Technology Readiness Level (TRL) math for innovative SMEs

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Technology Readiness Level (TRL) is an index to measure the maturity and usability of an evolving technology. It is increasingly used for benchmarking, risk management, and funding decisions in all over the world. So that decision-makers are able to figure out whether and when to integrate (launch) a technology (product) into larger systems (markets). Stan Sadin, a NASA researcher, came up with the first TRL scale with 7 levels in 1974. NASA formalized this measurement in 1989 and later developed its current 9-level form (on the right), which is still used and has inspired many “readiness level” scale variations so far.

Among the countries adopted this TRL scale are Canada, United Kingdom, Australia, and of course European countries. The scale is increasingly being embraced by many organizations including but not limited to OECD, EU, NATO, and NAMSA. So far, NASA led many ‘Readiness Level’ scales including Reuse Readiness Levels (RRLs) (for Software), Interoperability Readiness Levels (for a system to interoperate with other systems), Propellant Readiness Level (for space vehicles), and Application Readiness Level Metric (for funded projects). Due to specific needs, several institutions, venture capitalits, and companies also developed such scales as Manufacturing Readiness Level, Commercial Readiness Index, and Investment Readiness Level.

Why do we need TRLs in a business context?

Today business world is more chaotic than ever, which many call VUCA (Volatile, Uncertain, Complex, Ambiguous) or even Super VUCA (Vibrant, Unreal, Crazy, Astounding). Values are not created by single entities but by networks. Even customers participate in the design, creation and funding of products and services. There is no traditional industry borders anymore. All the work is multidisciplinary, cross-industry, and cross-national. It is hard to claim a competitive advantage and harder to sustain. No value relies on a single technology or resource. SMEs (Small- and Medium-sized Enterprises) have to be fast, flexible, and agile. Being an established company does not grant any market share or customer satisfaction. Even big companies employ startup mind-set which emphasizes validated learning and continuous innovation. Without these practices disruptive innovation is impossible. Otherwise businesses do not only limit their growth but also risk their survival.

To turn really interesting ideas and fledgling technologies into a company that can
continue to innovate for years, requires a lot of discipline. – Steve Jobs

We need standardized, systematic, and shared views of managing innovation, lowering market risks, making smart investments and establishing product-market fit. TRLs are one of the key tools that strengthen our decisions. Basically, TRLs are not interested in R&D process per se but the step by step making of an innovation enabled by R&D.

Image on the left illustrates TRL progress of a NASA technology. You can see two more TRL process on these links: Main engine AHMS and Friction Stir Welding. Except being part of relevant research partnerships, businesses usually do not focus on TRL 1-3 activities since only researchers are allowed to ignore commercialization :) Even research-intensive innovative SMEs mostly start from TRL 4 activities. So they are mainly expected to originate innovative products rather than scientific explanations. It is widely accepted that innovation does not require invention and that not all inventions turn into innovation. Indeed, most successful innovators are integrators of existing technologies and products in the best way to solve a particular customer problem. This work still needs a great deal of research and experiment to extend practical implementations of known scientific principles. Then, the hardest challenge of an SME is the design, execution, and delivery of an enchanting customer experience.

Science may never come up with a better communication system than the coffee break.
Earl Wilson

The significance of TRLs in SME Instrument

This year European Commission (EC) initiated its brand-new research & innovation program, Horizon 2020, which will last through 2020. In this program, EC gives enormous amount of importance to impact, outcome, and commercialization of supported research and innovation. Correspondingly, Horizon 2020 tries to attract SMEs more than ever in many aspects. It has even a specific SME Instrument to support activities closer to market deployment. As you may guess, both Horizon 2020 and SME Instrument refer to TRLs in their grantee selection as well as subsequent support process. The SME Instrument is explicitly targeted at applicants presenting innovation projects that have reached TRL 6 as a minimum (or equivalent for nontechnological innovations). As a rule of thumb, this means that the proposed activities should take place in an operational or production environment.

SME Instrument does not impose a TRL scale of its own. It refers to the same scale just as all the other funding schemes and calls in Horizon 2020. Definitions of these TRLs are listed in General Annexes – G, the one and only guide for TRLs in the 2014-15 Work Programme, as below. However, this program also suggests topic-specific interpretations of TRLs in terms of criteria to meet or milestones to demonstrate at each level. Consequently, TRLs are aimed to be more relevant and effective in funding decisions and project management.

