Keys to Commercialization Success

1. Keys to Commercialization Success Presented by: Martin Zeller Date: December 7, 2000 U S C E N G I N E E R I N G T E C H N O L O G Y T R A N S F E R C E N T E R A N A S A R E G I O N A L T E C H N O L O G Y T R A N S F E R C E N T E R h t t p : / / w w w . u s c . e d u / g o / t t c

2. Objectives of the SBIR Program • Stimulate technological innovation • Use small business to meet federal R&D needs • Increase private sector commercialization derived from federal R&D • Encourage the participation by disadvantaged and minority persons in technological innovation Presented by: Martin Zeller Date: December 7, 2000

3. Implications of SBIR’s Commercialization Objective • A company whose business plan does not call for commercial sales of a product or service should think twice about seeking funding from SBIR • Planned commercial sales can be to government or non-government customers • Think of SBIR as a seed capital fund to augment the research budget of a small business that is seeking to develop a new product or service that is to be offered for sale in the marketplace • Successful SBIR companies focus on commercial prospects and plans from the start (even before submitting a phase I proposal), not as an afterthought Presented by: Martin Zeller Date: December 7, 2000

4. Succeeding in SBIR • Success is not just about getting phase I and phase II funding, though that is part of the picture • To succeed in SBIR requires following through all the way to commercialization (phase III) • A small business must have a “commercialization mindset” going into phase I to succeed ultimately in SBIR Presented by: Martin Zeller Date: December 7, 2000

5. Commercialization Mindset • A business philosophy that stresses commercial sales of products and services, using a variety of business models • Some of these products and services will be new and require research and development prior to market introduction • The company will do what it takes to achieve the goal of commercial sales • Acquiring resources for R&D activities (SBIR perhaps) • Acquiring resources to protect, produce, promote, distribute, sell and support the product or service Presented by: Martin Zeller Date: December 7, 2000

6. A Healthy Approach to SBIR • Do not abandon your commercialization mindset just because you are participating in an R&D funding program • Remember, you are only using SBIR to fund research activities that will lead to a new product or service • Devote time and attention to non-research business activities that will help you reach a state of commercial readiness Presented by: Martin Zeller Date: December 7, 2000

7. SBIR Commercialization Activities • Some Generalizations • No different from non-research business activities that companies of all sizes undertake: advertising, marketing, production, distribution, customer service, accounting, legal, etc. • Most small businesses have limited internal resources and can not accomplish all of these activities on their own • Look outside the small business to acquire necessary resources to fill in the gaps Presented by: Martin Zeller Date: December 7, 2000

8. Typical Commercialization Activities • Conduct market research (secondary and primary) • Identify target market niches and prioritize • Prepare a business plan • Pursue sources of financing • Pursue prospective customers • Pursue prospective strategic partners • Secure agreements of third-party funding commitment, in-kind contribution, customer purchase orders, other commercial support • Prepare high quality SBIR proposals that address commercial plans and follow the format specified in the agency solicitation Presented by: Martin Zeller Date: December 7, 2000

9. Conduct Market Research • Secondary research • General market conditions, trends, etc. • Competition • Market size • Identify prospective customers and partners • Primary research • Needs assessment • Assess level of commercial interest • Make contacts with potential customers and partners Presented by: Martin Zeller Date: December 7, 2000

10. Identify Target Market Niches • Use information uncovered in market research to identify market niches to target for commercial sales • Market niches can be governmental or non-governmental • Prioritize niches and estimate expected penetration • Project sales based on overall market size and company’s expected share of the market Presented by: Martin Zeller Date: December 7, 2000

11. Pursue Prospective Customers • Use market research to uncover future customers • Build relationships • Find a champion for your product or service within a potential customer organization • Secure purchase order agreements (frequently with contingencies, but that’s okay) Presented by: Martin Zeller Date: December 7, 2000

