Collaboration: when David meets Goliath

Posted on 17 Mar 2017 by The Manufacturer

When big meets small, slow meets fast and old meets young there are bound to be culture clashes. Nevertheless, ‘David and Goliath’ collaborations can and do bring many benefits to both parties. Dr Frank Tietze from the University of Cambridge’s Institute for Manufacturing explores strategies that enable established companies and start-ups avoid the pitfalls and reap the rewards of cooperation.

Many small start-ups need collaboration with large companies if they want to develop and commercialise their new technology. Likewise, large firms need innovation to help them continue to grow in highly competitive markets.

Dr Frank Tietze at the recent Strategic IP Forum in Cambridge - image courtesy of the University of Cambridge’s Institute for Manufacturing.
Dr Frank Tietze at the recent Strategic IP Forum in Cambridge – image courtesy of the University of Cambridge’s Institute for Manufacturing.

However, open innovation can only succeed between ‘David and Goliath’ companies if relationships are based on trust and mutual benefit. So how do you collaborate and protect your own intellectual property (IP) while still capturing value for both when the partnership is between a small firm and a multinational?

The innovation and intellectual property management research group at the Centre for Technology Management, Institute for Manufacturing (IfM), is working with both small and large manufacturing companies to help navigate this partnership.

Collaboration between start-ups and large established companies can and should be mutually beneficial. While both small and large companies recognise the opportunities, there are a lot of hurdles along the way.

Both fear losing their own IP and so they need to work out how to simultaneously share and protect their knowledge while still capturing value. This is often called the open innovation paradox, and requires the partners to distinguish between background IP, which the companies bring to the partnership and understandably want to protect, and foreground IP, which is developed together.

Another hurdle is a lack of systems and processes for connecting companies and guiding the development of shared IP. A lot of large companies say that they want to do collaboration, but they don’t always make it easy. One of the biggest challenges for small companies is finding the right person to talk to at a large company.

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Two such firms that have navigated their way over the hurdles to collaborate successfully with others in ‘David and Goliath’ alliances are Caterpillar and Cambridge Display Technology (CDT). They shared some of the lessons learned from their collaboration at a recent Strategic IP Forum, a half-day open event we run twice a year in Cambridge.

Goliath’s perspective

A leading manufacturer of construction and mining equipment and diesel and natural gas engines, Caterpillar recognises that collaborating with start-ups and small technology companies enables development or deployment of new technologies to be more nimble and efficient at the same time as leveraging its own R&D funding with external funding where possible.

The company has successfully collaborated with a variety of small companies in areas from data analytics to combustion development and drone development.

Caterpillar’s intellectual property and technology licensing manager, Jo Costura, says the company’s technology licensing group helps small firms with big ideas to develop collaboration agreements on a win-win basis.

“A major challenge for creating a lasting collaboration between small and large companies is negotiating the IP principles up front. This is an integral part of reaching a commercial agreement and must be a deal you are both comfortable with and where you both get enough value,” Costura said. “Small companies also often don’t trust that large companies truly want to work with them on a win-win basis, it takes time and good listening to build trust.

Collaboration IP PQ - March 2017“The foundation for a successful collaboration is an aligned mission – it must deliver more than just financial returns for both companies – this is the best type of collaboration for Caterpillar, our partners and our customers.”

David’s view

However, many large companies don’t have a transparent collaboration system in place to specifically work with small firms.

John Nevard is director of Intellectual Property at Cambridge Display Technology (CDT), which began as a university spin-off in 1992 on the back of a discovery by three University of Cambridge academics that light-emitting diodes (LEDs) could be made with polymers. This discovery would lead to multiple digital display applications, such as in televisions and mobile phones.

As a start-up, CDT quickly realised that it would need to collaborate with multiple Goliath companies in order to progress its invention. Licensing was chosen as a strategy to extract value from CDT’s own IP and to engage with the Goliaths to encourage them in the development of the new technology.

CDT has been so successful in managing its own IP that it now it collaborates with a Goliath on how to better manage its IP portfolio – Japan’s Sumitomo Chemical group, which now owns CDT. So how did a small technology company become so good at managing its IP?

Nevard says that despite the hundreds of potential applications for the polymer LEDs, a lack of resources forced the fledgling company to be more selective in developing its IP portfolio.

Innovation Start Ups Leadership - Stock Image
Open innovation can only succeed between companies if relationships are based on trust and mutual benefit.

“Back in the 1990s, CDT had a great invention, but no resources to either manufacture the polymer LEDs or manufacture the specialist chemicals that go into making the devices,” he said.

“We had to collaborate with multiple large chemical and device manufacturers through licensing of our technology in order to progress our business. This meant that one of our first actions was to develop an IP strategy to build a patent portfolio.

“Patents are expensive and we were a small company with limited resources, so we could not file a patent on every possible version of our technology. Today, we are still a small company with limited resources, but CDT’s move into a more diverse range of technologies and businesses means that we are building up IP portfolios that support these new opportunities, and at the same time keeping within our tight budget without compromising quality.

“This culture of a strict evaluation process and constantly reviewing our IP portfolio has continued. We analyse an individual patent’s technology relevance and potential market size to calculate its competitive impact. If the business case for keeping a patent does not exist then that may lead to the patent being dropped or monetised in some way.”

“The patents that we retain increase the value of the company. This avoids the ‘zombie project’ problem that many large companies experience when innovations that have failed to fulfil their promise keeping sucking up resources because no-one wants to kill them off.”

To address such issues, we are building up a research group that works with manufacturing firms to better manage IP. In addition to the Strategic IP Forum, we also run an interest group for manufacturing companies where participants meet regularly to discuss IP-related issues from a business perspective, such as technology acquisitions or how patent data can be used to identify development partners.