Ceramic Fuel Cells Limited: Company Analysis

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Introduction

Ceramic Fuel Cell Limited (CFCL) was formed in 1992. CFCL is an Australian company that is at the frontier as far as Solid Oxide Fuel Cell (SOFC) technology is concerned. SOFC technology utilizes natural and renewable gas to manufacture and produce fuel cells that provide energy, which is sufficient, high quality and of low emission. SOFC technology boasts improved electrical efficiency of up to 60% and reduced carbon dioxide emissions by 60 % in comparison to coal. CFC Company has developed fuel cells competently using most advanced technology, which allows the control of water as well as fuel inputs and at the same time, it allows the company to control electricity and heat, which are the outputs. Having done this, CFCL is gearing up for commercialization as it is pursuing partnerships in Europe and Asia that will enable it to popularize its products (Ceramic Fuel Cells Limited, 2010).

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Technology Commercialization

Technology Mechanisms

According to Jolly (1974) technology transfer is an intentional transfer of technology from its source to new users (p.5). The technology transfer mechanism in use at CFCL for commercializing its technology is a brainchild of CFCL’s technology transfer office (TTO). The TTO is in turn a brainchild of CFCL’s interests to develop products with high commercial, economic and environmental value for its local market as well as foreign ones (Asia and Europe). The technology transfer office is charged with two important roles or objectives. The first is identifying research that demonstrates a potential to attract commercial interests. The second role is to formulate strategies that will enable successful exploitation of the identified research. The two objectives clearly front the company’s ambition to introduce more SOFC products in the global market.

Having the TTO in place CFCL has adopted licensing royalties as its preferred technology transfer mode because its operations abroad (outside Australia) are based on a partnership approach (Ceramic Fuel Cells Limited, 2010). The licensee to the licensor, who is CFCL, pays royalties for assets that are on use. These payments are also known as running royalties or private sector taxes. These payments may also include intellectual property. The payments are calculated from the actual cost of the item in question. Other metric systems can also be used in calculating the royalty figures. Royalty interest is an entitlement to collect royalty payments. Royalty interests may also consist of a portion of a future payment from a production or leasehold revenue availed by the owner entity of the asset. A license agreement defines the terms of association relating to a given resource, these may be conditional or not. Conditions could be pegged on geographic territory or business entity. Government may regulate the license agreement if it is a primary stakeholder in the pact.

Reasons for Selection

These two approaches – establishment of a TTO and licensing royalties – have been selected for a number of reasons. Both of them enhance the company’s dominance in solid oxide fuel cell (SOFC) technology as well as establish it as a world leader in the same. CFCL’s SOFC technology is a much-needed solution to the problem of reducing carbon dioxide emissions into the environment thus it is useful that the technology is used to develop more products for commercial use. Another reason is that the two approaches are solidly founded on the principle of research and development. That is, identifying potential research areas with compelling commercial interests, developing research to successfully exploit these areas and finally presenting the actual products.

Advantages and Disadvantages of other technology transfer mechanisms

One other commercialization mechanism that CFCL can explore is knowledge transfer. An advantage of this mechanism is that it provides a practical and efficient means of transferring knowledge from one part of an organization to another. As CFCL seeks to expand, it is considering Asia and Europe as strategic new markets. This implies a need for it to transfer its expertise and knowledge to these new points. Thus, knowledge transfer is one way the company can achieve this. However, a drawback arises from this mechanism, in that it is quite costly to implement because this will necessitate the need for CFCL to build new plants in these new markets for the transfer to happen. Another disadvantage is that of centering on existing knowledge and not on the acquisition of new knowledge either through research or through other means. Research and new knowledge are important for CFCL as it seeks to develop products of high commercial value to be consumed in its local and foreign markets.

