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New Product Development Center _NPDC_ Business Plan

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					OSU NEW PRODUCT DEVELOPMENT CENTER


           BUSINESS PLAN
                                 Table of Contents


Table of Contents                                              1

Executive Summary                                              2

Rationale of the NPDC                                          5

NPDC Today                                                     7

NPDC of the Future                                             8

Objectives                                                     9

NPDC Projects, Services, and Operations Plan                   9
     Product Development Projects                              9
     Communications Projects                                   10
     Business and Market Analysis Projects                     11

NPDC Staffing and Organizational Plan                          12

NPDC Marketing Plan                                            16

NPDC Financial Plan                                            17

NPDC Contingency Plan                                          20

Appendices
     A. NPDC Strategic Plan
     B. Marketing Plan
     C. Members of the Advisory Board
     D. Operating Policies of the Advisory Board
     E. Project Applications Packet
     F. Outline of Complementary Services in Oklahoma
     G. Complementary Economic Development Activities at OSU
     H. NPDC Annual Report 2003/2004
     I. NPDC Annual Report 2004/2005
     J. NPDC Menu of Services
     K. OSU Royalty Sharing Policy
     L. Brief Description of Similar Centers
     M. U.S. Census of Manufacturing Data (1997 and 2002)




                                                                    1
                       BUSINESS PLAN FOR THE OSU
                    NEW PRODUCT DEVELOPMENT CENTER

                                   Executive Summary
The health of Oklahoma’s economy critically relies on manufacturing, yet the number of
manufacturing jobs in Oklahoma continues to decline at an alarming rate. This declining trend is
due in large part to international competition and free trade in our global economy, and small
manufacturers in rural areas are particularly susceptible to these pressures. In Oklahoma,
approximately 74% of manufacturers have fewer than 20 employees, many located outside of
Oklahoma’s two major cities where access to engineering, business, and marketing expertise is
not readily available.

In order to compete in the global economy, the National Institute of Standards and Technology
has identified innovation and new product development as a critical activity, yet the small
manufacturers are ill equipped to do this. Oklahoma State University’s New Product
Development Center for Small, Rural Manufacturers was initiated to fill this gap and has shown
considerable localized success on a very limited budget. Significant new funding is needed to
expand its services and make the needed impacts on a more statewide basis.

Evidence of the decline in manufacturing jobs comes from the most recent U.S. Census data
showing that from 1997 to 2002, the number of manufacturing jobs in Oklahoma decreased by 8
percent (13,086 jobs) and the number of firms decreased by 1.4 percent (59 firms). Also noted
during this time, the manufacturing sector’s share of gross state product for Oklahoma has
declined at a slightly higher rate (15.4% to 11.1%) than the average for all states nation-wide
(15.5% to 12.8%).

One successful effort to stem a portion of the decline occurred in the mid 90’s, when the
Oklahoma State Legislature showed great vision in establishing the Food and Agricultural
Products Center (FAPC) at Oklahoma State University. The FAPC has become a world-class
model for providing services to manufacturers of food and agricultural products. Although the
FAPC scope is limited to this important, but relatively small, component of manufacturers in
Oklahoma (15%), its success is well documented. The most recent Census reports that there has
been a 24% increase in the number of food manufacturing firms in Oklahoma from 1997 to
2002. Modeled after the success of the FAPC, the New Product Development Center (NPDC)
expands OSU’s capacity to provide product development technical services to the other 85% of
small, rural Oklahoma manufacturers. An effort similar to that of the FAPC in this larger
segment of rural manufacturers could result in truly dramatic impacts to the rural economy

The NPDC of today has shown significant success. The NPDC proposed for the future should be
substantially more successful. Since it was initiated three years ago, the NPDC has been
involved with 10 projects, resulting in a projected $180 million in new revenues for Oklahoma,
and the potential for 210 new Oklahoma jobs – a cumulative impact to the state economy of $2.1
billion. To date, the NPDC has completed six major projects, three with the division of
Agricultural Sciences and Natural Resources and three with the College of Engineering,
Architecture, and Technology. Under current funding and staffing, the NPDC is limited to

                                                                                                 2
working with only four major product development projects per year and about 20 business
communications and/or analysis projects per year.

The new business plan will allow an expansion to at least 28 major product development projects
and 40 communication and business planning projects per year. With each NPDC project
contributing approximately $10 million in returns to the state and 21 new jobs, the NPDC
expects to generate a total average return of over $250 million and to create approximately 600
new jobs based on the projects completed every year.

Partnerships are critical to any economic activity, and the NPDC is no exception. The NPDC
partners with the Oklahoma Alliance for Manufacturing Excellence, Inc. and its Manufacturing
Extension Agents located across the state, along with OSU’s Application Engineers and the
Cooperative Extension Service. The Oklahoma Center for the Advancement of Science and
Technology (OCAST) and the national Small Business Innovations Research Program (SBIR)
are also very important to NPDC efforts, as well as various chambers of commerce and
economic development authorities in the state.

Since almost all of the NPDC projects are performed as OSU projects, the benefits exceed the
obvious monetary impact for Oklahoma. The projects allow for faculty and student involvement
in projects providing:

         Real world career experiences for students that contribute to their personal
           development;
         Opportunities for student internships;
         Oklahoma jobs after graduation; and
         Opportunities for faculty to apply their research to projects that directly impact their
           specific field.
Working with a consortium of other universities, the NPDC has already begun to develop a
national reputation for developing innovative programs that serve clients and work cooperatively
with other agencies. In November 2005, the NPDC was recognized by the national University
Economic Development Association with its award for the Best Technology Commercialization
Project during 2005 (the Klutts Gon-Topper). Project success stories are generating more
possible clients; however, the capacity to serve potential clients is limited by the NPDC’s lack of
full-time faculty and staff.

