Competition: a missed opportunity to be embraced

Who is your competition and how are you differentiated? This is a critical component of both commercialisation and fundraising, around which technology developers have significant scope to improve their current approach. Too often, companies are unwilling to tackle this topic in the depth it deserves. Whether this is due to fear, naivety, arrogance, ‘blissful ignorance’, or inexperience is not always evident. Competition is often seen as a negative. Consequently, people fail to see the learning potential that analysing the competition presents and opportunity that it provides to shape the narrative when speaking to investors and early adopters.

The result is that innovators often fall into one of two traps. The first is saying that there is no direct competition (e.g. we are the only ones), in which case they are admitting that they are addressing a non-existent problem as per pitfall 4 in Dr. Malcolm Fabiyi’s blog on why investments fail. The implication is that if no one else is solving the problem, it probably does not exist, the consequence then being that there is unlikely to be a market for your technology. This represents a failure to recognise that the presence of competition is a form of market and opportunity validation in and of itself.  The second is, they create a table of attributes (or matrix) which shows how they are the only one to tick every box (with the nearest competitor rarely being allowed to tick 75% of the criteria). See an example below:

 

I believe, however, that there is an opportunity for the technologist to choose how the competitor narrative is framed. But in doing so, it is not credible to select clearly irrelevant or bottom-of-the-barrel examples. In his investor pitch academy presentation, Andrew Chung of 1955 Capital (and formerly of Khosla Ventures) outlines a good framework for shaping the competitor narrative and I think his point on thoughtful understanding of competition is an area for improvement for most innovators.

In analysing the competitive landscape, it is important not to ignore adjacent technologies/ companies who may, over time, represent an alternative solution to the challenge or consider entering the market. Think: what else does or could do the same job? This of course will take some research.  I often sense technologists see this as a low value activity and are therefore not motivated sufficiently to put the time into researching all the direct, alternative and adjacent solutions. Which leads to more time investment in analysing their performance against key end-user defined performance criteria. Followed by, further time synthesising why their technology is not just better but has a significant moat that it will cost direct and putative competitors excessive amounts of money and time to overcome.

While doing this will be time-consuming, there are several benefits:

  • The first is that, with both investors and early adopters, it will demonstrate that you truly know your market and those who purport to address the challenge (the people that you are speaking to are also likely speaking to your competition).
  • Second, it will add credence to your claims of differentiation, as demonstrating this knowledge will have a self-fulfilling impact when you then say that you outperform all others for A, B, or C reasons.
  • Finally, a by-product of this exercise is that it will help to define the initial applications where you have the greatest advantage or where the competition has either ignored or been unable (to-date) to service the application successfully for a given reason. This is where your opportunity to define the competitive narrative comes into play. Combining this with some market sizing and growth analysis should identify those segments of sufficient size and momentum that can act as catapults into larger segments. Competition in these may be stronger but can be tackled once you have gained enough scale and success in the initial segments.

For companies with new technologies in the AgriFood sector, it is important to recognise that, if your technology is an improvement or an alternative to an existing practice, or use of a fixed asset (such as an irrigation system or heavy equipment), these existing assets are also likely to be a competitor to adoption. It is often underestimated how hard it is to displace the status quo or change behaviour. The same will apply for Watertech.

Lastly, one lens that is often neglected when assessing the competitive landscape is the competition for a share of the customer’s wallet. Whether your solution is going to be used on a farm, in the logistics chain, processing, production or packaging settings, the users of your technology have a limited amount of capital to re-invest in their business and will undoubtedly have more than one challenge (hopefully including the one that you are addressing) that they need to resolve. You therefore need to think about how you position yourself against the multitude of other investments they could make and why they should invest in you. You need to understand who/what you are in competition with, in order to highlight and frame your competitive advantage and differentiation in the right way.

