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What large companies want (from small ones).

Mon, 11/17/2014 - 16:31 -- KevinMcFarthing

In the film, “What Women Want”, Mel Gibson’s character has the ability to read women’s minds and understand what they’re thinking.  In the real world, we often need to second-guess what our existing or potential partners want.  This is the case for Open Innovation (OI), when smaller companies with something to offer try to understand just exactly what large companies need, and whether there would be complementarity between the two.

The purpose of this article is to give some advice, based on many years working within large companies and another few in consultancy helping companies both large and small succeed in OI.  There will undoubtedly be variability from one industry to another, but I suspect a common pattern will emerge.

When companies run specific calls or competitions for ideas, or even existing technologies, then the brief is usually clear, and behind it the company has a plan for how the external property will be incorporated into a future product or service.  It’s more difficult when a small company has a technology on which they wish to partner with a larger partner to commercialize the opportunity without knowing whether there’s an interest or not.  There will undoubtedly be great passion and excitement and a belief that it’s valuable, but will others want it?

So what do large companies want?  Here’s a rough guide to some of the key questions they will ask:

1.  Is there a benefit for the consumer/user?

The benefit has to be superior, not just different.  For example, pharmaceutical inventions of the type with “a different mechanism of action” only matter if the final product has greater efficacy, a lower side effect profile, is more appealing or is more convenient.  You need to be able to describe how your product is better, not just different.

2.  Is it patent protected?

Technologies offered by small companies usually require a lot of work by the large company to take them to market.  If, once that investment is made, the product is easily copied; the financial return will be severely diminished.  Having a good patent, or a strong application, which gives a reasonable degree of market advantage is a crucial part of the offering.  Large companies are not usually interested in pure ideas without some element of protection or validation.  I know of some companies who like to get inventions pre-patent so they can shape the Intellectual Property, but in my experience they are in the minority.

3.  Is there proof of concept?

Have you demonstrated technically that your invention will work in the final product?  Each product category usually has its own key parameters against which a prototype must deliver.  This doesn’t mean that you have the final product, but you have data that establishes proof of the principle. If you’re fortunate enough to already have some in-market experience, you may have some financial and consumer/user proof of concept.  The more you have, the happier the large company will be.

4.  Does it fit with an existing brand or business?

If your proposition has a strong fit with a brand or a business that the target large company already has in its portfolio, it is more likely to be considered and eventually accepted.  This is not because the large company is risk averse; it’s that the costs and associated risks of launching a new brand are so large they are bound to be scrutinized more carefully and in greater detail; and to take longer.

5.  Do the numbers make financial sense?

It’s worth trying to sketch out a rough P&L for the final product, to get a sense of the potential for profitability with the added cost of your new technology.  It’s also good to work out your financial expectations for outright purchase, royalties on sales or the outline of a supply contract.  The large company will pay a lot of attention to the numbers.

6.  Is there clarity on what needs to be done to take it to market?

You should be open on what has been done and what you believe remains to be completed in order for the product or service to reach the market.  The large company will inevitably take their own view but they will appreciate a clear, objective view of the current status.

Above all, companies don’t want to see hype.  I’ve been in many meetings where an external company has made a presentation along the lines of “this invention will transform your business” and “the world has never seen anything like this”.  If anything it tends to have the opposite effect to that intended.  Potentially skeptical people in large companies much prefer to review facts and substance and come to their own view.  Don’t suppress enthusiasm and passion, but stay objective.

Understanding more about what large companies want reduces the temptation to second-guess their needs.  You’ll never be able to reach the level of psychic insight that Mel Gibson’s character had, and the men amongst you won’t have to wax your legs if you don’t want to.  By the way – trust me on this – it doesn’t hurt anywhere near as much as Mel made out…..

 image credit: business man image from bigstock

 

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