Developing a research and development relationship with a large business can be an intimidating process. First, it's hard to convince a large business that it needs the nimbleness of a smaller counterpart to remain competitive. Second, it's hard to prove that a your small business can actually deliver a product that can revolutionize its business. At least these are two challenges Fred Lisy, vice president and chief operating officer of Orbital Research, faces when selling its R&D services.
Since 1997, Lisy has been involved with scouting out R&D opportunities for Orbital Research, a high-technology company that develops microdevices and advanced controls based in Cleveland, Ohio. It' s a scouting mission that hasn' t been easy. "It's a challenge right now for big companies to start thinking this way [looking to smaller companies for R&D expertise]," Lisy says. "These companies believe they have the talent and capabilities in-house."
The challenges become even more daunting when you consider Orbital's primary market -- military prime contractors like Boeing, Raytheon, and Newport News Shipbuilding. "My goal is to convince the military prime contractors that Orbital Research's technologies can give them a competitive advantage in the military sector, which will ultimately result in more sales to the government," Lisy says.
Selling to military prime contractors, however, is not Orbital's ultimate goal. Through selling its R&D services to the military, it gains funding for the development of devices that will also have significant commercial potential in the private sector. "They [military prime contractors] gain a competitive advantage in the military market, and Orbital Research gains the rights to the intellectual property for use with non-military applications," he says.
With so much riding on the initial R&D relationship, it's important that Lisy carefully explores and chooses potential R&D relationships. Here, he offers his top four tips for developing relationships that pay off.
Have a good intellectual property person. It's important to have someone on your team who is confident and knowledgeable in intellectual property rights and contracts. In Lisy's case, he recalls a $12,000 project that came with some 16 pages of terms and conditions from a company Orbital proposed an R&D relationship. Left to muddle through the paperwork alone, Lisy fears he might have inadvertently given away the resulting technology. But with the help of Orbital's in-house intellectual property person, Dr. Brian Kolkowski, J.D., he was able to avert any costly mistakes. With Kolkowski on board, "we're much more confident that we' re not going to be taken advantage of," says Lisy.
Distinguish between your end user and the customer. "The end user is someone who uses your technology," says Lisy. "A customer will actually pay for it." So, as Lisy points out, while engineers in the big companies loved Orbital's technology, he failed to get the attention of the guys who would actually pay for the development, namely the folks in the front office. "Getting accolades from the people who need it doesn't increase sales," says Lisy. You need to talk with the people who will approve the funds to support the R&D to start meaningful discussions.
Focus on the right partners. Who are the right partners? To find them, Lisy suggests doing two things. First, determine those partners that actually have the money to invest in your business' s project. Lisy discovered that Orbital was spending 80% of its time on projects that most likely wouldn't happen. "If I had only gone after our top 20 customers, I would have been much further along than spending time trying to convince all of them to work with us," he adds.
Second, make sure the people you're going after are serious about enlisting your company as an R&D partner. Lots of people can say "Hmmm, that's interesting," but not everyone wants to buy. Lisy recalls running out for a presentation based on vague interest from a prestigious company executive. Unfortunately, the visit didn't result in any business -- just needless travel expenses. Now, Lisy asks a few questions about the potential relationship before he books a ticket, including Are they willing to come to our place? Will they pay for us to go to theirs? Will they give us money to actually do the research or assist us in getting an agreement in place?
If at all possible, have a prototype. "A prototype is worth a thousand words," says Lisy. By developing prototypes through the Small Business Innovation Research (SBIR) program, Orbital has been able to determine the feasibility of its technology in conjunction with a particular partner's technology and create prototypes that it can turn around and sell to the partner. The program works in two phases. The SBIR Phase I program provides the funds to evaluate the feasibility of a concept or an innovation. The Phase II program provides the funds to make the prototypes. By working closely with a big company, Orbital can leverage the SBIR funds to develop a prototype. For Orbital, the SBIR program has become an excellent resource for this small business to convince big companies to work with it. "We can do the research and development for the big company and the company does not have to come up with all the funds to support this high risk innovation," Lisy says. "All we ask is that they buy the product if we are successful."