The Big Picture: The price of success

Posted on 2 Feb 2012

Acquiring new technologies to incorporate into your products is a growing and profitable trend – but the process presents many challenges.

Dr Letizia Mortara joined the IfM's Centre for Technology Management as a Research Associate in 2005
Dr Letizia Mortara joined the IfM's Centre for Technology Management as a Research Associate in 2005

Companies need to develop new technologies as products get more complex and competition imposes ever shorter lead times. Increasingly, firms are acquiring these technologies from external sources in order to gain the resources and competencies they need to maintain this high pace of innovation.

This trend presents all sorts of challenges. Companies are faced with many types of contractual options when acquiring a technology – sub contracting, licensing, an alliance or joint R&D project, a merger or even buying up a whole company. Technologies can also be purchased from a wide variety of sources, including universities and individual inventors, some of whom may have little experience of such transactions. Technology acquisitions are therefore very complex and require careful thought. A new report by the Institute for Manufacturing focuses on this theme, providing a structured guide to acquisition opportunities. The approach is divided into three parts: firstly examining context, then evaluating prospective opportunities and finally considering the different options relating to the acquisition.

The context of the acquisition is important: people who identify acquisition opportunities often ‘fall in love’ with the idea, but unless there is a clear match with company’s needs it is likely to fail. Issues to consider include the development stage of the technology and whether you have the necessary resources to perform any further development or would prefer this work to be performed externally.

Once you have decided how to acquire a technology there will still be many potential pitfalls during the acquisition process. Our research uncovered examples where companies had undertaken insufficient analysis before entering into negotiations, leading to impulsive decision making and emotions prevailing over logic.

Before getting to the negotiating table it is vital to think about all the issues that may arise around IP, contract terms and technology licensing options. The more prepared you are the better the chance of success.

‘Technology acquisitions: a guided approach to technology acquisitions and protection decisions’ by Dr Letizia Mortara and Dr Simon Ford was published in late January (