Pearson Innovation - Innovation Consultants

Guardian Newspaper November 2009

Mike Pearson MD of Pearson Innovation argues we need an overhaul of the way we transfer technologies out of our Universities

Technology transfer is the principal mechanism for taking discoveries made by research institutions, to the commercial sector for development into useful products and services. It should work like a dating agency crossed with a shop window; displaying its wares of emerging technologies and matching them to the needs of companies.

In the UK, technology transfer exists alongside institutions carrying out research universities, the NHS, hospitals, as well as publicly funded organisations such as the National Physical Laboratory. During 2006 £21bn was spent on R&D , a 9% increase on 2005. But are we getting payback? Do emerging technologies generate their expected value? The image below looks at how technology transfer works in the UK, and explores how a technology ‘translator’ could help. Gaurdian_image
In order for universities to act as engines of economic growth, as increasingly viewed by policymakers, they must translate their research into economic activity. Non-commercialised ideas are little beyond dreams; innovation means taking invention to market. A UNICO survey in 2004 shows a mixed picture. In some universities engagement with technology transfer is not substantial and commercialisation activity is only in its infancy; 30% of participants in the survey had started their activities since 2000. A comparison indicates that UK universities spin-out more companies per unit of research funding and license more technologies, but generate significantly less income than the US. We need to understand why.

Effective technology transfer is vital to the UK. Our reliance on traditional economic activity coal, steel, and manufacturing especially automotive drastically declined over the last twenty years needing to be replaced by a knowledge-based economy. UK inventiveness is prodigious. We currently have three of the top five universities in the world, and in April 2007 DTI published a report showing the UK outstripping the US in the research impact of a number of key disciplines including health and biological sciences. In 2006 UK pharmaceutical and biotech companies spent a huge 15.2 % of sales on R&D; a figure of 3% is typical in other industries.

Yet despite our clear inventiveness and adequate funding UK is proving poor at translating invention into commercial activity. Moreover, our advantage is rapidly being chipped away by China and India, both of which are getting better at research and have faster local routes to commercialisation. Technology transfer works by universities agreeing to transfer ownership of intellectual property for technologies they develop to Technology Transfer Offices (TTO’s), organisations run on a commercial basis with the objective of exploitation. Their mode of operation may differ; some, such as ISIS Innovation in Oxford, simply seek the most profitable way to move technology on and take no stake, others as exemplified by Imperial College have their own funding sources and will back ideas with hard cash.

At the same time a growing commercial technology transfer industry works from the other end, taking the needs of industry and attempting to identify appropriate technologies. This activity, referred to as technology scouting, is becoming easier with the advent of Open Innovation where companies publish a neutered form of their technology needs, whilst attempting to hide exactly where their interest lies. If we ask why we are not getting better return on research investment in this country we are forced to look first at the effectiveness of technology transfer. The answer lies not in what it does do but instead what it fails to do.

To be effective technology translation needs to happen in three stages: 1. first recognise technology opportunities created by research 2. then explore and assess, by creative processes, commercial opportunities that emerge when technology is matched to both identified and unidentified need 3. based on this select the appropriate route of exploitation. Looking at the first stage the TTO’s are generally good at identifying technologies within their university, mainly because those employed often have an academic background in that university. If we turn next to the third stage, exploitation, the tools used most frequently in the UK are spin-out and licensing. However, as statistics show, spin-outs are used too often and with little finesse or relevance to the markets being addressed.

Spin-outs frequently burn huge amounts of time and money just establishing themselves as businesses leaving little to spend on exploring and proving the technology they are based on. On June 28th this year the Scotsman reported a call for public and private sector funding to be targeted on a much smaller number of university spin-out companies, to give them a better chance of success. “Effort and funding might be better directed to ensuring that fewer spin-outs emerged and were nearer to market when they did and that they employed stronger commercial management sooner." Finding and funding experienced professionals to head up a spin-out, especially when the academic involved declines to get involved, creates a hurdle over which few jump successfully. In reality many technologies could be developed and readied for sale or trading, without the need to start a commercial entity and at a fraction of the cost.

Harvard Business Review recently described the role of an innovation capitalist, an entity able to prove technology and explore market opportunity in a far more focused way. In doing so they add considerable value and can help present technology in an effective manner that potential customers understand. These specialist firms use the fact that they can explore several technologies in parallel to give better ‘bang per buck’. They use creative techniques to expose potential and then use their access to major companies to seek partners. Licensing is ideal for a breakthrough technology where a licensee can see clear advantage in their sector, but is less effective for all the rest, which these days is the majority.

The UK tries to license far more frequently than the US but the returns achieved per unit of funding are a little more than a third of the US level. Clearly licensing is not proving that effective in this country. Companies face considerable risk taking on technology under licence and is often beyond any but the larger companies. Hence licensing and spin-out are proving blunt weapons; a more sophisticated approach is needed. This leaves the remaining stage: matching technology to commercial opportunity. The process does not simply entail understanding a technology but requires the ability to see what it might make possible across the entire spectrum of commerce and industry, including new and emerging markets. Therefore the widest possible experience is needed and often creative leaps are required if one is to select the most appropriate route to value-creation.

In the UK the larger TTO’s tend to employ ex-graduates and business entrepreneurs who may not have cross-sector experience nor much insight into the creative process that matches technology to need. They simply hope a copy of a patent and a set of test results is enough to make a company bite. This observation is backed up in a report by the Department of Economics at Rensselaer Polytechnic Institute. They concluded that the productivity of technology transfer is ultimately determined by the competencies of university scientists, entrepreneurs, technology transfer officers and other university administrators and their incentives to engage in entrepreneurial activities.

What is missing from technology transfer is a role best described as creative mentor; creative because leaps allow one to see potential where logic fails, and mentor because only repeated experience of taking technologies to market gives the necessary insight. It doesn’t means tearing down existing technology transfer structures as these roles augment it and will hugely enhance the success rate.

We need to recognise that the western world has had its Concorde Moment and henceforth the focus of research will turn to better and cheaper ways to do the things we already do. Pure research is vital to give big-picture understanding and enhance general knowledge but a shift to applied research is inevitable. Applied research can and should be linked from the start to the needs of industry or society instead of happening as an afterthought at the end of a research project. Naturally, scientists tend to resent the intrusion on their freedom but without strengthening the link between technology and need we will continue to pour research monies into a deep black hole.