Currently, the NPDC’s operating and staffing funds are primarily provided by grants and an
annual appropriation of $300,000 through the Oklahoma Department of Commerce (Table A).
The plan for the NPDC of the future includes the existing OSU facilities, funding a full-time
NPDC director, and adding eight faculty positions over the next three years to be divided equally
between the Division of Agricultural Sciences and Natural Resources and the College of
Engineering, Architecture and Technology. Figure 1 depicts the current and proposed positions
funded through the NPDC.




                                                                                                  3
         Source of Funds                       2002/03           2003/04       2004/05       2005/06
Oklahoma Department of Commerce                  $300,000         $300,000      $300,000      $300,000
NSF/PFI Grant                                                     $202,870      $200,000      $197,130
OSU Direct Cost Share                                              $76,885       $81,004       $89,935
Oklahoma Water Resources Council                 $100,000
U.S. SBA University Centers Grant                                                             $128,881
EDA Grant                                                                        $81,000       $81,434
Total                                            $400,000        $579,755       $581,004      $797,380

                 Table A. NPDC Funding History, 2002/03 through 2005/06
      College Administration                                                 CIED Administrative
          Representatives                       NPDC
                                                Director                        Representation
     Current: DASNR .0 FTE                                                     Current: .5 FTE
          CEAT 0.25 FTE                     Current: .0 FTE
    Proposed: DASNR .15 FTE                Proposed: 1.0 FTE                 Proposed: .15 FTE*
         CEAT 0.15 FTE



                                           Program Coordinator
                                             Current: 1.0 FTE
                                            Proposed: 1.0 FTE




             DASNR                              CEAT                                 Part-time
             Faculty                            Faculty                           Faculty Support
         Current: .0 FTE                    Current: .0 FTE                      Current: 1.0 FTE
        Proposed: 4.0 FTE                  Proposed: 4.0 FTE                    Proposed: 1.0 FTE



  *Would be housed within departments and jointly administered with the NPDC director and department heads,
                                        similar to the FAPC model.

          Figure A. Proposed Organization for the New Product Development Center

The plan also includes allocating new funds to allow the NPDC to increase the number of major
projects per year from 4 to 28. The experience of the NPDC during the past three years and the
success of the FAPC were used as guidelines to develop a proposed budget that will realistically
allow the NPDC to meet the expressed needs of a substantial number of rural Oklahoma
manufacturers. The budget is outlined in the body of the report in Tables 3 and 4.

The Director’s position deserves special note. In order to be as effective as needed to interact at
all levels within the University as well as with the state legislature, the position should be at the
level of the current FAPC director.


                                                                                                              4
                         BUSINESS PLAN
          FOR THE OSU NEW PRODUCT DEVELOPMENT CENTER

                                  Rationale for the NPDC
In 2002, 4,027 manufacturers with employees in Oklahoma sold $40 billion worth of goods,
added value of $17 billion, and paid 149,983 employees a total payroll of $5.355 billion or
$35,710 per employee (See Appendix M). The average manufacturing production worker in
Oklahoma earned just over $16 per hour. Collectively, in 2002, Oklahoma manufacturers spent
over $1 billion on capital expenditures and purchased $23 billion in materials, (2002 U.S. Census
of Manufacturers). In addition, the 2002 Census of Manufacturers reports an addition of 3,061
manufacturing firms with no employees, grossing receipts of $155.4 million. Metal fabricators
account for nearly 25 percent of the manufacturing firms in Oklahoma. Printing and machinery
manufacturing each account for just over 10 percent of the total number of firms. Nonmetallic
mineral products and food manufacturing are both at slightly less than seven percent of the total.

Oklahoma State University (OSU) has recognized the importance of manufacturing firms and the
importance of making university resources available to manufacturers. University faculty and
staff resources, as well as physical laboratory and demonstration processing facilities, are
addressing problems on a daily basis.

The Food and Agricultural Products Center (FAPC) is successfully addressing technical
problems faced by Oklahoma’s food and agricultural product companies, ensuring that research
and science-based expertise is readily available to this important, but relatively small, component
of Oklahoma manufacturers.

The New Product Development Center (NPDC) was initiated in 2002 by faculty from the
College of Engineering, Architecture and Technology and the Division of Agricultural Sciences
and Natural Resources with the commitment to increase OSU’s capacity to partner other small
Oklahoma manufacturers with university-based research teams.

A number of universities in other states have similar centers, but only a few offer services that
are similar to those coming from NPDC. A brief summary of several similar university centers
is contained in Appendix H. The NPDC operating model is evolving to be similar to other
successful centers but with unique enhancements.

Most of Oklahoma manufacturers are small with 74 percent reporting fewer than 20 employees.
Of the 4028 total firms in Oklahoma in 2002, 1267 were outside of the two largest combined
metropolitan areas. Jobs in these companies are critical to rural community survival.

From the 1997 to 2002 Census of Manufacturing, the number of manufacturing jobs in
Oklahoma decreased by 8 percent (13,086) and the number of firms decreased by 1.4 percent (59
firms).

The manufacturing sector’s share of gross state product for all states and for Oklahoma has been
declining (Figure 1). The decline since 1997 has been more pronounced for Oklahoma (15.4%
in 1997 to 11.1% in 2004) compared to the U.S. (15.5% in 1997 to 12.8% in 2004). Figure 1

                                                                                                    5
slightly understates the change because Oklahoma’s share of gross product for all states declined
from .94% to .92% from 1997 to 2004. Figure 2 shows other negative changes that have
occurred in manufacturing from 1997 to 2002. (Additional information can be found in
Appendix M).