This then becomes a factor of competing financial performances of the various investment opportunities for a customer, along with the influence of additional factors such as regulatory pressure and corporate prioritisation. But again, understanding how investing in your solution compares versus other investments the end-user could undertake provides an opportunity to shape the messaging to both adopters and investors as to why your proposition is compelling and in what scenarios.

From Lab to First Adopters

When it comes to finding Product-market Fit (PMF), entrepreneurial vision is helpful but insufficient. Landing on the moon may be the vision but it requires precise and completely accurate calculations to actually get there.

To increase the probability of finding PMF and to accelerate the process requires the systematic and thorough application of a particular toolset in a stage specific way. Those pioneering tools are: detailed hypothesis building, market engagement and application discovery, analysis and rapid iteration, and validation.

And, of course, the crowning evidence of PMF for product companies is that first set of deals that proves your ability to generate significant revenues at a high gross margin by solving a high value challenge either in a way that no other product can or in a way that is much more effective and efficient. The right set of ‘first deals’ demonstrates market acceptance and pull, and sets in motion a pattern of accelerating revenue capture (traction).

For broader platform companies, the ‘first deal’ challenge involves working with a broader ecosystem to identify applications and build products around your platform that achieve market acceptance. While the goals are the same as with the product company (see above ), the difference here is that there are potentially several different applications that we can apply the technology to. The skill lies in choosing the right initial applications that can have a multiplier effect with regard to: revenue generation; industry acceptance; and technology scaling.

‘First deals’ are different in nature and require a different pioneering skillset than those that follow in the growth stage. To generalise, they are harder to win, demand greater intensity, consume more attention, require more face-time with the ‘customer’, take longer, need a broader more cross-functional consensus within the ‘customer’ organisation, and are substantially more valuable than those that follow.

Whereas with ‘known’ products, resistance is likely to emerge early, curiosity for ‘the new’ means issues are likely to emerge later. For the venture organisation, where the mis-allocation of resource can be an existential threat, a long but ultimately fruitless engagement is deeply problematic. Curiosity is a powerful lever for stimulating engagement but also a trap sprung by the seductive charms of early interest. The challenge is to convert curiosity into opportunity early by creating a stage gate that gives the counterparty a clear choice between disengagement or a meaningful commitment that signals interest has been transmuted into an opportunity. All too often the issue lies in the lack of leverage that a technology company can bring to bear to ensure adherence to a stage-gated process. It is of course the evidenced and transparent promise of the technology that should support a more symmetrical interaction. Once established, the best way to ensure leverage (this is most applicable to platform technologies) is to have multiple competitive companies in the same industry all in the same process which creates an urgency to progress and conclude a deal within a desired timeframe with the carrot (should one be necessary) being some form of preferential access to technology which moves the competitive advantage needle.

At least from the perspective of the technology company, ‘first deals’ are based on no direct precedent. Practice is being formed and enacted for the first time. The execution capability is embryonic. Experience may accelerate the process when wisely applied but it may also hinder progress by adhering to modes of action applicable to different contexts. Generalised knowledge can be useful but is trumped by context specific insight. The goal for product companies as they move from ‘technology visionaries’ and ‘early adopters’ (who will adopt largely on the technology’s potential) to ‘followers’ is to evolve a practiced capability built on: fast learning and systematic iteration to distil what works; a creative process mindset; and extraordinary maniacal attention to ‘customer’ detail.

At each stage, a fit-for-purpose process must be created, tooled up, and optimised. Pooling expertise early into specialist jobs (embryonic functions) is important and is a precursor to scaling. One of the huge advantages of following this type of approach to designing and developing process, whether you are pioneering a product or a platform application, is that it quickly highlights the really critical steps in the process and what is needed to engineer successful outcomes. Those critical steps are nearly always conversations. The end goal is a series of repeatable actions – the smartest and most efficient way executing deals in these formative stages of the product’s lifecycle.