12. Pursue Strategic Partners • Use market research to uncover partnering prospects • Build relationships • Evaluate complementary resources • Find a champion for your product or service within a potential partner organization • Secure letters of support, funding commitment, agreements of in-kind contribution, manufacturing, marketing and distribution arrangements, etc. (frequently with contingencies, but that’s okay) Presented by: Martin Zeller Date: December 7, 2000

13. Prepare High Quality SBIR Proposals • The Commercialization Plan Section • Follow the instructions; the solicitation spells it all out • Resist the urge to go free-form, stream-of-consciousness in the organization of your material • Use the section numbering scheme prescribed in the solicitation • The solicitation tells precisely what to cover in each section; so cover it • If you don’t have the information required for a section, do not just omit it; say something about the topic • Get help from qualified sources Presented by: Martin Zeller Date: December 7, 2000

14. An Example from NASA SBIR Phase I Proposals Part 10: Commercial Applications Potential 1. The specific commercial products or services contemplated and the corresponding target market niche 2. Expected unique competitive advantage of the commercial products or services 3. Nature of the corresponding contemplated commercial venture 4. Importance of the contemplated commercial venture to the offeror's current competitive position and to its strategic planning 5. The offeror’s capability and plans to bring the necessary physical, personnel, and financial resources to bear, in a timely way, to result in a viable commercial venture in the near term subsequent to Phase-II (if awarded) Presented by: Martin Zeller Date: December 7, 2000

15. An Example from NASA SBIR Phase II Proposals Part 10: Commercialization and Phase-III Plans (1) Product or Service Commercial Feasibility (2) Market Feasibility and Competition (3) Strategic Relevance to the Offeror (4) Key Management, Technical Personnel and Organizational Structure (5) Production and Operations (6) Financial Planning Presented by: Martin Zeller Date: December 7, 2000

16. An Example from NASA SBIR Phase II Proposals (2) Market Feasibility and Competition: Describe: (a) the target market niche including the distinction between U.S. Government and other markets; (b) estimated potential market size in terms of revenues to be realized by the offeror from U.S. Government markets and, separately, from other markets; (c) competitive environment in terms of present and likely competing similar and alternative technologies, and corresponding competing domestic and foreign entities; (d) significant developments within the targeted business sector; and (e) offeror’s ability, if any, to protect relevant technology with patents or rights to exclusive access. Presented by: Martin Zeller Date: December 7, 2000

17. An Example from NASA SBIR Phase II Proposals (4) Key Management, Technical Personnel and organizational Structure: Describe: (a) the skills and experience of key management and technical personnel relevant to bringing innovative technology to commercial application, (b) current organizational structure, and (c) plans and timeline for obtaining the balance of all necessary key business development expertise and other staffing requirements. Presented by: Martin Zeller Date: December 7, 2000

18. For Further Information . . . Arizona Small Business Innovation Program Office, managed by: Pinnacle Management Group, Inc.1435 N. Hayden Road Scottsdale, AZ 85257 480.947.5910 (phone) 602.850.4260 (Fax) rampmg@aol.com A program of the Arizona Technology Incubator The Arizona affiliate of the NASA Far West Regional Technology Transfer Center Presented by: Martin Zeller Date: December 7, 2000

19. For Further Information . . . • NASA Far West Regional Technology Transfer Center • http://www.usc.edu/go/TTC/NASA/SBIR/index.html • 213-743-2353 • 800-642-2872 • nasa@usc.edu • Participating agency SBIR web sites • eg. NASA • http://sbir.nasa.gov Presented by: Martin Zeller Date: December 7, 2000

20. For Further Information . . . • SBIR Web site from SBA Office of Technology • http://www.sbaonline.sba.gov/SBIR • SBIR/STTR program overviews • Links to agency SBIR/STTR websites • Agency SBIR/STTR representatives • Proposal preparation handbook • Examples of winning proposals • Lists of award winners • SBIR conference information Presented by: Martin Zeller Date: December 7, 2000