                                        18
                                                                                                  U.S.    Oklahoma
                                        16
                                        14
                 Percentage of Total


                                        12
                                        10
                                         8
                                         6
                                         4
                                         2
                                         0
                                             1997      1998     1999      2000     2001     2002         2003   2004
                                                   Source: Bureau of Economic Analysis, U.S. Department of Commerce
                                                               http://w w w .bea.doc.gov/bea/regional/gsp/

     Figure 1. Manufacturing Share of State Product: U.S. and Oklahoma, 1997-2004

                                       Number of     US     Oklahoma
                                       Employees


                             Real Payroll


            Real Value of Sales


               Establishments


                                               -14        -12     -10      -8       -6       -4          -2     0
                                                                           % Change
                                       Figure 2. Changes in Manufacturing from 1997 to 2002

Due to their size, many of the small Oklahoma companies do not have the staff resources
required to do the engineering work needed to continuously adapt and modify their current
products to meet the evolving needs of existing and potential new customers. Competitive forces
require that companies continue to improve both their products and processes to meet the needs
of customers. Without a new product or product evolution strategy, Oklahoma manufacturers
will eventually lose their ability to compete.




                                                                                                                       6
                                                                  The NPDC Today

Funding, Activities and Impact

Starting with funding from a small state appropriation in 2002 and adding grants with proposals
developed by NDPC personnel (See Figure 3), the NPDC today is a group of part time faculty,
administrators, and graduate students who are expanding OSU’s capacity to provide product
development and other technical services to small, rural manufacturers. It was initiated by
faculty from the College of Engineering, Architecture and Technology and the Division of
Agricultural Sciences and Natural Resources and has made significant impacts in selected local
areas. With a part time staff and state appropriation of $300,000 per year plus grants from
federal agencies, the NPDC has been successful in completing six product developments, five of
which are on target to be commercialized. The impact of these five products could generate $90
million in new revenues for Oklahoma, and the potential for 100 new Oklahoma jobs – an
impact of over $1 billion to the Oklahoma economy.

In addition to product development, a marketing and client communication program has been
launched in the last year that has served or is serving 15 manufacturing firms. The products
developed thus far in the communication program have received outstanding reception by the
manufacturers and are being incorporated into their marketing program. An impact evaluation of
the communications program will be conducted in January 06.

Funding for the NPDC has come from state appropriations and grants, as shown in Figure 3. The
only permanent funding source is an annual $300,000 line item in the OK Department of
Commerce budget. A current federal initiative grant of $128,881 through the Small Business
Administration is included in the amount for the current fiscal year, but expires after 2 years.
This grant was developed in cooperation with the University of Kentucky.

Although the local impacts of NPDC activities are significant, the funding level is woefully
inadequate to make the statewide impacts needed to help rescue the declining rural economy.

                                      Total   State Approp   NSF/PFI    OSU Cost Share          EDA Grant   OK/UK SBA Grant
     Funding (Thousands of Dollars)




                                      900
                                      800
                                      700
                                      600
                                      500
                                      400
                                      300
                                      200
                                      100
                                        0
                                                2002/03            2003/04                 2004/05           2005/06
                                                                             Fiscal Year

                        Figure 3. Funding by Sources for the NPDC
Over an 11-year development and commercialization cycle, each project is projected to generate
cumulatively $18 million is new revenue and $10 million in direct and indirect economic impact


                                                                                                                              7
(Henson, J, “Economic Impacts of the New Product Development Center,” NPDC, OSU,
Stillwater, OK November 2005.”

Our Partners

The NPDC works closely with other organizations that recognize the challenges that Oklahoma
manufacturers face, specifically:

      The Oklahoma Alliance for Manufacturing Excellence, Inc., and its 22 Manufacturing
       Extension Agents (MEAs) located across the state are our partners. The MEAs are
       backed up technically by the Applications Engineering (AE) Program, operated through
       OSU and designed to give small- to medium-sized rural Oklahoma manufacturers access
       to the latest technology. The NPDC links OSU faculty with the opportunities to work
       with small and medium sized firms that AEs and MEAs identify.
      Oklahoma Cooperative Extension Service and its county staff throughout the state are
       also our partners. These individuals identify manufacturers that need assistance and refer
       them to the AEs for screening.
      Manufacturers that desire assistance with project proposals for the Oklahoma Center for
       the Advancement of Science and Technology (OCAST) and the national Small Business
       Innovations Research Program (SBIR).
      Chambers of Commerce and area economic development authorities such as the Ponca
       City Development Authority.

NPDC services that are not readily available to manufacturers in Oklahoma include:

      Engineering and technical services associated with new product development;
      Market evaluations;
      Assistance with new product concept development;
      Client communications projects; and
      Commercialization of new products.

As mentioned earlier, the NPDC team is all part time, including part time faculty, administrators,
and student interns. Utilizing these human resources, the NPDC has shown that OSU faculty and
staff can help make a difference on a local level in making small manufacturers more profitable
and sustainable as well as create new income and economic impact to rural communities. This
business plan plots a course to move it to significant statewide impact.

                                 The NPDC of the Future
Introduction

The NPDC of the future will have enhanced resources and impact. It will build on the successes
of the current NPDC programs and add the human capital necessary to make a significant
statewide impact.

NPDC Mission Statement


                                                                                                8
The overall mission of the New Product Development Center is to strengthen rural economies by
improving the competitiveness and sustainability of rural Oklahoma manufacturers. NPDC
enhances rural manufacturers’ capacity to develop and commercialize new and improved
products and assists in getting the products commercialized and sold nationally and
internationally.

Specifically, the NPDC mission is to “link the innovative ideas and capabilities of rural
manufacturers with the knowledge and technical expertise of land grant university faculty to
develop and commercialize economically competitive new products that strengthen rural
economies, creating new and enhanced jobs, capital investment, and increased tax base.”

NPDC Objectives

In order to make a significant impact on the rural economy of Oklahoma through enhanced
manufacturing, the NPDC objectives are to:

   1. Help 28 companies per year with new products capable of being manufactured in
      Oklahoma and sold world wide, creating at least 20 new jobs per company;
   2. Improve the marketing and communications effectiveness of 20 companies per year so
      that their sales and profits increase;
   3. Complete strategic planning programs for 10 companies per year that cause them to
      recognize their strengths, weaknesses, opportunities and threats and develop effective
      marketing, production, financial, and staffing and organizational strategies to be more
      successful; and
   4. Increase the number of jobs available in companies that work with NPDC on new product
      strategies, communication strategies, and/or business planning strategies.

