How Much is an Idea Worth?
A new study from Oxford University that was recently published states that a new method to determine the value of new technologies in the information and communications sector. This is an important gap that has been closed in existing techniques, and could also create a decision-making tool for investors.
Until now, a variety of methods have been used to assess how much new technologies are worth. These are models that use both quantitative and qualitative approaches. They may be very simple or highly complex. And their limitations are many: some are theoretical and have no practical, as they are based on past investment history and do not acknowledge the value of creativity, or they rely merely on subjective analyses. So their predictive power is not satisfactory.
This new method uses big data analysis and was developed by Professor Xiaolan Fu and Dr Shaomeng Li of Oxford’s Technology and Management Centre for Development (TMCD), and they worked with Chao Ai, Head of Early Stage Investment, R&D, at Chinese information and communication technology (ICT) company Huawei Technologies Co. Ltd. They created a database that matched all UK start-ups in the ICT field: they populated it with patents that were less than five years old between 2006 and 2015, along with records of patents in the relevant tech fields by all the world’s major patent grant offices during that same time window. There were over 1500 patents matched to 143 UK firms in the ICT field.
The researchers created a model that could determine variability in the of value of those technologies by looking at the characteristics of each patent and the companies themselves, as well as the market in which the technology was applied. The model so far has explained around 85% of the variation in the value of technologies owned by start-ups in the database.
Therefore, by entering parameters about these same characteristics for technologies that are about to be released, the model can be used to predict what their value will be.
A remarkable example used to test the model was Deepmind, the company that created AlphaGo and which was later bought out by Google. Their estimate of the value of Deepmind was between around $590 million and $660 million; and indeed, Google paid $650 million to acquire Deepmind in January 2014.
Professor Fu said that ‘The model has already proven itself to have a highly accurate predictive power, especially for technologies at an early stage of commercialization, it also uses completely objective data, which is a significant improvement on existing methods. ‘We are now looking forward to bringing our findings to the ICT community to explore the new model’s applications.’
In late June 2017 the research was named Best Paper by the Innovation Strategic Interest Group at the 2017 European Academy of Management Annual Conference.
The research work is a result of the Valuation of Early Stage Technology (VEST) research project, an industry-university collaboration between TMCD, a research programme at the Oxford Department of International Development (ODID), and Huawei.
The researchers cautioned that the technique is currently only applicable to the ICT sector; however, they have already been approached to develop similar models for other industries and it will be only a matter of time until nearly every field out there has a reliable predictor of the value of a new idea.
Which brings us to the conclusion of this story. Here at Tenex Developers we are eager to help people achieve highly positive business outcomes by building solutions for their challenges and by enabling their ideas. So now that it is easier to know how valuable your ideas are, you can also give us a call or send us an e-mail; our representatives will be very glad to show you how we can contribute decisively towards your success.