What is critical about building the execution capability is that it is foundational. It sets down the templates for others to follow. A great house cannot be built upon poorly built foundations. Starting over is a difficult and expensive job. Bad habits and poorly defined sub-optimal practices become embedded. A restart will almost certainly require the recruitment of new people. Success is ultimately only measured by results. There may be many ways to tackle a challenge but it pays to select the best way.

What is IP? And how to best leverage it?

We at Rapid Innovation Group are in the business of IP commercialisation. When we disaggregate that term, the most debate within the company, and a healthy debate it is I must add, is what does the term commercialisation mean. Is it sales and revenue generation at its most basic, or is it something far more fundamental than that? That’s a topic for another time and for someone with a little more nuance than me to tackle within our firm.

Instead I thought I’d write about what we mean when we talk about IP. Historically at Rapid Innovation, IP has been about the strength of the patent portfolio which we felt automatically granted a certain form of defensibility to our clients. However recently, I’ve been involved in a few engagements where what constitutes IP has had a rather more murky definition which has led to a more evolved position on IP in my thinking:

  1. One of our clients is doing a series A fundraise at the moment. They have a significant breakthrough in combustion technology and their business model is to develop and integrate it with large industrial collaborators, with the view to licensing to generate long-term revenue streams. One of the investors who is currently investigating them invests purely on the strength of the IP position. Our client has 7 patents across multiple patent families. Nevertheless, and despite NDAs, our client has not yet got to the stage of sharing their detailed designs because that is where their real technological differentiation lies. So where is their IP? In the patents, or in the design which is only briefly alluded to in the patents?
  2. Another client has licensed their IP to a company that has built large industrial plants using their technology. The core patent has expired but the license persists – both parties know, and will freely admit, that while much of the core technology is in the public domain, it is the secret knowhow and process knowledge that allows the licensee to profitably run the plant. How do you quantify that know-how? How do you protect it? How do you price it? Either way, their defensibility lies in that secret know-how. That plant cannot be run profitably without their process knowledge and know-how.
  3. A third client has a space heritage but like in the previous case, the core patent for their technology has expired. As such they have developed some process, and application patents. Fundamentally though, they do not have IP that protects the application, only their unique efficacy. What they do have is an emerging market with a clear need, a defined way that the market will adopt the technology, and a better product / design than their competitors. As such, their strategy is very much focused on selling this to as many customers as quickly as possible, and to find the right manufacturing model that will protect their design. Their defensibility lies in their commercialisation strategy, and their speed to market which is something that smaller, more agile companies are well suited to. They are very much a “deep-tech” company but are they an IP company – I don’t know and quite frankly don’t care as long as we have a product and a strategy that will fundamentally build market defensibility and long-term growth.

These are just a few examples of the extent of the diversity of challenges that have to be overcome “IP companies”, and while this is very generic, and fails to take into account several other hugely important contextual factors, it does provide a starter for six.

If you’ve got secret know-how and no one can reverse engineer your product / process when they get their hands on the product, then manufacture. This has two benefits as 1) it minimises IP leakage and 2) Allows you to price at the level you want as your customer has no way of knowing how it is you manufactured the technology and so is more willing to pay on the value of the problem being solved as opposed to imposing a cost plus model on you. Conversely, you shouldn’t dream of licensing in this scenario as you leave yourself open to your secret knowhow getting into the public domain and run the risk of your licence being compromised. Alternatively, if you’ve got a strong patent position, then license away as it’s pretty easy to see if someone is infringing on the patent.

Chester Karass said, in business as in life, you don’t get what you deserve, you get what you negotiate. The IP corollary is that your IP is only as strong as your wherewithal to protect it. Which for early stage companies with limited financial and even fewer legal resources is not very high. That’s why I’m a firm believer in the best piece of IP advice anyone ever gave me – keep secret what you can keep secret (and manufacture if no one can reverse engineer it) and patent what you can’t!

