Dr. Gilbert Nicolaon Head French Eureka Office European Network for European Network for Market-Oriented Industrial R&D

Board Member, Fulbright Commission Anvar – French Innovation Agency British Technology Group Scientific Attaché, French Embassy (US) Scientific Counselor, French Embassy (UK) Publications - Technology Transfer, Innovation, Scientific Policy Academic and Industrial Research Dr. Gilbert Nicolaon

INDUSTRY DEMAND FOR TECHNOLOGY SERVICES European Network Gilbert Nicolaon Innovation and Competitiveness Practitioners workshop World Bank TTGV Istanbul April 20, 2004

Industry demand ? Industry demand for technology services :  Multinational : they do not need assistance  SMEs : most of them do not feel the need ?

Does it mean that… …there is no market for this topic ! Thank you for your attention ?

Two questions : One « basic » question : What does industry need to meet this goal ? One « preliminary » question : What is industry ?

Preliminary question : What is industry ?

 Multinationals  High tech SMEs  Traditional sectors SMEs

Industry’s « Internal » expertise Large Group High T. SME Trad. SME Public lab TechnicalYYYY EconomicalYYYN FinancialY??N LegalYNNN I.P.R.YYN? Internat.YYNY

What is an SME ? SMEs : extremely diversified  Size  Industrial sector  Market  Technological level  International experience There is no such thing as a « typical » SME SMEs in Europe : Not 2 are alike

Industry in Europe Industry in Europe :  Multinational : a few hundred  High Tech SMEs : a few thousand  Traditional SMEs : over (+ Recently, Services sector SMEs) The largest potential market for tech. services is « traditional » sector SMEs

Basic question : What does industry need ?

Industry’s goal : Why would industry need technology services ? A few very simple reasons :  To develop new products  To increase it’s market  To improve it’s sales To have a high growth rate and profitability Governements are also interested since growth rate generates employement and profit generates taxes

What does industry need ? Industry needs :  new products to reach new markets  New processes to decrease production cost  New services to reach new customers To reach those goals : Industry needs innovation… which is not always coming from R&D !

Discovery, Invention, Innovation  Discovery means : Papers  Invention means : Patents  Innovation means : Profit Industry looks for : INNOVATION

SMEs demand for technology services

SMEs demand for Technology services The demand is limited BUT :  Technolgy is important for SMEs development  SMEs development is essential for the economy  Economic growth is essential for every country CONCLUSION : Technology demand has often to be « stimulated »

SMEs and technology services 1. Identify innovative SMEs 2. Motivate them 3. Bring them assistance

SMEs lead innovative projects 3 basic characteristics : 1.Strongly market oriented 2.Lead by an SME 3.Cooperative (SME+service provider)

SMEs lead innovative projects SMEs lead innovative projects 1.Strongly market oriented means :  The goal is to “make money” 2.Lead by an SME means :  Various external competences are needed 3.Cooperative means :  Each partner wants a piece of the cake

1. Market oriented

1. Market oriented 1. Market oriented  For decades “everybody” had a good experience with academic R&D cooperation  In the 80’s it was assumed that market oriented R&D cooperation were comparable THIS WAS AN OVERSIMPLIFICATION  For « market oriented » cooperation : Success = Profit Failure = Financial problems Success = HiringFailure = Laying off Success = GrowthFailure = Bankruptcy ? Success = Economic Dvp.Failure = Economic stagnation Extremely different from academic cooperation

1. Market oriented The goal is to “make money”  A good analysis of the market is crucial  A strong business plan is a must  An overview of the R. to Mkt. process is essential  Management capabilities are important Extremely different from academic cooperation (their output is exclusively scientific papers )

2. Lead by an SME

SMEs lead projects  Extremely diversified  Covering all industrial sectors  Covering a wide range of technologies  Sometime “Technology push”  More frequently “Market pull”  From very “high tech.” To “traditional”  From “worldwide” To “regional”  Offering a huge market potential BUT …

“Stimulated” bottom up  SMEs usually do not look spontaneously for tech.  High Tech SMEs do know the R&D community BUT  Traditional sector SMEs usually do not A very large number of potential customers need to be « stimulated » this lead to : THE STIMULATED BOTTOM UP CONCEPT

“Stimulated” bottom up A 3 Partners cooperation :  The governement (Ministries, agencies..)  Stimulate the process to boost the economy  Provide support for « assistance »  The Research Institutes (and Univ. Lab.)  Provide the appropriate technology services  The Industrial SMEs (+, recently, service SMEs)  Identify the market needs

How to identify them ? France : industrial SMEs « innovative » SMEs Europe : More than SMEs The World : Millions of SMEs An impossible task !