NPDC Projects, Services and Operations Plan

To meet the four objectives, the NPDC is currently managing new product development projects,
communications projects, and strategic planning projects for manufacturers. In all cases, the
NPDC provides the institutional linkage between the capabilities of rural manufacturers and the
knowledge and technical expertise of OSU faculty and students. These linkages are described in
three programs: 1) new product development projects, 2) communication projects, and 3)
strategic planning projects. Each type of project is described below.

New Product Development Projects – Types of Projects
The core of NPDC programs is to help small, rural manufacturers develop, commercialize, and
market new products. NPDC work is accomplished project by project, with each project being
unique. Three levels of projects are defined.

      Level 1 projects are generally student “capstone” projects with faculty oversight that are
       associated with teams of several senior-level students in their discipline developing a
       solution to an engineering problem that a firm faces. Some of these projects focus on
       new products identified by Manufacturing Extension Agents or Applications Engineers.
       Modest funding from the NPDC is used to maximize useful results.
      Level 2 projects are generally short-term extensions of Level 1 projects and are designed
       to refine the results of the senior design projects so that the companies can better

                                                                                                9
       implement the results. Some Level 2 projects may also be extensions of projects started
       by companies where assistance is needed for completion. These projects require an
       application and review process and somewhat more NPDC funding than Level 1 projects.
       A faculty member leads a team to undertake these projects, and the manufacturer and
       OSU sign a contract before work begins.
      Level 3 projects require a higher level of financial and development commitment and
       may take more than a year to complete. Because of the level of financial commitment,
       each Level 3 project also requires an application and review process before being
       accepted. The participating company pays a reasonable portion of the project cost. Each
       accepted project has a team of researchers assigned, led by a faculty member, and a
       contract between OSU and the manufacturer is signed before work begins. Intellectual
       property issues are addressed in this contract

New Product Development Projects – Project Selection Process

The NPDC project selection and development process is shown graphically in Figure 4. The
process begins when a manufacturer with a new concept contacts his or her AE or MEA. This
professional assists the manufacturer in assessing the product and company’s fit with the NPDC
program. If both parties feel that the NPDC is a viable option for further product development,
the manufacturer begins the application process. Appendix E contains the project application
and Appendix G contains a more detailed description of the process. Factors influencing project
acceptance include technical feasibility, market size, profit potential for the firm, expected
number of jobs created, and availability of appropriate expertise at OSU.

After the MEA and the AE determine if a project possibility exists, the MEA and/or AE assist
the manufacturer in filling out an application. The project is given an initial evaluation for
technical, market, and business prospects for the proposed product. The NPDC Advisory Board
(see Appendix C) then reviews the entire package and makes recommendations for or against
selection to the NPDC directors, who make the final decision on acceptance. Projects that clear
the technical and business evaluation are then matched with a faculty member who will serve as
the project’s principle investigator (PI). The PI develops a proposed work statement and project
budget. After acceptance, a contract with the manufacturer is negotiated that includes a cost
sharing agreement. After completion of the research and development, licensing agreements are
negotiated and upon signatures by OSU and the manufacturer, project deliverables, including a
prototype are delivered to the manufacturer.

Communications Projects
Communications projects are designed for manufacturers who need assistance creating materials
that communicate with customers. The NPDC links these manufacturers with upper-level
communications classes and interns that wish to take on real-world, hands-on projects. While no
guarantees of project results are given, the costs of these programs are minimal and the positive
response to this program has allowed the program to expand from four companies in Summer
2005 to 11 companies in Fall 2005.

Communications projects are currently being completed in Agricultural Communications 4403
(OSU), Journalism 4623 (OSU), and Journalism 4263 (University of Central Oklahoma). In
addition, four Agricultural Communications interns from OSU are working on additional


                                                                                              10
projects. Oral presentations of the project reports are presented to clients and staff at OSU, and
MEAs evaluate the project impacts for the company and state at project completion.

Each project generally delivers printed and electronic versions of the materials prepared for the
clients to assist in sustainability of the projects. The electronic versions allow the clients to
perform further modifications or to take the materials to be implemented or printed.

The expanded number of communications projects can be attributed to the fact that AEs and
MEAs have attended the final oral presentation sessions and understand the types of issues that
the students are capable of addressing. As a result, the MEAs and AEs actively recruit client
companies for communications projects.




                                    Figure 4. Project Process

Market and Business Analysis Projects




                                                                                                 11
Two types of Market and Business Analysis projects are conducted. The first is a project
assessment program that develops an analysis of the business implications of a new product
development project for a specific proposal and company. The result of project assessment is to
determine if investment in the project is likely to result in increased revenue, increased
manufacturing jobs, and increased profits for the firm for which the project will be done. This
process involves both determining the impact of the new product on sales (the result of a market
analysis), the likely cost of goods sold, and gross margin for the manufacturer.

The second type of project is a more comprehensive program designed to assess the current
business plan for a company and analyze new strategic initiatives that could be considered by the
company. These market and business analysis projects have been initiated for the first time in
Fall 2005 with a MBA class at University of Central Oklahoma (MKTG 5123). These projects
help companies conceive of new strategic initiatives and strategies designed to deal with specific
issues they face. The objectives in each case are to take advantage of a company’s strengths,
correct problems that cause them to be weak, exploit opportunities, and effectively deal with
potential threats. Some of the analyses will focus on individual components of a business plan
(marketing, finance, production, staffing). However, it is likely that all components of the
business plan will be impacted. Manufacturers interested in these programs will come through
the NPDC as referrals from Manufacturing Extension Agents, Applications Engineers, and OK
Cooperative Extension Service. The companies receive assistance from students in classes and
interns seeking real-world, hands-on projects and experiences.

