The Profit Motive

Market View

John D. Sanders, Ph.D.,

"The Profit Motive"

Which concept do you more believe in: 1) Good fences make good neighbors, or 2) Good trading partners don't make war? Who was more of a visionary: Robert Frost or Armand Hammer?

Armand Hammer pushed the idea for early business deals between the United States and the newly formed Soviet Union 75 years ago. No matter what the situation might be, a common purpose of creating more wealth through business activity forms the best alliance. On the other hand, putting a fence around either real estate or a good idea may not only keep the bad guys out but also keep the good guys in.

Let's explore these concepts just a little further without getting too philosophical. Should an inventor place a high protective wall around his invention, or go rambling off to find the development partner? The answer is: neither- it's somewhere in the middle. Not talking with anyone gets you nowhere. Talking with everyone gets the idea stolen.

How does the fledgling entrepreneur- or even the seasoned technological professional- pursue the marketing, manufacturing or financial partner to move a new development through the full cycle to a profitable conclusion. Obviously, the best way is to have both a high fence and a good trading partner. Get strong patents on the developments and ideas, and work only with financially robust and market savvy organizations who can take those products and services quickly to market with good profits for all parties. Right! That's like Will Rogers' key to investing in the stock market: Only buy stocks that go up; and, if they don't go up, don't buy them.

With today's technologies developing so quickly, one can seldom wait for the patent issuance before truly testing the markets. And since most patents lie on the shelf without any economic value, it is more likely that the time lost in building the fence cost more than any conceivable profits which would have ever been obtained. The fence builder actually kept the good guys in. Thus, in most cases there should be constant exploration to find the best potential partners for taking new technologies or ideas and nurturing them in a timely fashion to pursue the common goals.

This last comment is what I believe marketing is all about- determining with whom one should be a business partner and how it should be done. Be ready when the ideas come forward. Know where to go and be experienced at structuring deals. Don't be afraid to deal with those who just want to "make a profit." In fact, don't be led down a path by those whose motives aren't quickly ascertainable. And, the profit motive is the clearest and most easily definable. Each party can relate capital input and asset valuation, determine costs and risks, and define an appropriate return based upon these considerations.

But, you've got to know the territory. For those of you in the federal or university systems, meet the business community. Interact with the operating executives of the companies. Get to know what their organizations expect in business deals, and how they relate risk and reward potentials. And above all, find out who the decision makers are and what their level of financial commitment could be.

Then when the time comes to set up the trading partnership, it's not the fear of war that is of paramount importance or even building that high protective fence. The trust factors and organizational knowledge are already in place so that the effort is expended toward making the deal happen and good business get going.

If you have comments, please contact me at Technology Transfer Business magazine: phone: 703-848-2800, ext. 151; fax: 703-848-2353; internet: jsanders@technews.com.

prepared for the December, 1995 Issue of the Federal Laboratory Consortium NewsLink