PRTM Insight | Second Quarter 2007

TREASURE HUNT

For innovation-driven companies, technology scouting offers a way to

accelerate the product development cycle at a fraction of the cost of tradi-
tional methods. But with the explosion in the number of emerging
technologies worldwide, how do you find the ones that best suit your
needs? Companies that excel at technology scouting consider this a strate-
gic imperative, with a full-fledged program for locating and integrating the
right technologies. As the pressure to innovate keeps rising, this approach
will be mandatory for sustainable success.

rocter & Gamble. Eli Lilly. Boeing. These three companies, all at the top

P of their game, have something important in common: technology scout-

Treasure Hunt
Scouting out the right technologies to develop
breakthrough products cost effectively
By Chandresh Harjivan and Mark Deck
ing, the ability to rapidly identify and locate emerging technologies to
develop innovative products. This is no coincidence. For the third year in a row,
the Economist Intelligence Unit’s survey of CEOs has reported that the fail-
ure to innovate is the one of the top risks faced in developed markets today.
Indeed, in the most recent survey, 45% of participants said they plan to rely
more on outside sources of innovation over the next three years (“CEO
Briefing: Corporate priorities for 2007 and beyond,” The Economist
Intelligence Unit, January 2007).
As more and more companies realize, traditional approaches to innova-
tion, where R&D organizations conceived and developed ideas internally,
are no longer sufficient. To remain competitive, it’s now critical to supplement
internal efforts with new technologies from the outside. But in our experience,
many firms still don’t know how to find the technologies they need cost
effectively. This is no small issue. As the pressure to improve R&D produc-
tivity rises and the number of new technology options grows, knowing how
to tap and integrate the right solutions can accelerate the development cycle
at a fraction of the cost of more traditional methods. P&G, for example, has
built a proficiency in technology scouting over the past seven years that has
helped the company develop more than 100 new products, increase produc-
tivity by nearly 60%, and reaffirm its leadership position in the consumer
products industry (Huston and Sakab, “Connect and Develop,” Harvard
Business Review, March 2006).

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PRTM Insight | Second Quarter 2007 TREASURE HUNT

So in a world where new technologies are so plentiful, how do you use
technology scouting most effectively? In our experience, it’s important to
develop an operational model where you define your technology strategy,
determine the right approach for locating the technologies you need, and
incorporate those new technologies into your existing pipeline (Figure 1).
Since it isn’t always easy to know which technologies will pan out, it
pays to place multiple bets. This means acquiring a wide range of alternatives,
with different development pathways, to meet each particular technology
need. When, for example, Intel wasn’t sure that consumers would adopt
chips with two computing brains, it developed both single and dual-brain chips.

Figure 1: Technology Scouting Framework

Locating the Right Technologies
Strategy
Approach
Integration
Once you’ve identified the specific technology problems you want to
address, you need to locate the technologies that fit the bill. This is a daunt-
Mining ing prospect, a lot like finding a needle in a haystack—or actually like finding
Innovative
Technology Networking
Validation Transfer Products and many needles in many haystacks, since many technology solutions could
needs Crowdsourcing
Services suit your needs.
Hunting
To find the right pathways, ask yourself the following questions. Which
companies are developing these technologies? Where are they doing it?
Which elements of this technology are going to be most relevant to us? And
Defining Your Technology Strategy finally, where are our competitors working and whom are they working with?
To reap the full benefits of technology scouting, you’ll want to develop a In our experience, there are four key ways to locate emerging technolo-
strategy that will guide you in determining which technology assets you want gies: technology networking, crowdsourcing, technology hunting, and
to have in your technology portfolio, analogous to how you’d handle a prod- technology mining (Table 1).
uct development portfolio. Your technology strategy should answer a number
of questions. What problems do I need to solve? How much should I invest Table 1: Approaches for Finding New Technologies
in them? How many different alternatives should I explore? What is the
Approach Purpose Example
timeframe for investment? When will the new technologies be practical?
The answers to these questions should be in line with your overall business Technology Monitor trends and identify Novartis
Networking relavant solutions
strategy. If, for example, you’re pursuing a growth strategy, your technology
portfolio should be weighted toward breakthrough and market-changing Crowdsourcing Provide access to a Eli Lilly
technologies instead of sustaining technologies. marketplace of ideas for
companies looking to solve
It’s important to continuously review your technology portfolio to iden- specific problems
tify potential gaps, which will tell you where to direct your scouting efforts. If Technology Help locate technology British Telecom
radical innovation is called for, you need to locate a promising early-stage tech- Hunting solutions from start-up
nology. Universities and other research organizations are where you’d look. companies
But if you need to close a technology gap in a product development project that Technology Mining Find technologies described Deutsche Telekom AG
is close to completion, you should look for a technology that is in the final stages in published documents
of development. Your best bet in that case is to focus on start-ups and larger
commercial organizations.

