Government contracts (UT-CIS ptac)

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Ask Professor PTAC questions on how to sell to the government!

This Month's Question: I am the “Innovation” Sensation!

Dear Professor PTAC:

I have a really cool new and innovative idea that I would like to turn into a product. If I can just get someone to give me some money to develop it every one will buy it. I hear terms like SBIR, STTR, BAA and DoE Energy Grants. What are they, where can I find them, what is “Technology Transfer and how can any of these help me create new products or new opportunities for my business?

Signed,

Interested Seller

Dear Interested Seller:

The questions that you ask can sometimes be very complicated or involved. Well, it takes a complicated answer to address complicated questions. So go get a cup of coffee, or something else to drink, and please read my answers slowly and completely. I will go into a lot of advice before I give you access to the actual grant opportunities. You need this advice because I want you to be successful. Are you ready? Here we go!

Let’s first understand what we are talking about. What is Innovation? What is Technology Transfer? What are the steps that a business needs to walk through to be successful in these very challenging and competitive arenas?

The term innovation means a new way of doing something. It may refer to incremental, radical, and revolutionary changes in thinking, products, processes, or organizations. A distinction is typically made between Invention, an idea made manifest, and Innovation; ideas applied successfully. In many fields, something new must be substantially different to be innovative, not an insignificant change, e.g., in the arts, economics, business and government policy. In economics and government contracting the change must increase value, customer value, or producer value. The goal of innovation is positive change, to make someone or something better. Innovation leading to increased productivity is the fundamental source of increasing wealth in an economy.

So now that we know what innovation is and how it differs from invention, let’s talk a little about Research & Development (R&D), the economy, your business and “timing”. The initial advice that I give to most businesses is to invest in, or increase, your R&D monies during a “Good Economy” not during a “Bad Economy”. During good economic times we need to plan for bad economic times, that way we have the funds to invest when our current business takes a downturn or when working capital and R&D capital investments are scarce or unavailable. It is during the good times that we need to build our R&D investment accounts. Looking for R&D opportunities to save your business or to pull you out of a bad economy are usually surefire ways to guarantee “bankruptcy”.

During good times we want to create an Internal Research and Development (IRAD) Group (even if it’s only one person) so that we can take a look at our processes, products and customer needs. We need this IRAD group to be innovative in their approach. Just having a good or, “cool”, idea for something new is not what matters. What matters is this: is this new product or service so substantially different that it will satisfy a customer defined need in a way that nothing else can, even if that customer is internal to your company or organization? Just because you have a good idea for something new does not mean that anyone will invest in its development or ultimately use or purchase it. There must be some “Need” that your new idea will satisfy. Have you identified that “need”?

That new idea must also be very innovative so that you can attract government funding to first prove feasibility (can we really do this?) and then ultimately can we commercialize this new idea? If you have not done your upfront IRAD identification and planning activities then getting involved in R&D is just a very expensive and negative cash flow “experiment” and there really are not any government dollars available to the general public for this type of “Research for the sake of Research”. The government wants a product or service to result in “Commercialization” from any monies that they use to grant a small business in regards to R&D.

Commercialization is the process of introducing a new product into the market, government or commercial. The actual launch of a new product is the final stage of new product development, and the one where the most money will have to be spent for advertising, sales promotion, and other marketing efforts. In the case of new consumer packaged goods, costs could be at least $ 10 million, but can reach up to $ 200 million. In general one can say that it will cost about a dollar for each dollar of sales turnover achieved.

"Most Technology-based inventions never go beyond the conception stage. The light bulb in the mind gets lit often, but only occasionally does it leave a trace" [Jolly).

Commercialization is often confused with sales, marketing or business development. The Commercialization process has three key aspects:

• The funnel. It is essential to look at many ideas to get one or two products or business that can be sustained long-term
• It is a stage-wise process and each stage has its own key goals and milestones
• It is vital to involve key stakeholders early, including customers
  

Commercialization (going from "mind to market"[Jolly]) of a product will only take place, if the following four questions can be answered:

When?

The company has to decide on the introduction timing. When facing the danger of cannibalizing the sales of the company’s other products, if the product can be improved further, or if the economy is down, the launch should be delayed.

Where?

The company has to decide where to launch its products. It can be in a single location, one or several regions, a national or the international market. This decision will be strongly influenced by the company’s resources, in terms of capital, managerial confidence and operational capacities. Smaller companies usually launch in attractive cities or regions, while larger companies enter a national market at once.