Intellectual Property

Protecting R&D and related activities

As the company delves into more research and development to introduce new products in the market as well as improve its technology and products, there is a clear need for the company to protect its research activities. The protection is mainly against two forms of economic sabotage. The first is illegal reproduction of its technology which means the introduction of counterfeited products in the market to rival its own. The other is against unauthorized leakages of its unique technology, which also results in the same effect as the first one. These two forms are likely to undermine the company’s stability and dominance in SOFC technology market. To counter these two forms of sabotage the company has acquired exclusive rights to this technology, that is, patented it. Thus by doing so, other companies are not allowed to make, use or offer for sale CFCL’s fuel cells or any other of its patented products. The patent inherently plays three basic roles In CFCL. The first is that it provides an incentive aimed at realizing economic efficiency in R&D endeavors. The second is that the patent makes it easy as well as encourages CFCL to disclose its inventions to improve the lives of people. Again, CFCL’s fuel cells reduce carbon dioxide emissions significantly making them a source of clean energy. Thus, this type of technology should be made mainstream without unnecessary difficulties, which is what this patent aims at achieving. The third is that the patent provides the necessary boost for CFCL to make bold investment moves. This is because the patents minimize intimidation from existing companies with huge capital influence that can replace CFCL as the initial proprietors of the technology.

Intellectual Property (IP)

According to the company’s website, the two technological features that comprise CFCL’s intellectual property are its inventions and innovative solutions, which it recognizes as its key assets (Ceramic Fuel Cells Limited, 2010). Additionally, the intellectual property also comprises other key business elements such as CFCL’s secrets of trade, trademarks, non-disclosure agreements, confidentiality agreements as well as the company’s copyright and licenses (Ceramic Fuel Cells Limited, 2010). CFCL understands the importance of protecting its intellectual property that is why its approach is to develop a strong patent portfolio. In this portfolio, all of CFCL’s existing and emerging patent family members are captured. These members arise from a number of areas that have been associated with the company’s technology and expertise. These include, thermal management, high-temperature metal coatings, pre-performing concepts, multi-layer porous ceramics, fuel delivery, powder production reactors, powder mixing reactors and fuel cell anode technology together with feed-through design (Ceramic Fuel Cells Limited, 2010).

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International Patent strategy

CFCL’s international patent strategy is the same as the one it’s using in Australia that is to develop a strong patent portfolio. As CFCL comes up with more inventions and innovative solutions, it is spreading its technology abroad, that is, outside Australia and in North America, Europe and Asia. In these new markets, it is familiarizing itself with legislature available and that pertains to its interest there. This is because it needs to protect its intellectual property very well. The legislature helps it to determine the existence, nature and acquisition of patents as CFCL has considered them the best forms of protection for its IP. The IP as explained above includes key technical and business elements of CFCL. The table below shows the countries in which CFCL has acquired patents for its various IP. The data therein has been got from CFCL’s website (Ceramic Fuel Cells Limited, 2010).

Tab.1. Countries in which CFCL as acquired patents in

Country Continent IP type
Australia Australia Inventions and Innovative Solutions
China Asia Inventions and Innovative Solutions
Japan Asia Inventions and Innovative Solutions
Germany Europe Inventions and Innovative Solutions
UK Europe Inventions and Innovative Solutions
Norway Europe Inventions and Innovative Solutions
US North America Inventions and Innovative Solutions

Source: Ceramic Fuel Cells Limited. (2010) Intellectual Property. 

Globalization Strategy

Strategy being adopted

Before describing the appropriate globalization strategy apt for CFCL, it is imperative to take a formal definition of an organization. An organization is a social unit of people who work together systematically to achieve collective goals (WebFinance, 2010, p.3). Having defined what an organization is then we can now proceed to define what a globalization strategy is. It is a guide strategically designed and developed to propel successfully an organization towards globalization. The apt approach for CFCL to take towards globalization should address four main issues. The first issue to be addressed is the extent of dominance in the major markets of the world. Since CFCL is the world’s leader in SOFC technology, it is thus the assumption that it will dominate major markets with its line of products. The second issue to be considered is how it will achieve this dominance. CFCL has made the critical step needed in achieving this dominance through acquisition of a strong patent portfolio containing local and international patents. The third issue that should be a concern in the approach is the strategic world locations to implement its value chain activities. CFCL has expressed its interest to enter the Asian and European markets through its line of domestic products and these are clearly strategic locations since there is more sensitivity there to clean energy. Thus, it is expected that CFCL’s clean energy products will make significant if not overwhelming sales. The fourth issue that the approach should address is how the achieved dominance can be turned into a competitive advantage in the global market in order to outdo other companies with similar objectives. CFCL is a research and development-oriented company that is capable of manufacturing products of high commercial, economic and environmental value. This is the spirit the company should maintain and enhance in order to turn dominance into a competitive edge among other rival companies. It should form the basis of its marketing campaign that is aimed at popularizing its products.

