R&D to Commercialization

1. R&D to Commercialization Re-thinking your investment

2. Jon Peddie Research

3. Agenda Four hours of stories and ideas crammed into one hour

4. The r’s and d’s

5. Three Types of Research Basic Research No immediate end goal; exploratory, motivated by curiosity – done at universities and very large company labs Technology Research have an end goal in mind, often will explore to investigate an idea – semiconductors, medical and pharmaceuticals, chemical, and materials science Short-term Research Companies employ short-term research for technology that they are trying to exploit.

6. R&D? Where is the line? Research & Development is usually one line in the budget and that’s wrong Most firms do development, not research Bottom line: If there Return On Investment it’s development No ROI? It’s research

7. Picking the Right Goals • You can take any two-axis diagram: Some value vs. time, or cost vs. speed, etc. It reduces to two basic curves, an arrow pointing down from left to right, and one pointing up from left to right. Up to the right is the goal. Make it faster, or smaller, or have more features, etc. It’s the hard stuff to do

9. Doing the hard stuff

10. Magic Curves Difficult and differentiated Market development New discovery The higher are on this curve the more protected is your market, but the volume may not be great You travel this curve in pursuit of volume and have little control of your future Knock offs Market maturity Commoditized and sold on price

11. Doing Hard Stuff But, more products are spawned As you move up the curve, gains aren’t as great, and it takes longer

12. The trick to successful technology investment • Pick a target in the upper right corner of the chart Intel Centrino and then Ultrabook Apple iPhone and iPad Mercedes SL550 Jaeger-Lecoultre Creating Technologies and Products People Want and Need

13. Doing the Hard Stuff Doing the hard stuff means tackling a goal that scares off most others—because it’s too hard. Doing the hard stuff, and succeeding has the highest payoff, puts you ahead of the competition, and potentially gives you an IP base that can either produce a revenue stream, or thwart mimics.

14. failure

15. Doing the hard stuff means First NASA launches you will probably fail. NASA's Kepler telescope crippled by technical failures And yet – everyone of these failures was a success Xbox red ring of death Boeing 787 Dreamliner batteries

17. Failure is the Path to Success Failure is how we learn best. Call it trial and error, or a Bessel function, nobody gets it right the first time, or the second time. It is critically important that the organization and the culture and society honestly allow failure. I can’t emphasize too strongly the essential need to allow and support failure. The wealthiest entrepreneurs in the US have a long record of failures, and they will tell you those failures are what helped them succeed.

18. Good – Bad Examples • In Japan, most of Europe, and parts of South America a business failure means the end of the owner’s or CEO’s career. VCs, Banks, Suppliers, and even potential employees won’t talk to him – he becomes a pariah In China, Taiwan, the US, UK, and Canada a business failure is not the end of a career. Pick yourself up, dust yourself off, and start all over again….

19. Steps to commercialization

20. The First Step to Commercialization • Do a technology interview • (It’s time consuming) • Patiently interview all • the technologists • Ask what they’ve done • for the past five years or so • Ask what patents they filed, or thought of filling • What prototypes and experiments they’ve built • And what applications, markets, people do they think would be interested in the things they’ve done

21. Steps to Commercialization • Form a small circle of experts, technologist, marketing and manufacturing people, and (sigh) a lawyer • Pick the top five or ten most promising items. • Find a champion, someone who would rather work on the project than see his or her family or eat. People in Silicon Valley refer to this person as the one, “with the fire in their belly.” And here is the tricky part, enable that person, give them resources to make things happen—and permission to fail (yes, back to that again).

22. Five Steps to Commercialization Define Commercial Potential Demonstrating Commercial Context Growth & Sustainability To Generate Financial Returns Market Entry Imagining Commercial Opportunity Mobilize Resources Mobilize Resources Mobilize Resources Mobilize Resources Valley of Death This is a model of how technology moves from the laboratory to commercialization and into the marketplace. New technologies and companies are most at risk in the incubating and demonstrating phases, known as the "Valley of Death."

