Platt Perspective on Business and Technology

Innovation, disruptive innovation and market volatility 46: innovative business development and the tools that drive it 16

Posted in business and convergent technologies, macroeconomics by Timothy Platt on April 3, 2019

This is my 46th posting to a series on the economics of innovation, and on how change and innovation can be defined and analyzed in economic and related risk management terms (see Macroeconomics and Business and its Page 2 continuation, postings 173 and loosely following for its Parts 1-45.)

I began discussing some of the core issues of this series in Part 43, in terms of a specific case study example that can serve to illustrate them. My goal for that has been to take a more general line of discussion than I have often pursued up to there, and at least somewhat more fully take it out of the abstract.

More specifically and to explicitly connect the immediate preceding installments of this series to this one, I have recently been discussing a new synthetic polymer-based outdoor paint type as an innovation example, as developed by one organization (a research lab at a university), that would be purchased or licensed by a second organization for profitable development: a large paint manufacturer. At least up to now, I have focused for the most part on the innovation acquiring business that is participating in this: on that paint manufacturer and its due diligence and related considerations as they would decide whether or not to proceed in this transaction, and how to do so if they decide that they should.

My goal here is to at least begin to more fully consider the issues raised here from the perspective of the innovation-originating organization: that university with its innovation development office as set up to manage all patent and licensing agreements that would arise in that institution, and the research lab there that this innovation was actually created at. And I begin doing so at the starting point for all of the activity and potential activity that I have been discussing here: that innovation discovering research lab itself and the people who run it and who work there.

• A university research lab is both a place where research and discovery are matters of defining purpose, and a place where graduate school and postdoctoral level training are centrally important too. Ongoing efforts to achieve these dual goals inseparably interconnect, with most of the hands-on research that is done carried out by graduate students and postdoctoral fellows, and with the research and the teaching and mentoring that take place in them, enabling and shaping each other and on an ongoing day-to-day basis. I write this, thinking back to my own years of working in this type of setting, and from my longer timeframed efforts to more fully understand the capabilities and the dynamics of these organized systems in general.
• And I stress here, the significance of their being “research laboratories.” Their goal for the most part is to develop new knowledge, working on and at least ideally resolving one question or problem or set of them, to move on from there to work on a next question or problem or set of them that could only arise if preceding ones had been successfully worked upon, building a knowledge base needed to proceed forward. These are not applied research oriented product development facilities, except perhaps in a special and limited sense, where that would specifically support more basic research. Their goal is not, for the most part, to take the largely more-basic knowledge that they develop and verify and translate that into specific practical marketable applications. They are not geared to do that and the people who work there are not in general seeking out opportunities to do that either, at least while they are pursuing this part of their overall career paths. And these facilities do not in general even have the resources or funding needed for practical specific-product oriented development either.
• And one of the driving forces that would shape that reality comes from where so much of the funding for this research and training comes from: outside-sourced grants and with a great deal of that coming from government sources and certainly in countries such as the United States. I applied for and competed for funding from the US National Institutes of Health for much of my university-based research as most of my early hands-on research certainly, was biomedical in nature. In a case study scenario of the type that I write of here, it is likely that the professor who runs that lab would turn more to agencies such as the National Science Foundation for funding as that lab’s principle lead grant writer and applicant. Though a significant amount of research funding that goes to universities and their research labs comes from private sources too, and both from nonprofit foundations and from corporate sources. Either way, this funding is essentially always earmarked for more fundamental research and not for applied research or specific product development, and certainly when government funding is significantly involved.
• In this case study, the nature of the research problem worked upon strongly points to specific possible types of application: here the development of new outdoor paints as based upon new developments in the underlying polymer chemistry that would lead to them, that this lab has been working on developing. But this is still basically a more fundamental knowledge oriented university research lab that created this paint chemistry breakthrough – and if it is to be developed into specific profitably marketable products, that would have to mean bringing in a more applications oriented business that would take the next steps for that, and for final applied technology testing and certainly for product manufacturing.
• And from the developing lab’s perspective and that of the university that it exists in, the dynamics of the above-outlined system and the financial potential that it might hold, would in effect be thrown away if those new innovation-based technology transfers where not entered into and efficiently so. Traditionally, this type of loss of opportunity was in fact fairly standard for most universities as they saw the innovations created on their campuses either remain fallow and unused, and drift out their doors with little if any real return value gained from them. And that led directly to universities developing offices within their own systems for setting up and managing such technology transfer agreements, and with that carried out in as standardized and efficient a manner as possible so as to gain as much from these opportunities as possible – and both for the researchers involved and their labs, and for these universities as a whole.
• And yes, the contractual agreements that researchers enter into when applying for and accepting outside grant money and from both government agency and from private sector sources, enter into this too. And one of the core functions of a university’s innovation development office is to more efficiently navigate any terms or restrictions that might be included there, when dealing with and coming to agreement with businesses that might purchase or license technologies developed there, so as to meet those restrictions, if any. To take that out of the abstract, when foreign owned or operated businesses are involved and international technology transfer restrictions are in place as is often the case for dual-use technologies that can be used in both civilian and military contexts, that can and does include determination of even just what business organizations that university can be allowed to negotiate with and come to agreement with, and for which specific innovations that might be on the table.

Stepping back from this line of reasoning and from the systems that I am discussing here, to consider these two businesses again: the innovating university that is functioning as a business here, and the manufacturer, both critically depend on and require sound finances to continue to operate. And both depend on financial performance for that, that is highly performance based with the manufacturer here depending on its own cash flow and reserve-building capabilities, and the university depending on the effectiveness of its research as its driver for bringing in more funding. Both sides of this transaction capability have to operate in very competitive arenas, with small numbers of the more successfully innovative researchers on the university side of this gaining a disproportionately large share of the grant money that is out there to apply for, and with more successful marketable product developers and manufacturers often finding themselves in a stronger position to successfully enter into these agreements too. And that shapes the environment that all of the above plays out in.

I am going to continue this line of discussion in a next series installment where I will complete, at least for here, my discussion of this university research lab and outside for-profit manufacturer scenario. I will then step back to at least briefly consider this basic two organization model in more general terms, where for example, the innovating organization there might in fact be another for profit business too – including one that is larger than the acquiring business and that is in effect unloading patents that do not fit into their own needs planning. I will also specifically raise and challenge an assumption that I just built into the immediately preceding paragraph here, regarding the value of scale in the innovation acquiring business in their being able to successfully compete in this type of innovation as product market.

Meanwhile, you can find this and related postings at Macroeconomics and Business and its Page 2 continuation. And also see Ubiquitous Computing and Communications – everywhere all the time 3 and that directory’s Page 1 and Page 2.

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