 

 

 

The allure of the ‘data is the new oil’ analogy

The commodities market is no stranger to data; a quick Google search will lead to streams of data showing price fluctuations and percentage deltas. Oil is back up to $70 a barrel and lithium is riding high on the projected growth of batteries and electric vehicles. One thing, however, that is not publicly traded on the commodities market, is data itself. A myriad of recent articles have hailed data as the new oil- the most valuable commodity over the last century. However, while the comparison of data and oil has some use, to label data as a commodity like oil is a misnomer.

The comparison is an attractive one. Data is seen as the fuel for our modern information economy. It is extracted in a raw and crude form and refined to produce something of real value. Yet, the analogy is overly simple and ignores some key differences. It is important that these distinctions are drawn to enable us to think about data and its value in the right way.

The data/oil/commodity analogy

For those of you who haven’t seen Billy Rey Valentine being condescendingly explained the commodities market in Trading Places, it’s probably good to start with a quick definition. Commodities are basic goods and raw materials that are extracted, exchanged and refined. They are agricultural products, coffee beans, gold, oil and of course frozen orange juice. As the alluring narrative goes, data too is mined and refined.

But, data lacks what economists call fungibility: the property of a good or a commodity whose individual units are essentially interchangeable. If I buy electricity from E.ON or EDF, I still expect both sets of kWhs to keep the lights on. In this case, crude oil is extracted, refined and barrelled for use in power generation and the value is the generation of power which is uniform in its output. That barrel of oil had the same teleological journey as the next one.

Data, on the other hand, is differentiated by type and quality. More importantly, the value of data comes from the insight and information one can extract from its raw form; these insights are highly subjective, largely influenced by methodology of analysis and therefore differ wildly through interpretation. Cambridge Analytica had access to a similar ‘barrel’ of data as everyone else. What they did with that barrel, the insights they drew, and their capitalisation of its value set it apart from others.

Another difference in the analogy is that once commodities are used, they often can’t be used again.  Data on the other hand is not a finite resource. It can be generated, used, reused and reinterpreted. Data can be stored and the accumulation of it is highly sought after in the modern information economy. Even when companies go bankrupt and assets get stripped, databases are often considered the most valuable assets. For example, when Caesar’s Entertainment- a gambling giant that pioneered its “Total Rewards” loyalty program- filed for bankruptcy, its most valuable asset was deemed to be this customer service database valued at $1 billion. No wonder companies are keen to get you to reply their GDPR consent emails!

So, as we have explored above, there are real limitations to the data/oil/commodity analogy. But why does it persevere to be alluring? The strength of the data/oil/commodity analogy lies in the fact that data is a valuable asset that is revolutionising business models and driving technological innovation. The ability to collect data and valorise its raw form into insight and information is the fuel of lucrative new businesses and innovative new models—much like oil was at the turn of the last century.

 

Data’s use

Of course, when people think about data it is the tech giants of the modern world such as Facebook, Google and Amazon that come up first. Although Facebook was slightly dented by recent events following the Cambridge Analytica revelations, data still reigns supreme. Google’s recent demonstration of their AI Assistant had people simultaneously in awe and shock at the pace of development of natural language processing and artificial intelligence.

It is not just in Silicon Valley and with internet companies where data is revered; industrial giants and deep-tech early stage companies alike are waking up to the strategic value of data and information. The two largest industrial giants, Siemens and GE are both preparing for the future of industry, where data and the services it can enable will form a key part of corporate strategy. Industrial behemoths like these are increasingly moving towards collecting data and utilising it to improve their ongoing customer relationships and open up new value-added services. This transition will lead to changing business models- a process already under way. Rather than industrial customers buying machinery (products) and maintenance contracts, the likes of Siemens and GE utilise data to provide a continued and long-term service to their customers. Contracts are no longer about just selling products, but delivering ongoing solutions that rely on data. It is an extension of Rolls Royce’s “Power by the Hour” concept developed- well, trademarked in fact- in the 1960s.

