Dr. Abdul Kalam speaks, writes and works having a live vision at the back of his mind “Be India a Developed Nation“. The action plan to realise this blue print of mind into reality must have on the top of its itinerary ‘the technology’. Grooming ‘technology’ from seed upto a fruit bearing tree is an art, science and a specialised enterprise in itself.
Like in other businesses, finance is an important element here too. However, the key to success lies in assessing where, when and how to facilitate entry for money in the process of technological project realization. The author has a wide exposure to the whole tree of ‘technological growth process’ in various capacities – a grass root scientist, technocrat, industrial consultant and writer. It is with this backdrop that he enumerates the basic ingredients involved in making a technology idea grow into a full business, by ensuring the entry of financial sources at pre-assessed stages.
A vision is a picture of what is possible or what is desired in a longer-term future. It could be of one individual in origin or it could be a collective in its conception. The Technology Vision 2020 was a massive national exercise implemented by Technology Information, Forecasting and Assessment Council (TIFAC) during the years 1994 and 1995 and was released to the nation through a form of 25 documents on 2nd August, 1996 by the then Prime Minister. It resulted due to the tireless efforts of 500 persons with inputs from about 5000 persons from different fields of India.
A brief presentation of the findings of vision exercise along with several other linked factors such as the concept of developed India, economic issues, social issues and also certain implementational issues, have been brought out in a book “India 2020″ by Dr. APJ Abdul Kalam along with the author.
Further elaboration starting with the vision and also dealing with several aspects of important interconnected policies and procedures as well as the processes of science and technology and human dimensions, have been brought out by the author in a book ‘Empowering Indians’ (revised reprint 2002 with a foreward by Dr. APJ Abdul Kalam).
These two books contain substantive information about the details of the vision and also the various possibilities of implementation. The book referred to in Ref.2 has also described some of the projects in which TIFAC is involved in attempting to realise the vision into action as a major demonstrative exercise.
Much more can be seen in the TIFAC website: http://www.tifac.org.in , which is continually updated. Several other parameters such as technology capabilities, organisational capabilities, project management market research, etc. are also important in realising the vision. Therefore this paper briefly addresses the role of technology financing.
Technology idea to business: The essential steps
Often many persons including scientists and technologists tend to believe that a scientific or technological idea if pursued with sufficient funding and support, would automatically result in a commercial operation. Many also tend to think that basic research to technology to commerce is a straight forward linear process given enough time and money.
In actual life, science and technology are distinct elements though interwined. Technology and technological skills and knowledge are not automatic input-output derivatives of basic scientific research. These are discussed in some detail in Ref.2 citing a number of quotes and references from scholars. In actual practice, technology is complex and tacit (i.e. embodied in persons and organisations).
There are many different strands of technology in a single product or service. Therefore, having an excellence in one technological element alone does not assure a commercial product, let alone a commercial success. Based on the experiences of TIFAC and also of Technology Development Board (TDB), Prof. VS Ramamurthy, Secretary, Department of Science and Technology, Government of India often emphasises in a number of meetings and speeches that while financing is an important component, technology development does not take place merely by stepping up finance.
There are many other prior activities which need to be done if technology development can mature into a good business activity. It is precisely in this area where TIFAC has done considerable amount of work during the past 14 years. In the subsequent paragraphs the author will try to compress a few important issues relating to converting of technological ideas into business operations.
In actual life, science and technology are distinct elements though intertwined. Technology and technological skills and knowledge are not automatic input-output derivatives of basic scientific research
Let us refer to Fig.1. The x-axis of the Figure is time. The quantity of time will depend upon the product or service under consideration. For a completely new area time at the right hand end i.e., the time for “produce and supply to market”, could even be 7 years. In a number of cases in industry it would be of the order of ½ – 3 years for incremental innovations.
In fact, a good business strategy should be to have a number of technologically induced innovative products with different cycle times for realisation, so that in the overall, the technology development (which requires financing) will be continuously giving financial outputs through delivery to market, thus not becoming a drain on the overall to the company. This may be called “technology development diversification strategy”.
If a company does not have even a plan of having a few innovations in the existing product line or otherwise every 2 to 3 years, it is very unlikely the company can be successful in a present day competitive business world. It is necessary for a company or an entrepreneuer to look ahead in time as to what would be the status a few years from now. This looking ahead will help in initiating actions right now. This is where the role of technology financing starts.
Having identified a few product or service segments for the coming few years, the question (before the company or entrepreneur) comes as to what we will do now. How do we reaslise the desired change in the existing product line or process or even in terms of introducing new products/services. Often this process of looking ahead and deciding action for today, is an iterative process.
A technological idea or a business idea could give some idea as to what a future product can be. Then cycling back whether one should have different options, one would modify the product idea or service idea and finally arrive at a few target end results from a time equal to plus x years (i.e. in the near term future).
