massive distribution methods: editions, fairs, events, mailing and deliveries, congresses, inserts, etc.

As a sales item, Flaps have had an excellent reception in the market in: a smart gift of exceptional quality, reasonably priced, lasting (between 5 and 15 years approximately) and easily carried, Flaps is ideally suited to the broad market of readers.

 

CONCLUSIONS:

 

A successful inventor is like the conductor of an orchestra. He knows only a little about each instrument and yet somehow organizes the playing of a symphony. He is a salesperson, marketing researcher, technical researcher, public relations officer, talent scout, evaluator and negotiator. Those specific roles should, at first, be willingly accepted and then given to specialists.

 

Innovation is a specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service. It is capable of being presented as a discipline, capable of being learned, capable of being practiced.

 

Innovation is also a specific instrument of inventors and entrepreneurs. It is the act that endows resources with a new capacity to create wealth. Innovation, indeed, creates a resource. There is not such thing as a “resource” until an inventor finds a new use for something (existing in nature or invented by himself.) and thus endows it with economic value.

 

In other to assists independent inventors in our country in the best way possible, we have found an invaluable source of information and permanent support in WIPO programs, serving as an active tool for our regular training courses an general services, which are useful and benefit the inventors´ community and society  in different  and profitable ways.