8/9/2019 Response Note

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Response note for:The product market and the market for “ideas”: commercialization strategies for technology

entrepreneurs

This paper highlights that for entrepreneurs the major problem is not invention but commercialisation of theinvention which has to be done strategically. It can either be through direct entry or integration into the value

chain through cooperation with established players. The analysis showed that a critical factor was the presence

or absence of a market of ideas with also a focus on operating requirements, efficiency and institutions. In the

commercialisation strategy there is always a trade-off between both strategies as actors with complementary

assets can become imitators of the innovation.

In terms of profit margins direct competition involves aggressive investments in order to launch product

inclusive of marketing or manufacturing capacity. It is difficult for a new start-up to make customers aware of

their product offering whilst avoiding detection and retaliation from established players. Whereas with

collaboration the major investment is in protecting the idea and carried out through licensing or acquisition

The profits are higher, avoid a splurge n initial investment, conducive environment for innovation and I would

like to add there is a level of shared risk between strategic partners. Nevertheless collaborations also cause

monopolies and disclosure has risk of imitation or having the partner have a high bargaining power if there are

few strategic partner options, but with many options then the bargaining power shifts to the inventor.

In considering all this, the environment that the company is operating in is of paramount importance generally

divided between the excludability environment where a start-up excludes incumbents and the complementary

asset environment which addresses what vale the partnerships hold for a new technology. Thus from that

environmental perspective comes consideration of 4 different strategies namely

 

The attacker ’s advantage: where there is  poor IPR and complementary assets are not controlled byincumbents

  Ideas factories: where strong IPR and established firms control complementary assets thus

 partnerships are merged with focus on when and how to form a strategic partnership

  Reputation based ideas trading: an environment where disclosure is a problem but incumbents have

complementary assets. This leads to incumbents invest in a market for ideas and attract innovation.

  Greenfield competition: complementary assets are not important and start-ups have strong IPR thus

giving the start-up the power to select the means of commercialisation.

In conclusion they stressed that time, pace, consideration of a firm’s commercialisation environment all affect

the level of investment and the type of strategy a firm chooses to for commercialising. Overall extracting

value from an innovation depends on customer value proposition.

In my opinion, even though this paper was written more than a decade ago, it is still very relevant. It is even

more applicable now as current competitive climates with constraints such as volatile economic conditions

and boundary-less organisations like Uber . Moreover a number of companies are striving a competitive

environment based on Greenfield competition through lobbying for open innovation. Such organisations are

Unilever, Siemens and Pfizer. Moreover the customers themselves have now proven a good source of

research and development as seen by how Netflix changed its searching algorithm by launching a competition

for the best collaborative filtering algorithm

The need to assess the environment cannot be stressed enough , these recommendations work well and it’s

advisable for a start-up to immensely be aware of its operational environment.

8/9/2019 Response Note

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Response note for: 

 Profiting from technological innovation: Implications for integration, collaboration, licensing and

 public policy

This paper was looking at who profits from an innovation between the first mover, follower firms, or firms

with related capabilities. The analysis was done around 3 building blocks:

  Appropriability regime: how a firm captures profits from its innovations looking at the nature of the

technology and how the firm protects it. Caution is highlighted as IPR such as patents can be

circumvented.

  Complementary assets which are other services essential to commercialisation. They can be attained

through contractual agreements or integration. The assets can be categorised between general assets,

specialised assets and co-specialised assets.

  Dominant design paradigm: one deign or a class of designs which set an industry standard, usually

mass market focussed and risky when imitation is possible and a new standard emerges

So Teece goes on to reinforce that an inventor with tight appropriability makes money easily and can acquire

complementary assets thus competition and imitation is rare. Whereas with weak appropriability there are two

distinct phases called the preparadigmatic and paradigmatic phases. In the preparadigmatic, emphasis in on

design and less about the complementary assets or commercialisation and in the paradigmatic phase it’s about

getting the product to market. In the beginning price might be a big differentiator but it moves over to the

complementary assets and the types of partnerships. Having sound access to such assets translates to profits

for innovators more than imitators. To implement the innovator must either integrate all the complementaryassets essential to business survival or collaborate and build contractual relationships with each having its

merits or demerits.

Contractual relationships: The advantages include low cost as no upfront capital investment is required to

 build or buy complementary assets there is also a level of reduced risk. This strategy works best for those with

tight appropriability and when complementary assets are readily available from several suppliers. It also adds

credibility to innovator. Nevertheless it is difficult to renegotiate critical contracts if suppliers are few even

when performance is not up to standard and a partner may imitate a product due to disclosure.

Integration of assets: This strategy requires a high amount of capital investment and timing is crucial. It is

 better suited for large firms who might have many of the relevant assets or for not fully protected innovation.With the success of the innovation it might see the firm having additional income from the complementary

assets through usage by competitors.

It seems that the innovator can make profit through a strategic determinant process. From my point of view,

the paper states that this assessment highlights what big firms should focus on when it comes to R&D. To me

this narrows down the scope of the level of innovation and makes it more incremental which does not protect

large firms from innovations of a disruptive nature. I would actually lobby for large firms to invest more on

collaborative tactics or acquisitions and thus use less resources on R&D has already been done and tested by

someone else increasing the level of success. The paper seems to be looking at the innovative process from

one standpoint of a product type of innovation and would not seem fully relevant to other forms of innovation

such as process innovation which are service oriented but I stand to be corrected.