Having done this the technology development or business development starts. That is where the problem also starts. Invariably for such items which are innovative at the given point of time (in the present) there will be a relatively high degree of business and market uncertainty as well as product and technical uncertainties and perceived technology risks.
If these are very low at given point of time (in the present) there will be a relatively high degree of business and market uncertainty as well as product and technical uncertainties and perceived technology risks. If these are very low at given point of time (now) that means the product and services are already well established in market and therefore there is no great innovation involved. Actions relating to such products will be mainly issues like cutting costs or by trying some other business strategies. In such cases normally the competitor will also be doing the same and one cannot sustain long with such non-innovative actions.
Therefore, those who want to have a good business for the future where his or her company will have a specific commanding role or a powerful role or atleast a role in which the company fortunes are not fluctuating too fast then the company has to learn to take up just now in the present new activities where there are some higher business and market uncertainties and which are likely to become desired products or services a few years from now.
Often in India since business groups and technology development groups even within the same company tend to work differently in separate compartments each one worries only of his own part. If the technology is from an external institution to the company or the entrepreneur, then such “separatist” perceptions are often worse.
Normally technology generators do not think of all the options available for a business company or an entrepreneur and try to push their own specialisations; this is but natural. Similarly the business person or entrepreneur looks at only the investment aspects, markets and returns. But as explained above, for a futuristic product even with small changes at a future time of two to three years from now, it is necessary to study the technological aspects and the business aspects connected with these changes right now and take action. This zone is close to the origin of the Fig.1.
In the figure, technology, product and service uncertaintly is in the upper part of the y axis and business and market part of the uncertainty is to be in the lower part of the y axis. The correct management strategy should be to look at both parts of the curves (i.e. upper and lower) together.
If technology funding is done for a future product, without considering the lower half of the figure, even though in the time axis over a few years the technical uncertainties will come down, business uncertainty may not have come down because market and other issues have not been factored in the technology development. And, vice versa, if only a business strategy is done with marketing and other aspects without considering technological aspects on the assumption that the technology generator can be approached a few years from now after the market development and business development steps are ready, then we may be surprised to know that technological availability is poor or uncertainties are high. Then again, the lost time cannot be easily regained. Therefore, the correct management strategy is to grapple with technological uncertainties and technological risks as well as business and market uncertainties at the same time well in advance of the time in which we anticipate results to flow.
In other words, in the figure the left side of the funnel has to be dealt with pushing all the stake holders together inside the broad end of the funnel, so to say, figuratively thus making them a collective group to weigh technology options, to look at business aspects, etc. These functions are done by TIFAC in generating a number of well-researched reports in technology areas, as technology linked business opportunities.
Some of the reports are at a relatively macro/meso level as in the case of the Technology Vision 2020 reports and most of TIFAC reports are at meso / micro level (i.e. close to action levels) as in the Techno-Market Survey reports of the TIFAC. When issues are discussed to generate such reports, even the very process of the generation of the report creates a cohesion for further forward movement into the funnel without imbalance between the technology and business aspects. These reports are available in the public domain from TIFAC and industries can use them effectively for themselves to enter into funnel and later pursue specific projects. Many of them are already doing it. It is important for entrepreneurs and business managers to do such knowledge based preparations before they go for financing of technologies.
The technology financing is not a mere exercise in calculating the returns of investment or giving money as per procedures and formats but is more complex
Again while embarking on specific projects, one has to start looking at various technical elements including intellectual property rights (IPR) and other aspects even while formulating the projects. This process will help to a great deal in reducing uncertainties and help making a forward effective movement into the funnel of uncertainty. Then, when the decision is taken to launch a project (by the entrepreneur or a company), further details can be worked out.
Often TIFAC not only helps in entering the early part of the funnel before the launch of the project through its reports but also helps the potential entrepreneur who applies for the Home Grown Technologies (HGT) Program of TIFAC or Missions such as Sugar Technology Mission, Advanced Composites Mission, etc. or a number of vision 2020 projects which range from agriculture, agro processing, health sector, textile machinery, road transport sector and several other thrust areas like energy, etc. (see for details in Ref.3). Even while these projects are formulated by the entrepreneur or company and sent to TIFAC, through further assessment, evaluation and the interactive process. TIFAC helps in narrowing many uncertainties by scoping the project.
In fact, agencies which have funds will be able to do this well because often the potential customer would not like to spend a lot of intellectual and other managerial efforts in scoping when there is severe uncertainty about funding. That is why, the author believes the real role of a technology funder starts at a time before the line shown in the fig.1 as “launch of the project”.
But actual funding takes place after several of these evaluations and interactions. During this process the company or entrepreneur writes down the business plan and also goes through draft agreement for part funding which spells out roles of various stakeholders.