Data is spawning innovative technologies from the obvious smart algorithms to engineered hard technologies such as hydro-powered turbines to power smart water networks, novel approaches to asset monitoring and innovative ways to harvest energy to power the sensors that underpin these. Technologies span from smart approaches to data collection and methods to power sensors through to intelligent methods of analysis. The ability, appetite and vision to adopt these new technologies and develop models that the resultant data/information can enable, will lead to winners and losers across different industries. Data isn’t only the fuel of companies like Amazon and Google; it is a lucrative asset that will prove increasingly valuable industries such as energy, manufacturing and farming (to name just a few).

Conclusion

Data, then, can’t be called a commodity and it differs in comparison to sticky, black crude. It is an asset whereby its value stems from the interpretation and transformation of data into information. This information is an important component of our modern economy and will drive strategic diversification in some industries and kill of players who don’t move fast enough with it. Like oil was at the turn of the 20th century, data is a valuable asset that is changing the way our economy operates. It is no wonder that the reformist Saudi Prince, Muhammad bin Salman, pledged $45 billion to SoftBank’s Vision Fund whose focus is on the internet of things, robotics, AI and ride hailing.

Schrödinger’s Mongrel (and pricing equity in early-stage deep-tech)

I’m one of those annoying people that thinks Schrodinger’s Cat is an apt substrate for pretty much any old mixed metaphor that I can drag in. Apologies in advance.

It’s an age old question – how do you support valuation, at the point of seeking investment in a tech company that has zero, or very little, revenue, but shows exceptional promise. The reason it’s an old question is because it’s hard to answer, but here’s a clunky stab. The exceptional promise/ the pot of gold/ the cat is either alive or dead – which of these states it is in has simply yet to have been observed. It hasn’t been observed yet because we perceive time in a linear manner, but to a super-dimensional observer, the cat is, right here and now in spacetime – either alive or dead.

The mission for the entrepreneur looking for a strong valuation is to ensure that the likelihood is that it is alive. To put it another way, the business leader destined to chaperone the cat into the future, must be able to demonstrate to investors that the path through the fog-shrouded woods towards the goal, is well understood; that all the threats along the way have been considered, strategized and mitigated long before they jump out; and that the cat’s future wellbeing is a natural product of the work that has already been done to plan and manage risk. Risk in this context can be conceived of as existing on a series of spectrums such as technology, scaling, market, economic, investment, counterparty etc. An investor looking to push back on a valuation will generally be doing so by applying risk multipliers. Sound strategic commercialisation seeks to manage future risk through today’s action by pushing these spectrums ever closer to proven.

Good commercialisation therefore drives valuation, because it drives down risk. Bad or non-existent commercialisation is akin to leaving the future to chance. To put it another way, curiosity may actually save the cat…

Regardless of the state of the cat, I fully acknowledge that the metaphor is now as dead as a parrot.

Doing the right deal

Throughout the history of deal-making, folks have conceived of successful negotiations as being the ones where they “won.” Now, of course there is a place for adversarial negotiations, and of course there are times when it’s critical that you look out solely for your own company, but the types of deal that typically constitute the foundations for an early stage tech company, will usually function best when they function as a win-win long into the future.

 

For any early stage technology company, establishing the right structure and commercial basis for collaboration with key partners is critical. Attempting to use an imbalance of leverage, power, or information in closing a deal that favours you and cements a long-term partnership, is akin to building shaky foundations under a high-rise in the pacific ring of fire. It might look beautiful on the warm sunny day when it’s finished, but it’s unlikely to weather the storms. This is as true for a corporate as it is for a start-up, although both parties can be equally guilty of not always seeing this.

 

A long-term win-win is not always easy to structure, and there’s no simple solution for how to achieve it, but openness, honesty, and frank communication are a good place to start (I remember that from my wedding). If both parties genuinely understand the other’s hierarchy of intended outcomes, structuring is made considerably more simple, as is running a conceptual stress-test to see how it will handle any future tectonic shifts.

