Monthly Archives: January 2014

Building a Powerful Contact List: Key Tactics for Making the Random Walk a Little Less Random

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By:  Andrew Johnson, Ph.D.

red leader of blue group

Build a powerful contact list by focusing on key individuals first.

Building up a substantial contact list is crucial to any startup especially as they approach the commercial launch of their first product or service.  This list will be used by your commercial team to recruit alpha and beta evaluators, find strategic partners and of course uncover customers.  One of the key things to keep in mind as you create this list is that it is the quality of the people on this list rather than the ultimate number (although you need this list to grow very large eventually) that is most important.

Why quality is crucial
First, what do we mean by a quality contact.  This is an individual that has shown some interest in your product or service by asking you to:

  • Put them on your mailing list to keep them informed
  • Exchanged business cards with you at an event you both attended (they asked for yours first)
  • Has reached out to you via your website, phone or perhaps by visiting a poster or vendor booth you hosted at an industry event.

People that you connect with in one of the ways described above will have a higher chance of being valuable to you and your company in the future including becoming some of your first customers.  Simply scanning the badge of everyone that visits your booth at a tradeshow to grab some free swag might provide a big number of contacts that you can put on a spreadsheet but now you will have to sort through all of them to find the quality contacts just described.  You have better things to do with you time.

The Random Walk
The highest quality contacts that you could have are those that you have had a chance to sit down and connect with on a one-on-one basis.  If you establish a strong connection during these meetings, these folks can turn out to be your strongest advocates and will go out of their way to help you with referrals, advice and other valuable inputs.  However, the problem here is that you need a significantly larger number of contacts to insure that you have a broad enough reach that will ultimately return the kinds of contacts that will become satisfied customers.  It is not possible to reach all of these people individually.  Reid Hoffman (Cofounder and Chairman of LinkedIn) and Ben Casnocha provide an excellent discussion of how to successfully build your network of contacts with sufficient depth and breadth in their book ‘The Start-Up of You’.  All of the people that we would consider high quality contacts would be rated as first degree connections (depth) on LinkedIn.  The contact lists of your 1st degree connections represent your extended list (breadth) that will have the size you need to drive your commercial efforts.  In LinkedIn parlance, these are 2nd degree connections to you.  As an example of the reach of this extended network, a list of 300 – 400 direct connections (LinkedIn 1st degree connections) gives you access to over 6 million indirect connections (LinkedIn 2nd degree connections).  Whether you use LinkedIn or not, the compelling size of these indirect connections is real and worth the effort to cultivate.

This is Doable
It is likely that between the founding team members, your advisors and other strategic partners that you will be well on your way to developing a list of hundreds of quality (1st degree) contacts.  Be sure to seek out opportunities to meet with new people on a ‘one-to-one’ basis as much as possible.  You never know who these people are connected to and what valuable introductions they will provide.  Looking forward, that is can look like a very random process and it is.  You can increase the likelihood of making meaningful connections by attending events that you think will attract the people you would like to meet (industry events, tradeshows, lectures, CEO groups etc.).

Selected Tactics for Building your High Quality Contact List:

  • Reach out to friends and family.  Not all of these will be relevant but this is an easy first step.
  • Review the alumni contact list from your alma mater and professional school and reach out to prospects via e-mail, phone or ‘face-to-face’ (best).  Remember, don’t just stack you list with names; you need to know that they are at least a little bit interested.
  • Ask for referrals from those you meet.  Always ask the people you connect with who they would recommend that you meet and ask if they can introduce you.  Be sure to return the favor as much as possible as well. Give and take here can really pay off in the long run.
  • Be prepared to make connections anywhere and everywhere by being sure to keep a few of your business cards with you at all times.  You never know who you might meet at your spouse’s business party or at the grocery store.
  • An effective Marketing effort will bring in a number of high quality connections as well as leads for your sales force.  Don’t confuse a quality connection with a sales lead.  Sometimes a sales lead will also be a quality connection but that is not always the case.
  • Host or sponsor events in your industry.  Providing a technical talk, hosting a workshop or having an Open House event at your facility are excellent ways to quickly build your list of contacts.

Picture Credit:  © Suravid | Dreamstime Stock Photos & Stock Free Images

Eliminate This Risk to Your Sales Momentum

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traffic cone

Avoid the ‘out of stock’ pothole on your road to success.

By:  Andrew Johnson, Ph.D.

Your team has pushed hard to get a successful product launch.  There is intense focus on Sales & Marketing to take the ball now to close on ever greater numbers of sales.  There is nothing like being ‘out-of-stock’ to put a crimp in your sales momentum.  With a little bit of post-launch effort, the risk of this happening can be minimized.

STEP 1

  • Assemble a team made up of some of the technical people from your product development team, someone from Operations and a product manager.
  • This team will initially be tasked with the following:
    • For Consumables – Identify all critical raw materials.  These are key components like antibodies or other biologicals or chemicals that are critical for the proper functioning of your kit or reagent.
    • For Instrumentation – Identify components with particularly long lead times.