NRDC is one major facilitator in technology financing; while it can enter in any part of funnel of Fig.1, often it is better done in the middle of funnel when uncertainities are not too high
After the agreement is signed and the part fund flow begins, the role of the funder specially in the case of TIFAC changes into a different mode. Even though all the while TIFAC is a partner with the entrepreneurs and the technology generators coming up for a specific project, however, when TIFAC has funded, it assumes a special role of working closely and brings in the best experts as Project Monitoring Teams without conflict of interest with the entrepreneur and/or the company. Based on the TIFAC experience, many of the persons who have received technology finance from TIFAC have said that the role of the project monitoring group is that of counselling rather than monitoring.
It should be pointed here that there is no omnibus monitoring committee for TIFAC funded projects. Each project has a special monitoring group depending upon the expertise required and often bringing people with industrial experience and also those who can deal with end users and market segments. When these partners go further and further down the funnel from the left hand broad side of the funnel towards the narrower part in the right side, the uncertainties come down. In this process or pilot plant operations based on technological/business idea takes place, so that a stage is set for a much larger commercial operation. At this stage the companies can access Technology Development Board (TDB) or in some cases even the banks when risks have come down considerably.
Thus a crucial role of agencies like TIFAC in technology financing is to give options of ideas at an early stage through its reports and other interactions) and allow the potential companies and technology tenerators to enter the left side (broad side) of funnel in a synchronised manner and then be able to launch specific projects and work along till the uncertainties are brought down to minimum. So the technology financing is not a mere exercise in calculating the returns of investment or giving money as per procedures and formats but is more complex.
Technology financing sources: where and when they enter
This section describes information about various sources of financing available to an Indian company or entrepreneur and also the elements of criteria used by them.
We have described about TIFAC. It normally funds part on a soft loan basis. The projects can be a few tens of lakhs to several crores of rupees.
NRDC is one major facilitator in technology financing. While it can enter in any part of the funnel of Fig.1, often it is better done in the middle of funnel when uncertainties are not too high. NRDC can help the entrepreneur to gain some competitive time to launch commercial projects in addition to finding financing sources. NRDC would, of course, be looking at its own income as well. Projects can be a few tens of lakhs to several crores of rupees. NRDC helps in exports as well. It also helps in IPR aspects.
When uncertainties come down, and there is a greater promise of large commercial operations, go to TDB. It is better to have projects in the range of a few tens of crores of rupees. Again it is soft loan, part funding.
PATSER of DSIR is another source. Again it is better to target PATSER when you are in the middle level of the funnel. It is a part grant with royalty clauses.
There is another interesting scheme called TePP (Technopreneur Promotion Programme) jointly operated by PATSER and HGT of TIFAC. It is a small funding from several thousands to a few lakhs of rupees. Helps small individual innovators, mostly in the broad side of the funnel. Once their ideas show promise, they can try to go for PATSER or HGT.
SIDBI is another source but often in the right side (narrow side) of the funnel. It is a loan.
The author would advise entrepreneurs and companies to go for loan (soft or otherwise) rather than simple grants as it will train them to be sustainable, a feature very much needed in the competitive world.
There are also a few private sector venture capitalists and banks which are ready to fund projects. Often they are at the stage of right side of the funnel. They may be in IT and BT (Biotech) areas only. In future they may enter other areas. Other Government departments are trying to emulate TIFAC, PATSER, etc. One should look out for these.
Since this is a changing scene, be in touch with websites like that of TIFAC which give information about financing sources and technology sources.
Author : Dr. Y. S. Rajan
Readers are also welcome to contact the author in e-mail: firstname.lastname@example.org & email@example.com who would use the TIFAC network to assist you.
On the whole technology financing in India is fast entering a phase where industry and entrepreneurs are respected. About 85% projects funded by TIFAC, TDB and PATSER are for industry – big, small and medium. Take advantage of them, enter into development well ahead of time. Be not afraid of the broad end of uncertainties as “the early bird catches the worms”.
The author thanks Dr. V Siddhartha, Chairman, TIFAC-HGT Apex Board for giving material from International Society of Air Breathing Engines from which the author has adapted and further developed Fig.1
1. Dr. APJ Abdul Kalam with Y.S. Rajan: “India 2020 : A Vision for the new Millennium”, Viking-Penguin, New Delhi (1998), (reviewed in Invention Intelligence, May-June 1999).
2. Y.S. Rajan, “Empowering Indians : with economic, business and technology strengths for the twenty-first century”, Har Anand Publications, New Delhi – Revised reprint with foreword by Dr. APJ Abdul Kalam, April/2002 (A review of the book appeared in Invention Intelligence, March-April, 2002).
3. Technology Information, Forecasting and Assessment Council (TIFAC) websites : www.tifac.org.in , www.indianpatents.org.in , www.missionreach.org.in