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PRTM Insight | Second Quarter 2007
Technology Networking—This approach uses networks to monitor trends
in technology development and identify external technology solutions. The net-
works are both formal and informal, and can be driven physically or virtually.
Deutsche Telekom AG has set up a network of internal and external technol-
ogy scouts, located in DT’s Berlin laboratory, Ben Gurion University, Silicon
Valley, Shanghai, and Beijing. The scouts are “nodes”: They all have their
own networks of information sources. Because of their inside knowledge, inter-
nal scouts are better at finding relevant technologies, while external scouts are
better at identifying technological developments in white spaces.
At Novartis, technology networking is more informal—an internal por-
tal that promotes interdepartmental knowledge sharing. While most of the
discussions occur online, seminars and social gatherings facilitate commu-
nication within the virtual network. Each researcher is also expected to keep
up to date with scientific developments in the field in order to be able to
identify potential technology solutions the company might want to acquire.
Crowdsourcing—A buzzword in technology circles, crowdsourcing is
defined as leveraging the crowd to solve specific problems. In contrast with
technology networking, crowdsourcing uses open networks to solve specific
problems. Why is crowdsourcing so effective? The idea is that the “hive
mind,” or the collective intelligence of a crowd, is smarter than the individ-
ual. It can come back with the answers you need far more quickly than it would
take individuals to solve the problem, and at far less cost. Think “two minds
are better than one,” only multiply it by hundreds or thousands.
A few years ago, Eli Lilly launched InnoCentive as a way to connect with
people outside the company who could help in developing drugs and speed-
ing them to market. Pressing scientific problems—ones Eli Lilly’s internal
scientists had been unable to solve—were posted on InnoCentive’s website
and anyone in the company’s network of experts could take a shot at crack-
ing them. Eli Lilly also made InnoCentive available to other firms eager to
access its network. So far InnoCentive’s model has solved 30 percent of the
problems on the site. That’s 30 percent more problems than would have
been solved using a traditional in-house approach, since companies typical-
ly post problems only after they’ve failed to solve them on their own.
InnoCentive clients include some of the most innovative companies, includ-
ing P&G, Novartis, and Boeing.
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TREASURE HUNT
InnoCentive, which has grown by more than 25% in just over six months,
is only one example of the companies that have sprung up lately to offer
organized crowdsourcing services. Nine Sigma, Yourencore, yet2.com, and oth-
ers have created a virtual marketplace where companies can tap the best and
brightest ideas worldwide.
These companies, for the most
For larger problems, another
part, offer problems to individuals to
solve. For larger, more difficult prob- approach is to set up a
lems, another approach is to set up a “tournament,” where
“tournament,” where participants participants form teams
form teams. This approach is highly
efficient because it brings together competitors with the most advanced
know-how, and participants win awards only if they come up with a solution
for the technology need that’s been specified. Over the past few years, the
Defense Advanced Research Projects Agency (DARPA) staged Grand
Challenges to get help in designing a robotic car. People submitted their
designs for a race where the vehicles were to navigate a lengthy trek through
the Mojave Desert. In 2006, after three years without a winner, a team from
Stanford University came up with a car that made it through the course and
walked away with the $2 million prize. For the 2007 event, DARPA has
upped the ante, planning a more difficult urban terrain for the cars to traverse,
and more cash awards.
Technology Hunting—This approach consists of looking for specific tech-
nology solutions from target companies, typically technology start ups. British
Telecom’s BT Group Technology and Innovation Unit works with venture cap-
italists who point them in the direction of technology start ups with the
potential to help meet the company’s specific business needs. The unit typ-
ically develops a list of some one thousand technology start ups. By identifying
which of these companies has technological assets that may be of benefit, the
unit is then able to reduce the number to 50. Ultimately, that list is whittled
down to five companies that BT will enter into a formal arrangement with by
the end of a given year.
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PRTM Insight | Second Quarter 2007
Boeing, which has made a concerted effort to look for technologies out-
side its walls, procures a large number of new technologies from suppliers.
In the case of the C-17 airplane, which was being upgraded from its original
design of the early 1980s, these solutions reduced the cost of the development