Technology/Country Matrix

The data in the following matrix has been obtained from searching term “patent” in the company’s website (Ceramic Fuel Cells Limited, 2010).

Figure 1: A sample Technology/country Matrix for CFCL

Country or countries Technology Intellectual property type Type of IP rights Type of protection Maximum life of IP rights
US, Australia Enabling electrical conductivity in ceramic materials
Thermal management
Innovative solution Industrial Property Patent 20 Yrs
China, Australia Fuel Pre-reformer Innovative solution and Invention Industrial Property Patent 20 Yrs
Japan, USA, New Zealand, Australia High-temperature metal coatings Invention Industrial Property Patent 20 Yrs
Germany, UK,
Australia, New Zealand
Fuel Cell powered electricity Innovative solution Industrial Property Patent 20 Yrs
US, Japan, China, Canada, Australia Fuel Cell powered electricity generator Invention Industrial Property Patent 20 Yrs
Norway, Australia Fuel Cell powered electricity generator Invention Industrial Property Patent 20 Yrs

Source: Ceramic Fuel Cells Limited. (2010) Patent.

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The technology matrix is made of six fields. The first is the country that has licensed and adopted CFCL’s technology. The second field describes the technology that CFCL is selling. The third field gives the intellectual property type. The fourth gives the type of intellectual property rights. The fifth field gives the type of protection accorded by the relevant countries to the intellectual property. The sixth gives the length of life of the patent, which is the protection available in the listed countries.

The following series of pie charts seek to analyze and explain the shape of the above technology matrix.

 Pie Chart showing CFCL activity in different countries
Figure 2: Pie Chart showing CFCL activity in different countries

The pie chart suggests that a lot of CFCL’s activity has been in Australia followed by China, US, Japan and lastly UK, Germany, New Zealand ,Norway and Canada. It also gives an idea of how the numbers of patents are distributed, that is, CFCL has more patents in Australia and least patents in UK, Germany, New Zealand, Norway and Canada.

Pie chart showing the distribution of technology
Figure 3: Pie chart showing the distribution of technology

The pie chart shows that CFCL’s technology in enabling electrical conductivity in ceramic materials is more widespread than any other technology in the countries listed.

Shows the distribution in intellectual property type
Figure 4: Shows the distribution in intellectual property type

The pie chart suggests that both of CFCL’s intellectual property types – invention and innovative – solutions have attracted the same amount of interest in the countries involved.

In all the countries involved, the type of IP right is industrial property and the protection adopted is patenting with a life length of 20 years.

Influential Factors

To understand the shape of the matrix above we have to look at the influential factors involved. The first is commercialization, which is one of CFCL’s objectives. As CFCL seeks to commercialize it realizes that it has to ensure the security of its IP in its local and foreign markets. The available form of protection in its target markets especially the ones listed in the matrix is patenting. Globalization is another influential factor, which is also another of CFCL’s objectives. CFCL endeavors to globalize which is why it has spread its technology beyond Australia and into countries in Asia, Europe and North America. The third influential factor is CFCL’s policies as an organization. The matrix has taken the shape it has due to the progress made by CFCL as an organization. The progress is only achievable through assimilation of policies that promote growth in an organization. One of the policies is implementing an organizational structure, which allows for easy and effective management of the organization’s (CFCL) resources. Another policy in place facilitates good decision-making through instituting a culture of critical thinking, ethics and proper leadership in the company. The fourth influential factor is the legislature available in the countries listed in the matrix. The legislation offers patents with a 20-year life span as the best form of security for CFCL’s IP.

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Globalization Issues

Form a marketing and manufacturing perspective

CFCL’s endeavors to globalize demand a lot from its manufacturing and marketing capabilities. CFCL’s globalization strategy should be based on an economy of scale approach. This is because the approach will ensure that costs associated with the making and selling of CFCL’s products are offset because of the company’s expansive growth. An economy of scale is easily achievable in the case of CFCL because it is a company faced with little or no competition and it has customers who are ready to consume its products because of the advantages involved. Thus, measures should be put in place that would enable the company realize large-scale manufacturing of its products, which is the case in economies of scale set-ups. These large-scale manufacturing should be coupled with an expansive marketing campaign to popularize the company’s products. In addition, significantly important to CFCL is market segmentation that is, identifying who really is the company’s target market and how it is distributed. Once the company has done that the next thing is to determine the market proximity to have an idea of how near their products are to the target market. It is important that the company’s products be within easy reach of the target market.

