Platt Perspective on Business and Technology

Innovation, disruptive innovation and market volatility 43: innovative business development and the tools that drive it 13

Posted in business and convergent technologies, macroeconomics by Timothy Platt on September 2, 2018

This is my 43rd posting to a series on the economics of innovation, and on how change and innovation can be defined and analyzed in economic and related risk management terms (see Macroeconomics and Business, posting 173 and loosely following for Parts 1-5 and Macroeconomics and Business 2, posting 203 and loosely following for Parts 6-42.)

I focused in Part 42 on

• Budget prioritization, and balancing the costs of supporting innovation development and building for New,
• Against the costs of ongoing business processes and related as arise when meeting more standard, ongoing cost-center needs.
• And I discussed this all in terms of the real world budget and resource constraints that any business faces, and in terms of prioritizing what might be done on all fronts, and both in terms of direct costs faced and in terms of need and opportunity factors. Risk and benefits analyses and their conclusions arise from that.

More specifically, I focused in Part 42 for the most part, on a single innovation initiative, simplest case scenario. And I then briefly touched on the possibility of developing and maintaining a true innovation pipeline for the purpose of putting that simplest case possibility into a wider and perhaps more realistic context. My goal here is to begin again with that simplest single innovation-considered scenario – this time looking in more detail into what is actually involved there. This will mean breaking open the black box of the innovation and product development process, or rather flow of such processes, to consider the internal workings, cost and benefits analysis considerations that any business would face when having to address real innovation and either in prospect or as it is actually currently taking place. After developing this more detailed and I add more realistic analysis and discussing how it might be applied in a specific business context, I will re-add in the issues and complexities of innovation pipelines again, of the type that any innovation oriented business would have to develop and maintain.

• I begin all of this by considering an innovation effort that if successful, would lead to a significant upgrade to a product that customers already know, use and appreciate, that would draw real market interest for more effectively, and for most cost-effectively meeting consumer needs. And the product type that I would focus on here, is outdoor paint, of a type that could be applied to as wide a range of possible surfaces as possible, and that would last longer than current products do and both for waterproof surface endurance, and for resisting color fade.
• The key here is in cost-effectively developing a new chemical formulation for the base compound that colored pigments would be added to, to create the range of paint colors offered, that would bind to those pigments, and to as wide a range of paintable surface materials as possible, and stably so.
• Ideally this would include capacity to cover surfaces such as raw brick face in a single coat, that would soak up conventional house paint, leaving brick color showing through. Yes, there are undercoats that can be applied with a specific goal of sealing porous surfaces such as raw brick face. But the goal here is to make it unnecessary to paint the same surface twice; the goal here is one coat and done.
• And ideally this same paint formulation would stick firmly to surfaces such as plastic siding too, that do not absorb at all, where that can lead to paint peeling.
• And ideally this paint would last, as noted in the first of these bullet points and in any of a very wide range of climates and in the face of a very wide range of climate exposures. That would of course include tropical heat and sun exposure, and northern winter exposure and much more (e.g. coastal salt spray exposure.)
• And as a final point of detail here, any paint formulated and produced in this way should be as easy to use, and as quick and easy to clean up from as any water-based acrylic house paint already in use and it should be at least as close to being odor free as current paint offerings are when drying.

Perfection in achieving all of the above product design parameter goals and at low cost to the customer, and in a very competitively wide range of paint colors might be an impossible goal. But I assume here, an innovative new product development effort that would at the very least come very close to simultaneously reaching all of the above goals, and as close to perfectly as possible.

Now let’s consider an at least broadly stated research and development process that might lead to reaching that overall cumulative goal here, and its costs and benefits, and risk and benefits issues:

• Let’s begin in a materials science lab at a university, and with a new polymer formulation that holds potential for replacing the polymer emulsions currently in use in acrylic paint products. And let’s assume that the professor who runs this lab, teaches and does their research in a university that has an active innovation development office that works with members of their faculty, and with innovative graduate students and others there, to promote their innovations and to secure patent protection for them. This generally means that university taking a percentage of any resulting income achieved from that effort, off of the top from all monies received, with the rest parceled out according to a contractually agreed to formula-based process. But I will set that aside for purposes of this discussion and simply assume that this potential paint breakthrough has either patent, or what is more likely: patent pending protective status. And it is in some way offered on the market to any business that is willing to competitively pay for its use, and probably through an exclusive use agreement.
• This innovation represents a potentially valuable compound, and approach for generating it that might in fact yield better, longer lasting outdoor paints. But there are still going to be more questions than answers as to how or even whether that can work out successfully in practice, and cost-effectively so. A business that agrees to purchase the rights to this patentable, currently protected idea is buying access to what amounts to a seed, that might really grow into something. Or it might not.
• I will set aside the issue of whether another company might read the same patent filing and decide to tweak the chemistry outlined in it to make a comparable new product that would match what this patent pending chemistry would seem to offer. I will simply, if admittedly naively assume at least for this phase of this narrative that the patent proposal submitted by that university office and their attorneys, is sufficiently broadly enough written so as to effectively block that type of challenge, at least in any short or near-term. And I will assume that that patent filing is also specifically enough written while meeting that goal, so that it is not likely to be overturned and thrown out as being too vague or non-specific for its key innovation offered to be genuinely patentable. For here at least, I will simply assume that attempting to patent and filing for that, and securing a patent pending status on this new innovative approach is going to be sufficient to limit its access for use to the single organization or other entity that holds the patent filings on this, or to any business that buys a right to so use it from them.

My goal here has been to set the stage, by way of a specific working example, for all that will follow when discussing the type of analyses that I have outlined in the abstract in this series, and in its recent installments leading up to here in particular. I will continue pursuing this example by presuming that at least one paint manufacturer would be willing to buy into this new and novel innovation. What would prospective patent rights buyers consider in their due diligence exercises as they consider making a bid to buy, for securing exclusive use of this innovation? How would they make their overall, concluding decisions there? And for the business that does so buy in and sign a contract to finalize that, what comes next, as this raw idea and the potential new paint chemistry that it represents, is developed into what will hopefully become a whole new, groundbreaking line of products? And how will that fit into the rights acquiring business as a whole with its ongoing financial and other pressures and considerations to contend with?

I framed that in terms of the business-to-business client of an initially innovating company (here a university with its research labs.) I will discuss the issues as touched upon in the above questions from the perspective of the innovation offering business too. In this, you leave yourself open to gaps in your thinking if you do not look into all of the key relevant issues that would arise in this type of transaction from both perspectives. My goal will be to pursue both of those perspectives, in parallel with each other.

I will at least begin to explore those issues in my next installment to this series. Then after completing that single innovation effort narrative line, I will add the issues and complexities of innovation pipelines back into this overall discussion too. Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation. And also see Ubiquitous Computing and Communications – everywhere all the time 3 and that directory’s Page 1 and Page 2.

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