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  • Ernst Max Nielsen
    Max has worked 20+ years with TT as owner, manager, director and /or board member in both small and large companies, comprising TT consulting, high-tech startups, international groups – in USA, Russia, UK, Belgium, Hungary and his native Denmark. Max operates as a business angel investor.

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Comments

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It's great to hear from you and see what you've been up to. In your blog I feel your enthusiasm for life. thank you.

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Just wanted to thank you, not just because the nice post, but pretty much more because my grandfather is nearly recovering from his surgery and he has almost nothing to do but staying on bed all day, his best source of entertainment has been this blog and I feel this is something good for him and his recovery.

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Just wanted to thank you, not just because the nice post, but pretty much more because my grandfather is nearly recovering from his surgery and he has almost nothing to do but staying on bed all day, his best source of entertainment has been this blog and I feel this is something good for him and his recovery.

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I read the article, and I agree with you, the objetive points regarding calculating royalty rates are worth repeating. so Im going to share with my friends! thanks a lot

Max

The misleading word in this debate is "calculating". It gives the impression that this is a mathematical problem of finding something which exists. But that's not right. Firstly, we talk about the future and not something existing: a potential. And secondly, we are dealing with a business or even artistic skill in negotiating a deal rather than bean counting.
From practice (mine and others) I claim that the potential of an invention can only be negotiated albeit the strength of your negotiation position can be improved by a method I call "where's the Beef?" :-).

Consider some arguments: an invention or a new technology is rarely the basis for commercial success alone- much like a hammer is not a sufficient ingredient for getting the nail in place (if you turn it upside down it won't work).

Chan Kim's work on Blue Ocean Strategy shows that successful businesses innovate all aspects of the value chain, not just the technology side ("value innovation"). Follow links elsewhere on this site.

Research into so-called gazelle companies (eg. studies in Denmark, cp. www.borsen.dk) show that the most profitable businesses are not based on new technology platforms (new) but also/more on shrewd HR, organisational,marketing etc innovations.

I recommend dealers to use Michael Porter's "value chain" concept or Five Forces to approximate the cost and profit levels in a given industry. Firstly, the new invention must be placed in the value chain, then average cost and profit profiles in the relevant link of the chain can be found. You use this information to establish your position: if you sell technology, you'll argue that the buyer can improve his competitive position and ask a high price. If you are a buyer you'll use the same information to claim that technology is not all and that average profit rates must be the standard. Not much calculation in that!

Apart from practicing the method I offer a course on using it. Cp.: http://www.icnet.dk/Beef%20University

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