In my last post, Technology Transfer, I had discussed various aspects related to transfer of technology. Transfer of technology can take place through a number of mechanisms or modes. These may vary from a sales and service agreement either as an agent or sole distributor, to a subcontracting arrangement, an Original Equipment Manufacturing arrangements (OEM), production licensing, joint ventures, to Original Design Manufacturing (ODM) arrangement, production licensing to even joint R&D and production, university – industry licensing, Government R&D institute – industry Licensing etc.
However, in each of the transfer modes, detailed planning and coordination is required between the technology transferring agency and the technology receiving agency. It is very important that the two agencies understand each other’s capability, processes and competencies very well before even the deal for transferring technology is signed. If this planning and due diligence is not undertaken, the technology transfer process is bound to fail.
So what are the activities that go into planning the transfer of technology. In this article, I intend to make and attempt to explain the same.
The first activity that needs to be undertaken is to assessing the need of the technology transfer. A comprehensive analysis of this need is required, because, if there is no need for the technology to be transferred, the whole act would be in vain. Here, we need to understand that this need is different from demand. There may be a need for a technology but no demand because demand is related to the paying capability of the customer. If the need is established, the demand can be created by making the technology more affordable.
Once the need has been established, the feasibility of transfer of technology should be assessed. The feasibility study would take into consideration the pricing of the technology at which the transferring agency is ready to part with the technology. The capability of the receiving agency to accept and absorb the technology and the existence of a commercial market for the technology.
Both the agencies should follow a process approach for transfer of technology. The complete process of technology transfer right from technology search to post transfer implementation should be studied, understood and accepted between the transferring and receiving agencies.
When planning and implementing a technology transfer project, the managers of technology must gain good insights into the technical and business environment at the receiving firm, transferring firm, and general technical and business environment in the country and the world itself. For example, satellite phones when introduced by Iridium failed because the environment was not ready to accept them.
The receiving agency must explore a number of suitable partners before it zeroes on the transferring partner. Further, the receiving organization must be involved by the transferring organization right from the beginning in the planning and execution for the transfer to succeed. While at the same time, the receiving organization must develop sound engineering and project management skills to be able to successfully absorb the technology.
While planning for the transfer of technology, it is important that milestones and decision points are clearly demarcated so that activities can be strengthened, mistakes corrected, or even the project terminated at any point in time based on the progress. This would also assist in close monitoring and control of the transfer process and help in cost control.
During the process of planning the technology transfer on the side of the transferring agency, the following aspects need to be studied and found suitable by the transferring agency. :-
The terms and conditions for transfer of technology.
- Technological capability of the receiving agency.
- Relative newness of the technology. This would determine both the demand for the technology as well as the cost at which technology would be transferred.
- Strategic importance of the technology to the transferring firm. If the technology being transferred is of strategic importance to the transferring firm, chances are that it may not be transferred at all. Even if it is transferred, the price sought would be usually very high.
- Level of intellectual property protection needed. If the technology is critical and new, then the robustness of the IPR regime sought, in the country where the technology is being transferred, is high. However, if the technology is nearing end of patent period, it may be transferred to countries where the IPR regime is not very robust also. Cost of transfer is also dependent on these factors.
It must be understood that a technology transfer project does not end with commencement of production at the receivers premises. On the contrary, the success of a technology transfer project is determined by the extent to which the transferring and receiving agencies manage the barriers that impede transfer and strengthen initiatives that facilitate it.
In a future post, I shall discuss the effect of IPR regime on the transfer of technology as well as the various commercial aspects of technology transfer.