How early is too early: knowing when to engage your customer

“But we need to develop 3 phases of prototypes, go through accelerated life testing, and get 10 patents granted”. Or so go the usual protestations against early market engagement. The value of bringing partners and customers into the conversation at an early stage is often trumped by fear. “They’ll steal my technology”. “It isn’t advanced enough”. “They won’t understand it”.

There is only one thing that you need in order to commercially engage with companies; a proposition. Something to spark their interest. Let’s say you live in a very rainy country and I’ve invented the umbrella (which for some reason, no one else has figured out). If I approach you and tell you that I’ve got a solution to the downpours that blight your every day, do you think you’d be interested in talking to me? You bet you would.

What happens next? I find out what size umbrella you would like, what colour, and how much you are willing to pay. Because there’s no point in me spending 6 months and spending all my savings on an umbrella that is pink, made of wood, and costs £100 when what you wanted was red, plastic, and costs £50. No, the smartest thing I can do is make sure that I am developing the desired solution to a real problem, before I invest a significant amount of resource in doing so. Moreover, customers may be more open about the value of a solution when they’re encouraging you to create one (as opposed to negotiating over price).

Now, I don’t mean to downplay the importance of solid IP protection or reliable performance data. My point is that these are not prerequisites for starting a conversation with the company which will eventually use or distribute your technology.

These early conversations can significantly reduce market risk for emerging companies and their investors. They validate that a valuable problem is being solved. They help to shape the technology development path so that solutions are compatible with supply chains. They demonstrate demand for what you will ultimately be selling or licensing. All of this helps to avoid uncommercial development, something critical for young companies with short runways looking to maintain a competitive advantage.

Closing

Closing any deal is an event created by a process. The event itself involves getting the deal over the completion line. It is no more than the summation of a process that starts once a degree of mutual trust and interest have been established. Opening is a fluid mix of sparking interest (i.e. potential but still unsubstantiated fit and benefit) and relationship building. Relationships matter as they create access and provide the agency that gets things done and the medium through which information and insight is channelled and processed. Importantly, they also allow us to understand first hand what is important to an individual and an organisation. That is where empathy starts. In dealmaking, to deal is to empathise; to be able to imagine things from your counterpart’s point of view. Empathy is not simply a matter of adding another invaluable perspective, it is that soft intelligence that can lubricate the process, help smooth the bumps, and resolve the thorniest of issues. While creating ‘an opening’ is a prerequisite to selling, it is not in my book selling. It is a skill apart and a high value one at that when there is a significant degree of complexity and multiple players involved.

Determining the degree of fit, and the business case that may emanate from it, is a critical stage. The more thorough the work here the greater the probability that subsequent activities will progress smoothly. This is an evidence-based stage characterised by information sharing. The more structured this process, the better. Have a plan of what to share, with whom, and importantly, when to share. Building the business case – the ultimate measure of fit – in particular should never be presented as a fait accompli. Rather it is a very deliberate process. Agreeing a methodology (i.e. how value can be evaluated) is important because sellers are often guilty of presenting benefit cases that underestimate adoption costs while buyers may try and inflate them. The best form of persuasion (i.e. selling) are ‘facts’ messaged and presented in a manner that is compelling by virtue of being irrefutable. That is the subtle art of ascribing meaning to facts.

The basis of all sales is arbitrage: the buyer pays x for something potentially worth a multiple of x.  For the buyer that is the difference between cost and value.  This is where IP based propositions that are a multiple better than the incumbent technologies should be at a major advantage. The higher the multiple the greater and more transformative the potential value. Of course, the imperative here is transparency. Indeed ’radical transparency’, to borrow an acquired phrase, makes absolute sense. No bullshit required. Just detailed hard proof that for many of the companies RIG works with can only come through a period of collaboration. To fall short of ‘showing the value’ is to sell your technology short. Falling back on persuasion, however articulate and passionate the advocate, is a poor substitute for empirical, substantiated, indisputable, shared and accepted evidence of value. In this stage at least, the best way to sell is simply not to.

