Engineering Innovation

From idea to market through concepts and case studies

Benjamin M. Legum, Amber R. Stiles, Jennifer L. Vondran

• Publisher: De Gruyter
• Year: 2019
• ISBN:
  9783110521153
• Edition: 1
• Topic: Scienze fisiche
• Subtopic: Chimica

Engineering Innovation is an overview of the interconnected business and product development techniques needed to nurture the development of raw, emerging technologies into commercially viable products. This book relates Funding Strategies, Business Development, and Product Development to one another as an idea is refined to a validated concept, iteratively developed into a product, then produced for commercialization.

Engineering Innovation also provides an introduction to business strategies and manufacturing techniques on a technical level designed to encourage passionate clinicians, academics, engineers and savvy entrepreneurs.

• Offers a comprehensive overview of the process of bringing new technology to market.
• Identifies a variety of technology management skill sets and management tools.
• Explores concept generation in conjunction with intellectual property development for early-stage companies.
• Explores Quality and Transfer-to-Manufacturing.

Part A: The Business Side of Innovation

1 Starting Out with Due Diligence and Early-Stage Market Research

Abstract: At the outset of any business, it is important to conduct due diligence and early-stage market research. Due diligence is a form of research that involves looking to the relevant field of endeavor and reviewing the literature, market, and intellectual property (IP) landscape surrounding the area of technology of interest for the purpose of making a determination as to whether efforts to develop and commercialize an innovation are worth pursuing. The goal of due diligence is to identify and assess any potential obstacles and potential ways for overcoming these obstacles, and to evaluate the likelihood of long-term success. The value of due diligence is that, in many cases, it can be done with little to no monetary cost; only time. One important step in conducting due diligence is conducting early-stage market research, which involves collecting data and useful information about the needs and preferences of the consumers that make up the target market. The information that is gathered during market research will give you a better idea of whether your innovation is worth developing and bringing to market, that is, the information gathered during the market research portion of due diligence will inform the validation of your innovation.

Keywords: Due diligence, life cycle, startup, growth, expansion, maturity, exit, market research, market segments, value proposition, market reports, consulting firms, data acquisition firms, target consumer, competitors

1.1 The Life Cycle of a Company

Before delving into the business aspects of innovation, it would be good to start with a fundamental understanding of the typical life cycle that a business goes through. Businesses have a beginning; a middle, in which they grow and develop; and an end. Figure 1.1 shows the typical life cycle stages of a business.

Figure 1.1: Typical life cycle stages of a business.

• – The Due Diligence Stage (also referred to as the seed and development stage). The due diligence stage is the gestation period in which a business is conceived and born. It is when the business is still just an idea that is taking form. During this stage in the business’s life cycle important assessments are made using due diligence investigations (see Section 1.2), initial market research (see Section 1.4), and validation techniques (see Chapter 2), to determine whether the idea behind the business is worth pursuing. If so, then the business progresses to the next stage in the life cycle.
• – The startup stage. The startup stage is when the team is assembled and a company is formed and officially launched. This stage is often very exciting, but also very risky. It is the exciting period where the company prototypes, seeks early-stage funding sources, and initially goes to market, but it is also the period in the business’s life cycle where the company is most likely to fail. If a company is successful in obtaining funding and launching to market, the business will move to the next stage of its life cycle.
• – The growth stage. Successful startups advance to a period of growth and development, during which the company transitions into an established company. In this stage, revenues are consistently being generated by the company and profits increase. As success is incrementally earned at this stage in the life cycle, the business must grow in order to meet demand. Growth can involve increasing the company’s workforce, scaling up production, managing increased revenues, developing new strategies to remain competitive, and reevaluating how the company is managed.
• – The expansion stage. After establishing the company in the growth stage, it might make smart business sense for the company to go through a period of expansion. This could include expanding the company’s workforce, expanding product lines, expanding into new geographical regions, expanding into new markets, and participating in mergers and acquisitions.
• – The maturity and possible exit stage. Owners of established companies must decide how to proceed beyond the growth and expansion stages – the owners can either carry on routinely as they have, making a lifestyle out of their business, or the owners can opt to exit the business.

Just as a business has a life cycle, the development of an innovation from an idea to a prototype and then to a marketable product also follows a life cycle, known as the Product/Technology Development Process. At the same time, a business must also grow and develop through a series of phases known as the Business Development Process. Figure 1.2 illustrates how the Business Development Process and the Product/Technology Development Process run in parallel to one another, and also correspond to the progressive life cycle stages and funding stages of a business.

Figure 1.2: Engineering innovation life cycle: funding, business, and technology development.

