Marketing Nanotechnology:
A Conversation with Zyvex

July 2003

Nanotechnology. While the word itself sounds other-worldly, its description is even more futuristic — a manufacturing technology able to cost-effectively develop new materials and processes by manipulating molecular and atomic particles.

While the vote is out on whether nanotechnology will remain an enabling technology or develop into a standalone industry, Zyvex Corporation is making the right decisions. The company has become one of the most publicized private nanotechnology businesses in the world, highly regarded in the field of molecular assemblers — machines that build micro-machines to manipulate molecular material.

How does a start-up company in a start-up industry gain marketing traction? What marketing strategies should a company like this adopt when industry is not fully aware of the technology's capabilities, let alone what they need or how they could apply it?

To understand the challenges of marketing a new company with new technology in an emerging industry, we talked with Dr. Thomas A. Cellucci, COO of Zyvex, a scientist, businessman, and thought leader in the field of nanotechnology.

Nanotechnology is the hot new field — much discussed, but not well understood outside of technology circles. In a situation such as this, how do you manage and grow market demand?

We spend a lot of time devising methods to talk to people with interest — and to people with interest and money. Educational programs and seminars ensure that we build the right kind of demand. Our market development and application sales engineering (ASE) processes really come into play here. As a rule, we are interested in large repeat type applications — not one-off applications. We will consider a one-off application only if it is financially viable.

To some, nanotechnology still border on science fiction. How do you communicate the feasibility of Zyvex's products to your potential customers and convert science fiction to science reality?

Zyvex has created a comprehensive, fifteen-volume marketing strategy plan with the help of some of the brightest students from MIT, Kellogg and Sloan. This document outlines (among other things) the competitive advantage on all possible applications for nanotechnology. On a tactical level we approach each potential customer with documented facts, show them faster, cheaper and better applications, and are prepared for all questions.

New technologies like Zyvex's call for need-shaping marketing. How does a company market and sell products that the customers are not even aware of — or perceive a need for?

Today, there are two major processes at Zyvex: One is market development and the other is application sales engineering (ASE). ASE's function is to create awareness of nanotechnology and what it can and can't do, both today and later. We bring understanding through our white papers and speeches to C-level executives in various organizations. We then invite them to bring in their engineering teams to our facilities and jointly identify the problems, processes, and products that can be improved through our technology. We impart and share insights with certain customers, while solving problems for others.

We also speak to the highest levels of the government to provide a balance between optimism and realism, while developing a time frame for actual implementation. We've built a lot of credibility by telling them what the technology can't do, as well as what it can do, through real life demos and applications. There's a special onus on the company to do the right thing for the country. [NOTE: James Von Ehr II, CEO of Zyvex, is on the Nanotechnology Technical Advisory Group (TAG) to the President's Council of Advisors on Science and Technology (PCAST).]

How will Zyvex transition to a pure market-driven company?

Zyvex has already made the transition from a product-driven to a market-driven company. We're constantly looking for applications that will offer a faster, cheaper and better alternative. Everyday commercial and industrial applications are key to the success of our company.

Within this context, it's important to note that nanotechnology is not yet an industry. It's not clear today whether it will become an enabling technology that will be absorbed by other industries or an technology industry itself.

What role has the U.S. government played in creating and shaping the market for Zyvex? Will it continue to play a significant role?

The government has done a great deal for nanotechnology by creating a need for products based on this technology. In the near term, we'll see applications in the Space and Defense departments (like body armor, protective textiles, and tanks and aircraft material). We're also working with Defense Advanced Research Projects Agency (DARPA), Department of Energy (DoE) and Homeland Security on various other applications.

Similar to the laser industry, the government will pay for most of our technology in the beginning. One of the reasons for this is that Japan, China and Europe are each putting more money into this area than the U.S. We're paying particular attention to China since it is a low cost producer and a technology leader in this area. China produces a lot more Ph.D.s in this discipline than the U.S.

Another reason the government needs to do most of the funding is that venture capital firms are not yet attracted to nanotechnology as a long-term investment since there will be no returns in a 3-5 year time frame (which they typically look for). Therefore, we can see the government playing a significant role for the foreseeable future.

Education, research and industry are entwined in any new technology. What role will Zyvex play? How will you merge profit and philanthropic initiatives?

Zyvex has invested over half a million dollars in the NanoKids® Program at Rice University to teach children about nanotechnology. We support a number of programs and initiatives at various universities. Through the Texas Nanotechnology Initiative®, we continue to educate and support other nanotechnology efforts. We work closely with industry on improvements to the manufacturing process through compression of time frames, cost efficiencies, and customization. This will always be our approach. The best way to sell is not to sell at all, but to consult and add value through knowledge. We may not get sales right away, but they'll remember who gave them the knowledge. That's very powerful.

As Zyvex continues to grow, what marketing challenges do you foresee? How will the company stay ahead of its competition?

The biggest challenge that faces us is what not to do as much as what to do. Nanotechnology can solve a lot of problems, but Zyvex has to choose which ones to go after. Currently we're focusing our energies on three groups — aerospace/defense, electronics/telecommunications, and medical/healthcare. Other groups that we're looking into are chemicals and energy (fuel cells).

Zyvex will keep ahead of its competition through constant innovation. We're unique in that 20% of our operating expenses goes into R&D — this is a part of our ten-year business plan.

More than anything, Zyvex's success can be attributed to the vision and drive of the founder of our company, a strong and capable team to implement this vision, and a work culture that combines creativity with discipline. This will keep Zyvex at the leading edge for some time to come.

Dr. Thomas A. Cellucci has extensive senior executive experience in profitably growing businesses under both robust and declining market conditions and is the author or co-author of over 96 articles on nanotechnology, laser spectroscopy, environmental disturbance control, MEMS test and measurement, and high-tech sales and marketing. Most recently, he was President and CEO of Etec, Inc. (Peabody, Massachusetts) and Executive Vice President and General Manager of Integrated Dynamics Engineering (Westwood, Massachusetts and Raunheim, Germany).

Cellucci currently serves on several boards, most notably on the Board of Edmund Industrial Optics (Barrington, New Jersey) and as special advisor to the Board of MANCEF (Micro- and Nano-Commercialization Education Foundation). He is also a member of the Texas Nanotechnology Initiative®, a non-profit organization dedicated to establishing Texas as a world leader in the discoveries, development, and commercialization of nanotechnology.

Cellucci holds a Ph.D. in Physical Chemistry from the University of Pennsylvania, an MBA from Rutgers University, and a B.S. in Chemistry from Fordham University. He has also attended several executive courses at the Kellogg School of Management, The Wharton School of the University of Pennsylvania, MIT’s Sloan School of Management, and the Harvard Business School, where he is often invited to speak on nanotechnology.

Zyvex Corporation, based in Richardson, Texas, is the first molecular nanotechnology company. Zyvex’s mission is to be the leading worldwide supplier of tools, products, and services that enable adaptable, affordable, and molecularly precise manufacturing.


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