Beyond the core challenge of agreeing a methodology for establishing value, there is always an extensive list of associated ‘issues’ (not least those related to IP) that must be worked through before a closing event becomes a possibility. Failure to identify or anticipate an issue will delay ‘the close’ or lead to premature attempts to close a deal that is not yet closable. An apt metaphor might be borrowed from my boyhood:  compare this final stretch to building a model airplane of the type that predate the machines that you can order on Amazon and that are ready to fly straight out of the box. For the plane to fly the build had to be completed to spec and the little engine perfectly calibrated. Everything had to be just right, which took a fair amount of checking and tinkering, otherwise the plane failed to take off or crashed shortly after take-off. The most important tool was a comprehensive checklist.

The critical challenge of agreeing commercial terms is the penultimate activity before ‘the closing event’. This essentially involves trade-offs between cost and anticipated value. The buyside argues cost (and if procurement gets involved it will almost inevitably try to divorce cost from value as is their brief) while the sellside must stick to the language of value. To fall immediately into a pricing dialogue dominated by arguments around cost is to be seduced by the dark side. Instead frame your arguments using the language of value. How challenging this negotiation is primarily a function of how well you have executed the preceding stages. Though you will be frequently told otherwise, there is little in truth that cannot be anticipated or established before the negotiation to ratify final terms. An agreed methodology to evaluate value will at the very least enclose the discussion within parameters that make reaching agreement easier. The result we get may in part be down to our planning and negotiation skills but in much greater part it is down to leverage. Leverage is power and that power is found, created, built, adjusted, and understood as the process unfolds from first contact. In sum, the most skillful closers are those who know how to create leverage and use it to shape their counterpart’s decision-making, so that they seek in their own interest, terms that closely resemble the ones the closer set out to achieve in the first place.

 

Pick your champion

As an early stage technology company, the early deals done with big companies can set the course for the business for some time into the future. Getting them done is rarely simple, but the first step is to make sure you have the right champion.

It is a common misconception that because you are engaged in discussion with someone at a company, that you’re engaged with the company as a whole. It is rare that a large multinational invests all of its expertise, budgets and problems in a single individual or team, and frequently teams are empowered to solve their own problems in an economic way and encouraged to share their solutions with the group. This means that generally speaking there are multiple potential entry points into a company, and it’s wise to take advantage of this.

A second common misconception is that because an individual at a big company fully understands a specific problem or opportunity, that they truly care about solving it or grasping it. In actual fact, the vast majority of big companies have a real mix of cultures and sub-cultures meaning that even in the most board-mandated innovation-orientated environments, individuals can on occasion still get decapitated for taking undue risk or diverting themselves excessively from their day jobs to chase the prospect of a new technological Nirvana. Added to this, some people just don’t care as much as they ought to.

Large multinationals are generally constituted of complex and flowing networks of interests, perceptions and political capital. A good champion will help you to understand and navigate these very human elements, as well as support forward mapping the process to close. If they’re serious about wanting to get the deal done, then it’s in their interests to be open.

And so, at the risk of sounding like a Sunday supplement, a quick round-number checklist to help you to spot whether you have a good one. They:

 

  1. Understand what it does
  2. Understand the value of what it does
  3. Know to whom internally it has value and the nature of the problem it solves
  4. Can explain it to others
  5. Have real personal credibility
  6. Have a track record of on-boarding external technology
  7. Want to get a deal done
  8. Will empathise with your needs and work with you towards a shared goal
  9. Are frank about timing and will support sticking to an agreed timeframe
  10. Will help you to understand the process to getting a deal done, and all of the gates you need to pass through and the boxes to tick

If your primary engagement is with an individual with all of the above characteristics, great – you stand a chance of getting it done. If not, that doesn’t necessarily mean you want to jump off that horse, but it’s well worth considering getting new blood into the stable. Early technology deals should be done as much as possible from the same side of the table, focussed on benefits and structures for win-wins. A good champion works with you towards common objectives.

