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Posts Tagged ‘EEIG’

We are familiar with too many good ideas that never make it to the market and less frequently, brilliant marketing strategies selling a flop. A proper balance between the product and the business plan rarely occurs. That is probably why there are few companies like Zara or HM; only the chosen few can find the Holy Grail. But we all struggle to do our best and come up with the right balance that puts our product or services in the right spot in the market. The belief that that is achievable is what bring us together every time there is a gathering like this one. And the reason for this exposition is because we, the partners of AiB, believe that we are on the right track. First, let me go through briefly how the ideas that my colleagues have already explained can become a sellable thing. To start with, you may have gathered already that AiB has two heads, kind of like a Hydra.  The difference is that this one has only two heads, its breath is not poisonous but sweet, and its blood, instead of being deadly, heals. One of the heads of our friendly beast represents a service. AiB has been designed as a care service with the objective of detecting the risk of falls in the individual being cared for by a care service provider. Corresponding to that view, AiB as a service offers a complete software-hardware package that allows the care provider to screen the population under its care for a set of signs that will prompt the system to raise alarms. If this is the case, care professionals will perform a pre-evaluation of the person to double-check if the user should be included in the risk-prevention programme or if this is a false positive. Once the inclusion is decided upon, a multidisciplinary team will perform a complete check-up of the user and decide upon a personalized care plan for the user to follow. The care plan is a comprehensive set of neurological and physical exercises included in the system library, as well as any other action that the care professional decides, such as pharmacological therapy or dietetic recommendations. The system will request certain information by the user, mainly about environmental conditions, and prompt remedial actions to counter its risks. Once the personalized care plan is designed and introduced in the user terminal, the user will be asked to follow it by means of an agenda, reminders and so forth. Continuous follow-up of his or her performance will be recorded by the system, triggering alarms to the care professionals in case of deviation from the care plan or changes in the vital signs of the user. These events will allow the care professional to modify the personalized care plan accordingly. It will be obvious by now that AiB as a service is directed to socio-health organizations that can take advantage of the system to reduce the rate of falls in the population they cover, with a clear saving in the overall cost of care, which I am not going to go into since we all are aware of the cost of a hip replacement, for instance. The second nice head of our Hydra corresponds to the product that we envisage to earmark for the individual. In a nutshell, AiB as a product is a self-contained package for individual use by those concerned with their health, probably because they have already fallen or have seen their relatives fall. So it is for people who are aware of the personal cost of a fall in terms of days and/or health lost. The AiB product comprises a self-evaluation that will prompt a care plan, although obviously not at the level of the service care plan. The care plan includes a set of remedial actions that can be made in the environment, as well as physical and neurological exercises. A system of alarms will suggest the user refer to a care professional when deterioration in the performance of the user is detected. How does this translate into a business model? We have chosen the Business Model Canvas because it is as good or as bad as any other model but has the advantage of being simple and clear cut. I will concentrate on only two of the boxes of our model. First the customer segment, in the Canvas jargon. As you can see, we are targeting two completely different markets:  the professional care market and the individual, with basically the same body of knowledge.  Again our friendly Hydra comes to mind with two heads but only one body, and guarding against the perils of falls instead of the entrance to the Underworld. Second, the key activities. We have discussed a lot among the partners on how to proceed from here. We have been able to produce a thing, system and product for the prevention of falls, without killing each other.  A thing that is the sum of the efforts of very different organizations, from health care, to users, to ICT companies, to process designers, even an economist (myself). The result cannot be broken into parts so that each one takes its bit and markets it independently. So we arrived to a solution that has been in use for many years: the European Economic Interest Grouping. This legal figure is governed under European Community (EC) Council Regulation 2137/85. It allows us to continue collaborating while preserving the individuality of the members and separating the AiB undertaking from the other business of the partners. The use of the EEIG will allow the AiB partners to go on to the next step of industrializing our output. That will be our way forward. I am sorry I could not attend the event in person, but if you have any questions, feel free to ask either my colleagues present or contact me at the e-mail address shown on the screen. Thank you very much for your attention.

You can also whach the presentation at http://youtu.be/QZtK6AyvfN0

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The life of an AAL project, and for that matter of any R&D project, is very similar to the life of a human being. Let´s take a look at the process.

