Early stage entrepreneurs who intend to commercialize their idea/product/service (that’s the whole idea, right?) need to have a clear understanding of the Phases of Commercialization, a realistic view of where their company is on the path through those phases, and a well thought out plan of how to get to the next phase.
A company that is in Incubating Phase for example, cannot typically skip the Demonstrating Phase and go right to Market Entry or Commercialization. An entrepreneur’s overly optimistic view of where their company is on this continuum leads to: 1) Under estimating the time and money required to commercialize their product and ultimately become profitable; and 2) Difficulty in raising external funding (if desired) as potential investors are likely to see the status of the company more clearly than the entrepreneur.
Below is a summary of the Phases of Commercialization (Copyright 2004 BizLogx LLC) which I hope will be useful. They are used by the Ohio Department of Development in describing early stage companies, and increasingly used as a common language in the Venture Capital and Angel investment community. I also plan to post and expanded version of this information to the Cobalt Group website.
Phases of Commercialization
Imagining: The Imagining Phase begins with the techno-market insight – the linking, if only in concept, of a technology and a market opportunity. Activities focus on the generation of a “proof of principle”, generally defined as the demonstration in a laboratory setting of critical components of the technology.
Incubating: The Incubating Phase focuses on the performance of the technology in context of product performance specifications. Activities revolve around defining required performance specifications and then determining whether the technology can meet those specifications. For the most part, the activities prove the technical capabilities in a laboratory rather than a commercial setting.
Demonstrating: The Demonstrating Phase focuses on the performance of the technology in a commercial context – generally, in the hands of a current or prospective customer. In the Demonstrating Phase, the source of proof begins to switch from internal to external – from the lab to the market. Resource providers generally require the following types of proof: (i) the incorporation of the technology into a market-ready product with the performance characteristics required by prospective customers; (ii) evidence that the product meets the required performance specifications in the hands of customers; and (iii) evidence of manufacturing capabilities that meet performance, quality, and cost requirements (those assumed in the Commercial Concept or Business Plan).
Market Entry: In the Market Entry Phase, the activities are those typically associated with the introduction of a new product to market by an existing business – production, quality, service and product performance. The company has embedded the technology in a product or service and is aggressively marketing the product or service to prospective customers. The product or service is used by an increasing number of existing customers. The opportunity has attracted the resources necessary to expand marketing, sales, and support.
Growth and Sustainability: The Growth & Sustainability Phase involves the execution of a comprehensive product development plan to increase market share and/or extend the existing or new technologies into new products, services and markets. In the Growth & Sustainability Phase, the objective is to achieve the ongoing growth of revenue, margins, and profits in ways typically associated with a viable and profitable business
