Situation: A company is resource constrained and faced with a serious trade-off: do they focus on short term cash needs – immediate product improvements that will speed new product iterations to boost sales; or longer term strategic concerns – assuring that they have good IP protection on their technology before they launch new versions? When you are resource constrained, does it make more sense to focus on initiatives that will quickly produce cash or strategic concerns that will protect your future?
Advice from the CEOs:
Build two timelines – one for shoring up the patent portfolio so that you can safely build and launch new IP-protected versions of your technology and one for quickly completing product improvements to speed development of new product iterations which will generate cash. Assess both the energy requirements and the dollar risks and implications of each timeline. If you do not have the resources to do both in parallel, this analysis will help you to determine your best course of action. The risk analysis of each timeline should take into account what would happen if another company were to duplicate your technology and get to market with improvements before you do.
As a compliment to the above exercise, ask what happens if I don’t do either A or B? Do a SWOT and investment analysis on both. Which is the greater risk – launching with insufficiently protected IP or risking not being first to market?
These analyses will help you assess whether it may be feasible to accomplish part or all of either task with dollars in lieu of your own resources.
Situation: The Company sells customized products and pricing has been per product/per customer. A large client has proposed to purchase product rights across a number of products and uses. The technology is early in its expected 5-year life span. How should the Company set pricing to this customer?
Advice from the CEOs:
Start with a series of questions:
What is the value of your technology to the customer?
How much competition do you face?
What other solutions are available to the customer?
Based on this framework, ask contacts within the customer company open-ended questions that will reveal what is important to them including:
Planned use of the technology, and
Any protections that they seek.
You need to understand these before you can make decisions on pricing.
There are several pricing scenarios:
Set up a scale with a declining pricing driven by volume.
A large lump sum payment now, non-transferable if the customer is acquired by another company.
A large annual fee to cover a preset number of uses and volumes, with small increments for additional purchases.
The final arrangement will depend on the priorities of the customer.
Find out what the customer is willing to pay, but you set the terms.
Ask what guarantees they desire to protect their position. This includes:
The customer’s key risk factors.
Whether they want exclusive or usage rights. Exclusive is worth more.