NPDC Staffing and Organizational Plan

Administration of the NPDC

The NPDC is a joint program of the College of Engineering, Architecture and Technology
(CEAT) and the Division of Agricultural Sciences and Natural Resources (DASNR). The Dean,
Director, and Vice-President of DASNR and the Dean of CEAT are ultimately responsible for
the NPDC. The organizational chart is shown in Figure 5 for relationships outside the NPDC
and Figure 6 for relationships within the NPDC. Solid lines in the chart indicate direct or
reporting relationships, while dotted lines represent contractual/advisory relationships generally
associated with specific projects. Positions that have not previously existed are in broken-line
boxes. Note that both CEAT and DASNR administrators will have input on the makeup of the
advisory board.

          Dean and VP                Industry Advisory                   Dean
            DASNR                          Board                         CEAT




             DASNR                                                       CEAT
             Designee                                                   Designee




            DASNR                         NPDC                          CEAT
           Dept. Heads                    Director                    Dept. Heads               12
                                                                    Other
                       NPDC/DASNR/                             CEAT/DASNR
                          CEAT                               Faculty with NPDC
                          Faculty                                  Projects




  DASNR                                                                            CEAT
                                            NPDC
 Dept. Heads                                                                     Dept. Heads
                                            Director


                        Marketing and
                                                     NPDC Program             Part-time Graduate
                       Communications
                                                      Coordinator             Student Employees
                       Program Leaders



                      Financial/Admin.            Part-time Undergraduate
                          Assistant                 Student Employees

            Figure 5. Proposed Organizational Chart for Outside NPDC Relations

            Figure 6. Proposed Organizational Chart for Inside NPDC Relations

Weekly activities of the NPDC are currently managed by designees from DASNR (currently Dr.
Bill Barfield, an emeritus professor and former Head of the OSU Department of Biosystems and
Agricultural Engineering), and from CEAT (currently Dr. L.L. (Larry) Hoberock, Professor and
Head of the OSU School of Mechanical and Aerospace Engineering). The NPDC Director will
be responsible for day-to-day management issues once the position is filled.

The two college level designees serve at the discretion of the deans and could be administrators,
department heads, or faculty from the respective colleges. The NPDC Director reports to the
Deans of the two academic units through their designees and provides periodic feedback to the
NPDC Industry Advisory Board. Note that the respective Associate Director/Deans with
research responsibility serve in an ex officio capacity on the NPDC Industry Advisory Board
(see Appendix D).

The NPDC Director Position is proposed as a new position with research faculty rank.

       The primary responsibilities of the NPDC Director are:

       1.      Project management
                Maintain relationships with potential and existing client companies

                                                                                                   13
                 Assure that projects selected for NPDC support are economically viable and
                  supportable by the research resources available at OSU
                Identify and recruit faculty to lead NPDC projects and work with them to define
                  contract budgets and work statements
                Assure that NPDC projects are progressing as scheduled
                Initiate and manage research contracts with companies including budgets, work
                  statements, deliverables, licensing agreements and royalty payments for intellectual
                  property generated by NPDC projects
                Evaluate the results of NPDC projects
       2.      Public Relations
                Create awareness of NPDC programs among Oklahoma manufacturers
                Communicate the results of NPDC projects to OSU administration, funding agencies,
                  and industry groups
                Direct staff in preparing and distributing appropriate NPDC PR materials (website,
                  brochures, newsletters, etc…)
       3.      Funding
                Educate legislators and influential individuals on the importance of the NPDC and
                  the need for state funding
                Write proposals for grants to support NPDC activities
       4.      Administration and Publication
                Organize meetings of the NPDC Industry Advisory Board and provide project and
                  NPDC activity reports to the NPDC Industry Advisory Board for their consideration
                Hire, direct and evaluate full-time and part-time staff
                Contribute information used in the evaluation of faculty associated with NPDC
                Write, produce, and distribute reports and papers, including annual reports and
                  published papers

The level of the Director’s position deserves special note. In order to be as effective as needed to
interact at all levels within the University as well as with the state legislature, the position should
be at the level of the current FAPC director.

The NPDC Industry Advisory Board was formed in 2003 to assist in project selection and
program improvement. The board meets annually to review project applications and make
recommendations to the NPDC directors. Intermediate electronic meetings are held as needed
for project evaluation. This group comprises members from the Oklahoma manufacturing
community, i2E (formerly the Oklahoma Technology and Commercialization Center), marketing
and business professionals from both OSU and private industry, and technical professionals
familiar with engineering research and manufacturing processes. The current membership of the
Board is given in Appendix C, and the operating policy for the board is given in Appendix D.

The full-time NPDC staff also includes a Program Coordinator position and an
administrative/financial assistant. The program coordinator is envisioned as a person with
primary responsibilities for the day-to-day operations of the NPDC.

   The primary responsibilities of the Program Coordinator are:

       1.      Public Relations
                Create and publish a newsletter highlighting NPDC activities
                Oversee currency of website, brochures, and other PR materials


                                                                                                    14
        2.     Accounting and Purchasing
                Assure that funds are properly spent and accounting procedures are aligned with
                  university policy
        3.     Administration
                Hire and evaluate part-time undergraduate staff
                Assist in writing the annual NPDC report
                Assist the director with grant writing and submission
                Maintain the NPDC proposal and budget process
                Assure that the annual reports are produced and available
                Help clients through the NPDC proposal and budget process
                Contribute information used in the evaluation of faculty associated with NPDC
                Develop and prepare oral presentations about NPDC activities

A position description for a full-time Financial/Administrative Assistant is being written with
plans for funding to come from existing funds. The Administrative/Financial Assistant will
report to the NPDC Director and assist in all matters including budgeting, accounting,
purchasing, payroll, and other areas as assigned.

