The new rallying cry for U.S. politicians seems to be INNOVATION. In a recent meeting of the President’s National Advisory Council on Innovation and Entrepreneurship, attended by PlazaBridge Group, the committee examined the many challenges and opportunities for the entrepreneurial community. Product obsolescence of 50% to 70% will occur by 2012 according to some (Atkins, 2010). Entire portfolios of products languish in maturing markets. New markets and repurposing into different segments will be necessary. R&D expenditures are rising faster in Asia than in the U.S. The awarding of PhDs in critical areas like engineering is rising in other countries faster than in the U.S. The result led Secretary of Commerce Gary Locke to state “America’s innovation engine is not as efficient or as effective as it needs to be, and we are not creating as many jobs as we should.” The process of Innovation could be better. The ITIF in 2009 issued key guidelines to establish a fertile environment for innovation:
1. Put in place incentives for firms to innovate within their own borders
2. Be open to high-skill immigration
3. Foster a digital economy
4. Support the kinds of institutions that are critical to innovation
5. Ensure that regulations and other related government policies support, not retard, innovation
Additionally, evidence points to the critical competitive weakness of the U.S. is to be found in the translation of R&D advances into commercial products and not necessarily in the R&D activity itself (Mowery, 1998)
And there is the rub: the INNOVATION GAP between the effort put into R&D and translating that effort and expenditure into commercial viability (i.e., a sustainable value proposition). Too many are focusing on the need for greater research and discovery and too few on the challenges of bringing discovery out of the labs and backrooms and into the marketplace.
PlazaBridge Group knows a little about the subject.
Here are some of our observations about the Innovation Gap:
1. Placing original research in the context of the customer’s situation requires knowledge of the context, not only the science behind the discovery. The best entrepreneurs understand the customer’s environment or desires almost better than their idea or discovery. I am particularly thinking of a CEO who runs a company with the leading market share in his business. He is at the core an engineer, but is the leading knowledge expert on the customer’s processes and the leading advocate for policy and regulations.
2. Operating a lab is not like operating an engineering and product development effort. I met a recent PhD graduate that licensed his invention (electrically movable polymers) from his university. He spent 4 years basically continuing his lab research thinking he was bringing his invention closer to commercialization. We see a lot of early technology companies operating like university labs without an understanding of how engineering becomes messy and unpredictable in the face of customer demands. Labs are predictable, stable environments. Customer operations are not.
3. It’s a matter of perspective: the approach to original discovery is often so detailed and focused that the translation to market application and usability requires much more effort than anticipated. Even SBIRs have no fundamental goal other than RESEARCH. The inclusion of a commercialization effort in Phase II is more a writing exercise than a concerted effort.
4. The wrapping, around the core IP, of technology integration, service delivery and partner leverage necessary to market viable products often diminishes the underlying value of the original discovery. By the time a product that satisfies the customer is developed, the core technology can be substituted by another technology fairly easily. The true value ends up being in the work and effort applied to the total solution. This fact (although not necessarily always true for sure) has a counterproductive aspect: the inventor, and often the majority owner, is desperate to keep his/her original research intact and relevant at all costs. The protection of IP value and relevance trumps the value of answering customer’s needs.
5. It’s an old saying and, yet, it has never been disproved: people buy from emotion. Building a better mousetrap is just the START; delivering the emotional payoff is the close. The Innovation Gap may be more an emotional gap than a development or integration gap. I need an electric car but what really motivates me is the anger of overspending on gas that goes into commodity speculation.
There are many more aspects to the INNOVATION GAP but I’ll leave that to another day. Suffice it to say that exclusively relying on more and more research to save our economic woes ignores the greatest asset of the U.S.: the knowledge and freedom to wrap solutions with those things that satisfy the needs for PERSONAL happiness.
