Technologies that have a heavy hardware and engineering footprint require a different commercialisation approach as the value chain is quite long and capital intensive. Understanding where one sits on the value chain can be very helpful in trying to commercialise the technologies particularly in emerging markets.
The following illustration highlights the value chain in bringing technology to market and the relevant actors along the value chain.
Illustration: Value Chain of Hardware based engineering technologies
There are 9 principal actors in the overall value chain and each having a unique role to play:
Intellectual Property Owner Is the owner of the core technology and may have the patents filed in its/their name. In cases where the IP owner is the individual and they do not have the wherewithal to commercialise the technology then they will grant commercialisation rights to another agency. Where IP owner is an entity then it may or may not need separate commercialisation agency. This scenario is applicable when the agency is the owner of a portfolio of patents and wants to separate the commercialisation of each IP.
Technology Licensor Is the master licensing agency of the technology to different markets and market-segments. The agency will have the technology commercialisation rights from the IP owner. Its core role is to ensure that the technology is introduced to market and will need to establish the entire value chain as illustrated above.
Systems Integrator Plays the most critical role in the entire value chain. Its role is to integrate the technology with additional components (balance-of-system/plant) and ensure that the technology delivers on all of the promised delivery parameters. The systems integrator must also provide a performance guarantee on the whole system to the EPC contractor, the next stakeholder in the value chain.
Original Equipment Manufacturer (OEM) The OEMs will work with the systems integrator to deliver component design, prototypes and trial units made to specification. Should the IP owner want to closely guard the knowledge around the core component, then it must commission an OEM separate to the Systems Integrator and supply it with the core component. The OEMs will provide standard warranties and guarantees to the systems integrator.
EPC Contractor The contractor responsible for implementing the technology at a site by doing the EPC - Engineering design, Procurement of parts and Construction will procure the technology from the systems integrator. The EPC will be responsible for applying for licenses, permits/permissions, environmental clearances, civil construction, supply, installation, testing and commissioning of the technology. It will have to provide the overall project guarantee to the client.
O&M Operator The O&M - Operations and Maintenance of the project can be done by multiple parties. The client can do the O&M in which case it will require a systems performance guarantee and warranties from the EPC contractor. The EPC can also do the O&M as it would have full knowledge of the technology, in which case it will have to provide a comprehensive guarantee to the client.
Project Developer Where the investment into the project is made by a “project developer”, additional dynamics come into play. The developer would need to develop a deep understanding of the technology and its operating conditions before investing into it. The project developer is putting a lot at stake including capital and reputation and will therefore need to be extremely comfortable with the risks it is assuming. The level of performance guarantees available will play a role in the decision making of the project developer.
Lenders and Investors The lenders and investors who are investing into the will want specific criteria to be assessed in the due-diligence exercise done by the project developer on the technology. In case those criteria aren’t sufficiently diligenced, then lenders and investors may commission third-party independent assessments. In particular they would want to understand how financial risks could get compounded, in case there of technology failures or inadequacies that may affect the cash flows of the project.
Client The client that is sponsoring the project or procuring the output of the project will equally want to know the efficacy of the technology. Although the clients do require the project developers, EPC contractors and O&M operators to provide with performance guarantees, just like lenders and investors, the client would also want to understand financial, operational and reputational risks that could surface as a result of technology non-performance.
Important points to note:
Just owning the technology patent doesn’t mean that technology will propagate across to the end client. The entire value chain has to be established.
Each actor on the value chain has to provide performance and financial assurance to the next one in the chain. This requires the actor to make sufficient financial provisions on the balance sheet as well ensuring adequate insurance cover is in place.
Value chain actors can play more than one role provided they assume the risks of each node. Just because they are playing multiple roles, doesn’t mean that the risk will reduce.
Technology Readiness Level (TRL) and Commercialisation Readiness Level (CRL) scores can help all actors in the value quantify the technology maturity, risks and readiness.
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