Smart technology scouting – Part 1

20 January 2010 | Jennifer Ernst

Technology scouting has been happening for many years. Yet the models for how best to find and secure opportunities are still emerging as companies increasingly look outside.

My role at PARC (part management consultant, part matchmaker) and encounters with various organizations have given me a unique vantage point into the strategies and common pitfalls of technology scouting functions. I’ve shared here some advice for effective technology scouting, including defining the Why and the What. The followup post tackles the Who, Where, and How within the popular “want-find-get-manage” framework.

THE WHY: Why are we doing technology scouting?

This is the first question anyone involved in technology scouting needs to answer. It sounds obvious when I write it here. In reality, though, this is not a straightforward question.

Inconsistent answers to the “why” question are a recipe for frustration

When I asked audience and panel participants at Frost & Sullivan’s Growth, Innovation, & Leadership 2009 why they cared about technology scouting, the diversity of the answers was telling:

• Speed — let’s create new offerings by integrating or adapting technology that has already been used elsewhere
• Aggressive growth objectives — with corporate growth goals too high to achieve through purely organic growth, let’s mine earlier stage technologies that might not yet be on competitors’ radars
• Resource restraints – let’s work with partners to amplify what can be done with limited internal resources such as funding, people, or facilities
• Access to expertise — let’s work with innovation partners to gain access to market or technical expertise not present in the company
• Diversification/ back-up plans for internal programs — let’s treat external technologies as the most viable sources of a Plan B
• Trading cards — let’s buy patents for defensive use
• Freedom to practice — let’s keep out of trouble with non-exclusive rights in intellectual property

Each of the above answers sets different requirements for the technology scouting function. Unfortunately, many scouting organizations are set up with vague mandates such as “not all smart people work for us, so…” and “90+% of research relevant to us is done outside our walls, so…”  These may be useful motivations for adapting open innovation practices, but they don’t help the corporate scouting organization direct their activities.

Lack of organizational alignment means different objectives

The result of lack of focus is conflicting objectives among technology scouting team members and acquisition functions. For example: picture Bob, a technology scout who is attempting to serve multiple objectives at the same time. He thinks he’s looking to help the company enter new markets, and therefore looks for things outside the domain of current businesses. Bob brings some opportunities in for review, but Amy, the technical leader, thinks she’s evaluating Plan B options for the company’s major technical programs. Her criteria will be almost exactly the opposite of Bob’s.

Next, imagine both Bob and Amy have somehow identified something they want to pursue.  They end up in negotiations with the technology’s inventors. Bob thinks he’s trying to corner a new market, Amy thinks she’s negotiating options for something they may or may not use, and they’re both working with a legal team that thinks the goal is amassing patents to use as trading cards.

Can you see a problem emerging?

THE WHAT: What technologies are we are looking for? What characteristics do they need to have?

Scope is a tricky thing. If a scouting team’s “find”  mandate is too narrow, you’re likely to miss valuable options.  If it’s too broad, you end up exploring too many options that are never going to fly.

Pragmatism wins.

In addition to technical needs, the following factors should define what technology scouts should consider:

Organizational capacity to absorb external options

A smart technology scout focuses his or her efforts on the parts of the organization that can best absorb new technologies, based on a combination of timing and individual personality. For example, a business unit in the middle of an aggressive product launch is probably going to be less able to incorporate new technology than a division that is stable and looking to expand.

Because of intrinsic time factors in the technology acquisition process, a technology scout needs to be looking ahead. At the same time, he or she has to be realistic about when an internal team can pick up new options, or even has the bandwidth to consider them. A  few of the more progressive companies I’ve worked with have started incubation functions, often to pilot small projects that integrate internal and external technology. These provide an interim holding tank, so the time matching can be better managed.

Another piece of this is individual personality.  Some people are wired to see opportunity. They look at new ideas and are continually thinking, “What could I do with that?”  Others are wired to be heads-down focused on executing what’s at hand.

At the practical level, this translates into questions like, “How mature does the technology need to be for our company to pursue it?”  Some organizations are better at seeing exploratory concepts and molding them; others are better at taking proven technologies and executing quickly.  There is no right or wrong.  A smart technology scout, though, knows the players and strengths/weaknesses in his or her company and selects opportunities accordingly.

Expected time horizon for intended impact of investment

If a scouting organization’s mandate is to “keep a pulse on what’s out there”, the team will need to build a very different network than if they are looking for products to fill gaps in a near-term roadmap. They will invest their time differently.

I have come to believe there are natural fits between sources of technology and the time horizons for impact — each of these comes with a different threshold for investment. Smart technology scouting includes scouting the right sources that are matched to the delivery horizon.

Horizon 1 – specific short-term needs for existing products or near-term launches. The needs can be clearly defined and succinctly communicated. The need is also unlikely to be a primary source of competitive differentiation. Good resources tend to be companies within your existing value chain (suppliers, partners, customers) and intermediaries like NineSigma, Innocentive, and Yet2.com.  I’ve seen a few companies begin to create relationships with companies in “Sister Industries”. These are usually informal channels of communication between key individuals, in organizations that tend to have similar problems but different ways of solving them.  Because technology scouts generally have broad organizational context, they are good people to have as the interface between companies.

Horizon 2 — needs for the mid-term horizon, evolving product opportunities. Commercial intent is present, but the shape of the final offering can still be shaped. The field of options can be wider. You’re less likely to find an existing technology that’s an exact match, so an investment in co-development may be necessary. The solution may, itself, provide a source of competitive advantage.  This is an area where PARC has proven valuable, having developed an arsenal of technology and bringing experience in migrating technologies between industries. National labs are another alternative. Partnerships with start-ups can sometimes provide opportunities to address these needs, but the scouting company’s needs can’t become a diversion from the start-up’s primary revenue track.

Horizon 3 — exploration. The charter here is simply to ”keep a pulse” on what’s possible. Universities and pre-competitive consortia are among the most popular resources.

The technical needs

The most obvious aspect of defining what you’re scouting for is technology needs, which vary depending on what horizon the scouting organization is focused on. Fortunately, every scouting organization I’ve worked with has some methodology for identifying needs, though they are varied in how they prioritize. Three common approaches:

Go out to all the different groups of the business and ask what they need. I’m not a fan of this approach, as it tends to generate lists of many small, non-strategic needs and has a lower success rate.

Use broad corporate strategy. In theory, corporate strategy should be a better starting point than the individualized needs of technical leaders. In practice, strategy is often too amorphous to be useful to a technology scout.

Use strategic product roadmaps. This is where rubber meets the road. I’ve come to believe this is the most effective approach. Internal teams know what they are committed to developing themselves and what they are willing to depend on partners for. Companies and scouting organizations that start from their roadmaps are usually better at engaging partners in how the pieces of a puzzle can come together.

The best opportunities are created when internal and external parties are willing to have candid discussions about what they are trying to accomplish and what each party believes they can contribute. This degree of openness does not come easily for many companies, but I believe it’s an essential factor when dealing in emerging technologies. [See my earlier post on "Opening communication for open innovation: Should you share your strategy?"]

But where do you look? What happens once you find it? Get rights to it? Acquire it? Manage it? For more suggestions and advice, please see part 2 of this post.

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