All innovation starts with an idea, and passion with a purpose drives the transformation of an idea into an innovative technology. Many scientists, engineers, researchers, inventors, and entrepreneurs are struck by an idea, like the proverbial flash of genius, and then are motivated to develop the idea into a viable technology or product. Not only is there a sense of intellectual accomplishment associated with bringing an idea to fruition, there is also commercial success to be had, if the innovative technology is marketable.

But how does an innovative technology develop from an idea to a prototype then on to a marketable product? This is a question that many intellectual people ask themselves. Conducting research and development, building a functional prototype, and testing the prototype can consume significant amounts of time, resources, and energy. It would be a shame and a waste to discover that a similar technology or product exists in the market after investing significant time and money into efforts to turn the idea into a working prototype.

Fortunately, there are steps that innovators can take to help assess whether development of the idea should move forward. With a little investigative know-how and diligence, innovators can understand what problems the innovative concept (which can be a technology, product, or service) solves; what value the concept has; where the concept fits in the market; and whether developing the concept is worth the effort it will take to create a commercial product. One of the first things innovators should do before investing a lot of time, money, and resources into developing a new concept into a marketable technology or product is to conduct thorough due diligence.

1.1.1 Life Cycle Deviations

It is important to note that the above-mentioned stages represent the typical life cycle of a business. However, not every business’s life cycle is the same. Alternative paths can include the following:

• – Intellectual Property Portfolio Monetization. Some businesses are formed solely for the purpose of generating and leveraging intellectual property (IP) assets (these businesses are often referred to as nonpracticing entities, meaning they hold IP assets, but do not produce a product). Nonpracticing entities often never go through growth or expansion phases. Nonpracticing entities may be serial inventors or a business. The nonpracticing entity acquires a collection of patent rights related to an invention in what is called a patent portfolio. The patents in the portfolio are often assigned to the company, meaning that the company owns the patents – not the inventor(s). By assigning the patents in the portfolio to the company, the company can easily monetize the patents by transferring, selling, or licensing the patents to others. This can be a successful business model for people who do not want to grow or expand a business. Rather, the business can focus its efforts on strategically developing, selling, and licensing patents.
• – Early-Stage Funding. A business that receives significant investor funding during the due diligence phase may quickly rocket to the growth phase, spending little time in the startup phase of the life cycle.
• – Early Acquisition. A business that is acquired during the startup stage will be accelerated to the exit stage, skipping over the growth or expansion phases entirely. Planning for growth and expansion is key for getting acquired early, but in certain industries, the current system of big industry players encourage acquisition of smaller, startup entities. Therefore, the exit stage of the life cycle can arrive much earlier than expected.
• – Initial Public Offering (IPO or “going public”). Many businesses opt to do an IPO, in which shares of the company are sold to investors (after an underwriter – usually an institutional investor(s) – places the shares for sale on an exchange). These investors can include entities such as banks, insurance companies, pension funds, hedge funds, and individuals.

1.2 What is Due Diligence?

In essence, due diligence is doing your homework and making sure that any risks associated with developing a concept into a marketable technology or product have been carefully considered. Due diligence is a form of research, or an investigation, that involves looking to the relevant field of endeavor and reviewing the literature, market, and IP landscape surrounding the area of interest for the purpose of making a determination as to whether the innovative concept is worth pursuing. The purpose of due diligence is to identify and assess any potential obstacles, potential ways for overcoming these obstacles, and to evaluate the likelihood of long-term success. The value of due diligence is that, (1) it can help an innovator avoid wasting time and resources on an unmarketable product, and (2) it can encourage the innovator to revise or refine the concept to better reflect market realities. In many cases, the incentive of performing due diligence is that it can be done with little to no monetary cost; only time.

Due diligence takes time, and – as the name implies – diligence. However, there is no specific formula when it comes to how due diligence should be conducted. Due diligence is not going to be the same for every business. The scope and breadth of due diligence will be different at each stage of the business life cycle, and while there is a general formula for how to conduct due diligence, there is plenty of flexibility in how due diligence can be performed (Figure 1.3).

Figure 1.3: Business Development timeline.

In short, due diligence depends on the specific circumstances surrounding the innovative technology or product. For instance, a technological invention in a field where there is a lot of innovation, that is, a crowded market such as online social media platforms, may require more careful due diligence to ensure that there is a place in the market for the new technology.

Due diligence for developmental stages:

1. Determining if a concept is viable.
2. Developing a business model.
3. Determining strategies for market expansion.

Different types of due diligence include:

• – Analysis of market trends.
• – Evaluation of technological feasibility of developing the product.
• – Conducting cost analysis (for instance, evaluating what it costs to develop the prototype, what it costs to secure IP protections, what it costs to scale up production, etc.).
• – Conducting policy analysis (such as conducting an evaluation of the local, state, and federal laws and rules (and international considerations) associated with bringing the product to market).
• – Analyzing the IP landscape for the relevant marke...