TRL DEFINITION
TRL 1 basic principles observed
TRL 2 technology concept formulated
TRL 3 experimental proof of concept
TRL 4 technology validated in lab
TRL 5 technology validated in relevant environment
(industrially relevant environment in the case of key enabling technologies)
TRL 6 technology demonstrated in relevant environment
(industrially relevant environment in the case of key enabling technologies)
TRL 7 system prototype demonstration in operational environment
TRL 8 system complete and qualified
TRL 9 actual system proven in operational environment
(competitive manufacturing in the case of key enabling technologies; or in space)

An exception: FAQ note on ‘Health, demographic change and wellbeing’ topic reads that “TRLs are not commonly used in the health sector … no references to TRLs have been made in topics of the Societal Challenge 1 Work Programme 2014-2015 … in particular, the general reference to the use of TRL in the SME instrument does not apply to PHC 12. The use of TRL is under review for WP2016/2017.”

Tips on TRL measurement

Previous studies on TRL assessment pointed out some confusions among industry professionals, some of which are clarified below. These would help specialists assign the correct TRL to their project at the right time enabling more effective project management and higher funding possibility.

Confusion is a word we have invented for an order which is not understood.
Henry Miller

  • A TRL number is obtained once the description in the diagram has been achieved. For example, when a technology successfully achieves TRL 5, it does not move to TRL 6. Therefore, an SME reporting TRL 6 should be conclusively done with TRL 6 activities and validation.
  • If a technology consists of various sub-technologies, its TRL number is the lowest of all. A technology may depend on a number of technologies or sub-systems with their own TRLs. Then, the ultimate technology is assigned with the lowest TRL number among them.
  • When an element of a technology is altered, its previous TRL number becomes invalid. When one replaces, eliminates, or adds a major component or part even in a TRL-9 technology, everything starts all over again from the appropriate TRL usually between 1-4.
  • When the primary use of a technology changes, its previous TRL number becomes invalid. If you try to integrate (launch) a technology (product) into a different system (market), you cannot claim its previous TRL number any more. You should work through TRL validations again.
  • If a technology spends too much time at a given TRL, its TRL number becomes invalid. As time goes by, even a TRL 9 technology requires re-confirmation due to the probable changes in the conditions (i.e. know-how, market environment) that its previous TRL number is based on.
  • Activities and progress through TRLs are not time-boxed. Some technologies may evolve faster than others. Or, a particular technology may pass some levels in weeks but the others in years.
  • TRL milestones, activities, and validation criteria are subjected to change over time. You cannot precisely specify TRL 8 requirements for your project while you are at TRL 2 stage and keep them the same along the way. Inspection and adaptation are needed.

Critical threshold in an innovation project: TRL 6 

Almost all the TRL scale developers and users in various industries perceive TRL 6 to be a major transition from research and experiment to real life implementation and commercialization. This level calls for a critical decision-making on whether to make any further investment for a project, and if any, how to make the most out of it. Several EC presenters have also recognized its practical meaning. From TRL 6 forward, the maturation step is driven more by assuring management confidence than by R&D requirements. This is a breaking point where individual technologies and stand-alone elements are not a matter of discussion any more. Now, only the overall evolving technology, system or product is given emphasize holistically and a single TRL number accordingly. There is no more room for conceptualizing but only for proving.

Creativity is ‘thinking up’ new things. Innovation is ‘doing’ new things. Theodore Levitt

Due to its vital importance in the assessment of a technology, a common understanding of TRL 6 is a must. This starts with the definition of technology, “the practical application of knowledge so that something entirely new can be done, or so that something can be done in a completely new way”. Next comes the descriptions of the key terms frequently used in TRL 6 discussions.