For consumables, pay especially careful attention to sole suppliers of a critical raw material.  What would happen if this company went out of business or decided to discontinue the product?  Alternatively, what would happen to your business if they doubled the price of this component?

Use Failure Mode Effect Analysis (FMEA) to  help you and your team assess not only impact of what delays in instrument components  or loss of a source for a key reagent would have but also how likely it would be for that to happen.  This will allow you to compile a prioritized list with the biggest risks to your business at the top.

STEP 2

  • For Consumables – Have the technical team find an alternate source for the critical raw material.  This alternate source might be more expensive but it is much better to have a validated alternative source than to run out of it when your demand is growing.
  • For Instrumentation – Make sure that your agreement with component suppliers include options for rush shipments.  Find out what the lead times and additional costs are for this.  With good Sales forecasting you should not need to exercise this option but it is good to have this in place (just in case).  Consider keeping some additional inventory of critical components to buffer risk.

You cannot eliminate all of these risks to your business but it is far better to know what they are and have contingency plans in place in the (hopefully) unlikely event that some of them come to pass.   Remember that some of these risks can be mitigated by solutions provided by your technical team and others using business tactics.

Picture Credit:  © Foto.fritz | Stock Free Images & Dreamstime Stock Photos

International Team Leadership: A Real Life Case Study in How Not to Be the Ugly American

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Dartboard with flag darts

Cultural sensitivity is like getting agreement to the same set of rules for a game. Once you have mutual understanding, you will work together and succeed as a team.

By :  Andrew Johnson, Ph.D.

Taking the time to meet with and understand the culture of your international partners goes a long way to boosting you entire team’s efficiency.  The following case study demonstrates the value of cultural sensitivity when leading an international team.

Case Study:  (some details intentionally left vague to provide anonymity for those involved)

Situation:
Senior executives at company headquarters in the US wanted to have several new products commercialized from a company that they recently acquired in Scandinavia.  The effort was to be led by a US-based Project Manager with R&D, Operations and Finance team members split between the US and Scandinavia.  This product was originally being commercialized by the Scandinavian team alone prior to the acquisition.

Soon after project kick-off, the effort began to run into delays and missed deadlines.  Team members would be absent from critical meetings, deadlines would be frequently missed and resentments seemed to be growing.  This was a project that was on its way to a spectacular disaster.

How we saw them
The US members of the team seemed to feel that all of the project problems were coming from the Scandinavian side.  We would send them plans, proposed work solutions and data.  We felt that we would either hear nothing in return or there was an extreme lack of urgency.  We felt that there must be some resentment among our Scandinavian colleagues since this project leadership had been imposed on them and that they were actively looking for ways to sabotage the project.

How they saw us
The technology and science behind the product we were commercializing had all come from years of work that was originally done by the Scandinavians.  They felt that the US side of the team was arrogant and pushy.  We were seen to be constantly questioning the quality of their science and imposing unrealistic deadlines. To them, the US team seemed to be bent on placing the blame for delays and problems on them.

Getting back on track
The project leader traveled to the Scandinavian site and spent time getting to know each of the individual project members.  Several meetings with the US part of the team where held while the project manager was with the Scandinavians to begin to rebuild trust across the entire team.   This allowed for some mutual understanding to be made between the US and Scandinavian team members and also helped to establish a way of working together that both sides supported.  We finally became one team with a single purpose (Our Team).  Ultimately, we all successfully commercialized our product on time and within budget.

Some Lessons Learned:

  • All meetings were held in English.  The Scandinavians seemed perfectly fluent in English so it was with some surprise to learn that their own confidence in speaking and understanding English was low.  Their slowness to respond to questions and demands for information were not being delayed by a willfulness to obstruct the team’s progress but more from a fear of either providing the wrong information or not looking competent.
  • The culture of the Scandinavian team was to work by consensus.  On the other hand, individual initiative was rewarded and appreciated on the US team.  Someone being singled out for a particularly good job was a good thing for a US team member.  The same thing was seen as embarrassing and even offensive to a Scandinavian team member.  This is why the US style of giving ownership of parts of the project to individuals was not well received by our Scandinavian colleagues.
  • National pride was extremely important to the Scandinavian team members.  In the US, individual achievement and a successful commercial launch for the company were rated much higher than national pride (this in spite of all of the hoopla around ‘Made in the USA’).  With the US now owning the company, a successful product launch was no longer seen as important since this was not perceived as a success for their country.  Regardless of these differences, both cultures prized success for the team.  Once everyone felt that we were all on the same team, we worked hard together to succeed together.

The ultimate outcome
Once both sides of the team learned more about the cultural differences between them, new ways of working together that respected these differences got the team back on track.  Ultimately this project was able to launch earlier than expected.  Simply imposing the project management style that had worked well in the US on our Scandinavian colleagues resulted in a dysfunctional team.  The value of making the effort to understand the culture of the people that you will be working with is not only good advice for international teams but also for domestic teams as well.

