Platt Perspective on Business and Technology

Pure research, applied research and development, and business models 6

Posted in strategy and planning by Timothy Platt on August 18, 2017

This is my 6th installment to a series in which I discuss contexts and circumstances – and business models and their execution, where it would be cost-effective and prudent for a business to actively participate in applied and even pure research, as a means of creating its own next-step future (see Business Strategy and Operations – 4, postings 664 and loosely following for Parts 1-5.)

I began Part 5 by offering a version of the old assumed wisdom of only large and well funded businesses having the capacity to even be able to afford real research. And I then turned to at least begin to propose a disruptive alternative to that understanding, by at least beginning to outline how a medium sized or even small business could successfully pursue research, with a business model that would be centered around offering it and its fruits as marketable services and products. I strongly suggest at least reviewing that posting in anticipation of reading this one, to put what follows here into more meaningful perspective. But in brief I argued a case for:

• A particular type of proposed client business and industry specialization on the part of such a research-oriented business venture,
• And meshing that business’ niche client focus, with demonstrated expertise and experience in the founders and leaders of such a research firm, with their having established track records for doing productive, successful research in their clients’ particular areas of business activity.

I ended Part 5 in this context by stating that you should:

• Focus in this on the industry and the businesses operating in it,
• That you would turn to and market yourself to as your most likely customers:
• Customer businesses that explicitly need the fruits of research and development that you can offer in order for them to be and remain as competitive as possible but that they would chose not to carry out in-house and on their own.

Simply having research expertise that would be particularly applicable to and even valuable in some prospective business client marketplace is not sufficient. This has to be a competitively active enough niche market arena, for there to be client businesses that see need for the type of research results that a research offering business could provide them. And they have to see sufficient urgency of need for this, to be willing to pay for such a service – while being sufficiently resource-limited that they could not just do their own research on their own.

This means looking for and mapping out the marketplace scale of opportunity for potential client businesses, that fall into a fiscal resources sweet spot:

• With enough expendable funds to buy research and its results
• But not enough to do this work themselves and on their own, with all of the additional up-front and ongoing supportive expenditures that that would entail.

And that means really understanding the competitive dynamics of the businesses in a proposed client marketplace for this, and how those dynamics shape their finances, and their decision making processes and outcomes.

• The more stringent and demanding the competitive pressures faced, the tighter the finances will, in general for all competitors, when simultaneously seeking to
• Stay competitive in their industry and sector in what they bring to market,
• While staying agile and resourceful enough to stay actively in business at a basic operations and performance level,
• In the face of all of the change taking place in and around them.

This type of market analysis has to be included in the determination of any appropriate client market that a proposed research-offering business would pursue, in any realistic business plan development for the type of research-oriented business that I write of here.

With that noted, let’s consider the research itself that such a business could and would carry out as a marketable service, and how that would mesh with the needs and requirements of a potential client business and overall customer base. And I begin by noting one of the most important points that I could possibly raise in a series of this type:

• No business is going to want to buy open-ended, undirected research from an outside provider and certainly not when an open-ended price tag would go with that. And that definitely holds for highly competitive businesses that might know that they need the innovative fruits of research but that are hard-pressed to find and secure them, and certainly on their own.
• They would approach a potential research company partner that might assist them there, with specific questions and priorities that they would need to resolve, in order to address current and for the most part shorter-term needs – even if their overall intent is to build and develop for longer-term strength and market share with their own customers. And at the very least, they would limit what they would agree to buy to the cost-limited and specific, and with a goal of meeting specific needs.
• And this understanding on the part of any client business would govern their decision making here, at least until they have established an ongoing track record of successful engagement with such a research firm. Then and only then would they even consider adding in a measure of longer-term, back burner priority work too, with more pure-research elements included into the mix paid for too.

Now let’s reconsider the basic research-type continuum again, with this in mind:

• Pure research is more open-ended and it is definitely long-term oriented for any positive return on investment that it might lead to. This is the last form of research that a successful research oriented business would profitably, recurringly be able to offer as it takes off and develops as a business, with what is hopefully going to become a stable and reliable client base.
• And it is the least likely categorical type of research that client businesses would want to purchase service of, and certainly when a proposed research partner business that they would consider working with is first starting out, or when they as a research purchasing or outsourcing business is just starting to explore this type of business-to-business collaboration.
• More pure research oriented service offerings would only become viable marketable options for addressing and helping to address what amount to long-term nagging needs on the part of client businesses that are already familiar with and comfortable with such outsourcing or collaborative options. (Note that I am making some significant assumptions in all of this, that will merit further consideration later.)
• Applied research and its more final product facing extreme: product development, are more short-term and practical value creation focused, and fit more smoothly into the type of research business, business model that I write of here and certainly when such an enterprise is still proving itself and either in general or to some new client business.

As a simple scenario for taking that last bullet point out of the abstract, a client business might very well want to own and manage its own specific product development processes. But it still might find need to buy some of the more immediately applicable applied research what would go into that, to avoid for example having to make large up-front investments in what would be essential highly specialized research facility resources that they would not need or use longer-term. Consider for example, how such a client business might need the results of testing out a large number of specific specialty compounds to see which of them would have the best properties for some specific heat tolerance-demanding application. But they do not have the specialized equipment or other resources for doing this in-house and see it as not being cost-effective for them to acquire all of that, for what might very well be just this one time use. So they turn to a partner business that can do this testing and a set of specific related research task assignments as well, in order to meet these needs.

They would work with their research provider business partner in deciding what general types of materials to test at least categorically that would meet their specific product design and development needs. And the client company would establish the materials performance requirements that the research developer business would need to meet or exceed. And then they would let their research partner home in on a best specific formulation for meeting these requirements, through iterative process as they prototype manufacture, test, review and refine to repeat that cycle – until they arrive at a product formulation that meets those client needs and to their signed-off upon satisfaction. If they have the right equipment and related resources in place and the right expertise and experience, they can in most cases arrive at that finalized product solution faster and at lower cost than their client business would have been able to on their own and by a considerable measure when the costs of building to even be able to start this research on the part of their client is added in.

• This posting and its narrative adds a second basic supporting element to this business model: that a research business should be specialized and that it should focus on a sufficiently narrow range of expertise in what it offers,
• And that it offer practical research capabilities that would meet timeframe and priorities needs that would appeal to real world potential client businesses.

I am going to turn in my next series installment to the issues of actually building and marketing such a research-based and research offering enterprise. And after that I will consider how such a business, once successfully launched, can expand what it does to capture a wider and more inclusive research-requiring client business market. In anticipation of that, I note here that a key to that is in what is added in and how and when, as the entire portfolio of services and areas of expertise offered, connects together as a single logically consistent whole. Meanwhile, you can find this and related postings and series at Business Strategy and Operations – 4, and also at Page 1, Page 2 and Page 3 of that directory.

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