Innovation: A new or improved technology, product, design, process, service or solution.
Prototype: A physical or virtual model used to evaluate the technical or manufacturing feasibility or military utility of a particular technology or process, concept, end item, or system.
Model: A functional form of a system, generally reduced in scale, near or at operational specification. Models will be sufficiently hardened to allow demonstration of the technical and operational capabilities required of the final system.
Demonstration/Pilot: Actions aiming to validate the technical and economic viability of a new or improved technology, product, process, service or solution in an operational (or near to operational) environment.
Market replication: Actions aiming the ‘first’ application/deployment in the market of an innovation that has already been demonstrated but not yet applied/deployed. ‘First’ means new at least to Europe or new at least to the application sector in question. Multiple applications in the market are not covered.
Critical technology element: A new or novel component that a technology or system depends on to achieve successful development or to successfully meet a system operational threshold requirement.
Relevant environment: Testing environment that simulates the key aspects of the operational environment.
Operational environment: Environment that addresses all of the operational requirements and specifications required of the final system, including platform/packaging.
Key enabling technologies: Nanotechnologies, micro- and nanoelectronics (including semiconductors), photonics, advanced materials, advanced manufacturing systems, biotechnology, and other strategic drivers such as space.

How TRL 6 assessment process works

TRLs Handbook for Space Applications, a major guide published by ESA, states that the details of an appropriate Technology Readiness Assessment (TRA) process depend on the specifics of the prospective system applications and program requirements. And, it just lists below principles open to technology-specific adaptation. At TRL 6, TRA must involve not only the technologists involved in demonstration, it must also involve prospective customers. Actually, TRA should be organized and implemented by the customer organization, rather than the technology organization. Below is not officially required by any Horizon 2020 or SME Instrument call. However, ESA obviously presents great tips on how to better detect TRL 6 even if the project does not target SME Instrument.

DETAILED DEFINITION OF ‘TRL 6’: At TRL 6, a representative model, prototype or system, which would go well beyond an ad hoc discrete component level breadboard, must be tested in a relevant environment. If the only relevant environment to show progress is the operational environment, then the validation must be demonstrated in operational environment. At TRL 6, several (or many) new technologies will typically be integrated into the demonstration so a working, sub-scale (but scaleable) model of the system should be successfully demonstrated.

KEY QUESTIONS TO ADDRESS: All of the following questions with regard to technology development and system-level demonstration accomplishments should be affirmatively answered.

  1. Has the new system (or subsystem) that incorporates the new technology been clearly described and modeled? What are the critical functions that would be performed by the new technology in the system? What are the new capabilities that would result?
  2. Have one or more specific applications been defined with sufficient fidelity that the detailed technologies involved in that sub-system or system can be identified, including preliminary designs and cost estimates? Have the relevant technology requirements been identified and are the interactions among the various technologies within the system well understood?
  3. Have rigorous system-level demonstrations been performed successfully in a relevant environment? Have those demonstrations included key elements being tested individually and/or in an integrated fashion? Were the results consistent with the levels of performance, cost, etc. that the new technology must possess for the intended system applications to be technically and/or economically viable? Are the tests performed representative of the whole environment, in terms of type, sequence, simultaneity. What metrics were used to conclude that the system-level demonstration(s) worked as desired?
  4. Is there a viable path forward that would lead the demonstration accomplished forward the intended application? Is a demonstration at TRL 7 needed, and if so, why? What are the likely capabilities that will be needed to follow that path (including operational environments, testing environments, etc.)? Can the technical risk and effort be evaluated?

APPROPRIATE EVIDENCE REQUIRED: The answers to above questions should be supported by appropriate evidence, including the previous TRL 5 validation documents, plus the following information.

  1. A clear description of the new technology, including the design of demonstrations performed and explanation of how the testing environment is relevant to the expected operational environment.
  2. A document describing in full detail the expected functional and environmental requirements that the new technology must satisfy within the context of the envisaged application.
  3. Identification of any or all demonstrations and/or analytical studies that have been performed, and the results of demonstrations performed, upon which the feasibility of the technology depends. All references documenting the results of analysis, modeling, demonstrations, experimentation performed in-house or by others that establish the technical and/or economic feasibility of new technology.
  4. Compelling arguments that indicate likely connections between the subsystem- or system-level demonstrations performed in a relevant environment and yet-to-be-performed demonstrations at higher levels of integration (e.g., systems-level) in an operational environment. An evaluation of the technical risk (Low, Medium, High), and required effort (Low, Medium, High) to advance to the next TRL level.