Some Tips for Managing International Teams:

  • Plan some travel in your budget – Ideally it is best for there to be an opportunity for all of the team members to meet face- to-face at the beginning of the project.  If this is not possible, make sure that at least the team leaders can spend time working with the international team in person.
  • Alternate meeting times to accommodate time-zone differences.  Nothing is as arrogant as forcing your international team to stay late or get up early just so they can make a meeting that is within normal working hours for you.
  • Many things can be done remotely once a connection has been made and trust established.  Build trust and understanding early to leverage the effectiveness of this way of working.
  • Take the time to find out what motivates your overseas colleagues as well as what they might find offensive.  Paying attention to these details can make all the difference between a successfully executed effort and a disaster.

Picture Credit:  © Starfotograf | Stock Free Images & Dreamstime Stock Photos

Building Strong Technology Companies One Royalty Deal at a Time

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By:  Robert Benson, Ph.D.

How to write license agreements to ensure monitoring and auditing is as simple as possible.

Team on puzzle pieces

Solving the puzzle of royalty terms need not be complicated. Having a good understanding of the motivations of both parties in a royalty arrangement will help to get a deal where both parties begin seeing profit.

This was the topic of a seminar (“Licensing Compliance – Getting What You Negotiated – Pitfalls and Best Practices”) hosted recently by MATTO (Massachusetts Association of Technology Transfer Offices).  This event was mainly attended by tech transfer professionals from Massachusetts-based academic institutions.

There was a focus on three clauses in licenses that tend to breed complications. Two clauses – concerning combination product and royalty stacking –are responsible for many “difficult-to-audit” agreements and a third clause – which refers to royalties paid by a sublicensee to the licensee on sales of licensed products — makes it difficult for universities to predict royalties from sales. The licensee and licensor generally take opposite sides on these clauses.  To simplify things I will refer to the licensor as the “university” and licensee as the “company”.  These three clauses are all changes from a straight royalty on sales of licensed product, i.e., sales times royalty rate = royalty.

Combination product language refers to a situation where the licensed product is sold as a combination – that is,  at least some of the product’s value and therefore its sales price is due to a non-licensed product or item, An example is a drug (licensed product) sold pre-loaded in a  syringe (non-licensed product).  The company doesn’t want to pay the royalty on the sales price of the non-licensed part of the product.  Combination product language is a solution often suggested by the company and agreed to by the university.  There are lots of ways this can be handled.  The most common is to multiply the sales price by something like A/(A+B);  A being the price of the licensed product (the drug) and B being the price of the non-licensed portion (the syringe) when each is sold alone.  This simple example works well, but what if the syringe is custom-made just for this drug and has no separate price B? There are lots of times where A and/or B (and C and D, as things get complicated) don’t have sales prices that are easily determined.  In such cases having this type of combination product language in the agreement can lead to all kinds of difficulties, including litigation, to determine a fair royalty amount.

Royalty stacking occurs when a product is covered by IP held by more than one party.   For example a medical device may require one license for the device itself and a second license for the software to run it.   This situation would require separate royalties for each license.  The company may argue that under such circumstances the royalties are too high for them to be competitive.  Royalty stacking is one answer; both royalties are lowered as long as both licenses are required.  There are lots of way this can be done too. Typically one royalty is lowered by 50% of the royalty paid to the other licensor, with some limit as to how much the royalty can be reduced.

Companies like combination product and royalty stacking clauses because they lower the royalties.  Universities do not particularly like these clauses for the same reason.  And, in addition to lowering royalties, combination product and royalty stacking can be erroneously calculated (not always by mistake) thus lowering the royalties the university receives by even more.  Companies, too, have the added burden of accurately calculating the royalties, a task made difficult (and expensive) if lots of different products are being sold in different combinations and with different third-party licenses required.

The third issue discussed was how royalties on sales by a sublicensee are passed back to the university.  There are two basic ways this is handled. The first, usually favored by the company, is that a fraction of all payments from the sublicensee to the company be paid to the university.  For example 20% of all payments (with specific exceptions) from the sublicensee to the company will be paid to the university.  The company likes this because it gives them flexibility in structuring the sublicense.  The university usually accepts this type of payment but worries that royalties on sales by the sublicensees may be too low (the sublicense may not even have a sales royalty).  Since royalties on sales usually constitute  the bulk of any money coming back to the university, the university would prefer another approach,  in which the sublicensee pays the same (or greater) royalties on sales as the company and the company passes back to the university the same royalty the company would have paid if it had made the sale directly.

So was there a consensus on how to handle these three changes from a straight royalty on sales?  No — in licensing there is never a consensus because each license is distinctive, and every university and company is trying to accomplish something different with each deal (which is why I don’t usually believe in “express licenses” – a fashionable type of license that some universities are promoting).  However, quite a few attendees  said they would be willing, in some cases, to lower the royalty rate in exchange for dropping combination product and royalty stacking clauses and having a straight pass-through of the royalty on sales by the sublicensees.   If 5% is the usual royalty rate asked by universities, some said that they would accept a straight 3% on sales by the company and sublicensees without any reductions due to combination product or royalty stacking clauses.

I think this solution may work for the company in many situations but not all.  The big advantage is the simplicity of calculating royalties and performing audits and the certainty of the royalty stream coming back to the university from sublicensee sales.

Picture Credit:  CraigTaylor74 via photopin cc