INTRODUCTION

I am very pleased to be back with you today and to have the opportunity to review some recently collected data on the commercialization of Canadian invention. Before we get to that data, I would like to give you a bit of background on the experience of my organization with regard to Canadian invention.

THE INVENTOR’S ASSISTANCE PROGRAM (IAP) AT CIIC

The first professional Inventor’s Assistance Program in Canada was launched at the University of Waterloo in the Spring of 1976. This program was based on the Preliminary Innovation Evaluation System (PIES) model that had been developed by Dr. Gerald Udell and was in use at the University of Oregon in 1974.

The PIES system identifies and defines a total of 33 Critical Success Factors that must be examined for each innovation being evaluated. The examination attaches a rating to each factor and the total of the ratings supplies insight on the potential for a given innovation.

Udell used the following groupings for his 33 factors:

• • Societal Factors
  • Business Risk Factors
  • Demand Analysis Factors
  • Market Acceptance Factors
  • Competitive Factors

The Canadian Industrial Innovation Centre (CIIC) has adapted the Udell model over the years; modifying these groupings as shown below and increasing the number of factors to 37, plus five commercializing options that we consider and comment on. The factors are listed in Appendix 1.

• • Technical Factors
  • Production Factors
  • Market Demand Factors
  • Competition Factors
  • Acceptability Factors
  • Effort Factors
  • Risk Factors

Since 1976 we have subjected almost 12,000 innovations to the rigorous analysis based on this model. That is an average of almost 550 per year. Our peak year exceeded 1000 evaluations. Almost 100% of these are from Canadian innovators, although they are not always located in Canada.

The output of this evaluation is a comprehensive report that details our findings based on a review of each factor, and our overall conclusions as to the commercial potential of the innovation. Internally we give each report a characterization into one of a number of rating categories ranging from a strong STOP to an enthusiastic GO.

In our early years, about 30% - 35% were encouraged to keep going, even if it was a qualified encouragement. This high percentage results from the fact that we were learning our profession and were more likely to err on the positive side. In the late 80’s and into the early 90’s the percentage dropped to about 25% and now we are as low as 15% that are recommended to continue in some fashion.

The price to our clients for this service has grown from $50 Can. to $345 Can. Our cost at this time is about $750 Can. with the difference being made up from a federal government grant. We have had continuous financial support for this program since 1976.

The following Table shows the recent mix of inventions submitted to the CIIC for evaluation. It is not surprising that the single largest group of inventions are household and consumer products since this service is largely targeted at a segment of the population that does not invent within a corporate or research environment.

Table 1. Types of inventions submitted to the CIIC/W.

An interest in the gender of Canadian inventors has been expressed over the years. While gender determination is not specifically addressed in any of our information gathering, we do have a fairly large sample where the inventors gender has been indicated.

In the early 1980’s, an informal study by an analyst at the Innovation Centre indicated that about 5% of IAP clients were female. A recently completed review of later data indicates that this number has increased to 11% for the period up to1989 and has increased again to 16.2% for those clients using our services since 1990. This is a very encouraging trend.

The value of a program such as this can be judged on at least two dimensions

• • The amount of money and time (and the possible disappointment) that can be saved through objective advice that redirects an innovator to a better opportunity.

• • The success of those innovations which are identified as having at least some commercial potential as measured by sales and employment created.

Both of these are important issues but both can be difficult to reliably measure. Yet such measurement is important as one tries to justify the need for continued public support to such a program.

TRACKING SUCCESS

Until recently we did not have any rigorous data that measured the level of success.

Since our contact with the innovator usually stops with the delivery of our report, we have had only anecdotal information regarding their subsequent activity. This information was usually obtained when the innovator received some good press for their invention and this came to our attention. In recent years, our senior analyst has been making a habit of staying in some contact with those clients who he felt might achieve success and thus has gathered some additional information.