Faculty Positions

Currently, engineering, agricultural economics and agricultural communications faculty
members associated with NPDC are committed to projects on an as needed basis and are full-
time tenure-track or tenured faculty in their respective departments. Faculty can interact with
NPDC either as 1) instructors of senior design Level 1 Projects, 2) instructors of other courses in
which some of the projects come from NPDC clients, or 3) as faculty who have taken the lead in
Level 2 or 3 NPDC projects. Faculty members receive financial incentives in the form of
summer salary support, academic year salary support, overload pay, and support for research
scientists, graduate research assistants and staff.

The organization chart for the NPDC of the future calls for eight faculty members to be
employed directly by the center. These faculty members will be managed similarly to faculty in
the Food and Agricultural Products Center and would have tenure-track appointments in
appropriate academic units (i.e. Mechanical and Aerospace Engineering, Biosystems and
Agricultural Engineering, Electrical and Computer Engineering, Marketing, Agricultural
Economics, or Agricultural Communications). The respective academic department head and
the NPDC director will jointly manage and evaluate performance in these positions. The eight
needed faculty positions follow in order of priority. Research and Extension appointment
percentages are shown for each along with their potential departmental affiliations:

   1.   Mechanical Design Engineering (75R, 25E) (MAE or BAE)
   2.   Business Analysis and Communications (50R, 50E) (Ag. Econ.)
   3.   Electronics and Electronic Design Engineering (75R, 25E) (ECE or BAE)
   4.   Materials Engineering (75R, 25E) (MAE)
   5.   Controls and Instrumentation Engineering (75R, 25E) (MAE, ECE or BAE)
   6.   Automation Engineering (75R, 25E), (IEM)
   7.   Mechanical Design Engineering (75R, 25E) (MAE or BAE)
   8.   Electronics and Electronic Design Engineering (75R, 25E) (ECE or BAE)



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The first three positions are needed in the first year, the next three positions in the second year
and the last two positions in the third year. Initially, the engineering positions will be 75 percent
applied and basic research and 25 percent extension. Research projects would be focused on
NPDC client projects and research topics that could lead to manufacturing opportunities in
Oklahoma. Teaching assignments for these faculty members could be added if there is a need
for supervision of senior design projects in engineering, business planning and communications
class projects. These positions would be evenly split between DASNR and CEAT.

All of the positions except the Business Analysis and Communications positions are engineering
positions to support product development. The Business Analysis and Communications Leader
(position 2 above) will be the business analysis program leader and is primarily responsible for
evaluating the market for the proposed new product and evaluating the financial likelihood that
products will result in profitable opportunities for client companies. The market evaluation will
generally include:

   1. An evaluation of potential customers for the product and their interest in the product or
      service;
   2. An evaluation of competing products and firms, including any existing patents that may
      limit the capacity of the firm to successfully implement its product;
   3. Government or regulatory conditions that may limit or support the product’s sales;
   4. An evaluation of the company’s capacity to exploit the opportunities presented by the
      new product; and
   5. Development of strategic planning programs for manufacturers.

A Communications Project Leader (faculty) will be a part time position and work with the
Business Analysis and Communications person to supervise client communications interns and
students. She/he will have the primary responsibility of supervising student teams in classes and
interns that create promotional brochures, web sites, advertising layouts, trade show booth
designs, demonstration DVDs and CDs for products, and an advertising plan for clients
identified by NPDC staff. The deliverables for each project will be determined by the teams, and
may vary depending on the needs of the company. These projects are currently being used to
establish the NPDC as a service provider in the manufacturing industry in Oklahoma, and
depending on the need, this position may be defined in the future as a full-time faculty or staff
position.

NPDC Marketing Plan

A requirement of any successful organization is a solid marketing plan. The NPDC marketing
plan includes the following elements: situation analysis, objectives, strategies, tactics,
implementation plan, and monitoring and measurement of the effects of the marketing strategies
and tactics. Details of the marketing plan are contained in Appendix B.

Situation Analysis

A number of complementary programs and agencies exist that deal with economic development
and manufacturers in Oklahoma, as noted in Appendix F. However, none of the other programs
offer:


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    1.       Ph.D. level engineering expertise and product development experience from the
             diverse set of departments associated with Oklahoma State University.
    2.       The only educational institution with a commitment to extension that is part of the
             land-grant university model.
    3.       A unique combination of engineering expertise with business planning and
             communications projects.

Objectives

The primary objective of the NPDC marketing plan is to make manufacturers aware of the
services available through NPDC programs and position the NPDC as a resource team that can
help manufacturers solve problems associated with new product development, market analyses
for new products, and communications project deliverables.

Strategies and Tactics

The principle strategies that the NPDC will use are 1) differentiation from other services
available to manufacturers, 2) establishing a positive position in the mind of company CEOs, 3)
targeting firms with greatest interest in new products, and 4) remaining complementary with
other services available to manufacturers in Oklahoma. Tactics to implement the strategies
contained in the marketing plan are contained in Appendix B.

Implementation Plan

The implementation plan includes a set of actions needed to activate the tactics in the marketing
plan, Appendix B.

Monitoring and Measuring the Success of the Marketing Effort

Managers of each firm that participates in an NPDC program will be asked to describe how they
found out about the program and who influenced their decision to participate. Measures of the
marketing program success will include:

    1.   Number of inquiries about program participation including hits to the web site;
    2.   Number of applications received for each type of project;
    3.   Number of communications projects completed;
    4.   Number of marketing projects completed;
    5.   Jobs created or saved;
    6.   Revenue generated;
    7.   Costs avoided; and
    8.   Capital expenditures by client companies.

NPDC Financial Plan

The NPDC income since establishment was shown by categorical breakdown earlier in Table A
and repeated in Figure 3. The projects are described in the NPDC Annual Reports that are
included in Appendix H and Appendix I. The NPDC has the following current and expected
sources of funds:

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      State appropriations which have come through the Oklahoma Department of Commerce;
      Grants (NSF and others);
      Targeted Federal appropriations;
      Funds acquired from project contracts with companies;
      SBIR projects with companies;
      Foundation contributions to support student projects; and
      Royalties from intellectual property rights retained from project.