TRL assessment vs. feasibility study vs. business plan

When TRLs were first introduced at NASA, the primary problem was whether a technology worked smoothly and when to integrate it into the larger system. The demand was usually tangible and known, an order or tender was already in place, and production (budget, scale) was not a real concern. As TRLs started to be used by various organizations in different industries, TRL definitions had to be either revised or diversified to address various business aspects and uncertainties in the market. Many executives made use of additional readiness scales simultaneously to cover different business dimensions whereas some employed certain scales to track the diffusion of an innovation to cover beyond TRL 9.

So far, EC has not elaborated on TRLs and preferred to complement TRLs with feasibility and business plan. Therefore, market demand and economic viability are incorporated in projects. SME Instrument WP divides SME support into three phases, the first two of which include financial support and aim TRL 6-9 activities. A phase 1 proposal must include an initial business plan describing, among other things, the underlying business model. Winners will conduct a feasibility study in phase 1 verifying the technological, practical, and economic viability of an innovation. This study might include risk assessment, market study, user involvement, Intellectual Property (IP) management, profitability analysis, and development of a strategic business plan. A phase 2 proposal must be based on a feasibility assessment and contain an elaborated business plan. Issues detected during phase 1 need to be addressed during phase 2, which might focus on demonstration, testing, prototyping, piloting, scaling-up, miniaturization, design, and market replication.

Most science entrepreneurs focus on explaining their research and technologies rather than making explicit how they precisely create value for customers.
Alexander Osterwalder 

In an innovative business context, without feasibility and planning ingredients, TRLs do not serve their main purpose, or vice versa. Meanwhile, EC liberally does not reinforce any form or content other than filling out the grant applications convincingly and preparing the deliverables as promised. Also, FAQ note, in response to further explanation requests, open-mindedly and shortly says that general business practices apply. Meanwhile, early statistics show that success rate (ratio of beneficiaries to submissions) is unavoidably around 6-8% due to huge SME interest and limited funding capacity. Basically, being a great SME with an exceptional project expressed in a perfect proposal is not enough to get funded. Only best of the best can succeed. Admittedly, there are some lessons SMEs need to learn to better craft their projects and proposals, as well. In conclusion, it may be crucial to revisit some generally-accepted popular business practices.

Note: EC itself carries out some feasibility studies along with subcontractors, too. These studies are not necessarily comparable to those of SMEs except their general outline and professionalism. One can also notice that these reports are getting shorter during the last 5 years, roughly from above 200 pages to even below 100 pages.

Thoughts on ‘general business practices’

A few remarks might be worth to consider in a business innovation context. A feasibility study aims to determine whether a proposed project is viable. A business plan is a roadmap and an agreement on how the SME intends to carry out the project. That is, the feasibility is conducted during the deliberation phase of the business development cycle, prior to commencing a formal business plan. In a sense, a feasibility with its certain viability dimensions can be associated with new product development process for identifying customer problems, alternative solutions, business opportunities, and the best ways to tap into those opportunities. However, an SME had better make use of these three tools in an overlapping, iterative, responsive, and cyclical way rather than in a discrete, static, and sequential way.

I have always found that plans are useless but planning is indispensable.
Dwight Eisenhower

In this amazing journey, there are many well-established tools at an SME’s disposal including but not limited to Porter’s Five Forces Model, BCG Growth-Share Matrix, Market Research, and SWOT analysis. Also, EC has such official publications as IP Relevance Fact SheetSME Standardization Guide, Performance of SMEs in FP7, and  Business Innovation Observatory. Recently, thought leaders added a few more approaches to above conventional list. Their key warning is to employ almost a real-time lean planning process to reflect on the changes in the market and adjust. Most vital approaches showing how to better do this are Lean Startup, Business Model & Value Proposition CanvasesCustomer Development Methodology, Disruptive Innovation, and Design Thinking. All these perspectives put emphasis on human-centered, agile, and continuous progress in innovation management. Although these characteristics are mostly attributed to startups, Steve Blank, in the most-downloaded HBR article, highlights that these practices are not just for young tech ventures and also implemented by such large organizations as GE, Intuit, and NIH.

It should also be noted that ‘startup’ has two different connotations: (1) a newly created company regardles of its ambition, (2) a high-growing and innovative company regardless of its inception. SME Instrument clearly states that it is not a company creation vehicle, though startups are not excluded. Also, being a well-established company does not provide an advantage if the proposed project is not at the core of the company strategy. Finally, such publications featured by DG Enterprise & Industry might be guiding: “Five Co-s” in innovating and the evolution of service innovation research.

