As part of a series of new features, yet2.com is pleased to present Industry Insights. In future weeks, this space will hold columns, interviews, and perspectives from leaders in technology, business, consultancy, licensing, and intellectual property law. Although these individuals come from diverse backgrounds, they are united in recognizing the true importance and benefits of technology transfer.
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| Chris De Bleser |
IP and the Wealth of Companies
Chris De Bleser, Chief Executive Officer, yet2.com, Inc.
At yet2.com, we are excited to be playing a part in what we see as a new global movement. For the first time, technology transfer is becoming a key part of business across the globe, driven by a combination of forces that have spurred activity from both buyers and sellers of technology. Few companies can develop every component of every product they make or sell; fewer still are the companies that can market everything they develop. Companies that invest heavily in research and development have recognized a need to realize value from their latent technology-based assets at the same time that other companies need a sudden influx of technology to fuel their growth. This trend, now almost universal, was first noticed in industries with short product and technology life cycles (such as the information technology industry), or where the complexity of technologies has mushroomed and the commercialization of technologies must be optimized, such as in the pharmaceuticals industry. With increased global competition and a more discerning customer, these trends are prevalent in almost any industry today.
"...technology and other IP now comprise 70% of the value of companies."
Recent years have seen a remarkable trend in the way in which the public markets value companies. Whereas only a decade ago, most of the value of public companies could be attributed to tangible assets, the market has increasingly demonstrated that the majority of a company´s value comes from its intangible assets, from the technology and other intellectual property driving business. A recent study by Arthur D. Little found that only 8% of public companies´ value was attributable to intangibles in 1990. However, a decade later, the breakdown has changed remarkably, as technology and other IP now comprise 70% of the value of companies.1
This remarkable trend in resident value has increased the pressure on companies to fully leverage their intangible assets, as it shows that a key way of increasing shareholder value is finding new ways to exploit intellectual property. The unrealized potential of under-utilized technology assets is simply enormous--the value of these latent assets are estimated by the British Technology Group at between $3 and $5 trillion dollars globally. For companies seeking increasing returns, the push is on to profit from this vast reserve of under-utilized assets.
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Innovations now come to market through the process of technology transfer. Ambitious technology licensing programs are taking off in organizations of all sizes. Not only are unused, non-core technologies being licensed, but companies are finding ways to license some of their core innovations through finding new applications for narrowly applied technologies. Certain organizations have gone as far as licensing core technologies to direct competitors, feeling that they can gain key strategic benefits by being intertwined in their competitors´ technology foundations. On a global basis, companies are using technology transfer to generate income from a set of previously under-performing assets. The returns from this activity can be enormous; from 1994 to 1997, making a new effort to realize returns from its assets, Dow Chemical was able to raise its technology licensing income from $25 million to $125 million.2 Seeing such results, other companies are undertaking similarly ambitious programs.
The pressure to generate increased returns from technology-based assets is coupled with increasing pressures to innovate rapidly. The current era boasts unprecedented speed of technological change; many of the revolutionary innovations of five years ago are now obsolete. In this environment, companies unable to bring new technologies to market quickly will find themselves left behind.
These tremendous market and competitive pressures have led companies to recognize the value of bringing in externally developed technologies to assist in their product development process. The "not-invented-here" syndrome, whereby companies didn´t trust technologies developed externally, is eroding in the face of the need to innovate quickly. Companies have realized that the technology pipeline produced by their own research and development effort might be insufficient, and that time and money will be saved not by "reinventing the wheel" but by bringing in technologies from external sources. For the first time, other companies, government labs, universities, and individual inventors are being recognized as sources of new technology. Through in-licensing, companies are able to conserve resources and get products to market faster, leaving them free to concentrate on core innovations and giving them increased competitive advantage in an era of rampant technological change. Not only is in-licensing saving time and money versus in-house development of non-core technology, it often provides access to more advanced technologies which in-house development would never be able to deliver. Joe Miller, Chief Technology Officer of Dupont, has acknowledged that "[sourcing external technologies] will change my business model. We will use this access to the world of available technologies to bring new products to market."3 Dupont is not alone; in industries as diverse as automotive and pharmaceuticals, companies are looking to find available technologies to augment their product development process.
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"Ultimately, a liquid, cross-industry marketplace will need to be buyer-driven."
But despite the rapidly increasing supply of and demand for licensable technologies, there has been no efficient market for transferring technologies. Companies have traditionally relied on a personal network of contacts to locate technology buyers or suppliers. Such dependence is far from ideal; Theo Grigoriou, President of Allied Signal Technologies, has found that the "The current technology transfer process is seriously limited by the difficulty licensors and licensees have in identifying one another."4 A reliance on a limited network makes the process remarkably inefficient, and the best technologies are often left under-utilized. Of the estimated $3 to $5 trillion in latent technology value, only $100 billion worth of technology value is transferred globally per year, most of which happens within the industry where the technology has been developed.5 To date this has been a predominantly seller-driven process. Ultimately, a liquid cross-industry marketplace will need to be buyer-driven. The need and the value-added that the technology delivers is always best understood by the buyer. Much communication and education is still required to change age-old habits of developing everything one needs internally. Clearly, the technology transfer space is in need of an efficient market that spreads information on available technologies and brings together qualified buyers and sellers.
This is where we feel yet2.com adds value. Just imagine a market place where almost all of the technologies available for licensing are accessible by the global development community. The Internet is the perfect medium for matching buyers and sellers of technology. Those looking to extract value from their technology-based assets can post their technologies in a format designed to reveal the potential of the innovation; those looking to bring in technologies to augment their product development process can find never-before-seen technologies through the yet2.com site. All of the previous barriers preventing technology transfer between companies--geography, industry, and company size--are vanishing. Through our site, we have brought together Asian firms with North American companies, organizations from completely different industries have been introduced, and the smallest of companies have been matched with industry leaders. In all likelihood, none of these matches would have taken place without yet2.com. We are proud of the value that we have created even at this early stage of our development, and look forward to that day in the not-too-distant future where new and exciting products developed around technology that was exchanged through yet2.com come to market. We believe in our vision, and the exclusive support of over 50 of the world´s most technology-rich corporations reinforces the power of the concept. We are just at the beginning of realizing the true potential an efficient marketplace can bring. We look forward to what the future has in store and hope that you and your organization join us on the journey, because with your help, the best is still.... yet to come.
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