A human life starts even before inception, it is an act of love, the decisive moment when people start thinking about creating a new life. Similarly, a project is born from an idea; an idea created by business, end-user, and academia who think that what they have in mind will make a difference to themselves and to humanity. Isn´t that what we all think about our future offspring?

Then comes the inception, oh sorry the call! This is the moment in which the partners –business, end user, and academia; kind of a “ménage a trois”- decide to go ahead with the idea and make it a proposal. The proposal needs to be fed by all parties involved, taking care not to overdo it in any aspect,-neither technical, nor scholarly nor completely end user driven- but with just the right mix of all the ingredients. If we have been careful, the proposal will be accepted and a newborn project will come to life.

Now starts a difficult period. The partners have to come to terms with each other, adapt to each other’s idiosyncrasies, accept that things have to be decided in common while preserving everybody’s interests. Just like those first moments of having a toddler at home. Let´s assume that the kid is well bred, behaves at school and its teachers are happy with it.  It gets good marks at the interim reviews and obtains a good grade after obligatory schooling, meaning that the final evaluation is really good.

Would you send that kid into the world alone to earn its living? Do you think that because its grades at the end of obligatory schooling were excellent, your obligations towards the child are finished? Well, this is what many organizations involved in R&D are doing. And that’s why most projects don´t pass the stage of pilots; you could say that they don’t even reach puberty. The road to abandonment is, sometimes, a fight over the result. The path is similar to a divorce with unresolved issues about a child’s custody, or in our case disputes about joint ownership of the foreground. The result is, again, another pilot.

What is needed is a lifetime commitment, a commitment to be together “in sickness and in health”, to abide by the principles that, when the idea was born and the partners decided to work together to make it real, they would stick together till the child is not a child anymore  and can have a fruitful and independent life. That is, till the result of the R&D project has materialized into an industrialized product or service that can be launched into the market.

But reaching that stage means investing in the industrialization of the product or service; kind of putting the child through university or vocational training. And there is not a vast array of grants for that, at least, not at the level of the grants for R&D. So we have found our first culprit: The European Commission. The EC must provide financing for the industrialization stage! Is that so? Is it the case that European entrepreneurs have to rely heavily on public finance and support? Maybe so and maybe that’s why the USA is leading the way.

Yes, the problem is finding means for the industrialization and marketing of the R&D result. And the problem is also that the consortium is made up of organizations with very different financial structures; most probably it is a mix of public organizations and NGOs, SMEs and big companies. Their problems are very different. Public organizations and NGOs have very specific problems of their own, that I will not address since in every one of the 28 European countries the problem is different. As for SMEs, access to finance could be a problem and we know it is in short supply, more so if the SME is based in one of the southern European countries.  So here we have the next culprits: banks. They should be obliged to finance good projects like ours! Don’t they understand our business!

Maybe the big company is willing to take over the industrialization phase, but what about our part. What? With so many resources they are not willing to cover our part? Don’t they see that they will certainly recover their contribution once the product is in the market making millions? Well, apparently not and here we start the next phase of blaming each other, leading us back to square one: a pilot!

So even if all the members of the consortium decide to go forward with the industrialization and commercialization phase, there are problems ahead that have to be confronted. And the principal one is how to organize the industrialization and commercialization phase.

If the consortium had a legal status, with a clear coordinating, management and research structure, it would be a lot easier. I am not advocating the creation of a brand new company each time a R&D project pops out. A traditional legal company is burdensome and costly. But some kind of arrangement has to be found for the kid to get through university.

There is a system at hand since 1989: the European Economic Interest Grouping. The EEIG is an instrument for those wishing to internationalize their activities while giving them a European dimension.

An EEIG can be set up by at least two legal entities registered in two different European Economic Area countries, those of the European Union plus Iceland, Liechtenstein, and Norway. Legal entities refer to any kind of company, large, medium, and small; institutions such as universities, scientific research centres, local authorities, and chambers of commerce; and also individuals. The only condition for them all is to have an economic activity of some kind prior to entering the EEIG.

Its purpose is to facilitate the economic activities of its members by pooling resources, activities and/or skills, exactly as we have done during the development phase. It can carry on the job and keep the partners focused on the project results. Why is it not used more? I don’t know, you tell me.

