Note: This post was originally written by TechAlliance EIR Colin Macaulay.
Sidebar: I have been using my biotech startup experience to encourage new life-science entrepreneurs to develop their own technologies and to avoid some common pitfalls in their startup journeys. Through this mentoring process I have encountered several common issues that I try to explore in a series of short blogs. These are my own observations and opinions and do not represent those of any institute, company, or client I may have worked with.
I don’t know if any academic researchers feel pressured to commercialize their ideas or to work in areas with perceived commercial potential. From those in science, engineering or medicine that I have worked with, I find some simply want to get their new technologies onto the market to help those who need them, while others are mostly searching for alternative funding sources for their academic projects. If you are going to commercialize new ideas or technologies out of academic institutes, it is important to understand the innovation process and its central role in entrepreneurship and commercialization.
In the first blog of this series, I described how most startup educational programs are variations on Steve Blank’s ubiquitously utilized approach to building a lean startup. I use these ideas as the foundation for my own mentoring of academic researchers on the fundamentals of the innovation process, and then customize it to the life-science sector in which they wish to commercialize. I was invited by an Engineering Graduate Students Society to give a general talk on entrepreneurship and commercialization. During the talk, I illustrated the innovation process and focused on the commercialization activities required to build the core elements of a business model: product-market fit and value proposition. Every entrepreneur needs to understand who their customers are, the problem they are trying to alleviate, and the value of their solution to the customer. Without these core elements, there is no commercial opportunity. After the lecture and student discussion, an Engineering Professor (Dr. EP) asked, “That innovation process is all well and good and I have lots of ideas that could be commercialized, but I am really busy, so who is going to do it?”
Dr. EP was right. That is the big question. Who is going to do it? It is the biggest roadblock with respect to the commercialization of academic research. Who will learn the innovation process? Who will “get out of the building” to undertake commercialization activities required to create the business models needed to move an idea from an academic research project to a commercially viable product or service?
Innovation is generally described as a process used to solve a problem or fill a need for a specific customer segment where a solution to the problem would be highly valued by the customer leading to its widespread adoption. The innovation process comprises two broad groups of activities: one group is associated with building and implementing a business model, while the other group is associated with building and optimizing a solution to the problem. Most academic researchers naturally focus on the latter group. Academic scholars create new knowledge, processes and technologies. Sometimes this is done with a specific customer/user in mind and sometimes it is driven purely by fundamental academic research. Regardless of why they are created, detailed descriptions of new technologies or ideas are not enough to assess their commercial potential. As I noted in the first blog, it has been repeatedly shown that having an astonishing technology backed by prestigious academic leaders, strong intellectual property protection, and an elegant product development strategy, does not overcome the absence of paying customers.
Most new technology startups fail due to business model failures, not technology failures. In short, this means that for one reason or another there is an absence of paying customers. Investors in startups try to mitigate this risk by looking for companies where a new technology is matched with a well-developed business model. Innovation programs try to mitigate this risk by teaching new entrepreneurs how to create a business model and how to change their focus from building a product to building a business. I think most people will have noticed that the standard investor pitch deck is designed as a business model summary. Given how important the business model is in bringing technologies to market, I find it surprising how often academic researchers will pitch to potential investors without one. Most of the time they will hear that the science is interesting, but they are “too early.”
Creating and implementing a business model are the commercialization activities associated with the innovation process. Early commercialization activities focus on building, testing, and validating the business model through interactions with customers and other stakeholders. Late commercialization activities focus on implementing the business model and getting the product onto the market. The first assumptions entrepreneurs use in their new business model are typically wrong. These assumptions need to be tested in the marketplace with customers and other stakeholders. The entrepreneur must confirm and validate customer identity, the nature and significance of the problem, and the value of the new solution compared to the existing solutions. The assumptions in all segments of the business model should be tested and validated in the marketplace before being implemented. This early market feedback is used to optimize product-market fit, the value proposition, and to iron out any other wrinkles that could hinder business model success (e.g., revenue). This business-model organized, customer-focused approach to commercialization has been adopted by both the NIH and NSF in their I-Corps training programs because it has been the most effective way to teach the innovation process to academic researchers interested in commercializing their own technologies. The content of the business model has been covered in widely available text books, tutorials and courses. Reach out to your regional innovation centre if you would like more information or want to learn how to customize your business model to your sector.