The core funding to date has been $300,000 per year in the Oklahoma Department of Commerce
budget. A National Science Foundation (NSF) grant has been providing approximately $200,000
per year for three years, and the university in-kind contributions have been between $77,000 and
$90,000 per year. A Small Business Administration (SBA) grant shared with the University of
Kentucky will provide approximately $257,000 of support over a two-year period beginning in
2005/06. An Economic Development Administration (EDA) grant has provided $81,434 per
year for two years. Project funds from companies are not shown in Figure 3 because they are
funds for specific services or equipment contributions for specific projects.

An important note is that grant funding will be $797,380 in 2005/06 and has increased every year
of the life of the NPDC. Existing grants will provide approximately $210,000 into 2006/07
without including any carry over from the NSF grant that can be extended until 2006/07. If the
proposed structure is fully implemented with full-time Director, Coordinator, and faculty
positions; grant, project, and eventually royalty support would be expected to continue to
increase.

While it would be premature to project precise numbers, several current projects are very close to
commercialization and either have or are in the process of having royalty sharing agreements
written and approved. The magnitude of royalty payments in at least one case could be
significant but, like all new IP, is always dependent on many additional steps to product
commercialization. The NPDC is not designed to take on projects that will pay for themselves
but designed to undertake projects that will benefit rural manufacturers and create jobs in
Oklahoma. One firm with whom we have worked is in the process of building a plant and hiring
crews that will result in approximately 100 new relatively high paying jobs in Oklahoma. The
NPDC and the scientists involved in the project will share in rather modest royalties. The
benefits to the state of Oklahoma are substantial and important.

Currently, there are no faculty members who are full-time employees of the NPDC. New NPDC
faculty positions will be primarily extension/research positions, jointly managed by the
respective department heads and NPDC Director, similar to how faculty in the Food and
Agricultural Products Center are managed. It is possible that faculty in these positions will have
limited teaching assignments. Senior design classes would be an obvious place where faculty
associated with NPDC could contribute either as the faculty member in charge or as supervisors
of projects related to NPDC activities. Each position is budgeted at $108,000 per year for an 11-
month contract and 28 percent benefits. These positions are designed to give NPDC increased
capacity to perform projects, work directly with companies in project development, improve the
outcomes of senior design projects, and encourage further development of projects after a senior
design project has been completed.


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     Tables 2 and 3 list the funding requirements for the NPDC and proposed sources of funding.
     Also included is the full-time personnel needed to implement this plan. Once all faculty
     positions are filled, the NPDC staff can handle as many as 28 projects per year. It is difficult to
     know how much each of the projects would cost and how much of the cost would be paid by the
     manufacturer or from NPDC funds. Currently, we are asking that manufacturers pay between 5
     and 50 percent of the total with their contributions focused on the acquisition of materials and
     physical assets associated with the project. Note that the manufacturers’ contributions are not
     shown in either expenditures or income in Table A or Figure 3. The NPDC contribution has
     primarily been used to fund faculty time spent on the projects, while the manufacturer
     contribution has been in the form of materials and product components. With full-time NPDC
     faculty paid from NPDC funds, we believe it would be possible to do projects for approximately
     $35,000 per year in addition to what the manufacturer funds. The $35,000 per project would be
     for graduate student assistants and other direct project costs.

     After the resignation of Autumn Hood, NPDC Coordinator, the NPDC has no full-time
     employees. We believe that it is imperative that the base university budget include the NPDC
     Director’s position. As shown in Tables 2 and 3, the business plan requests that the university
     fund the NPDC Director’s position. In addition, the plan requires that the university supports
     development of additional funding over the next three years for the eight full-time faculty.


Table 2. Proposed NPDC Budget for 2005/06 through 2010/11 (Part 1)
                                        Current      Proposed     Proposed     Proposed      Proposed Proposed Proposed
                                        2005/06       2005/06      2006/07      2007/08       2008/09 2009/2010 2010/11
Faculty and Staff
College Representatives
(Hoberock/Barfield)**                       $100,000      $75,000 $35,000 $36,750.00 $38,587.50 $40,516.88 $42,542.72
Part-time Faculty                            $52,800      $52,800 $55,440.00 $58,212.00 $61,122.60 $64,178.73 $67,387.67
Director's Position                               $0      $65,000 $130,000         $136,500 $143,325 $150,491 $158,016
NPDC Faculty Positions (located in
Depts)***                                         $0            $0 $162,000        $680,400 $952,560 $1,000,188 $1,050,197
Coordinator's Position                       $11,249      $11,249 $60,000           $63,000       $66,150      $69,458     $72,930
Financial Assistant                               $0            $0 $32,000          $33,600       $35,280      $37,044     $38,896
Benefits @36 %                               $59,058      $73,458 $170,798         $363,046 $466,929 $490,275 $514,789
Total NPDC Personnel                        $223,107     $277,507 $645,238 $1,371,508 $1,763,954 $1,852,152 $1,944,759
Non Salary Project Expenses                 $175,000     $175,000 $420,000         $840,000 $980,000 $980,000 $980,000
Non-NPDC Faculty Salary Support             $325,000     $325,000 $195,000         $390,000 $455,000 $455,000 $455,000
Travel, Phone Supplies                       $30,000      $30,000 $30,000           $35,000       $40,000      $40,000     $40,000
Part-time Students and Grad Interns          $45,000      $45,000 $50,000           $70,000       $90,000      $90,000     $90,000
Miscellaneous                                $10,000      $10,000 $10,000           $10,000       $10,000      $10,000     $10,000
Total NPDC Budget                           $808,107     $862,507 $1,350,238 $2,716,508 $3,338,954 $3,427,152 $3,519,759
** As the Director is hired and assumes responsibility for the NPDE, The College Administrative Representatives' involvement
in daily activities decreases and is focused on developing political support. Ultimately, this role will be assumed by the
Director.
***Assumes three positions for one-half year in 06/07, six position in 07/08, and 8 positions in 08/09 through 10/11.




