The Commercialization Process of

Innovation in Small and Medium-Sized

Firms

Jarkko Pellikka, M.Sc. (Econ.), Ph.D Cand.

Savonia Polytechnic
25.5.2005, Iisalmi
 Objectives of the Lecture
 Why important?
 Importance of innovative SMEs
 Crucial role of commercialization

 What is the process of commercialization?

 Definition
 Stages
 Alternative paths to commercialize innovations

 What are the central challenges of the commercialization

process?
 Central decisions
 Resources
 Operations
 Importance of innovative SMEs
 The innovative small and medium-sized firms
are widely seen as promoters of economical
growth regionally, nationally and
internationally
 The positive impact of these firms is generally
related to their capability to create, transfer
and exploit innovations
 In addition, some studies have reported that
especially growth-oriented small technology
firms have a very positive effect on the local
employment situation
Benefits of commercialization
 In a general level, faster commercialization
can secure the firm’s existence, but more
importantly it provides several benefits such
as the growth of turnover, profits and market
share
 Additionally, the firms can reach the market
leader position in the national as well as in
the international level
 It is also noticed that the significant cost
benefits can accrue from compressing the
commercialization process
 Why commercialization is important?
(1)

 In order to realize the benefits of

innovation commercialization is
required!
 New, innovation need to bring to the
market
 Otherwise innovation is just another
expense
Why commercialization is important? (2)
 Competitiveness in a dynamic business
environment
 SMEs need to commercialize their

product-based ideas succesfully

 Basic requirements: effectiveness (e.g.

use of limited resources), rapidity and

timing (noticing the customer
acceptance, etc.)
Why commercialization is important? (3)

 Important especially for the firms

operating in the turbulent business
environment (e.g. ICT industry)
 strongly dependent on one or few
technology-based products
 acquire, produce and exploit new
technological information and knowledge
 challenged by the short product-cycles and
other market uncertainties
What is the process of
commercialization?
 The term “commercialization” is defined as a process
that starts with the techno-market insight and ends
with the sustaining functions of the market-
competent product (Jolly, 1997)
 The commercialization process includes five main
stages:
 Imagining
 Incubating
 Demonstrating
 promoting and
 Sustaining
 THE COMMERCIALIZATION PROCESS of
INNOVATION
SUBPROCESSES: BUILDING THE VALUE OF A NEW TECHNOLOGY

3. 7. 9.
1. INCUBATING 5. PROMOTING
IMAGINING DEMONSTRATING SUSTAINING
to Define Adoption Commercializa-
The Dual Commercializ- Contextually
(Techno- in Products and tion
2. ability 8.
Market) Mobilizing Processes 6.
4. Mobilizing Mobilizing
Insight Interest and Mobilizing Market Complementary
Endorsement Resources for Assets for
Constituents
Demonstration Delivery

BRIDGES: SATISFYING AND MOBILIZING STAKEHOLDERS AT EACH STAGE

Source: Vijay K. Jolly (1997)
What the firms actually do during the
commercialization process? (1)

 Imagining stage:
 Imagining stage is some kind of an idea stage. In
this stage it is important to see if there is any
market potential for a innovative-product that
probably will be later developed
 Proto-typing activities (e.g. engineering and other
R&D activities)
 Testing (with the key-customer)
 Patenting (i.e. securing the immaterial property
rights, IPR)
What the firms actually do during the
commercialization process? (2)

 In the incubating stage, the company

defines the commercialization ability of the
innovative product idea. In this stage, the
idea is already technologically tested
 Resources and venture capital is also included to
the idea
 Market and customer analysis is normally done
 Searching re-sellers and building distribution
channels
 What the firms actually do during the
commercialization process? (3)

 In the demonstrating stage, the

commercialization efforts are concentrated in
product promotion
 The company should have a specific product
concept (e.g. product and support services, help-
desc etc.) , which makes it possible to serve
better to the demand situation in the market
 Strongly focus on the selling and marketing
activities with the re-sellers (also abroad
depending on the product!)
What the firms actually do during the
commercialization process? (4)

 The meaning of the promoting stage is to

get customers to understand and use the new
product. It is also important to build a proper
infrastructure (e.g. extra services) to help the
product users
 Focusing furthermore selling and marketing
activities internationally
 Customer satisfaction is crucial (by improving
service and product quality)
 Cutting costs and developing production
What the firms actually do during the
commercialization process? (5)

 The Sustaining stage includes the normal

operations that sustain the product’s
economical abilities. There are several
possibilities to do that, like for example
cutting costs and the product improvements
 In this stage, it is also important that the
company stops the specific product
production in the right time (timing)
 Focusing on marketing and selling activities, but
also on R&D to secure the product
competitiveness in the future
Summarizing the
commercialization process
 The commercialization process combines the central
processes of the firm

Product-development process Marketing and selling process

Commercialization Process of Innovation

Central challenges of the
commercialization process
 Successful commercialization process
requires several activities, resources
and decisions
 Coordination of this complex entity is
very challenging, when it is necessary
to identify the critical factors
(challenges/problems) that influences to
the process
 Framework for analysing the
problems of commercialization
 Based on the several studies the
identifiable problem areas divided into:
 commercialization environment

 marketing

 financing

 management
 Commercialization environment
 Availability and content of the support and
development services provided by the local
institutions (e.g. technology centers,
science parks, etc.)
 Infrastructure of the business environment
(suitable premises and other facilities)
 Failure to acquire sufficient resources for
the commercialization (skilled employees,
experiences managers, etc.)
 Marketing
 Fail to identify the optimal functionality of
the new technology-based product
 Fail to access, gather and exploit the market
and the customer information
 Fail to allocate the marketing activities
 Fail to recognize the right timing of
marketing efforts
 Fail to form the close relationships with the
early adopters/lead-users
 Financing
 Fail to mobilize the adequate financial resources
(i.e. lack of money)
 Fail to manage financial resources (e.g. focusing
too much on product-development)
 Problems in availability of appropriate financing
during commercialization process (e.g. public
finance instruments are often too bureaucratic)
 Problems of the capital structure (costs vs.
revenues)
 Management
 Fail to set the measures of commercialization
(future incomes, market share, cost-structure, etc.)
 Fail to acquire and manage multi-functional
resources (marketing, production, engineering,
etc.)
 Lack of marketing and finance experience
 Fail to form collaboration and partnerships (e.g.
internationally)
 Fail to exploit the new market opportunities rapidly
 Discussion
 Commercialization is a complex and challenging process
for SMEs (see requirements and challenges of the
commercialization process)
 Important to identify the concrete problems and to raise
awareness of these key problems during the
commercialization process
 Local service providers as well as the policy makers
should focus more on the suitability of the services, and
generally the ability of the local infrastructure to solve
commercialization chellenges of SMEs
 In a small open economy internationalization play a
critical role even in the very beginning of the
commercialization process
Thank You! Questions?
Contact:

Jarkko Pellikka, M.Sc. (Econ.), Ph.D. Cand.

Savonia Polytechnic
+358 44 785 6623
jarkko.pellikka@savonia-amk.fi
fax +358 17 255 6644