You Must Clear Hurdles To Reach The Finish Line
Many technology providers mistakenly and somewhat naively believe that they are poised to hit the jackpot when their technology passes initial screening and they enter into a development agreement with the customer. Why do they make this assumption? They have beaten the odds and have succeeded in advancing their technology to a new phase of the business relationship. While it is true that this progress is heartening, they shouldn't assume this achievement will necessarily trigger a big payday for them. It is simply another step in an overall development process.
It is important that technology providers view the customer relationship from their customer's perspective as well as their own. While it is understandable that a technology provider will want to be rewarded for their investment in their technology, they should remember that companies typically invest money and resources in product development in stages. (I'm not referring to basic research investments which can consume significant sums over extended time periods). Resource commitments grow with a company's increasing confidence in a new technology. This means that the company will continue to seek to limit its investments and its risk exposure while it continues to vet the proposition. A technology provider should expect its compensation to be staged, consistent with this philosophy.
The challenge for both parties is to seek to manage the relationship collaboratively as the technology continues to "prove itself out". As a technology's potential value to the customer increases, the more interest they will have in (exclusively) controlling it. Similarly, the provider will want to leverage this growing interest by securing promises of increasing rewards with diminishing risk if the technology continues to progress along the development path. This tension captures the essence of the deal negotiation process. As with most negotiations, the desire should be to balance the needs of the respective parties, but each is responsible for protecting its own interests. The savvy, resolve and discipline of the principals will dictate the details and business terms.