CFCL’s capital base should be sufficient to fund its globalization endeavors and in particular, the scale of manufacturing and marketing needed. Going it alone raises serious concerns about CFCL’s ability to fund its globalization agenda. Companies that choose to drive the globalization agenda on their own should be certain that they are able to finance the project otherwise it could turn into a huge upset.

Alone Vs Partnering for Commercialization

Other available options like distribution, licensing and joint ventures have the advantage of being able to raise or generate the capital required to drive the globalization agenda. An additional advantage of this partnership is that losses are not entirely incurred by a single organization but are distributed among the parties involved, which mitigates their effects. An organization seeking such partnerships has to meet certain requirements that it make an asset to other firms involved in the partnership.

Organization Issues

One of the requirements is for the organization to develop ethics and adopt an ethical decision-making model. Ethics are the principles by which you decide what is right and wrong. Ethics form the basis on which a person or an organization determines which action is fit to take as a response to the various situations, which they encounter (Markkula Center for Applied Ethics, 2010, p.2). Ethics constitute the standards of behavior that promote proper coexistence in a community or a society (Markkula Center for Applied Ethics, 2010, 2). It is the case that a decision-making process founded on ethics promises good decision making which is important in building a strong partnership. It is therefore imperative for an ethical person or organization to match its standards with a proper ethical decision-making model. Examples of ethical decision-making models as given by Wellington (2009) include the Resolved Method by Jonathan Kranky, Laura Nash’s Twelve Questions, Michael McDonald’s A Framework of Ethical Decision Making and Thomas Bivins’ The Ethical Worksheet among others (p.1).

Another requirement is for an organization to develop in itself a continuous quality improvement culture. Continuous quality improvement refers to the formal approach applied in analyzing performance as well as improving it (Duke University Medical Center, 2005, p.1). Considering that the organization has its interests and those of its partners at heart, it is important for it to develop products that meet the set standards. This is to avoid any possibility of failure that may occur (e.g. poor sales) are likely to take the company down together with its partners. Thus, it is very important to undertake continuous quality improvements in their products. The Failure Mode and Effect Analysis (FMEA) is one underlying concept of continuous quality improvement. FMEA is an abbreviation for Failure Modes and Effect Analysis. According to Dovach (n.d), it is an analytic activity carried out on a product, service or process in order to know its strengths and weaknesses, deal with a potential problem before it occurs and ensure that it meets the set requirements. FMEA has its origin at the National Aeronautics and Space Administration (NASA) in the USA where it was used as a risk analysis and mitigation technique, however more recently; it has become widespread in industries being used to attain process improvement (Sarma, n.d). FMEA is a vital tool to project teams and companies as a whole and is faced with questions like how a failure can occur, the effect of such a failure on a system and what actions can be taken to counter such potential failures if they happen (Dovach, n.d.). It provides a suitable approach to developing remedies to these questions (Dovach, n.d.). The functions of FMEA include, first, it predicts design or process-related failure modes and by doing so, it works to ensure that set requirements for a process or product are met. Secondly, FMEA tests and finds out the effect and severity of a given failure mode. Thirdly, FMEAs pinpoint the cause and work out the probability of occurrence of a failure mode. Fourthly, it identifies a control and weighs its effectiveness; it quantifies each associated risk and ultimately arranges the risks in order of priorities. Finally, it develops and documents action plans that appear to reduce the risks involved.

A culture of critical thinking is the other requirement that the organization should meet. Critical thinking skills are aimed at helping an individual or organization act purely objectively and rationally (Kurland, 2000, p.1). According to Kurland (2000), the characteristics of critical thinking are rationality, self-awareness, honesty, open-mindedness, discipline and judgment. Clearly, a sense of objectivity and rationality is important in the well-being of the partnership.