I am not going to go into any profound explanation  on how to form an EEIG, that is for lawyers and, thank goodness I am not one. I have enough with being a member of another disgraced group: the Economist. In any case, just Google European Economic Interest Grouping and you will find more information than you care to know. Nevertheless I recommend that those who may have some interest in EEIG go to the link

http://ec.europa.eu/employment_social/equal/products/sup/pro-122-hb.pdf

and download the document. It is outdated in certain parts, but the main body is a very good introduction to EEIG. All you need to know before talking to your lawyer is there, and to some extent what follows comes from that document.

There are some good reasons for choosing an EEIG structure for continuing our endeavours:

First of all, it is governed under European business law, all members are on an equal footing, something that would not happen if another form of business structure is adopted, since in this latter case the governing law would be exclusively that of the country in which the company is registered.

The second reason is that, being able to draw from all quarters of economic life, from industry to academia, from public bodies to individuals, it is able to create an ideal playground for synergies to flourish.

Council Regulation nº 2137/85 of 25 July 1985 regulating EEIGs constitutes a very limited set of norms, allowing the members of the EEIG complete freedom for organizing its structure. Flexibility is then the third reason.

But at the same time, and this is the fourth reason, an EEIG is a stable organizational figure. It is an autonomous legal structure with powers for representation, negotiation, contracting and all the other features of an independent legal economic entity.

Fifth and finally, an EEIG is different from its members. The main difference is its ancillary nature, meaning that its purpose is to facilitate the activity of its members, but not to replace them.

I said before that the Council Regulation governing EEIGs leaves a lot of leeway to the members. Effectively, article 5 detailing what the Contract must have includes only:

1) the name of the grouping, including EEIG

2) the official address of the grouping,

3) the object of the grouping,

4) details of all the members of the grouping,

5) the duration of the grouping, in case this is limited.

And it is advisable to keep it like that, since any change to the information contained in the Contract has to be unanimously approved and registered in the national registry of the country in which the EEIG is resident.

To complement the Contract the members are recommended to draw up a document, this time as complete as possible, of the Internal Regulations governing the EEIG. This document has the advantage over the Contract of being able to be modified as the members so decide and it is not necessary to register it or its amendments. It could include, for instance:

1) the way in which the grouping is to be financed,

2) the way in which members are to share in the grouping’s profits and losses,

3) the conditions for admission, resignation, withdrawal, or expulsion of members,

4) the rules for the general meeting of members,

5) the appointment, dismissal, and powers of managers,

6) and the resolution of disputes among members.

Once this is agreed upon, the next step is to register the Contract in the registry of the country of residence and its publication in the corresponding national gazette and in the Official Journal of the European Communities.

An important factor to have in mind is the financial side of the EEIG. Since there is no requirement for capital, the members are free to regulate the way the EEIG will be financed. Contributions can be in kind, in cash, by provision of skills, etc. Financing can also be obtained through loans from financial institutions but not directly from the public. In real life the majority of EEIGs finance their activities on the basis of annual membership fees.

Another important factor to consider is that “… the members of a grouping shall have unlimited joint and several liability for its debts.  ….” In plain English what it means is that anybody having recourse against the EEIG, if not satisfied in a reasonable time, can go against any of its members to recoup its outstanding debt. It is up to that member to go against the other members in order to recoup the debt. Is this a problem? At first it looks like it is, but let’s look at it closer. The EEIG is stronger than its individual members, just because it is the sum of all of them. So the most likely outcome is that it will get better conditions than any of the individual parts.

Another factor to consider is that the access to European Commission R&D project financing will be easier. An EEIG is already a multinational entity, at least from two different EAA countries. It shows the evaluators a commitment to working together and one structure already in place. Consider that most support programmes include conditions about the transnational nature of the grouping, with independent operators and demonstrating a strong synergy among its members, all features ingrained characteristics of an EEIG.

Summing up, tract C is asking: Have SMEs which are partners in the consortia the financial power to establish an AAL solution on the market? If not, who will drive the solution? My answer is that the consortia -research institutions, end user groups and SMEs- should keep together, and that it is only up to them and is their sole responsibility to take the necessary steps to make it possible for the final R&D result to make it to the market. And the best available legal instrument to bind those organizations together is the European Economic Interest Grouping.

Paraphrasing a former USA President: “My fellow Europeans, ask not what the European Commission can do for you, ask what you can do for Europe.”

Given at:

AAL FORUM

Norrköping, 25th September 2013

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