Global roll outs are generally only undertaken by multinational conglomerates, since they have the necessary size and make use of international distribution systems (e.g., 3M, Procter & Gamble). Other multinationals use the “lead-country” strategy: introducing the new product in one country/region at a time (e.g. Colgate-Palmolive).

To Whom?

The company has to decide who their primary target consumers are. In this way it can concentrate its distribution and promotion resources.

The primary target consumer group will have been identified earlier by research and test marketing (Your IRAD group). These primary consumer groups should consist of innovators, early adopters, heavy users and/or opinion leaders. This will ensure adoption by other buyers in the market place during the product growth period.

How?

The company has to decide on an action plan for introducing the product by implementing the above decisions. It has to develop a viable marketing mix and create a respective marketing budget.

Now, before we get into the types of Contracts and Grants available to a business, let’s talk a little about Technology Transfer.

Technology transfer is the process of developing practical applications from the results of scientific research, it is the process of sharing of skills, knowledge, technologies, methods of manufacturing, samples of manufacturing and facilities among industries, universities, governments and other institutions to ensure that scientific and technological developments are accessible to a wider range of users who can then further develop and exploit the technology into new products, processes, applications, materials or services. While conceptually the practice has been utilized for many years, the present-day volume of research combined with high-profile failures at many private large business R&D facilities and elsewhere, has led to a focus on the process itself.

Transfer process:

Many companies, universities and governmental organizations now have an "Office of Technology Transfer" (also known as "Tech Transfer" or "TechXfer") dedicated to identifying research which has potential commercial interest and strategies for how to exploit it. For instance, a research result may be of scientific and commercial interest, but patents are normally only issued for practical processes, and so someone -- not necessarily the researchers -- must come up with a specific practical process. Another consideration is commercial value; for example, while there are many ways to accomplish nuclear fusion, the ones of commercial value are those that generate more energy than they require to operate.

The process to commercially exploit research, or transfer technology, varies widely. It can involve licensing agreements or setting up joint ventures and partnerships to share both the risks and rewards of bringing new technologies to market. Other corporate vehicles, e.g. spin-outs, are used where the host organization does not have the necessary will, resources or skills to develop a new technology. Often these approaches are associated with the raising of venture capital (VC) as a means of funding the development process.

In recent years, there has been a marked increase in technology transfer intermediaries specialized in this field. These organizations, companies and individuals work on behalf of research institutions, governments and even large multinationals. Where start-ups and spin-outs are the clients, commercial fees are sometimes waived in lieu of an equity stake in the business. As a result of the potential complexity of the technology transfer process, technology transfer organizations are often multidisciplinary, including economists, engineers, lawyers, marketers and scientists. The dynamics of the technology transfer process has attracted attention in its own right, and there are several dedicated societies and journals. Look these up and read them.

You must perform your “Due Diligence” before you choose to work with any R&D or Technology Transfer intermediaries. As is the case with ALL government contracting, be certain to have your own “Government Experienced” Lawyer and Accountant on your team. Do not depend upon standard commercial procurement experts. Government contracting is a totally different legal arena. Do your Due Diligence and fully understand the process before you get involved in any government contracting or grant opportunity!

As stated in your question, there are many different vehicles that are available to a business that is interested in receiving Grant or Contract dollars to deliver an innovative solution to a government need. Small Business Innovation Transfer (SBIR), Small Business Technology Transfer (STTR), Broad Area Announcements (BAAs), agency specific grants as well as many others…

Getting a new idea off the ground can be a very rewarding and challenging endeavor. Please let us at CIS UT-PTAC know if we can be of any assistance at all.

The SBIR/STTR (Small Business Innovation Research/Small Business Technology Transfer) program is a multiphase federal government initiative designed to provide funding for new and innovative "high-risk" technologies.

The University of Tennessee SBIR Assistance Center provides services to customers

• uses the University's Colleges to identify faculty tp write proposals for SBIR/STTR awards (MRDI),
• helps award winning companies that are ready for commercialization market to the government (PTAC).

For more detailed information on the SBIR/STTR programs visit http://www.sba.gov/aboutsba/sbaprograms/sbir/index.html

You can also find sources for all other BAAs and government Agency Grant Opportunities at the “Do your Market Research” link on the left hand margin of this webpage.

Thank you,

I hope this helps. Now start your research!

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