In response to inquiries from the media in Canada, we have written a number of small case studies on clients who we knew had gained some success. This collection now exceeds 60 write-ups with another 20 to be done. Our best estimate based on this knowledge was that there were probably between 200 and 250 “successes” in the marketplace. We have always defined success in these cases as at least recovery of investment by the innovator.

While interesting and useful for the media, this data was not “hard “ enough to support our case for value returned to Canada from the governments financial support of the program.

THE UNIVERSITY OF WATERLOO (UW) STUDY

Thus in late 1995 we made contact with the Institute for Innovation Research in the Department of Management Sciences at the University of Waterloo to see if there might be interest in undertaking some rigorous analysis of the data which we had on Canadian innovation..

This led to a telephone survey of 1095 or 21% of the past clients of our Inventor’s Assistance Program who had used the service between 1977 and 1993. Since we are interested in market success, no later users were surveyed on the assumption that they would likely not yet have reached the market.

Before discussing the results I should give you some information on the rating systems we use. These have varied in detail and discrimination somewhat over the years so, for the purpose of this analysis, they have been grouped into five categories from A to E. The general grouping is shown below:

The top three (A,B,C) can be considered as “go” ratings while D and E are “no-go” ratings.

The following table from the UW report shows the number of responses to the survey by rating. This closely reflects the distribution of our recommendations for this population of clients.

The Total Frame is the total number of evaluations completed between 1977 and 1993. The Total Sample reflects records for which useable address information could be gathered after taking an initial sample of 20% of the Total Frame.

The relatively high Response Rate is in part due to the process we used whereby a pre-survey mailing was undertaken and the subsequent telephone surveys were conducted in the evening hours over an eight week period during the Spring of 1996.

This Table shows that 75% of submissions (D and E) receive advice to stop further development on their ideas (no-go). In every case the report contains clear reasons why these recommendations are presented and identifies the critical factors that our data shows are problematic. We suggest that, should the client wish to proceed, they address these critical factors first and with as much objectivity and realism as possible.

At the other end, we identify 2% where we feel that the idea has strong potential and should be carried forward if at all possible. An additional 4% appear to have good potential but we feel that they need to gather some critical information which may change that judgment.

Finally, as might be expected given the experience of the independent inventors, almost 20% are ideas that will probably achieve some level of sales but we are cautioning that the investment of time and money should be carefully controlled since the returns will likely be modest.

SOME INTERESTING RESULTS

A great deal of data was gathered from this survey and is still being examined by the research team. In the following I will present some of the preliminary results that have been developed.

The first question determined whether any level of sales had been achieved at any time. As can be seen, almost 7% reported at least some level of sales. Extrapolated over the total Sample Frame this indicates that as many as 600 new ideas had some sales. If we include the additional inventions reviewed by the IAP since 1993, this number increases to 800 or more.

Table 3. Percentage of Ideas/Inventions Leading to Innovations.

How does our IAP rating correlate with the idea getting to the market? The Table below shows that there is correspondence between the rating and the subsequent probability of sales. 96% - 98% of those with a no-go recommendation did not get to the market, whereas, 25% of those most highly rated did achieve some level of sales. There will be some discussion later on the reasons why 75% of the go ideas did not make it to market. It is interesting to note that almost 50% of those with the stop recommendation did not follow that recommendation but, given the subsequent lack of success, clearly should have done so.

This raises an interesting question that we are discussion at the CIIC. Given the predictive capability of the STOP recommendation, should we be much firmer in our advice? While this might save some additional expense and disappointment, the concern here is that many people need to go through the process in order to learn and grow. If they just stop, they might not learn lessons that would be useful in the future.

Another question of interest is the probable lifetime in the market for an invention from this source. The data from the survey indicates that in 1995 there were possibly 240 previously evaluated inventions that were still in the market. Other data indicates that the average lifetime of an invention is about 3.6 years. Of 74 successful inventions reviewed before 1985, only three were still selling 10 years later.

