The 4 Big Changes to Open Innovation During the Last 4 Years It's easier than ever before to get your ideas licensed by bigger companies.
By Stephen Key Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Like everyone else, I discovered that figuring how out to support myself while doing something I truly enjoyed was going to be difficult. I knew at a young age that I needed to find something that motivated me -- something that would challenge me for an entire career.
Life seemed too short to do anything that didn't give me satisfaction. I feel like I got lucky: At my first "real" job, when I was 27, I had the good fortune of being introduced to the concept of product licensing. Companies would rent my ideas, I discovered, if they were good enough.
I started to create simple ideas. I wasn't extremely creative, but when I looked at products on the market, I thought I could do better. I had learned the importance of creating products that sold at arts and craft fairs. I knew to let people tell me what they wanted. Better still, to let the market tell me.
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So I focused on figuring out how to test my ideas quickly. Was there a market for an idea? I wanted to know without spending a lot of time or money. When I had a good idea, I would present it to a company that was well suited to take it to market for me. In my mind, it was as close to an ideal partnership as I could imagine.
Companies had marketing, manufacturing, distribution, and also, relationships. I would let them do all the heavy lifting. I could keep coming up with ideas!
When I shared my system for licensing ideas with other inventors, they were successful. After teaching other inventors how to license their ideas for more than a decade, I was asked to write a book about my process. So I did.
I'm happy to report that since One Simple Idea: Turn Your Dreams Into a Licensing Goldmine While Letting Others Do the Work was published in 2011, so much about the open innovation game has changed. More and more companies are opening their doors. There are new ways of reaching out to companies to tell them about an idea. Communication technologies have made it easier than ever to get the help you need on a project. Patent law has evolved.
So, what's changed that you must know about?
1. You don't have to call potential licensees to get in.
As open innovation becomes more popular, companies are increasingly asking inventors to submit their product ideas to them online. This is great news! What you sound like and where you're calling from don't matter.
You can't simply click "submit" and assume you've done enough though. If you want to be successful at this, you have to establish contact with an employee who is going to champion your product idea to the rest of the company, or at the least, give you the feedback you need to either improve your idea and resubmit it or move on. What you don't want to do is submit your idea into a black hole. So when you fill out a form you find online, type a variation of the following statement in the comments section:
"Hi, I'm [your name]. I'm a product developer at [name of your company]. I'm wondering, is someone actually reading these forms? I want to be sure. Could the person who is receiving these submissions please email me to confirm? My email address is [your email address]."
Make sure to read the fine print closely whenever you submit an idea. What are you agreeing to? Unfortunately, some companies include language that is harmful to your interests on their forms.
Related: The 4 Qualities That Inventors or Entrepreneurs Should Look for in a Partner
2. Filming a short "infomercial" is hands down the best way of advertising your product idea.
In the past, I submitted my ideas using only a sell sheet. Sell sheets are still necessary, but you can and should go a step further. (This is true for most products, but not all.) Video is king!
Creating a short video that showcases the benefit of your product idea is easier to do than you may think. Use your iPhone. Model it after the videos seen on direct-response television. By that I mean spend just 10 to 15 seconds on the problem your product idea solves. Then, show how your idea solves it.
3. If you're struggling to prove demand for your product idea really does exist, consider crowdfunding.
Potential licensees are risk-averse. They want to be as sure as possible consumers want a product before investing in it. Successful crowdfunding campaigns beautifully demonstrate proof of demand. Unlike most other ways of testing the market, the proof is indisputable!
My students are increasingly running crowdfunding campaigns to attract the attention of a licensee. They're also securing more lucrative deals as a result. However, you can't simply throw your idea up on a site such as Kickstarter and expect great things to happen. You need to be willing to devote a lot of resources to making your campaign a success, including drumming up support and awareness months in advance.
4. There's a way to negotiate so that everyone wins.
Most people think they need a patent to license an idea. They're wrong. What is important is establishing perceived ownership. I learned firsthand that patents aren't inherently worth anything. The only way ownership is ever definitively determined is in a court of law. After successfully defending my "ownership" of an idea in federal court, I know I never want to go to court again.
So how can you license an idea without intellectual property? Here's what I tell my students to do when they're in negotiations with a potential licensee. Ask the company that is interested in your idea to pay you a 3 percent royalty rate while your application is pending. Tell them in the event that a patent is granted, they should agree to pay you a 5 percent royalty. If the patent never issues, the company will only have to pay you a 1 percent royalty rate for your efforts. See? Everyone wins.
The updated and revised version of One Simple Idea is out now.