The ? Solution : Take advantage of existing networks  National (and Regional) Innovation agencies  Private Consultants  Public organisations dealing with Ind. Dvp.  Venture  Venture Capitalists  Federation of Industries  International networks (for ex.) :  Eurêka (market oriented network) : 34 members  E.U. Framework program  TAFTIE Association

The « power » of existing networks It has appeared, along the years, that existing networks, with good regional relays, are the most efficient and reliable tools to identify suitable potential SMEs customers for technology services.

Communication Communication is essential  Oral communication  Conferences on a regional basis (trade shows…)  Communication through radio stations (T.V.?)  Written communication  Articles in newspapers and professional magazines  Promotional brochures  Modern communication  Through the World Wide Web

Communication  Set up a specific communication budget  For governmental agencies  For Research Institutes  Use extensively past success  More convincing for SMEs managers  Presented by the entrepreneur  Use « professional » communication tools

SMEs lead projects SMEs lead projects SMEs often need assistance for :  Financial engineering  International issues  Cultural aspects (Language…)  I.P.R.  Legal agreements

3. Cooperative projects

3. Cooperative At least 2 partners : One SME and a technology “provider” This means :  A legal agreement  Between partners with different background  With a strong economical dimension This is usually the most difficult part of the project « engineering »

3. Cooperative  As many legal systems as countries  Very different legal approach +  Some quite different cultural attitudes towards legal questions.

A few questions ?  Confidentiality  I.P.R.  Ownership of the results  Disclosure of the results  Contractor or Partner ?

Contractor or Partner ?  Contractor : The R.I. is paid for its R&D services  Partner : The R.I. is a partner and is associated to the potential profit (for ex. through royalties on sales)

Royalties, Royalties, Royalties….! Learned from experience :  During the negociation of a licensing agreement the most discussed topic is : the level of Royalties.  This is only one of the issues…and it may not be the most important one ! Legal matters definitely need to be adressed professionally

A few more questions ?  Who brings what ?  Who will do what ?  Who will pay for what ?  Who will own what ?  Who will commercialise what ? +  What is the applicable law ?  What is the competent jurisdiction ?

The Number of partners 2 is recommended Rule of thumb : For “close to the market” projects the probabilty of success is inversly proportionnal to the square of the number of partners

What makes a « good » project ?

« SMEs » lead projects The limiting factors (The French experience) :  NOT Technical  Financial (financial failure of one partner)  Economical (overestimation of the market)  Legal (disagreement between partners)

What makes a « good » project  A good technology  A rigorous business plan  A carefully analysed market  A strong legal agreement  A top level management MOST OF ALL A GOOD BALANCE BETWEEN ALL THOSE FACTORS

Which project do you support ? Exc.GoodAve.Bad TechnicalXO FinancialOX EconomicalXO LegalXO ManagerialXO

Project management Quote from a Venture Capitalist : “I may invest in an average project with an excellent management...but I would never invest in an excellent project with an average management”

Lessons learned from past experience  Early 80s’ : beginning of the work with SMEs - Experience through national innovation program - Experience of academic international cooperation  25 years later : -Some specific « challenges » associated with SMEs cooperative innovation projects have been identified -A much better understanding of the limitations

A few reasons for failure Failure to reach the market is high for projects without :  A good market analysis  A rigorous business plan  A strong (and balanced) legal agreement  A motivated (and experimented) management team AND  Small projects with multiple partners  Projects lead by an academic institution

Thank you for your attention Tele :

For Chemists my name spells : Ni Co La O N

Gilbert Nicolaon  1/3 R&D ( )  University (France and USA)  Industry (Franco-American joint venture)  1/3 Scientific « diplomacy » ( ) (Sci. policy)  U.S.A. (Houston, Chicago, New York)  U.K. French Embassy (London)  1/3 Innovation engineering (1985- ) »ANVAR French Innovation agency »British Technology Group (London) »EUREKA program (European mkt oriented program)

A few exemples  The rusty cans Convince SMEs  The expensive chocolatLegal agreement  The rickshawLocal innovation  The tea cupSme/Univ/Large Co  The microplaneInvest. Abroad  The endless C.D.Large and small  The biodegradable Large and small  The by-productSerendipity (CLEF)  The very High Tech.Spin-off (Soitec)