Table 5. Survival of Innovations.

The next issue relates to the economic importance of these inventions. Given that most (19%) of the 25% evaluated as “go” were determined to have limited potential, how did they all do? A first measure, and one relatively easy to gather is value of sales. The following Table reports sales from the 30 still selling in 1995 from the Table above plus an additional non-random sample of 73 inventions known to personnel at the Innovation Centre and not included in the survey.

As can be seen, the sales distribution is far from normal, with many at a low level of sales and a few with very high sales. A conservative estimate of the means sales is $213,600 in 1995..

Table 6. Value of Sales for Successful Inventions.

When we take the mean sales level of $213,600 times the estimated mean product life of 3.6 years times the estimated 800 products that have been or will be in the market as calculated above, the total aggregate sales from inventions reviewed by the IAP exceeds $615 million!

It is an interesting exercise to attempt to estimate the total employment that might be created by this level of activity. A reasonable first assumption is that, given the nature of the products reviewed, $150,000 to $250,000 in sales might equate to one job. This would lead to a calculate of 2,460 to 4,100 job-years.

Job creation and sales are important but so are profits because they lead to growth, more innovation and additional return to society through taxes. The survey asked the respondents who had success to estimate their gross profit margin. This turned out to be a surprisingly high mean of 28% with many reporting greater than 40%.

Table 7. Gross Profit Margin for Successful Inventions.

Of course, no product can continue forever. It is useful to review the reported reasons for discontinuing sales. The Table below shows a wide variety of reasons but a number can be grouped into the same group as our “C” rating - limited potential. We have yet to confirm this by correlating the specific reported reasons with their rating from the IAP.

Table 8. Reasons for Discontinuing Sales.

Of even more interest is the data that addresses why inventions did not ever get to market as shown in the next Table. This data covers the 93% from the survey who reported no sales. The first two reasons would likely fall into our C group and the fourth would likely be a D or E. Of particular interest is the group reporting “Lack of Capital”. We will be reviewing this data to determine how many of our A (Recommended for Further Development) actually fall into this group. These could be considered as significant lost potential contributors to the Canadian economy and may point us to opportunities to seek new sources of early-stage investment funds where the potential return can be reasonably calculated.

Table 9. Reasons why Ideas/Inventions did not Reach Market.

The very large “Other” group indicates that future surveys would need to spend more time on this general line of questioning.

RETURN TO SOCIETY

The initial and later Astebro papers contains significant analysis of the economic measures of invention that are beyond the scope of this presentation. However, there is one measure that should be commented on.

In any program such as the IAP that receives financial support from the public (society) through government grants, tax breaks or some similar mechanism, there should be both an accountability and a measure of value.

Since its beginning as a separate organization from the University of Waterloo, the Innovation Centre has been addressing the issue of accountability by publishing an Annual Review that contains reports on the progress of our services and audited financial statements.

More difficult has been the attempt to give a measure of value. While we have many anecdotal stories of client success that are reported, we have not had a good measure of the return on investment to Canada of the public support which we have received.

For the first time, the data from this study has allowed the researchers to develop an initial measure of the economic benefit delivered to society by the IAP. This measure is termed the Social Rate of Return. The calculations of this return, based on the data gathered in the survey, indicate that the most plausible estimate of the social rate of return is between 10% and 30%. The authors indicate that a typical, minimally acceptable, social rate of return is set at between 2% and 4%. While there is a need for better benchmarks, we are very pleased that the IAP does seem to return considerable economic value to Canadian society.

FUTURE INVESTIGATION

As with most studies, there are many questions that do not get answered within the study scope. We have identified a number of these that we feel would warrant further investigation. For example:

1. What was the actual amount of money and time invested from the initial development of the idea through to market entry?
2. What were the sources and amounts of all financing used to get to market?
3. What were the major non-financial resources that were needed?
4. Were there any follow-on products that resulted from this product and how did they do?
5. What were the levels of job creation?
6. How important was the IAP advice given and what was it worth?
7. What new market approaches would be suggested on the basis of this experience?