Another requirement for the organization is for it to have good leadership. Good leadership is important in an organization as it helps to bring the individuals together and lead them to achieve the set goals (The Teal Trust, n.d., p.1). A good leader means that right decisions will be made through an ethical model and thus promoting professionalism. Various leadership theories have been put forward that are applicable in running an organization successfully. The Contingency leadership theory was developed by Fred Fiedler and it supposes that, by addressing leader-member relations, task structure, and position power, you are at the same time attending to the effectiveness of a leader. The path-goal theory was developed by Robert House and it stresses increasing subordinate motivation through taking into account their ideas and making it clear to them how they can perform at their best. The leader-style theory was developed by Vroom and Yetton and guides leaders in making suitable decisions and also provides a measure of the extent to which subordinates can be included in the decision-making process. The advantage of this style is that subordinates are committed to the organization’s objectives and it encourages leader-subordinate interaction.

Another important requirement is for the organization to operate on a robust organizational structure. Organizational theory in an organization is undertaken to identify the themes that propel problem-solving, maximize efficiency, maximize productivity and that take care of the needs of the stakeholders (Barzilai, n.d., p.1). These subtopics put together work to device an organizational structure or culture where the individuals in the organization are motivated and understand their roles and work together in groups with proper communications channels and leadership (Barzilai, n.d., p.1). Clearly, the importance of a good organizational structure in developing a strong partnership can be seen.

Another requirement that is of relative significance and that has to be met by the organization is integration of knowledge (Clemens, 2004, p.4). By achieving knowledge, integration an individual or organization is able to, first, make use of available knowledge to formulate solutions to address various problems or challenges that they are facing during growth. (Clemens, 2004, p.3) Secondly, knowledge integration helps to expose underlying assumptions and inconsistencies through reconciling conflicting ideas (Clemens, 2004, p.5). Thirdly, knowledge integration helps an individual or organization to identify effectively areas with incoherence, uncertainty and disagreement, which it does through synthesizing different perspectives (Clemens, 2004, p.6). Finally, by weaving different ideas together knowledge integration achieves a whole that is better than the total of its part (Clemens, 2004, p.7). This is the way of ensuring improvements in the quality of products produced through the partnership, which in turn guarantees good income.

Conclusion

CFCL has established itself as the global leader in SOFC technology. Already it has developed fuel cells together with their fuel stacks that are a source of clean energy. It is working on introducing a range of products that provide energy for domestic use and small-scale projects that do not require relatively high amounts of energy. Commercialization and globalization are their short-term and long-term objectives respectively. Establishing ECT – CFCL’s version of a TTO- can be termed as the proper basis for its technology mechanism. Because it will ensure that, the company continues to develop products that exhibit high commercial, economic and environmental value. CFCL’s strong patent portfolio guarantees security for its intellectual property. The patents it has acquired apply in Australia, United States, Europe and Asia. This is a positive step towards realizing its globalization agenda. As described above the approach to globalization is apt for CFCL as it touches on the four main issues sensitive to globalization. CFCL’s pursuit of partnerships abroad is good for its globalization agenda, as it will facilitate smooth and effective entry into the new markets. It will also boost its manufacturing and marketing abilities, which are also critical to its globalization agenda. To preserve these partnerships as well as strengthen them CFCL must comply with the requirements mentioned above. The requirements are developing ethics, adopting an ethical decision-making model, critical thinking, integrating knowledge, realizing continuous quality improvement and realizing good leadership in the organization.

References

Barzilai, K. (n.d) Organizational theory. Web.

Ceramic Fuel Cells Limited. (2010) Ceramic Fuel Cells Limited. Web.

Ceramic Fuel Cells Limited. (2010) Intellectual Property. Web.

Ceramic Fuel Cells Limited. (2010) Partners. Web.

Ceramic Fuel Cells Limited. (2010) Patent. Web.

Clemens, M. (2004) Knowledge Integration.

Duke University Medical Center. (2005) What is quality Improvement. Web.

Dovach, R.A. (n.d.) Perspective on quality. Web.

Jolly, J. A. (1974) The technology transfer process: concepts, framework and methodology. Web.

Kurland, D. J. (2000) What is critical thinking.

Markkula Center for Applied Ethics. (2010) A framework for thinking ethically.

Sarma, A.D. (n.d.) FEMA in action Integration of Process of FMEA in a software project management. Web.

The Teal Trust. (n.d.) Our definition of leadership. Web.

WebFinance. (2010) Organization. Web.

Wellington, A. (2009) Sample decision making models. Web.

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