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        Table 3. Proposed NPDC Budget for 2005/06 through 2010/11 (Part 2)

                                                    Current Proposed Proposed                     Proposed            Proposed    Proposed     Proposed
                                                    2005/06 2005/06   2006/07                      2007/08             2008/09    2009/2010     2010/11
Proposed Federal Initiative, OSU, UK,
UT, VPI                                                                             $500,000         $500,000  $500,000   $500,000   $500,000
OSU Cost Share (NSF Project)           $89,935 $89,935                                    $0               $0         $0         $0         $0
NSF/PFI Grant                         $197,130 $197,130                                   $0               $0         $0         $0         $0
Economic Development Administration $81,434 $81,434                                  $83,000          $83,000    $83,000    $83,000    $83,000
OSU/UK SBA Grant                      $128,881 $128,881                             $128,881               $0         $0         $0         $0
Other                                       $0       $0                             $150,000         $350,000  $500,000   $500,000   $500,000
Total Grants                          $497,380 $497,380                             $861,881         $933,000 $1,083,000 $1,083,000 $1,083,000

Royalties                                                     $0            $0               $0               $0        $32,000      $80,000    $144,000
DASNR Support
      College Representative                           $****0         $****0          $11,000          $11,900          $12,500      $13,100     $13,800
      Director                                             $0        $29,467          $58,933          $61,880          $64,974      $68,223     $71,634
CEAT Support
      College Representative                          $68,000        $34,000          $25,500          $11,900          $12,495      $13,120     $13,776
      Director                                             $0        $29,467          $58,933          $61,880          $64,974      $68,223     $71,634
CIED Support
      College Representative                               $0 $22,875     $10,675    $11,209    $11,769    $12,358    $12,976
      Director                                             $0 $29,467     $58,933    $61,880    $64,974    $68,223    $71,634
State Appropriations                                 $300,000 $300,000  $655,120 $1,584,560 $2,039,107 $2,106,563 $2,177,391
Total Support                                        $865,380 $942,655 $1,740,976 $2,738,209 $3,385,793 $3,512,808 $3,659,844

Support Minus Cost (Contingency
Fund)                                                 $57,273        $80,148        $390,738           $21,700          $46,839      $85,657    $140,084
Number of Projects per Year                                 5              5              12                24               28           28          28
* Salaries are increased 5 percent per year
** Assumes three positions for one half year in 06/07, six positions in 07/08, and 8 positions 08/09 through 10/11.
*** Funds from clients for specific projects are not shown either as income or expense in Tables 6 and 7.
****Role covered by Barfield with funds from CIED until 1/1/06




                                                                   Contingency Plan
        As stated in the plan, it is prudent to phase in the funding for full-time faculty positions based on
        the needs identified and project loads manufacturers bring to the NPDC. The rate at which that
        phase-in occurs could be altered depending on project needs and demand. Certainly, even with
        complete staffing, there will be a need to involve non NPDC faculty in product development and
        commercialization. The NPDC will offer incentives for existing faculty to continue to
        participate in NPDC project research, and the funding should cover all project costs and faculty
        costs.

        The relationships being established with companies through the communications projects and
        marketing strategy projects will allow NPDC to gain position in the mind of manufacturers as a
        service provider of merit in Oklahoma. The capacity for manufacturing to be maintained as a
        viable industry requires that firms continue to innovate.


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As with any agency that generates grant support, the ability to carry over funds from one year to
the next is crucial so that gaps between projects can be adequately covered. A reserve
maintenance program would be expected to be a financial contingency strategy essential to
NPDC performance.

It is also remotely possible that the NPDC will accrue large royalty payments from some project
developments. Appendix K contains the OSU royalty distribution policy that allows the NPDC
to receive a potion of royalties from NPDC projects. At first blush, it would seem reasonable to
return some of the NPDC royalties to the department generating the research since the
department facilities were used. Discussions have begun with the Associate Dean for Research
and the Associate Director of the Oklahoma Agricultural Experiment Station about the
appropriate procedure. In the discussion, the following issues are among those being considered:

      A fair and equitable manner is needed for using any windfall royalties.

      If departments receive funds for equipment and facility maintenance only if there is a
       windfall of royalties, most of the projects conducted under NPDC funding would not
       yield any departmental support.

      An alternative is to use a stores account and charge audited fees for all equipment usage
       on NPDC projects. The fee would be paid regardless of royalties and would properly
       compensate for operational cost for the equipment. This would guarantee department
       funding to assist in equipment replacement. Biosystems and Agricultural Engineering
       currently have such a policy.

      Returning the windfall royalties only to departments that participate in the project that
       generates this windfall would be a disincentive for faculty to work on projects that may
       have small royalties, but be highly important to local rural communities.

      Other avenues that could be considered are the use of some royalty funds for graduate
       student fellowships, for post-doctoral fellowships, and for seed money for new project
       areas.

As part of our contingency plan, it is critical that the faculty hired by NPDC have credentials
consistent with tenure-track positions in their respective departments. NPDC faculty
appointments should result in tenure and be respected as a peer position in their departments. At
some point, should the NPDC need to downsize, we believe the faculty resources would be
absorbed into their respective departments as teachers and researchers.

We believe it is possible to use existing facilities and laboratories to complete NPDC projects on
campus, and therefore the plan does not call for extensive facilities except for office and
conference room space. Departments will be reimbursed for departmental staff and facilities
used for NPDC projects. In the absence of an audited stores account for equipment and facility
usage by the department hosting the project, the reimbursement will be negotiated on a project-
by-project basis.




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