This later question is a particularly pertinent one given the degree of interest in such tools as the Internet for marketing or at least market-testing new ideas.

The CIIC has been using the Internet increasingly over the past two years as an important source of market information to input into the IAP evaluation. We have also been seeing increased response to our use of the Web as a means of marketing our own services. The number of inquiries has been growing quite rapidly.

At this point we have very little information on any successful use of the Web by independent inventors. A search of the Web under “invention” and “sale” produced 145 references using one search engine. An examination of these reveals a few that are either lists of inventions for sale placed by organizations or single inventions listed by the inventor.

The former immediately raises questions in our minds with regard to the credibility of the organizations listing the inventions. We are all aware that the invention marketers (those of doubtful repute) will advertise that they give their clients invention wide exposure to possible corporate buyers. The Web may be the latest variation on this promise.

It is clear to us that the Web holds high potential in some areas of commerce, particularly for the gathering of information and potentially for the test-marketing of new products. We are not yet very sure that it will become a useful method of mass-marketing except in some very specific areas such as software where there are some indications of success.

We are, however, encouraging our clients to look at this medium as a part of their whole marketing strategy. For interest I have included in Appendix 2. two articles that were published in our Summer 1997 newsletter that are designed to give inventors some useful information on an approach to the Internet.

I would like to express my appreciation for your attention today and would be very pleased to receive your comments on the experiences which I have shared with you in this paper.

APPENDIX 1.

Inventor’s Assistance Program

Critical Factors

Technical Factors Production Factors

1. Technical Feasibility 7. Technology of Production
2. Functional Performance 8. Tooling Cost
3. Research and Development 9. Cost of Production
4. Technology Significance
5. Safety
6. Environmental Impact

Market Factors

Market Demand Competition

10. Need 24. Existing Competition
1. Potential Market 25. New Competition
2. Trend of Demand 26. Price
3. Duration of Demand
4. Demand Predictability
5. Product Line Potential

Acceptability Effort

16. Societal Benefits 27. Marketing Research
1. Compatibility 28. Promotion Costs
2. Learning 29. Distribution
3. Function
4. Visibility
5. Appearance
6. Durability
7. Service

Risk Factors Commercializing Options

30. Legality 38. License or Outright Sale
1. Development Risks 39. Existing Business
2. Dependence 40. New Venture Potential
3. Protection 41. Part-Time Effort
4. Investment Costs 42. Other Possibilities
5. Potential Sales
6. Payback Period
7. Profitability

APPENDIX 2.

Selected Articles from Eureka!

The Newsletter of the Canadian Industrial Innovation Centre

Harness the Power of the Internet!

By Lise Devost Reckler, Inventor of ProteXion Plus Harness

As an inventor with a new product, I am learning that improving my

marketing skills is one of the best investments I can make! Based on this

belief, I have decided to create a web page to advertise my invention.

My invention is a reflective safety harness to be used by pedestrians, by

joggers, or people doing nighttime repairs by the roadside. My harness is

designed to be readily visible day or night. I have witnessed and heard of

many serious or fatal accidents based on the inability of drivers to see

people at the side of a busy road. With this safety harness, the reflective

strips can be seen by motorists up to one mile away!

I have decided to develop a web page on the Internet for several reasons:

To Create Awareness

My product may add an element of safety to many different situations

including sports activities, holiday events for children (Hallowe’en), and

nighttime roadside repairs. Since my product can be used by such a large

market, the internet may serve to reach many of these potential consumers.

To Obtain Geographical Reach

I live in New Brunswick, which isolates me from larger cities where I could

market my product. A web page will help me penetrate such market barriers

and reach out internationally!