IDEO, a world pioneer consultancy, details three elements of an innovation in its recently-updated Human-Centered Design Kit:
What do people desire?
What is technically and organizationally feasible?
What can be financially viable?

Traditionally, feasibility is limited to technological possibility and research-intensive innovativeness is associated with academic / engineering work. But, today SMEs are not contented with their success in technology. It would be a great mistake to think if you build it, customers will come. Above three questions are overlapping in nature and each deserves outstanding hand-in-hand research both in ideation and implementation. If you think research and experiment on non-technological issues in an innovation are overestimated, see this government initiative on user experienc (UX) just as an example. You may also check how WEF Technology Pioneers (i.e. Airbnb, Spotify, Twitter) have been blending the three elements to disrupt the markets.

Apparently, there is a difference between ‘solution-problem fit’ and ‘product-market fit‘. And, there is a path from a tech-focused ‘core’ product towards a value-focused ‘extended’ product. Thought leaders are relentlessly resourceful in inventing new constructs and attaching new meanings to them over time. Literature (here and there) never ends, so let me leave you with a few inspirational quotes:

Your product is not “the product” – Ash Maurya

iPhone is a complete experience. It’s not a phone. You can’t divide hardware, software, and services. Its success depends on developers, carriers, foreign manufacturers…
Tim Cook

Competition shifts from the functionality of a discrete product to the performance of the broader product system, to systems of systems, in which the firm is just one actor.
Michael Porter

Further reading, if you still can [.pdf]🙂

None of the above reflect those of the mentioned organizations or even mine! I just tried to rephrase credible sources and official documents still in effect and accessible on the web. Please contact me if you are willing to co-author a paper refining this post and proposing a specific TRL scale / calculator for innovative SMEs.

Basic learners:
Technology readiness levels NASA White Paper, 1995
Technology readiness levels handbook for space…, European Space Agency, 2008
ISO 16290:2013 Definition of the TRLs and their criteria of assessment, ISO, 2013
OSLO Manual: Guidelines for collecting and interpreting innovation data, OECD, 2005
Frascati Manual: Proposed standard practice for surveys on research…, OECD, 2002
Frascati Manual Revisions: FOS Classification, 2007, Measuring R&D in developing countries, 2012

Curious minds:
Reuse readiness levels as a measure of software reusability NASA White Paper, 2008
Expert elicitation in technology readiness assessment Master’s Thesis, Aalto Univ, 2010
Evaluation of technology readiness for physics-oriented issues White Paper , 2009
From TRL to SRL: The concept of systems readiness level, Multiple authors, 2006
Using the TRLs scale to support technology management, Carnegie Mellon Univ, 2002
Horizon 2020 Calls Overview European Commission, 2013
Robotics in H2020 IMPACT and Technology Readiness Levels European Commission, 2014
Development of an assessment methodology for demonstrating…, NATO, 2010
Exchange of good policy practices … of Key Enabling Technologies, European Union, 2012
Technology readiness assessment guide, U.S. Dept. of Energy, 2011
Technology readiness assessment guidance, U.S. Dept. of Defense, 2011
Manufacturing readiness level deskbook, U.S. Dept. of Defense, 2011
Commercial readiness index for renewable energy, Australian Renewable Energy Agency, 2014
Integrated technology readiness and risk assessment, Multiple authors, 2014
Assessment of readiness for internal technology transfer – A case study, Multiple authors, 2011
The TRL scale as a research & innovation policy tool: EARTO recommendations, EARTO, 2014
Technology and market readiness levels, Dent Associates White Paper, 2011
Demand readiness level (DRL), a new tool, ANR-ERANET Workshop, 2011
Discussion paper on investment readiness programmes, OECD, 2010
Investment readiness: Summary report of the workshop, EC, 2006
Technical risk assessment handbook, Australian Dept. of Defence, 2010
Defining an integration readiness level for defense acquisitions, Multiple authors, 2009
NASA system engineering handbook, NASA, 2007
Science and technology readiness level calculator, U.S. Dept. of Homeland Security, 2009

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