Getting the right champion is just the beginning, and from there on out its essential to be building your own political capital, and understanding first-hand the inner machinations of the business, but you’ll never understand it nearly as well as when you have a talented insider with aligned interests.

Negotiation Tools

Successful commercialisation requires a great technology with differentiated IP, a sound strategy with clear execution, and a little bit of unexpected foresight.

Case in point, a RIG client had a market-leading technology, a clear but simple strategy that resonated with its customers, partners and employees, and a strong execution-focused team that collaborated closely across the different functions of R&D, production, marketing, sales and support. This put the company in a winning position. However, an unexpectedly genius bit of negotiation led to the first few years of growth and sales being far smoother than previously imagined.

The technology had been incubated in university and was godfathered by one of the world’s largest energy companies who had provided clear technical specs, some development funding, and some of their business units to act as field trial partners until a commercial version of the technology was available. The quid pro quo from our client was that the energy company had exclusive access to the technology for a period of time. In order for the technology and the company to be viable and valuable, it had to unshackle itself from its customer and prove that it had worldwide application within its target market.

We had prepped and planned the negotiation for weeks on ends mapping out the various stakeholders and persons of interest within the energy company. Over a several month negotiating cycle we managed to secure a removal of their exclusivity on the technology without any change in shareholding. The key concessions were royalties over time and a Most Favoured Nation (MFN) pricing structure for the energy company. Little did we know the second thing, which we saw as a necessary evil, became one of our client’s most powerful negotiation tools.

As we started commercialising the technology out in the global energy market we discovered that there was real interest in the problem our client was solving, and a real differentiation in how they solved it. The market was keen to adopt the technology and we were able to get through the technical qualification process and identify significant problems that we could solve so that budget could be secured for initial uses of the technology. While this process wasn’t rapid, reflecting the sales cycles in the energy industry, it was smooth progress. We believed that we’d hit rough waters when it came to procurement especially as we were selling this across the world and we believed that different geographies would have different spending thresholds. Sure enough, during negotiations, having agreed all the terms and conditions, and just before producing an order, procurement teams would invariably ask for discounts saying that the budget secured was only for a certain round figure. However we knew that the problem was significant, and that our client’s technology could solve the problem best, so we stuck to our guns. However the argument we used every time, and with significant credibility, was the MFN pricing. The conversation normally lasted as long as this:

Potential customer: We’d like a 20-30% discount on the unit price of your technology. Our budget is only x. Our internal customers (the operational and technology team) want to use your technology but you have to work with us to fit the budget.

Us: I’m sorry we can’t do that. Energy Company Y has a MFN pricing agreement with us where they get 5% less than the lowest price in the market. So if we discount you by 20-25% we’d have to do the same for them and given that their volumes are an order of magnitude higher than yours, we can’t afford to do that.

Potential customer: Ok understood. We’ll prepare the order in the next day.

As you’ll note, the conversation was never about your price versus your competitors because our sales process ensured that we had identified that the problem we were solving was significant and had established in the users’ minds that our technology was best equipped to solve it. As a result, it was never a competitive scenario so the lever the customer had was at best made of rubber while ours was made of steel. It was never a lever that we had ever remotely imagined we’d have to use.

We probably trotted that line out to 30 different customers in 15 different geographies during the first couple of years of commercialisation. It worked with everyone but one: a family-owned energy company in India from who we decided to walk away from after two years of discussions and negotiations. Speaking for my countrymen, despite us seeing the value and understanding the logic, we just can’t live without a discount!