To Find Buyers and Distributors

My biggest focus now is promoting ProteXion Plus! I am looking for

interested retailers and distributors. Hopefully a web page will connect me

with some companies I would otherwise not meet.

In preparing a web page, I had to consider a couple of key points:

* I needed high quality pictures of my product to clearly communicate

its use to viewers.

* My product can be listed in many categories: sports, leisure, safety,

automobile accessories, etc...Listing in all of these areas not only

increases my exposure to all my markets, but also ensures a more

targeted approach within the vastness of the internet.

* One of the key features of advertising on the internet, in my opinion,

is my ability as an advertiser to track the number of people who visit

my site as well as the number of e-mails I receive. This feature will

be very crucial as I attempt to gauge the effectiveness of my

advertising.

Inventors have the ability to develop product demand to the level where

they build viable businesses that employ Canadians. As the internet is

becoming more powerful and far reaching in its scope, it offers any

inventor tremendous potential in being a major force in this country and

throughout the world! I personally plan to harness this power of the

internet!

Lise Devost has received a US patent for her safety harness and is awaiting

a Canadian patent. Her hope is to make ProteXion Plus a standard safety

accessory. If you wish to learn more, contact Lise at (506) 739-6865 or

e-mail to ldevost@nb.sympatico.ca.

Your Web Page: What comes After Design?

By Andreas Wiatowski, Digitized Solutions

Compared to newspaper, magazine, trade journal, television, radio and trade

show marketing, the Internet offers one of the least expensive and

increasingly effective methods of advertising products or services

worldwide!

If you are considering reaping the rewards of the Internet, designing an

effective web page and selecting a domain name is an important first step

and can be well-provided by an Internet Service Provider. However, once

this task is complete, your job isn’t nearly finished! Even the best

designed web site or registered domain name will not guarantee that people

will find you.

How are you going to get visitors to your web site so you may share your

new product ideas?

Submitting Your Site

Submit your web site address to Search Engines, Web Crawlers, and Link

Pages. Simply put, these are the “Yellow Pages” of the Internet. For

example, there is Yahoo, Webcrawler, Altavista, OpenText, Lycos, Infoseek,

and literally thousands of other “Yellow Pages” throughout the world. They

allow people to search their databases using key words and phrases. Since

there are literally millions of web addresses around the world, this is the

avenue most people turn to when they need to find specific information on

the Internet.

Since submitting your web address and information is free, you want to let

these “Yellow Pages” know that you are now on the Internet and give them

some valuable information about your web site contents. There are many

techniques involved in successfully submitting your web address to these

entities, but the most successful way to reach the top 200-500 directories

throughout the world is to hire a professional to submit them for you since

this process can be very time consuming and tedious!

Traditional Methods of Marketing Your Web Site

Once your web site is up and running and you have submitted your site to

the “Yellow Pages” of the Internet, don’t forget to market your web site on

your own! Print it on your business cards, letterhead, envelopes, fax cover

sheets and just about any piece of stationary you own. If you already have

printed materials and don’t wish to reinvest in new stationary, get a

rubber stamp or labels printed out with your new web address! Also, when

talking on the phone to any potential customers or current clients, let

them know that you are now on the Internet!

Monitoring Statistics

Every person that visits your web site leaves a digital “footprint” that

carries valuable information. This information, once decoded from its

native format, can be used to evaluate the performance of your web site. It

can give you information like where in the world your visitor came from,

which web pages are being accessed the most, the average peak time at which

your site is being accessed, and much more! Tracking these statistics will

allow you to measure the effectiveness of your web page in attracting

potential buyers.

Developing a web page, placing it effectively, and tracking results takes a

lot of planning and strategy. However, your web site can produce incredible

results! Consulting a professional will help make this job easier for you.

But remember that ultimately, you are the author and manager of your web

page!

Andreas Wiatowski is a Partner/Director of Digitized Solutions specializing

in Web Design and Marketing. He may be reached at (519) 896-2102.