When advising academic researchers on how to commercialize their technologies, I focus the initial meetings on the content and need for a business model. Many researchers believe a business model is only needed after you have developed the technology when you want to incorporate and implement a business plan. In fact, a business model should be used much earlier in the process to assess the commercial utility of a new technology idea. There is no point in spending limited resources on optimizing and patenting a new technology if no one will pay for it. The due diligence process to assess commercial utility is performed by building, testing, and validating the business model. It can take months to go through this process. A structured program like I-Corps takes eight-weeks; a less structured program could take longer. With standard innovation programs we expect the inventor/entrepreneur who wants to bring the new technology to market to apply themselves full-time to do the work. It is important that they get out of the building to interact with the customers and other stakeholders to test and validate all early business model assumptions. However, many academic scholars are like Dr. EP and do not have the time or training for this innovation process.
Some universities and outside granting agencies have small awards to promote commercial development of academic technologies. In my experience with small funding programs where the technology has no commercial licensee to start, the most success occurs when the inventor/entrepreneur is willing to devote themselves full-time to business model development. The least success occurs when a single academic researcher tries to do it part time while maintaining their standard academic schedule. In the latter case, the researcher usually defaults to product development activities focused on incremental technology improvements rather than commercialization activities focused on business model improvements. This “build it first” approach can leave tech-transfer offices or commercialization centres filled with unneeded solutions to problems without any commercial utility. If the academic scholars themselves cannot take the time required to develop and validate a business model, there are alternatives. This process can be outsourced, but at high cost. Institutes could develop their own professional commercialization teams; however, these could be easily swamped by a few good ideas. In my experience, the best solution is when the academic inventor can enlist a post-graduate colleague looking to transition their career into innovation and commercialization by learning the process from ground up and taking on this new project full-time. Professional commercialization teams can then help coordinate and train this next generation of innovators. It would be more effective if these early commercialization awards could fund the next generation of innovators to create and validate business models of new ideas and technologies. This would allow larger, later-stage awards or investments to support the people and technologies backed by high quality business models.
In June 2016, the Government of Canada released a report outlining their Innovation Agenda. There were six areas of focus, with the first being education so every Canadian can be “innovation ready”. Innovation itself was not well described, but the economic outputs of innovation as a “path to inclusive growth” were highly desired. Fostering innovation and new company formation is one of the levers that governments around the world use to promote economic growth and job creation. You can see this with the growth of startup incubators across the country. However, we need to expand the education initiative beyond business schools, incubators and accelerators. An understanding of the innovation process is applicable to everyone who needs to solve a problem that isn’t adequately addressed by current practices. Teaching innovation is generally applicable and valuable to everyone, and fits into the core educational mandate of academic institutes.
I was recently involved as a mentor to fellows in a medical innovation program. This program trains recent graduate-degree (PhD., MSc., MD) recipients in science, engineering, or medicine in the innovation process, including the patent process and other early commercialization activities. Ideally, at the end of the program they will have developed early prototypes of new medical devices along with business models that facilitate their commercialization. In addition, they will have the option of spearheading the commercialization effort themselves.
There is no reason why innovation programs cannot be implemented across all faculties within academic institutes. Most academic scholars are too busy with their own research and academic responsibilities to commercialize their ideas directly. Why not educate the next generation of inventors and entrepreneurs in the innovation process by commercializing these home-grown technologies? Building such a culture of innovation requires having the right leadership, policies, programs, and training in place. It requires leadership that can Link the free pursuit of academic research with the discipline and rewards of commercialization.
So, who is going to do it? Other than the professional degree programs, teaching innovation and commercialization is as close as we can get to teaching graduates how to create a job rather than to simply look for one. When Dr. EP says he has “many ideas that could be commercialized”, but doesn’t have the time, there should be a lineup at his door of young innovators eager to take on the challenge.