by $20 million per plane—and
Boeing procures a large number improved sales considerably (David
of new technologies from O. Swain, “Achieving R&D Leader-
suppliers ship,” Research & Technology Magazine,
January–February 2007).
Technology Mining—As the term suggests, technology mining consists of
tapping the large numbers of documents in the public domain—patents,
articles, journals, technological reports, and trend studies—for potential
technology solutions. This can be as simple as setting up a keyword search
through a free service such as “Google Alert.” Companies like Deutsche
Telekom also use more complex methods, including algorithms that do auto-
mated searches through all kinds of electronic sources. Some websites like
KnowledgeStorm.com offer an advanced searching capability that is devoted
exclusively to business technology research content and solutions.
Incorporating the New Technologies
Scouting efforts won’t be effective unless you ensure the external technolo-
gies are integrated well into your R&D pipeline. First, each candidate needs
to be sorted with smart filters, so you can focus on the ones that are the
most promising. But that’s only part of the story. If you’re going to get tech-
nologies from the outside, you need to see how they’re going to fit in with the
rest of the company. It’s important to make sure the potential technology
meshes with your ability to internally develop, manufacture, and market it. If,
for example, the solution requires a manufacturing process you don’t have,
you may need to eliminate that technology early on.
When it comes to integration, the method you use depends on factors like
the nature of your technology need, your available resources, and the type of
organization that’s providing the technology. A promising new technology from
a research organization means the technology is probably not mature enough
to be quickly integrated and transferred into development, while a more
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TREASURE HUNT
advanced technology is. Regardless of the type of technology being integrat-
ed, you need a substantial integration team consisting of members from
both your organization and the organization that developed the technology.
You also need jointly developed performance integration criteria and a signif-
icant internal development effort. The integration team should disband only
after all integration criteria are met.
How do you know if your technology scouting program is a success?
It’s important to use a set of performance metrics to measure results.
Technology utilization, for example, measures the number of newly developed
products that successfully leverage new technologies. This metric could be
applied to both internally and externally developed technologies as a way of
measuring scouting effectiveness.
Realizing the Benefits
No matter how extensive your scouting efforts are, they won’t pay off in
the long term unless you set up a dedicated technology scouting organization.
The group should be cross-functional, with people who understand the key
issues. It should be independent of your R&D organization, since R&D tends
to favor the technologies being developed internally. At the same time, how-
ever, the team needs to be integrated with the rest of the company so that it
doesn’t become isolated. Boeing set up Phantom Works, an advanced R&D
organization, to test out new ideas from across the company. At the same time,
Phantom Works provides new technologies acquired from the outside to the
different business units—commercial aircraft, defense, etc.—and helps them
share lessons learned.
Equally important, your technology scouting organization must have
support from the C-suite—not only the CEO, but also an executive with
broad technical expertise—to give the group the authority and resources it
needs. With the backing of the chief technology officer, Kimberly-Clark set up
an Enterprise Growth Incubator, a separate technology organization with
considerable resources to support external technology scouting.
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PRTM Insight | Second Quarter 2007

A dedicated organization with strong executive sponsorship will signal the

importance of technology scouting—and will force the rest of the company to
take notice and evolve toward accepting technology from the outside. With a
technology scouting team formally established, the rest of the organization will
welcome it as a way to help them do their jobs better, not as a threat that will
replace them.

or companies where innovation is a source of competitive advantage, the

F identification and incorporation of new technologies is now a core capa-
bility. As the information explosion continues, technology scouting offers a
way to acquire new technologies at a fraction of the cost and time it takes to
develop them internally. That’s an offer no innovation-driven company can
afford to pass up.

for more information, please contact:

Chandresh Harjivan, PRTM Principal, charjivan@prtm.com, + 1 202.756.1700

Mark Deck, PRTM Director, mdeck@prtm.com, +1 781.434.1200

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