23. What Successful Companies Do Phase 1 Exploration: broadly explore an idea that seems promising Phase 2 Experimentation: conduct experiments to confirm ideas, talk to customers, continue to validate good idea.  Phase 3 Business case: develop business case including resources/ROI.  Phase 4 Design: prototypes and customer samples. Phase 5 Pre-production release: manufacturability and supply chain readiness  Phase 6 Release to manufacturing: Phase 5 & 6 can potentially be outsourcings.

24. The Final Step to Commercialization The next step is simple, just three words: Marketing Marketing, and Marketing

25. The Virtuous Circle: Commercialization Leads to Better R&D Commercialization helps focus thinking on what and where to apply research – Selective sensitivity Selective sensitivity also has risks. It’s important to get out of your comfort zone Inviting outside experts in from time to time, can be helpful.

26. Stories • Nvidia • Pixar-Disney

27. cases From the organization to the nation

28. Moving up scale My comments so far have been about organizations, universities, and companies Allow me to say a little about nations - successful nations

29. Changes in Taiwan's economy highlights the role of scientists and engineers. The former agrarian economy has given way to one focused increasingly on technologically advanced production. Taiwan is a leading producer of computers, and is attempting to expand its aircraft, biotechnology, and precision instrument industries. Much of the development is due to assistance from Taiwan’s authorities, in the form of research and development funding. National Science Foundation, 1998 Today, just 15 years later

30. From Just Manufacturing to Brand Taiwan saw the rise of the low cost labor in China At the same time the standard of living was rising in Taiwan It would be impossible to be a low-cost manufacturing services economy and raise the standard of living Taiwan shifted to high-end engineering and developing international brands

31. China following the Same Path China’s society is changing beyond all recognition At the heart of the most sweeping social and economic transformation is the rise of a powerful new – largely urban – middle class.

32. China will be the powerhouse of middle class consumerism Today, China has around 150 million people earning between US$10 and US$100 per day. As long as China continues to grow, and necessary economic reforms are made, we expect as many as 500 million Chinese could enter the global middle class over the next decade. By 2030 around one billion people in China could be middle class — as much as 70% of its projected population. total income by band 2010 and 2020 annual income, thousands of people

33. World Recognized Brands China leads the world in PCs with a world class brand – Lenovo Recognize these brands? You will. There’s more… During Q2 ZTE moved to 4th place in smartphone marketshare. Lu QianHao, head of handset marketing thinks they can occupy third spot within 36 months. “We will double our costs this year and the next to increase our branding

34. How did the middle class climb the economic ladder? A lot of it is entrepreneurship. There have been a lot of business opportunities. (and a lot of failures) Many foreign companies are contributing to creating the white-collar middle class Chinese state companies also employ a lot of people Their income has more than tripled over the last 10 or 15 years Gone are the days of the docile Chines worker They are now demanding regular hours and interesting work

35. Thailand Next? Thailand can be next and start creating unique, highly desirable products and brands for the next generation of consumer and industrial products—it just takes the will of the government and the backing of the people. The Thai economy remains largely export driven and robust and is the second largest in Southeast Asia.

36. Thailand • Needs to invest in high-end • technology (hard stuff) • The government could/should • take the lead • Develop a consumer middle class • Raise the standard of living, create a higher expectation • Create internationally recognized and wanted brands

37. Things That Interest Me • Memistors • 8K+ displays and cameras • Computational photography (Jon’s wave theory and Voxels) • Wearable computing (invisible & unobtrusive) • IBM’s SyNAPSE Project (Neuromorphiccircuits)

38. Summary • Understand the kind of research you’re doing • Harvest it • Nurture and support new projects and companies • If you fail, try it again • Do the hard stuff • Differentiate and build a premium brand • Get out of the low-cost labor markets

39. Thank you Chasing pixels – finding gems Jon@jonpeddie.com

40. Is it coffee yet?